AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ONDECEMBER 23, 2009
REGISTRATION NO. 333-________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

AMARILLO BIOSCIENCES, INC.
(Exact name0001014763true1871349175149922245337805541688139054661983023059221769776413362140233732919114195841187702324937329191180628875717959840736264408221612602901013405213405218010260000003376526337652673499113395851004868145567572951630594799109856826900000241523025526924152326536683062505410985680962529625242066220247414202039714961315302551220881110108916622025552259580080825961019710783827840736264408221612602900.010.01100000001000000000000.010.010.011000000000.0130000000010000000420661721000000000000014437930801443793080420661720.010.01300000000300000000144379308144379308144379308144379308594563165631841818720021214107811277124941038246122528687219206451577454389235716355173014453325229814277808212918452298114457212083062386742652210914404351668711897186891461018525471683331189721236388866114506232099895101885340060.010.011443793080.03420661720.04113270245407309345805921579545340064051644207786476963215668211498214051635111498283192400000145062342066212781794961315622025542066172534006941059410542066172420662505542067542615805958059190532119053457276144379314437931885643010108916580047632958001000000001443793082099895434434344323741514437930814437931889987312208811522591704005773130577313038886615800580038886612099895534006145062320444471168773390514698106833743371609781504404344394105222359575337805302430241107297707182541333022029814150541902079417442951013589913898891249977211737499551850000236854724380000014379213589918051772433798536725511631060251200004605647521179926000000500002020021644884315437319886912000075453751190961723879128683867944090399377193808551000001442504763296290340226870577313046000000

1. Organization and Business. Ainos, Inc., a Texas corporation formerly known as Amarillo Biosciences, Inc. (the "Company", "we" or "us"), is engaged in developing medical technologies for point-of-care (“POCT”) testing and safe and novel medical treatment for a broad range of registrantdisease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and clinical development activities for our programs, securing related intellectual property and commercialization of proprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products. Although we have historically been involved in extensive pharmaceutical research and development of low-dose oral interferon as specifieda therapeutic, we are prioritizing the commercialization of medical devices as part of our diversification strategy. Since the beginning of 2021, we have acquired significant intellectual property from our majority shareholder, Ainos, Inc., a Cayman Islands corporation (“Ainos KY”), to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) POCTs and COVID-19 POCTs. We expect our underlying intellectual property to enable us to expedite the commercialization of our medical device pipeline, beginning with the Ainos-branded COVID-19 POCT product candidates.

1.  Organization and Summary of Significant Accounting Policies

Organization and Business

We are engaged in its charter)


Texas283475-1974352
(State or jurisdiction of
incorporation or organization)		(Primary Standard Industrial
Classification Code Number)		(I.R.S. Employer
Identification No.)


4134 Business Park Drive
Amarillo, Texas 79110-4225
(806) 376-1741
(Addressdeveloping medical technologies for point-of-care (“POCT”) testing and telephone numbersafe and novel medical treatment for a broad range of principal executive offices)

4134 Business Park Drive
Amarillo, Texas 79110-4225
(806) 376-1741

(Name, addressdisease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and telephone numberclinical development activities for our programs, securing related intellectual property and commercialization of agentproprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products.

Although we have historically been involved in extensive pharmaceutical research and development of low-dose oral interferon as a therapeutic, we are prioritizing the commercialization of medical devices as part of our diversification strategy. Since the beginning of 2021, we have acquired significant intellectual property from our majority shareholder, Ainos KY, to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) and COVID-19 POCTs. This includes 51 issued and pending patents related to VOC technologies and 3 issued patents for service)

Copies to:

Edward L. Morris, Esq.
John B. Atkins, Esq.
Underwood, Wilson, Berry, Stein & Johnson, P.C.
500 S. Taylor, Suite 1200
Amarillo, Texas 79101
(806) 376-5613
(806) 349-9471 (fax)


Approximate dateCOVID-19 POCT products. We expect our underlying intellectual property to enable us to expedite the commercialization of commencementour medical device pipeline, beginning with Ainos-branded COVID-19 POCT product candidates.

Basis of proposed saleAccounting

The basis is United States generally accepted accounting policies (“U.S. GAAP”).

Going Concern

These financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) applicable to a going concern, which contemplates the public: From timerealization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has generated minimal revenue and has an accumulated deficit totaling $10,108,916 since inception. These factors, among others, indicate that there is substantial doubt about the Company’s ability to time aftercontinue as a going concern within one year from the effectiveissuance date of this registration statement.

If anyfiling.

In order to obtain the necessary capital to sustain operations, management’s plans include, among other things, the possibility of the securities being registered on this Form are topursuing new equity sales and/or making additional debt borrowings, There can be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

(COVER CONTINUES ON FOLLOWING PAGE)



Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer
o    Accelerated filer
o    Non-accelerated filer
x   Smaller reporting company

CALCULATION OF REGISTRATION FEE

Title of each class of
securities to be registered
 
Amount to be
Registered (1)
 
Proposed Maximum
Offering Price Per
Security
 
Proposed Maximum
Aggregate Offering
Price
 
Amount of
Registration Fee (2)
Common Stock, $.01 par value
per share		 10,000,000 $0.30 $3,000,000 $213.90

(1) Relates to common stock, of Amarillo Biosciences, Inc., offered by the Company. In the event of a stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended.

(2) Calculated according to Rule 457(o) of the Securities Act of 1933.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically statesno assurances, however, that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.


The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED _____________, 2009

AMARILLO BIOSCIENCES, INC.
OTC Bulletin Board trading symbol: AMAR
10,000,000 Shares of Common Stock

This prospectus relates to the public offering of up to 10,000,000 shares of our common stock, par value $.01 per share, by Issuer. The shares offered by the Company will be offered at a fixed price of $____ per share for a period not to exceed three (3) years from the date of this prospectus. We will pay the expenses of registering these shares.

The sharessuccessful in obtaining additional financing, or that such financing will be offered directly through our officersavailable on favorable term, if at all. Obtaining commercial loans, assuming those loans would be available, will increase the Company’s liabilities and directors. No commission or other compensation relatedfuture cash commitments. If the Company is unable to obtain financing in the sale ofamounts and on terms deemed acceptable, the shares willbusiness and future success may be paid to our officersadversely affected and directors. Thethe Company may engage and offer the shares through one or more broker-dealers. A commission of eight percent (8%) will be offered in cash from proceeds of the offering to any engaged broker-dealer. In addition, the broker-dealer shall receive eight percent (8%) warrant coverage. No commission or other consideration will be paid to officers or directors for their involvement in this offering. Our officers and directors will not register as a broker/dealer with the Securities and Exchange Commission in reliance on Rule 3a4-1 of the Securities and Exchange Act of 1934. The intended methods of communication include, without limitation, in-person contact, telephone contact, and facsimile or electronic transmission contact.

Investment in the shares involves a high degree of risk. You should consider carefully the riskcease operations. These factors beginning on page ___ of this prospectus before purchasing any of the shares offered by this prospectus. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

Our common stock is quoted on the OTC Bulletin Board and trades under the symbol "AMAR". The last reported sale price of our common stock on the OTC Bulletin Board on December 21, 2009, was approximately $0.1655 per share.


Table of Contents

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is_________, 2009.

AMARILLO BIOSCIENCES, INC. HAS NOT REGISTERED THESE SHARES UNDER THE SECURITIES LAWS OF ANY STATE. BROKERS OR DEALERS EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THAT THE SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES LAWS OF THE STATE OR STATES IN WHICH SALES OF THE SHARES OCCUR AS OF THE TIME OF SUCH SALES, OR THAT THERE IS AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES LAWS OF SUCH STATES.

THIS PROSPECTUS IS NOT AN OFFER TO SELL ANY SECURITIES OTHER THAN THE SHARES. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER IS UNLAWFUL.

AMARILLO BIOSCIENCES INC. HAS NOT AUTHORIZED ANYONE, INCLUDING ANY SALESPERSON OR BROKER, TO GIVE ORAL OR WRITTEN INFORMATION ABOUT THIS OFFERING, AMARILLO BIOSCIENCES, INC., OR THE SHARES THAT IS DIFFERENT FROM THE INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS, OR ANY SUPPLEMENT TO THIS PROSPECTUS, IS ACCURATE AT ANY DATE OTHER THAN THE DATE INDICATED ON THE COVER PAGE OF THIS PROSPECTUS OR ANY SUPPLEMENT TO IT.

IN THIS PROSPECTUS, REFERENCES TO "AMARILLO," "THE COMPANY," "WE," "US," AND "OUR," REFER TO AMARILLO BIOSCIENCES, INC.

AMARILLO BIOSCIENCES, INC.

TABLE OF CONTENTS

Page
Prospectus Summary4
Risk Factors5
Forward-Looking Statements7
Use of Proceeds8
Selling Security Holders8
Plan of Distribution9
Description of Securities to be Registered9
Description of Business9
Description of Property16
Legal Proceedings16
Management's Discussion and Analysis or Plan of Operation16
Market Price of and Dividends on Registrants Common Equity and Related Stockholder Matters21
Changes in Accountants23
Management23
Executive Compensation25
Security Ownership of Certain Beneficial Owners and Management28
Certain Relationships and Related Transactions, and Corporate Governance30
Additional Information31
Disclosure of Commission Position on Indemnification for Securities Act Liabilities31
Experts32
Unaudited Financial Statements33
Audited Financial StatementsF-1


Table of Contents

You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of any time after its date.

Prospectus Summary

General

We are a Texas corporation formed in 1984, engaged in developing biologics for the treatment of human and animal diseases. We focus our research on the treatment of human disease indications, particularly influenza, using natural human interferon alpha that is administered in a proprietary low dose formulation.

We own or have licensed nine issued patents and four pending patents related to the delivery of low-dose oral interferon alpha, and one patent on our dietary supplement. We have filed with the U.S. Food and Drug Administration ("FDA"), and there now are in effect, six Investigational New Drug ("IND") Applications covering indicated uses for low-dose oral interferon alpha, including influenza, chronic cough, hepatitis C virus infection, and oral warts in HIV+ patients.

We have not generated any significant revenues since inception in 1984. We have a history of losses and we expect to incur losses for the foreseeable future. For the three months ended September 30, 2009, and September 30, 2008, we had revenues of $48,036 and $30,234, respectively, and incurred net losses of $1,090,120 and $331,940, respectively. For the fiscal years ended December 31, 2008 and 2007, we had revenues of $109,836 and $70,069, respectively, and incurred net losses of $1,923,067 and $2,506,073, respectively. As a result of recurring losses from operations and our need to raise additional financing in order to execute our 2009 plan of operations, our auditors, in their report dated March 18, 2009, have expressed substantial doubt aboutregarding our ability to continue as a going concern.

Our Corporate Information

Amarillo Biosciences, Inc. was incorporated in June 1984 in the State of Texas under the name of Amarillo Cell Culture Company, Incorporated. In May 1996, we changed our name to Amarillo Biosciences, Inc. Our principal executive offices are located at 4134 Business Park Drive, Amarillo, Texas 79110. Our Telephone number is (806) 376-1741. Our website address is www.amarbio.com. Information contained on, or that can be accessed through, our website is not part of the prospectus.

About This Offering

Following is a summary of this offering. Please see the Plan of Distribution section for a more detailed description of the terms of this offering:

Securities Being Offered:Up to 10,000,000 shares of common stock, par value $.01, at a price of $____ per share.
Offering Price per Share:$____
Offering Period:A period not to exceed 3 years.
Proceeds to the Company:$__________ maximum less no more than 8% commission to the broker/dealer (if engaged) and less legal fees, printing fees, and other miscellaneous expenses equal to approximately $_______.
Use of Proceeds:General working capital and operating expense purposes.
Number of Shares Outstanding Before this Offering:51,970,576 as of December 22, 2009
Stock Symbol:AMAR
Number of Shares Outstanding After this Offering:61,970,576 if the maximum offered amount is reached.
Risk Factors:Carefully review this entire Prospectus and the "Risk Factors" section herein for factors you should carefully consider before making your investment decision.



Table of Contents

Estimated use of proceeds

The estimated net proceeds to the Company from the sale of the 10,000,000 shares of Common Stock offered through this Prospectus are estimated to be approximately $______ after deducting offering expenses. The Company intends to use the net proceeds of this offering for general corporate purposes, summarized as follows:

UseAmount
Debt Reduction$____
General Working Capital$____
Total$____


RISK FACTORS

You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled "Information Regarding Forward Looking Statements." The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.

Risk Relating to Our Business and Industry:

We may not be able to adequately protect and maintain our intellectual property.

Our success will depend in part on our ability to protect and maintain our patents, intellectual property rights and licensing arrangements for our products and technology. We currently own or have licensed ten issued patents and three patents pending. No assurance can be given that such licenses or rights used by us will not be challenged, infringed or circumvented or that the rights granted thereunder will provide competitive advantages to us. Furthermore, there can be no assurance that we will be able to remain in compliance with our existing or future licensing arrangements. Consequently, there may be a risk that licensing arrangements are withdrawn with no penalties to the licensee or compensation to us.

We rely on third parties for the supply, manufacture and distribution of our products.

Third parties manufacture and distribute all of our products. We do not currently have manufacturing facilities or personnel to independently manufacture our products. Currently, Marlyn Nutraceutical manufactures our nutraceutical products. Our licensed distributors, located in the United States and internationally, distribute the products. Except for any contractual rights and remedies that we may have with our manufacturer and our distributors, we have no control over the availability of our products, their quality or cost or the actual distribution of our products. If for any reason we are unable to obtain or retain third-party manufacturers and distributors on commercially acceptable terms, we may not be able to produce and distribute our products as planned. If we encounter delays or difficulties with our contract manufacturer in producing or packaging our products or with our distributor in distributing our products, the production, distribution, marketing and subsequent sales of these products would be adversely affected, and we may have to seek alternative sources of supply or distribution or abandon or sell product lines on unsatisfactory terms. We may not be able to enter into alternative supply, production or distribution arrangements on commercially acceptable terms, if at all. There can be no assurance that the manufacturer that we have engaged will be able to provide sufficient quantities of these products or that the products supplied will meet with our specifications or that our distributor will be able to distribute our products in accordance with our requirements.

We are dependant on funding from private placements of stock.

Our sales revenue, sublicense fees and royalty income are low compared to expenses. Our primary focus is to achieve FDA approval of oral interferon for one or more disease indications. We do not expect significant sales or royalty revenue in the near term as Phase 2 and Phase 3 clinical studies must be completed before an NDA (New Drug Application) may be submitted to the FDA. We operate at a net loss and current liabilities exceed current assets mostly by the amount owed to HBL for two $1 million notes plus $572,773 of accrued interest on December 31, 2008. HBL was paid $200,000 of accrued interest in January of 2008 and extended the notes and remaining accrued interest until June 3, 2008 and August 28, 2008. The Company is in default of the notes, but HBL has not demanded payment. We do not have sufficient liquidity to pay off the notes or to fund operating losses unless funding is obtained from private placements of stock. There can be no assurance that private placement funding will always be available on terms acceptable to us, or at all.



Table of Contents

We are dependent on certain key existing and future personnel.

Our success will depend, to a large degree, upon the efforts and abilities of our officers and key management employees such as Joseph M. Cummins, our President and Chief Executive Officer and Martin J. Cummins, our Vice President of Clinical and Regulatory Affairs. The loss of the services of one or more of our key employees could have a material adverse effect on our operations. We do currently have employment agreements with our executive officers. We do not currently maintain key man life insurance on any of our key employees. In addition, as our business plan is implemented, we will need to recruit and retain additional management and key employees in virtually all phases of our operations. On October 1, 2009, following the departure of Dr. Gary W. Coy, our Vice-President and Chief Financial Officer, on September 4, 2009, we engaged Bernard Cohen to be a Vice-President and the Chief Financial Officer of the Company. Dr. Coy remains a consultant with the Company, but we cannot assure that we will be able to successfully attract and retain key personnel.

If we do not successfully develop, acquire or license new drugs our business may not grow.

We must invest substantial time, resources and capital in identifying and developing new drugs, dosage and delivery systems, either on our own or by acquiring and licensing such products from third parties. Our growth depends, in part, on our success in such process. If we are unable to either develop new products on our own or acquire licenses for new products from third parties, our ability to grow revenues and market share may be adversely affected. In addition, we may not be able to recover our investment in the development of new drugs, given that projects may be interrupted, unsuccessful, not as profitable as initially contemplated or we may not be able to obtain necessary financing for such development if we are unable to fund such development from our future revenues. Similarly, there is no assurance that we can successfully secure such rights from third parties on an economically feasible basis.

Our competitors are much larger and more experienced than we are and, even if we complete the development of our drugs, we may not be able to successfully compete with them.

The pharmaceutical industry is highly competitive. Our biologics and low-dose oral interferon alpha applications compete with high dose injectable interferon manufactured by Roche, Schering, InterMune, Serono, Biogen, Berlex and Hemispherx. High dose injectable interferon has been widely accepted by the medical community for many years. Companies who manufacture injectable interferon alpha applications are more established than we are and have far greater financial, technical, research and development, sales and marketing, administrative and other resources than we do. Even if we successfully complete the development of our tests, we may not be able to compete effectively with these much larger companies and their more established products.

We have been the subject of a going concern opinion by our independent auditors who have raised substantial doubt as to our ability to continue as a going concern.

Our Independent Registered Public Accountants have added an explanatory paragraph to their audit reports issued in connection with our financial statements which states that our recurring losses from operations and the need to raise additional financing in order to execute our business plan raise substantial doubt about our ability to continue as a going concern. We have experienced net losses from operations of $2,418,316 for the year ended December 31, 2007 and $1,836,758 for the year ended December 31, 2008. In addition, as of December 31, 2007 we had an accumulated deficit of $28,459,951 and $31,660,009 for the year ended December 31, 2008. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidatedaccompanying financial statements do not include any adjustmentadjustments 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. Assurances cannot be given that adequate financing can be obtained to meet our capital needs. If we are unable to generate profits and unable to continue to obtain financing to meet our working capital requirements, we may have to curtail our business sharply or cease operations altogether. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis to retain our current financing, to obtain additional financing, and, ultimately, to attain profitability. Should any of these events not occur, we will be adversely affected and we may have to cease operations.

Risk Relating to Our Current Financing Arrangement:

There are a large number of shares underlying our preferred stock and warrants that may be available for future sale, and the sale of these shares may depress the market price of our common stock

As of December 22, 2009, we had 51,970,576 shares of common stock issued and outstanding and 24,923,763 shares reserved for issuance on the exercise of option or warrant rights. No shares of our Preferred Stock are issued and outstanding. This prospectus covers up to 10,000,000 shares of common stock. The sale of these shares may adversely affect the market price of our common stock.

Risks Related to our Common Stock:

There is only a limited market for our common stock and the price of our common stock may be affected by factors that are unrelated to the performance of our business.



Table of Contents

If any of the risks described in these Risk Factors or other unseen risks are realized, the market price of our common stock could be materially adversely affected. Additionally, market prices for securities of biotechnology and diagnostic companies have historically been very volatile. The market for these securities has from time to time experienced significant price and volume fluctuations for reasons that are unrelated to the operating performance of any one company. In particular, and in addition to the other risks described elsewhere in these Risk Factors, the following factors can adversely affect the market price of our common stock:

•announcements of technological innovation or improved or new diagnostic products by others;
•general market conditions;
•changes in government regulation or patent decisions;
•changes in insurance reimbursement practices or policies for diagnostic products.

Our common shares have traded on the Over the Counter Bulletin Board at prices below $5.00 for several years. As a result, our shares are characterized as "penny stocks" which could adversely affect the market liquidity of our common stock.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on Nasdaq or a national securities exchange and any equity security issued by an issuer that has:

•net tangible assets in excess of $2,000,000, if such issuer has been in continuous operation for three years;
•net tangible assets in excess of $5,000,000, if such issuer has been in continuous operation for less than three years; or
•average revenue of at least $6,000,000, for the last three years.

Unless an exception is available, the regulations require, prior to any transaction involving a penny stock, that a disclosure schedule explaining the penny stock market and the risks associated therewith is delivered to a prospective purchaser of the penny stock. We currently do not qualify for an exception, and, therefore, our common stock is considered to be penny stock and is subject to these requirements. The penny stock regulations adversely affect the market liquidity of our common shares by limiting the ability of broker/dealers to trade the shares and the ability of purchasers of our common shares to sell in the secondary market. In addition, certain institutions and investors will not invest in penny stocks.

Future sales of a significant number of shares of our common stock by existing stockholders may lower the price of our common stock, which could result in losses to our stockholders.

We estimate there that are approximately 21,000,000 restricted shares outstanding which, upon becoming freely tradable under Rule 144 of the Securities Exchange Act of 1934, may lower the price of our common stock.

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Registration Statement that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Registration Statement, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

•The efficacy, safety and intended utilization of our product candidates;
•The conduct and results our of research, discovery and preclinical efforts and clinical trials;
•our plans regarding future research, discovery and preclinical efforts and clinical activities, collaborative, intellectual property and regulatory activities;
•Our results of operations, financial condition and businesses, and products and drug candidates under development;



Table of Contents

•our product candidates that appear promising in early research and clinical trials may not demonstrate safety and efficacy in subsequent clinical trials;
•risks associated with reliance on collaborative partners for further clinical trials and other development activities;
•risks involved with development and commercialization of product candidates; and
•risks involved in obtaining future financing.

USE OF PROCEEDS

This prospectus relates to up to 10,000,000 shares of our common stock that may be offered and sold from time to time by the Company. We expect there to be approximately $_______ net proceeds to the Company (after deducting offering expenses) from the sale of these shares and expect to use these proceeds for general corporate purposes including debt reduction/interest payments on notes and general working capital purposes, summarized as follows:

UseAmount
Debt Reduction$____
General Working Capital$____
Total$____

DETERMINATION OF OFFERING PRICE

The offering price of these shares has been arbitrarily determined and bears no relationship to any objective criteria. The price does not bear any relationship to the Company's assets, book value, historical earnings, or net worth. In determining the offering price, management considered such factors as the prospects, if any, for similar companies, anticipated results of operations, present financial resources, the general condition of the securities market, and the likelihood of acceptance of this offering. Accordingly, the offering price should not be considered an indication of the actual value of our securities.

Dividend Policy

The Company does not anticipate paying dividends on its Common Stock at any time in the foreseeable future and plans to retain earnings for the development and expansion of the Company's Business. See "Description of Securities."

SELLING SECURITY HOLDERS

This is a self-underwritten offering. This prospectus is part of a prospectus that permits our officers and directors to sell the shares directly to the public, with no commission or other remuneration payable to them for any shares that are sold by them. We may also engage registered broker-dealers to offer and sell the shares. We may pay any such registered persons who make such sales a commission of up to 8% of the sale price of shares sold, with warrant coverage. We are currently not a party to any underwriting agreement, arrangement or understanding for the sale of the shares being offered. In the event we retain a broker who may be deemed an underwriter, we will file a post-effective amendment to this registration statement with the Securities and Exchange Commission. This offering is intended to be made solely by the delivery of this prospectus and the accompanying Subscription Application to prospective investors. We may terminate this offering prior to the expiration date. Our officers and directors will sell the shares and intend to offer them to friends, family members and business acquaintances. In offering the securities on our behalf, our directors and officers will rely on the safe harbor from broker dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934.

Rule 3a4-1 sets forth those conditions under which a person associated with an Issuer may participate in the offering of the Issuer's securities and not be deemed to be a broker-dealer. Those conditions are as follows:

a.        Our officers and directors are not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of their participation; and

b.        Our officers and directors will not be compensated in connection with their participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and

c.        Our officers and directors are not, nor will they be at the time of their participation in the offering, an associated person of a broker-dealer; and


Table of Contents

d.        Our officers and directors meet the conditions of paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or intend primarily to perform at the end of the offering, substantial duties for or on behalf of our Company, other than in connection with transactions in securities; and (B) are not a broker or dealer, or been associated person of a broker or dealer, within the preceding twelve months; and (C) have not participated in selling and offering securities for any Issuer more than once every twelve months other than in reliance on Paragraphs (a)(4)(i) and (a)(4)(iii).

Our officers, directors, control persons and affiliates of same do not intend to purchase any shares in this offering.

Our officers and directors, who will offer and sell the shares are aware that they are required to comply with the provisions of Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the officers and directors, sales agents, any broker-dealer or other person who participate in the distribution of shares in this offering from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete.

PLAN OF DISTRIBUTION

See Selling Security Holders section, above. Any engaged broker-dealer will be entitled to a commission equal to eight percent (8%) of the amount of cash raised through this offering in addition to eight percent (8%) warrant coverage for the Common Stock placed. The Warrants are for three (3) years and are exercisable into Rule 144 restricted stock at ten percent (10%) above the offering price.

Terms of the Offering

We are offering a maximum of 10,000,000 shares of our common stock at $___ per share. The shares will be sold at the fixed price of $__ per share until the earlier of (i) the date when the sale of all shares is completed; or (ii) three (3) years from the date of this Prospectus. There is no minimum amount of aggregate subscriptions and there is no minimum subscription amount required of each investor. Subscriptions, once received, are irrevocable. There is no commitment on the part of any person to purchase and pay for any shares.

There can be no assurance that all, or any, of the shares will be sold. In order to comply with the applicable securities laws of certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from registration or qualification requirement is available and has been complied with. The purchasers in this offering and in any subsequent trading market must be residents of such states where the shares have been registered or qualified for sale or an exemption from such registration or qualification is available. As of the date of this Prospectus, we have not identified the specific states where the offering will be sold. We will file a pre-effective amendment indicating which state or states the securities are to be sold pursuant to this registration statement.

DESCRIPTION OF THE SECURITIES TO BE REGISTERED

This prospectus includes up to 10,000,000 shares of our common stock offered by the Company. The following description of our common stock is only a summary. You should also refer to our certificate of incorporation and bylaws, which have been filed as exhibits to the registration statement of which this prospectus forms a part.

We are authorized to issue 100,000,000 shares of common stock having a par value of $.01 per share. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Our outstanding shares of common stock are fully paid and non-assessable. Holders of shares of Common Stock have no conversion, preemptive or other subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock.

DESCRIPTION OF BUSINESS

General

We are a Texas corporation formed in 1984 engaged in developing biologics for the treatment of human and animal diseases. We focus our research on the treatment of human disease indications, particularly influenza, using natural human interferon alpha that is administered in a proprietary low dose oral form.



Table of Contents

We currently own or license ten issued patents including one issued patent on our dietary supplement, Maxisal® and three pending patents related to the low-dose oral delivery of interferon. We have completed more than 100 pre-clinical (animal) and human studies on the safety and efficacy of low-dose orally administered interferon. We have filed with the U.S. Food and Drug Administration ("FDA"), and there now are in effect, six Investigational New Drug ("IND") Applications covering indicated uses for low-dose oral interferon alpha.

Our funding strategy is to seek private placement and pharma partner funding to complete Phase 2 clinical studies for influenza, chronic cough in COPD patients, and hepatitis C; then to find large pharma partners to fund Phase 3 clinical studies and assist with the regulatory approval process in the United States and Europe.

Technology - Non-toxic Interferon

Injectable interferon is FDA-approved to treat some neoplastic, viral and autoimmune diseases. Many patients experience moderate to severe side effects that result in discontinuance of injectable interferon therapy. Our product is a natural human interferon alpha 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 effective against viral and autoimmune diseases. Oral interferon is given in concentrations 10,000 times less than that given by injection, resulting in almost no side effects.

Influenza/Cold - FDA Phase 2 Study

The University of Western Australia has reached full enrollment in a Phase 2 clinical study of oral interferon as prevention/treatment of respiratory illnesses, including influenza. We provided the study drug, electronic data collection service, and US regulatory support for the study. A total of 200 healthy volunteers have been enrolled to take oral interferon or placebo lozenges once daily for 16 weeks, with an additional 4 weeks of untreated observation. Once per week, the study volunteers will submit a report detailing the severity of any cold/flu symptoms experienced, any medications taken, number of days of work missed, etc. The aim of the study is to determine whether the volunteers who take oral interferon experience fewer respiratory illnesses and/or less severe symptoms during the winter cold/flu season in Australia (June-September). Final results of the study are expected to be available before the end of the year.

Two publications in the April issue of the Journal of Virology report that interferon placed in the nose of guinea pigs or ferrets significantly suppresses replication of influenza virus. These publications reinforce our view that low-dose interferon, in the nose or in the mouth, is protective against influenza in humans.

In the March 20, 2009 issue of Science (page 1560-1561), flu experts stated "Our ability to anticipate pandemic events is poor, and our anti-pandemic armamentarium is weak. In an ever-shifting landscape of influenza evolution, we need to be farsighted and forceful in optimizing pandemic response capacity."

We believe low-dose oral interferon alpha will help people overcome pandemic influenza. The present swine flu epidemic threatens to endanger millions of people. The WHO predicted (May 7, 2009) that 2 billion people could be infected by this new swine flu.

Chronic Cough in COPD - FDA Phase 2 study ongoing; funding sought for a second study

COPD affects approximately 10% of the population over 40, is a growing problem, and is the 4th leading cause of death in the world. Chronic obstructive pulmonary disease (COPD) is a clinical condition with a progressive airflow limitation that is poorly reversible and characteristic of chronic bronchitis and emphysema. The causes of COPD include tobacco smoke, occupational dusts, chemicals, vapors and environmental pollutants. COPD is estimated to affect more that 600 million people worldwide. There are no effective therapies for emphysema, nor are there efficient clinical management strategies.

Data from a Phase 2 clinical study at Texas Tech University shows that treatment with oral interferon leads to a rapid and significant reduction in the cough associated with idiopathic pulmonary fibrosis (IPF), resulting in improved quality of life. Blinded, controlled studies in the US and Canada showed that oral interferon relieves chronic coughing in horses with COPD-like disease. A proof-of-concept study of low-dose oral interferon as treatment of chronic cough is ongoing at Texas Tech University. This clinical study is a Phase 2, randomized, double-blind, placebo-controlled, parallel trial in which 40 eligible volunteers with IPF- or COPD-associated chronic cough will be randomly assigned to one of two groups in equal numbers to receive either oral interferon or placebo lozenges. Treatment will be given three times daily for 4 weeks, and patients will be followed for 4 weeks post-treatment to assess durability of response. The study will evaluate the ability of oral interferon to reduce the frequency and severity of chronic cough, compared to placebo.

Hepatitis C - FDA Phase 2 study ongoing

CytoPharm, Inc., our licensee for Taiwan and China, has started a Phase 2, placebo-controlled, dose-ranging study of 165 hepatitis C virus-infected patients in Taiwan. The study is designed to test the ability of oral interferon to reduce the virologic relapse rate of patients who have completed standard therapy with pegylated interferon plus ribavirin.


Table of Contents

Oral Warts in HIV+ Patients - FDA Phase 2 study ongoing

Oral warts are lesions in the mouth caused by the human papillomavirus. The FDA has granted Orphan Drug Designation to us for interferon in the treatment of oral warts in HIV+ patients. In Phase 1/2 clinical studies of 36 HIV+ patients with multiple oral warts who were receiving highly active antiretroviral therapy (HAART), efficacy of oral interferon was observed when some subjects achieved a complete or nearly complete regression of their warts.

We have concluded enrollment of a Phase 2 placebo-controlled, 24-week study. A total of 59 oral warts patients were enrolled at 10 clinical sites in the US. Analysis of data from this study will be completed by the end of 2009 or early 2010.

Strategic Alliance with HBL

Hayashibara Biochemical Laboratories, Inc. ("HBL") was established in 1970 to engage in research and development. It is a subsidiary of Hayashibara Company, Ltd., a privately-owned Japanese holding corporation with diversified subsidiaries. For more than 130 years, the Hayashibara Company, Ltd. and its predecessors have been applying microbiological technology to the starch industry for the production of maltose and other sugars.

In 1981, HBL established the Fujisaki Institute to accelerate development of industrial methods for the production of biologics and to sponsor clinical trials for such products. In 1985, HBL built the Fujisaki Cell Center to support basic research. 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 has developed and obtained patents for technology relating to the production of interferon alpha-containing lozenges by which the stability of the interferon alpha activity can be maintained for up to 24 months at room temperature and up to five years if the product is refrigerated. 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"). Such Development Agreement was subsequently amended on January 17, 1996; May 10, 1996; and September 7, 2001. The current expiration date of the Development Agreement is March 12, 2011, at which time it will automatically renew for an additional three (3) years, unless the parties agree otherwise. Among other things, the Development Agreement provides us with a source of natural human interferon alpha for use in the Company's interferon alpha-containing products.

Strategic Alliance with Nobel.

We signed a licensing and supply agreement in September 2004 with a Turkish pharmaceutical company, NOBEL ILAC SANAYII VE TICARET A.S., providing the rights to oral low-dose interferon-alpha for the treatment of Behcet's disease in Turkey and in Azerbaijan, Bosnia & Herzegovina, Bulgaria, Croatia, Georgia, Kazakhstan, Kyrghyzstan, Macedonia, Romania, Russia, Saudi Arabia, Slovenia, Tajikistan, Turkmenistan, Uzbekistan, and Federal Republic of Yugoslavia.

Strategic Alliance with Bumimedic.

In January 2006 we entered into a license and distribution agreement 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. Bumimedic will seek registration for our natural human IFN and commence marketing the product after approval. The terms of the agreement call for Bumimedic to manufacture lozenges from our bulk natural human IFN (which is supplied by Hayashibara Biochemical Laboratories); package the lozenges and distribute them to local hospitals, pharmacies and clinics in Malaysia. Pursuant to the agreement, we will receive a series of payments, in three stages: upon formal execution of the distribution agreement, upon regulatory approval, and upon production. We will also receive a royalty on the sale of the natural human IFN.

Strategic Alliance with CytoPharm.

In November 2006, we entered into a License and Supply Agreement with CytoPharm, Inc., a Taipei, Taiwan-based biopharmaceutical company whose parent company is Vita Genomics, Inc., the largest biotech company in Taiwan specializing in pharmacogenomics and specialty Clinical Research Organization. Under the terms of the Agreement, CytoPharm and its subsidiary will conduct all clinical trials, and seek to obtain regulatory approvals in both China and Taiwan (the "Territory") to launch our low dose oral interferon in the Territory for influenza and hepatitis B ("HBV") and hepatitis C ("HCV") indications. According to the Agreement, CytoPharm will make payments to us upon reaching certain milestones and will also pay royalties on low dose oral interferon sales in the Territory.



Table of Contents

In March 2008, we entered into a Supply Agreement for Animal Health with CytoPharm, Inc. Under the terms of the Agreement, CytoPharm will conduct all clinical trials, and seek to obtain regulatory approvals in China and Taiwan (the "Territory") to launch our low dose oral interferon in the Territory for treatment of diseases and other healthcare applications of swine, cattle and poultry. CytoPharm will make payments to us upon reaching certain milestones and will also pay royalties on low dose oral interferon sales in the Territory.

Strategic Alliance with Cyto Biotech.

On February 6, 2009, we entered into a 15-year License and Supply agreement with Cyto Biotech, Inc. a Taipei, Taiwan animal health company. Under the terms of the agreement, Cyto Biotech, will, at its sole expense and cost, conduct all clinical trials and studies and seek to obtain regulatory approvals in China, Taiwan, Thailand, the Philippines, Cambodia, Vietnam and Malaysia ("the Territory"), subject to the existing license and supply agreements with CytoPharm, Inc. and Bumimedic SDN. BHD., required for the commercial launch of our low dose oral interferon in the Territory for any animal and human health indications.

Cyto Biotech purchased common stock, included in the above issuances in Amarillo Biosciences stock; paid an initial license fee to us; and will pay a net royalty on low dose oral interferon sales. In addition, the agreement calls for certain minimum royalty payments to be made.

Patents and Proprietary Rights

Since our inception, we have 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, composition of matter and manufacturing. We presently own or license ten patents including one issued patent on our dietary supplement. We also have three pending patents related to low-dose orally delivered interferon. Our owned and licensed patents are listed below:

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 NEOPLASTIC DISEASE WITH ORAL INTERFERON" as described and claimed in U.S. Patent No. 5,824,300 issued October 1998, Licensed. Expiration: October 2015.

3.     "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.

4.     "TREATMENT OF HYPERALLERGENIC RESPONSE" as described and claimed in U.S. Patent No. 5,882,640 issued March 1999, Licensed. Expiration: March 2016.

5.     "LOW-DOSE ORAL ADMINISTRATION OF INTERFERONS" as described and claimed in U.S. Patent No. 5,910,304 issued June 1999, Licensed. Expiration: December 2010.

6.     "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.

7.     "INTERFERON-ALPHA MEDIATED UPREGULATION OF AQUAPORIN EXPRESSION" as described and claimed in U.S. Patent No. 6,506,377 issued January 2003, Owned. Expiration: September 2021. Patents with Formulation Claims

8.     "SEMI-SOLID PHARMACEUTICAL AGENT AND PROCESS TO PRODUCE THE SAME" as described and claimed in U.S. Patent No. 5,489,577 issued February 1996, Licensed. Expiration: June 2013.

9.     "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.

10.   "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 2023.

There are no current patent litigation proceedings involving us.


Table of Contents

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 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 may, 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. Some of competitors are Roche, Schering, Berlex, Serono, Biogen, InterMune and Hemispherix.

United States Regulation

Before any of our products can be marketed in the United States, they must receive approval from the FDA. To receive this approval, any drug we develop 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 process typically required by the FDA:

•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, or NDA, or of an NDA supplement (for subsequent indications or other modifications, including a change in location of the manufacturing facility).

Preclinical Testing

In the United States, drug candidates are tested in animals until adequate proof of safety and efficacy is established. These preclinical studies generally evaluate the mechanism of action and pharmacology of the product and assess the potential safety and efficacy of the product. Tested compounds must be produced according to applicable current good manufacturing practice (cGMP) requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices (GLP). The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an investigational new drug application, or IND, which must become effective before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If the FDA has any concerns, the sponsor of the application and the FDA must resolve the concerns before clinical trials can begin. Regulatory authorities may require additional preclinical data before allowing the clinical studies to commence or proceed from one Phase to another, and could demand that the studies be discontinued or suspended at any time if there are significant safety issues. Furthermore, an independent institutional review board, or IRB, for each medical center proposing to participate in the conduct of the clinical trial must review and approve the clinical protocol and patient informed consent form before the center commences the study.

Clinical Trials

Clinical trials for new drug candidates are typically conducted in three sequential phases that may overlap. In Phase 1, the initial introduction of the drug candidate into human volunteers, the emphasis is on testing for safety or adverse effects, dosage, tolerance, metabolism, distribution, excretion, and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the drug candidate for specific targeted indications, to determine dosage tolerance and optimal dosage and to identify possible adverse side effects and safety risks. Once a compound shows evidence of effectiveness and is found to have an acceptable safety profile in Phase 2 evaluations, pivotal Phase 3 trials are undertaken to more fully evaluate clinical outcomes and to establish the overall risk/benefit profile of the drug, and to provide, if appropriate, an adequate basis for product labeling. During all clinical trials, physicians will monitor patients to determine effectiveness of the drug candidate and to observe and report any reactions or safety risks that may result from use of the drug candidate. The FDA, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk.


Table of Contents

The data from the clinical trials, together with preclinical data and other supporting information that establishes a drug candidate's safety, are submitted to the FDA in the form of a new drug application, or NDA, or NDA supplement (for approval of a new indication if the product candidate is already approved for another indication). Under applicable laws and FDA regulations, each NDA submitted for FDA approval is usually given an internal administrative review within 45 to 60 days following submission of the NDA. If deemed complete, the FDA will "file" the NDA, thereby triggering substantive review of the application. The FDA can refuse to file any NDA that it deems incomplete or not properly reviewable. The FDA has established internal substantive review goals of six months for priority NDA's (for drugs addressing serious or life threatening conditions for which there is an unmet medical need) and ten months for regular NDA's. The FDA, however, is not legally required to complete its review within these periods, and these performance goals may change over time. Moreover, the outcome of the review, even if generally favorable, is not typically an actual approval, but an "action letter" that describes additional work that must be done before the NDA can be approved. The FDA's review of a NDA may involve review and recommendations by an independent FDA advisory committee. The FDA may deny approval of an NDA or an NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal Phase 3 clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval.

Data Review and Approval

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. It normally takes many years to satisfy these various regulatory requirements, assuming they are satisfied. Information generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the process. Accordingly, the actual time and expense required to bring a product to market may vary substantially. We cannot assure you that we will submit applications for required authorizations to manufacture and/or market potential products or that any such application will be reviewed and approved by the appropriate regulatory authorities in a timely manner, if at all. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit, or prevent regulatory approval. Success in early stage clinical trials does not ensure success in later stage clinical trials. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations, and dosages, or have conditions placed on them that restrict the commercial applications, advertising, promotion, or distribution of these products.

Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. The FDA may also request additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after a drug receives approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information via the FDA's voluntary adverse drug reaction reporting system. Any products manufactured or distributed by us pursuant to FDA approvals would be subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the good manufacturing practices regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug. Furthermore, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.

The FDA closely regulates the marketing and promotion of drugs. Approval may be subject to post-marketing surveillance and other record keeping and reporting obligations, and involve ongoing requirements. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers' communications on the subject of off-label use.

505(b)(2)

The traditional approval process for New Drugs is set out in Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act. An alternative path to FDA approval is for new or improved formulations of previously approved products. This alternative path, established by section 505(b)(2) of the Federal Food, Drug, and Cosmetic 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 FDA may also require companies to perform additional studies to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the indications for which the referenced product was approved, as well as for any new indications sought by the Section 505(b)(2) applicant.



Table of Contents

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA's Orange Book publication. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is valid or will not be infringed by the new product. If the applicant does not challenge the listed patents, the Section 505(b)(2) application will not be approved until all the listed patents claiming the referenced product have expired. The Section 505(b)(2) application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired.

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. Orphan drug designation must be requested before submitting a NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in very limited circumstances, for seven years. These, very limited, circumstances are (i) an inability to supply the drug in sufficient quantities or (ii) a situation in which a new formulation of the drug has shown superior safety or efficacy. This exclusivity, however, also could block the approval of our product for seven years if a competitor obtains earlier approval of the same drug for the same indication.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of 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.

Under European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is available for medicines produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all EU member states. This authorization is a marketing authorization application ("MAA"). The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval. This procedure is referred to as the mutual recognition procedure ("MRP").

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 our investigational drugs or approval of new diseases for our existing products and could also increase the cost of regulatory compliance. We cannot 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, 2008 and 2007, the Company incurred research and development expenses of $525,903 and $530,867, respectively. During the nine months ended September 30, 2009 and 2008, the Company incurred research and development expenses of $389,969 and $388,014, respectively.

Employees

We have 3 full-time employees and 2 part-time employees based in Amarillo, Texas. Of these employees, 3 are executive officers and 2 work in administrative and research and development capacities. We also use consultants in business and research development.


Table of Contents

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, 2010 and our monthly rent is $1,000 per month. We believe that the facilities are well maintained and generally suitable and adequate for our current and projected operating needs.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this prospectus, we were not aware of any such legal proceedings or claims against us.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

Company Goal - FDA Approval and Commercialization of Oral Interferon.
Amarillo Biosciences, Inc. (OTCBB: AMAR) is the world leader in the development of low-dose interferon for oral delivery and is conducting Phase 2 clinical studies in various human diseases. Our funding strategy is to seek private placement and pharma partner funding to complete Phase 2 clinical studies for influenza, chronic cough in COPD patients, and hepatitis C; then to find large pharma partners to fund Phase 3 clinical trials and to assist with the regulatory approval process in the US and Europe. We believe that our technology and the large billion dollar markets for these disease indications will attract global pharma partners sometime next year.

Intellectual Property
Our portfolio consists of patents with claims that encompass method of use or treatment with interferon and composition of matter and manufacturing. We currently own or license nine patents and four pending patents related to the low-dose oral delivery of interferon, and one issued patent on our dietary supplement, Maxisal®. We have completed more than 100 pre-clinical (animal) and human studies on the safety and efficacy of low-dose orally administered interferon.

Technology - Non-toxic Interferon
Injectable interferon is FDA-approved to treat some neoplastic, viral and autoimmune diseases. Many patients experience moderate to severe side effects that result in discontinuance of injectable interferon therapy. Our product is a natural human interferon alpha 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 effective against viral and autoimmune diseases. Oral interferon is given in concentrations 10,000 times less than that given by injection, resulting in almost no side effects.

Influenza
Influenza (the flu) is a contagious respiratory illness caused by influenza viruses. It can cause mild to severe illness, and at times can lead to death. Influenza usually starts suddenly and may include the following symptoms: 1) fever (usually high), 2) headache, 3) tiredness (can be extreme), 4) cough, 5) sore throat, 6) runny or stuffy nose, 7) body aches, and 8) digestive problems such as diarrhea, nausea and vomiting. Complications of flu can include bacterial pneumonia, ear infections, sinus infections, dehydration, and worsening of chronic medical conditions, such as congestive heart failure, asthma, or diabetes.

Flu viruses spread mainly from person to person through coughing or sneezing. Sometimes people may become infected by touching something with flu viruses on it and then touching their mouth or nose. Most healthy adults may be able to infect others beginning 1 day before symptoms develop and up to 5 days after becoming sick. That means that a person may be able to pass on the flu to someone else before they know they are sick, as well as while they are sick.

Pigs can be infected with both human and avian influenza viruses in addition to swine influenza viruses. Infected pigs get symptoms similar to humans, such as cough, fever and runny nose. Because pigs are susceptible to avian, human and swine influenza viruses, they potentially may be infected with influenza viruses of different species (e.g., ducks and humans) at the same time. When this happens, it is possible for the genes of these viruses to mix and create a new virus. For example if a pig were infected with a human influenza virus and an avian influenza virus at the same time, the viruses could mix (reassort) and produce a new virus with most of the genes from the human virus, but with a few genes from the avian virus. The resulting new virus could be able to infect humans and spread from person to person, but it would have surface proteins not previously seen in influenza viruses that infect humans.

Influenza A viruses are found in many different animals, including ducks, chickens, pigs, whales, horses and seals. Influenza B viruses circulate widely only among humans. While it is unusual for people to get influenza infections directly from animals, sporadic human infections and outbreaks caused by certain avian influenza A viruses have been reported.



Table of Contents

A number of natural outbreak or challenge studies indicate that low doses of IFNa given orally and/or intranasally are safe and effective at treating human flu. IFNa administered intranasally coats the oropharynx and comes in contact with the same receptors as IFNa administered orally. Leukocyte interferon was given in low doses intranasally for 3 consecutive days to 374 subjects "at the height" of an influenza outbreak. Interferon-treated subjects had less severe illness than 382 subjects given placebo. When interferon was given to 320 subjects "before" the influenza outbreak, these subjects had less illness than the 317 subjects given placebo. It was reported that the interferon treatment was free of adverse events.

In 1969, approximately 14,000 people in Moscow participated in controlled studies of placebo versus interferon treatment during a natural outbreak of Hong Kong influenza. Interferon (about 128 units) or placebo was dripped into the nose daily for 5 days starting about the time of the first reported influenza cases. Interferon treatment significantly (P<0.01) reduced the number of influenza cases.

In Japan, intranasal drops of human interferon alpha (5,000 units daily) given for 4 months reduced the frequency and severity of diseases due to influenza A (H3N2 and H1N1) and parainfluenza virus. Data was collected on 83 volunteers in the study. Fever occurred in 6 of 40 volunteers given interferon and in 15 of 43 volunteers given placebo (P<0.01). Subjective symptoms such as headache, cough, fatigue, anorexia, myalgia, etc. occurred in 34% of volunteers given interferon and in 67% of volunteers given placebo (P<0.01).

During influenza epidemics in 1983, 1984 and 1985, 140 children were treated with a spray of natural human interferon alpha into the nose and mouth twice daily for 3-4 days. The total daily dose was reported to be 700-1600 units. The 53 control children were given traditional Chinese herbs. Children given interferon had a significantly (P<0.01) faster normalization of temperature at 24, 36 and 48 hours after the first treatment. The clinicians reported that pharyngitis and lymphadenosis of the posterior pharynx improved when fever subsided.

Low doses of interferon probably do not have a direct antiviral effect but instead exert an immune modulatory effect through interferon stimulated genes. Influenza studies conducted in the USA, Australia and Germany have shown that oral interferon protects mice against an otherwise fatal influenza infection.

Influenza/Cold FDA Phase 2 Study
The University of Western Australia has reached full enrollment in a Phase 2 clinical study of oral interferon as prevention/treatment of respiratory illnesses, including influenza. We provided the study drug, electronic data collection service, and US regulatory support for the study. A total of 200 healthy volunteers have been enrolled to take oral interferon or placebo lozenges once daily for 16 weeks, with an additional 4 weeks of untreated observation. Once per week, the study volunteers will submit a report detailing the severity of any cold/flu symptoms experienced, any medications taken, number of days of work missed, etc. The aim of the study is to determine whether the volunteers who take oral interferon experience fewer respiratory illnesses and/or less severe symptoms during the winter cold/flu season in Australia (June-September). Final results of the study are expected to be available before the end of the year.

Two publications in the April issue of the Journal of Virology report that interferon placed in the nose of guinea pigs or ferrets suppresses replication of influenza virus. These publications reinforce our view that low-dose interferon, in the nose or in the mouth, is protective against influenza in humans.

In the March 20, 2009 issue of Science (page 1560-1561), flu experts stated "Our ability to anticipate pandemic events is poor, and our anti-pandemic armamentarium is weak. In an ever-shifting landscape of influenza evolution, we need to be farsighted and forceful in optimizing pandemic response capacity."

We believe low-dose oral interferon alpha will help people overcome pandemic influenza. The present swine flu epidemic threatens to endanger millions of people. The WHO predicted (May 7, 2009) that 2 billion people could be infected by this new swine flu.

Chronic Cough - COPD - FDA Phase 2 ongoing, funding sought for a second study
COPD affects approximately 10% of the population over 40, is a growing problem, and is the 4th leading cause of death in the world. Chronic obstructive pulmonary disease (COPD) is a clinical condition with a progressive airflow limitation that is poorly reversible and characteristic of chronic bronchitis and emphysema. The causes of COPD include tobacco smoke, occupational dusts, chemicals, vapors and environmental pollutants. COPD is estimated to affect more that 600 million people worldwide. There are no effective therapies for emphysema, nor are there efficient clinical management strategies.

Data from a Phase 2 clinical study at Texas Tech University shows that treatment with oral interferon leads to a rapid and significant reduction in the cough associated with idiopathic pulmonary fibrosis (IPF), resulting in improved quality of life. Blinded, controlled studies in the US and Canada showed that oral interferon relieves chronic coughing in horses with COPD-like disease.

A proof-of-concept study of low-dose oral interferon as treatment of chronic cough is ongoing at Texas Tech University. This clinical study is a Phase 2, randomized, double-blind, placebo-controlled, parallel trial in which 40 eligible volunteers with IPF- or COPD-associated chronic cough will be randomly assigned to one of two groups in equal numbers to receive either oral interferon or placebo lozenges. Treatment will be given three times daily for 4 weeks, and patients will be followed for 4 weeks post-treatment to assess durability of response. The study will evaluate the ability of oral interferon to reduce the frequency and severity of chronic cough, compared to placebo.


Table of Contents

Hepatitis C FDA Phase 2 (funded by Cytopharm)
CytoPharm, Inc., our licensee for Taiwan and China, has started enrollment into a Phase 2, placebo-controlled, dose-ranging study of 165 hepatitis C virus-infected patients in Taiwan. The study is designed to test the ability of oral interferon to reduce the virologic relapse rate of patients who have completed standard therapy with pegylated interferon plus ribavirin.

Oral Warts in HIV+ Patients - FDA Phase 2 ongoing, funded by AMAR
Oral warts are lesions in the mouth caused by the human papillomavirus. The FDA has granted Orphan Drug Designation to us for interferon in the treatment of oral warts in HIV+ patients. In Phase 1/2 clinical studies of 36 HIV+ patients with multiple oral warts who were receiving highly active antiretroviral therapy (HAART), efficacy of oral interferon was observed when some subjects achieved a complete or nearly complete regression of their warts.

We have concluded enrollment of a Phase 2 placebo-controlled, 24-week study. A total of 59 oral warts patients were enrolled at 10 clinical sites in the US. Analysis of data from this study will be completed by the end of 2009 or early 2010.

Strategic Alliance with HBL. Hayashibara Biochemical Laboratories, Inc. ("HBL") was established in 1970 to engage in research and development. It is a subsidiary of Hayashibara Company, Ltd., a privately-owned Japanese holding corporation with diversified subsidiaries. For more than 130 years the Hayashibara Company, Ltd. and its predecessors have been applying microbiological technology to the starch industry for the production of maltose and other sugars.

In 1981, HBL established the Fujisaki Institute to accelerate development of industrial methods for the production of biologics and to sponsor clinical trials for such products. In 1985, HBL built the Fujisaki Cell Center to support basic research. 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 has developed and obtained patents for technology relating to the production of interferon alpha-containing lozenges by which the stability of the interferon alpha activity can be maintained for up to 24 months at room temperature and up to five years if the product is refrigerated. 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"). Such Development Agreement was subsequently amended on January 17, 1996; May 10, 1996; and September 7, 2001. The current expiration date of the Development Agreement is March 12, 2011, at which time it will automatically renew for an additional three (3) years, unless the parties agree otherwise. Among other things, the Development Agreement provides us with a source of natural human interferon alpha for use in the Company's interferon alpha-containing products.

Strategic Alliance with Nobel. We signed a licensing and supply agreement in September 2004 with a Turkish pharmaceutical company, NOBEL ILAC SANAYII VE TICARET A.S., providing the rights to oral low-dose interferon-alpha for the treatment of Behcet's disease in Turkey and in Azerbaijan, Bosnia & Herzegovina, Bulgaria, Croatia, Georgia, Kazakhstan, Kyrghyzstan, Macedonia, Romania, Russia, Saudi Arabia, Slovenia, Tajikistan, Turkmenistan, Uzbekistan, and Federal Republic of Yugoslavia.

Strategic Alliance with Bumimedic. In January 2006 we entered into a license and distribution agreement 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. Bumimedic will seek registration for our natural human IFN and commence marketing the product after approval. The terms of the agreement call for Bumimedic to manufacture lozenges from our bulk natural human IFN (which is supplied by Hayashibara Biochemical Laboratories); package the lozenges and distribute them to local hospitals, pharmacies and clinics in Malaysia. Pursuant to the agreement, we will receive a series of payments, in three stages: upon formal execution of the distribution agreement, upon regulatory approval, and upon production. We will also receive a royalty on the sale of the natural human IFN.

Strategic Alliance with CytoPharm. In November 2006, we entered into a License and Supply Agreement with CytoPharm, Inc., a Taipei, Taiwan-based biopharmaceutical company whose parent company is Vita Genomics, Inc., the largest biotech company in Taiwan specializing in pharmacogenomics and specialty Clinical Research Organization. Under the terms of the Agreement, CytoPharm and its subsidiary will conduct all clinical trials, and seek to obtain regulatory approvals in both China and Taiwan (the "Territory") to launch our low dose oral interferon in the Territory for influenza and hepatitis B ("HBV") and hepatitis C ("HCV") indications. According to the Agreement, CytoPharm will make payments to us upon reaching certain milestones and will also pay royalties on low dose oral interferon sales in the Territory.

In March 2008, we entered into a Supply Agreement for Animal Health with CytoPharm, Inc. Under the terms of the Agreement, CytoPharm will conduct all clinical trials, and seek to obtain regulatory approvals in China and Taiwan (the "Territory") to launch our low dose oral interferon in the Territory for treatment of diseases and other healthcare applications of swine, cattle and poultry. CytoPharm will make payments to us upon reaching certain milestones and will also pay royalties on low dose oral interferon sales in the Territory.



Table of Contents

Strategic Alliance with Cyto Biotech. On February 6, 2009, we entered into a 15-year License and Supply agreement with Cyto Biotech, Inc. a Taipei, Taiwan animal health company. Under the terms of the agreement, Cyto Biotech, will, at its sole expense and cost, conduct all clinical trials and studies and seek to obtain regulatory approvals in China, Taiwan, Thailand, the Philippines, Cambodia, Vietnam and Malaysia ("the Territory"), subject to the existing license and supply agreements with CytoPharm, Inc. and Bumimedic SDN. BHD., required for the commercial launch of our low dose oral interferon in the Territory for any animal and human health indications.

Cyto Biotech purchased common stock, included in the above issuances in Amarillo Biosciences stock; paid an initial license fee to us; and will pay a net royalty on low dose oral interferon sales. In addition, the agreement calls for certain minimum royalty payments to be made.

Nutraceutical Product. We sell anhydrous crystalline maltose (ACM) as Maxisal® to individuals and to pharmacies in the USA and to licensed distributors overseas. We seek to out-license Maxisal®.

Equity Funding. In January 2008, we completed a private placement by selling 1,000 shares of Series A convertible preferred stock for $1,000 per share in a private placement offering; generating gross proceeds of $1,000,000 and net proceeds of $793,793. The convertible preferred stock is convertible into 4,000,0000 shares of common stock. The investor also received five year warrants to purchase 4,000,000 shares of common stock at $0.30 per share. The investment banker was paid a commission of $80,000 plus received five year warrants to purchase 640,000 shares of common stock at $0.30 per share.

The Series A preferred shareholder was paid $77,903 (10% annualized return) of stock dividends during 2008. A total of 437,273 shares were issued at $0.09 to $0.27 per share. The preferred shareholder converted all the outstanding preferred stock into 4,000,000 shares of common stock at $0.25 per share in three stages on October 15, 17 and 20, 2008. Currently there is no preferred stock outstanding and no future dividends required to be paid. The warrant anti-dilution provisions were triggered on November 21, 2008 when private placement shares were sold for $0.10 per share. Holders of the 4,640,000 warrants issued received 9,280,000 additional warrants. Total warrants were increased by a factor of three and the exercise price reduced from $0.30 to $0.10 per share.

In addition to the January 2008 private placement, we sold 1,160,000 unregistered shares of common stock for $0.10-$0.25 per share. Net proceeds from private placement sales of common stock totaled $121,000 after payment of $10,000 in commissions and finder's fees. Directors, officers and consultants purchased 188,404 shares of common stock for $0.10 per share for cash generating $18,841. Officers and consultants also received 702,439 shares of common stock for $0.06-$0.33 per share in lieu of $186,311 of salaries and services.

In the first quarter of 2009, the Company sold 3,050,000 unregistered shares of common stock for $0.10 per share plus 3,050,000 3-year warrants with $0.20 exercise price and 500,000 unregistered shares of common stock for $0.10 per share plus 500,000 3-year warrants with $0.10 exercise price. Net proceeds from private placement stock sales totaled $320,000 after payment of $35,000 in commissions and finder's fees. A consultant purchased 62,500 shares at $0.08 per share for $5,000 cash. Equity funding net of commissions and finder's fees totaled $325,000.

In the second quarter of 2009, the Company sold 2,320,290 unregistered shares of common stock for $0.10 per share plus 2,280,000 3-year warrants with $0.10 exercise price. Net proceeds from private placement stock sales totaled $227,029 after payment of $5,000 in finder's fees. An officer was paid 419,367 shares of common stock in lieu of $41,937 of salary. Two investment bankers exercised 395,156 cashless warrants at $0.10 per share and received 183,375 shares of common stock.

In the third quarter of 2009, the Company sold 1,507,060 unregistered shares of common stock for $0.10 per share plus 1,507,060 3-year warrants with $0.10 exercise price. Net proceeds from private placement stock sales totaled $147,706 after payment of $3,000 in finder's fees. An officer was paid 50,443 shares of common stock in lieu of $9,836 of salary. Two consultants were issued 25,000 and 20,550 shares of registered common stock for $4,875 and $5,343 of services respectively. An officer was paid 408,486 shares of the Company's registered common stock, pursuant to the Amended and Restated 2008 directors, Officers, and Consultants Stock Purchase Plan in payment of $35,458 of accrued and unpaid salary due and owing for pay periods running from February 15, 2009, through May 31, 2009, inclusive. Four investment bankers exercised 1,076,842 cashless warrants at $0.10 per share and received 602,479 shares of common stock.

Since September 30, 2009, the Company sold 600,000 unregistered shares of common stock for $0.10 per share together with 600,000 warrants with 3-year term and exercisable at $0.10 per share. Net proceeds totaled $60,000.

Results of Operations for Three Months ended September 30, 2009, as compared to Three Months ended September 30, 2008

Revenues. During the quarter ended September 30, 2009, $36 from dietary supplement sales was generated compared to $234 for the quarter ended September 30, 2008, a decrease of $198 or 85%. During the quarter ended September 30, 2009, $48,000 sublicense fee was generated compared to a $30,000 sublicense fee the quarter ended September 30, 2008, an increase of $18,000 or 60%.

Research and Development Expenses. Research and development expenses of $110,032 were incurred for the quarter ended September 30, 2009, compared to $42,398 for the quarter ended September 30, 2008, an increase of $67,634 (160%). The increase was mostly from a patient recruitment advertising credit for $75,000 in the third quarter of 2008. R&D costs excluding the advertising credit were $117,398.


Table of Contents

Selling, General and Administrative Expenses. Selling, general and administrative expenses of $235,484 were incurred for the third quarter in 2009, compared to $281,113 for the third quarter of 2008, a decrease of $45,629 (16%). The reduction was mostly the result of savings from staff reductions.

Change in

Fair Value of Derivative Instruments. Change inFinancial 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, of derivative instruments was realized as a $744,913 operating expense in the third quarter of 2009 compared to zero in the third quarter of 2008. The change in fair value of derivative instruments was not reported in 2008.

Net Loss. The Company's net loss for the third quarter of 2009 was $1,090,120 compared to a net loss of $331,940 for the third quarter of 2008, an increase of $758,180 (228%). This was mostly a result of the $744,913 change in fair value of derivatives recorded for the third quarter of 2009. Recognition ofwith the change in fair value for derivatives wasrecorded in earnings. We elected not reported in 2008. A $25,000 preferred stock dividend was recognized duringto measure any eligible items using the third quarter of 2008 which increasedfair value option. Consistent with the net loss applicable to common shareholders to $356,940.

Liquidity and Capital Resources

On September 30, 2009, the Company had available $39,975 cash and had a working capital deficit (current assets less current liabilities) of $6,509,354. This includes $3,424,372 of non-cash derivative liabilities for warrants with embedded derivatives. Current liabilities include two $1 million notes, $639,904 of accrued interest and $78,360 of accrued expense owed to Hayashibara Biochemical Laboratories, Inc. (HBL), the Company's largest shareholder. Accrued payroll and vacation expenses owed mostly to officers are $256,193.

Assuming there is no decrease in current accounts payable, the Company's negative cash flow for operating activities plus equipment purchases and patent filings, the Company's cash burn rate was approximately $75,000 per month during the first nine months of 2009. The Company's continued losses and lack of liquidity raise substantial doubt about whether the Company is able to continue as a going concern for a reasonable period of time. The Company's ability to continue as a going concern is dependent upon several factors including, but not limited to, the Company's ability to generate sufficient cash flows to meet its obligations on a timely basis, obtain license and milestone fees, obtain additional financing and continue to obtain supplies and services from its vendors. The Company will need to raise additional funds in order to fully execute its 2009 and 2010 Plan. The Company is currently pursuing potential investors for funding. In addition, the Company is also pursuing potential pharmaceutical partners to provide upfront license fee payments and funding for clinical studies. There can be no assurance that private placement funding or pharmaceutical partner funding will become available.

Results of Operations for the Year Ended December 31, 2008 as Compared to the Year Ended December 31, 2007

Revenues. During the fiscal year ended December 31, 2008, $109,836 from product sales, sublicense fees and royalties was generated compared to $70,069 for the fiscal year ended December 31, 2007, an increase of $39,767 or approximately 57%.

Selling, General and Administrative Expenses. We were successful in cutting costs in 2008. Selling, General and Administrative expenses were reduced from $1,936,847 for the fiscal year ended December 31, 2007 to $1,366,076 for the fiscal year ended December 31, 2008, a cost savings of $570,771 or approximately 29.4%. Professional and investor relations fees were cut $678,930 and $56,286 respectively. A portionFair Value Measurement Topic of the cost reductions in professional and investor relations fees were offset by adding Dr. Peter Mueller to the management team on April 15, 2008 and also increasing employee health insurance benefits. Salaries, payroll taxes, employee option expenses and health insurance costs were $278,174 higher in 2008 than 2007. Total non-cash operating expenses for stock, options and accrued salaries were $849,436 in 2008 compared to $1,045,662 in 2007, a decrease of $196,226 or approximately 19%.

Research and Development Expenses. Research and Development expenses of $525,903 were incurred for the fiscal year ended December 31, 2008, compared to $530,867 for the fiscal year ended December 31, 2007, a decrease of $4,964 or approximately 1%.

Net Income (Loss). Net loss for the fiscal year ended December 31, 2008 was $1,923,067 compared to a net loss of $2,506,073 for the fiscal year ended December 31, 2007, a decrease of $583,006 or approximately 23%. Net loss applicable to common shareholders that includes stock dividends for preferred stock shareholders, deemed dividend for the preferred stock beneficial conversion feature (BCF) and warrant anti-dilution reset deemed dividends for 2008 was $3,200,058 compared to $2,506,073 for 2007, an increase of $693,985 or approximately 28%. Preferred stock dividends, preferred stock BCF deemed dividend and warrant anti-dilution reset deemed dividends in 2008 were $77,903, $562,841 and $636,247 respectively.

Liquidity and Capital Resources

At December 31, 2008,FASB ASC, we had available cash of $10,853, and had a working capital deficit of $3,114,314. Negative cash flow from operating activities plus equipment purchases, software purchases and patent filings (burn rate) is approximately $81,000 per month. Continued losses and lack of liquidity indicate that we may not be able to continue as a going concern for a reasonable period of time. The ability to continue as a going concern is dependent upon several factors including, but not limited to, the ability to generate sufficient cash flow to meet obligations


Table of Contents

on a timely basis, obtain additional financing and continue to obtain supplies and services from vendors. We will need to raise additional funds in order to fully execute our 2009 Plan. We are presently negotiating with human and animal health commercial development partners in various regions of the world. We believe that one or more of these agreements will be executed during 2009. These agreements could generally include provisions for the commercial partner to pay us a technology access fee, could include payments for a portion of the clinical trial expenses, could include payment obligations to us upon the accomplishment of certain defined tasks and/or could provide for paymentsimplemented guidelines relating to the future salesdisclosure of commercial product. These agreements couldour 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 important source of funds. However, there can be no assurance that we will be successfulasset or paid to transfer a liability in obtaining additional funding from human health commercial development partners, institutional or private investors. If we are not successful in raising additional funds, we will need to significantly curtail clinical trial expenditures and to further reduce staff and administrative expenses and may be forced to cease operations.

Total outstanding current liabilities were approximately 13% higheran orderly transaction between market participants at the end of 2008 with approximately $3.14 million at December 31, 2008, as compared to approximately $2.78 million at December 31, 2007.

CRITICAL ACCOUNTING POLICIES

We believemeasurement date. A three-tier fair value hierarchy prioritizes the following critical accounting policies, among others, affect our more significant judgments and estimatesinputs used in measuring fair value. The hierarchy gives the preparationhighest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

·

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

·

Level 2, 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 3, 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 1 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 ouraccounts receivable, prepaid expense, accounts payable, accrued liabilities, advances from investors, and notes payable approximate fair value due to the immediate or short-term maturities of these financial statements:

Accounting for instruments.

Stock-Based Compensation

Stock based

Stock-based compensation expense is recorded in accordance with Financial Account Standards Board Accounting Standards Codification ("FASB ASC")ASC Topic 718, Share-Based Payment,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 estimateshas adopted the simplified method to account for forfeitures that it expects willof employee awards as they occur and records expense based uponas a result, we will record compensation cost assuming all option holders will complete the number of awards expectedrequisite service period. If an employee forfeits an award because they fail to vest.

The fair value of each option granted in 2008 is estimated oncomplete the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%, expected volatility of between 109.6 and 165.75%, risk-free interest rate between 1.00 and 3.34%, and expected life between 2 and 8 years. The fair value of each option grantedrequisite service period, we will reverse compensation cost previously recognized in the first nineperiod the award is forfeited.

Cash and Cash Equivalents

The Company classifies investments as cash equivalents if the original maturity of an investment is three months of 2009 is estimated on the date of grant using the Black-Scholes option-pricing modelor less.

Revenue Recognition

We account for revenue from contracts with the following weighted average assumptions: dividend yield of 0%, expected volatility of between 145.9% and 308.35%, risk-free interest rate between 0.04% and 2.02%, and expected life between 0.1 and 2 years.

Accounting for Warrants with Embedded Derivative Feature

Incustomers in accordance with Financial AccountAccounting Standards Board (“FASB”) Accounting Standards Codification ("FASB ASC"Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (“Topic 815,606”).” The unit of account in Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided at a point in time or over a period of time. Topic 606 requires that a contract’s transaction price, which is the Company reclassified warrants with embedded derivative feature (full-ratchet anti-dilution provision)amount of consideration to liabilities at fair valuewhich an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on January 1, 2009relative standalone selling prices and reportedrecognized as revenue when (point in time) or as (over time) the change in fair valueperformance obligation is satisfied.

Total revenues include sales of products to customers, net of discounts or allowances, if any, and include freight and delivery costs billed to customers. Revenues for product sales are recognized when control of the warrantspromised good is transferred to unaffiliated customers, typically when finished products are shipped. Shipping costs are deemed fulfillment costs and are not recognized as a separate performance obligation.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to non-collectability. 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, 2021 or 2020.

Inventory

Inventories are stated at the endlower of each quartercost or market. Cost is determined on a first-in, first-out basis. The Company continually assesses the appropriateness of inventory valuations giving consideration to date in 2009.

The fair valueslow-moving, non-saleable, out-of-date or close-dated inventory.

Property and Equipment

Property and equipment are stated on the basis of warrants with embedded derivative feature washistorical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the two to seven year estimated on January 1, 2009 and atuseful lives of the end of each quarter to date in 2009 with the binomial Black-Scholes option-pricing pricing model with the following assumptions: probability of anti-dilution ratchet at $0.06 per share between 25% and 50%, dividend yield 0.0%, expected volatility between 138% and 233%, risk-free interest rate between 0.4% and 0.8% and expected life between 1.3 and 2 years.

assets.

Patents and Patent Expenditures

AMAR

The Company holds patent license agreements and holdsmaintains 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 15-17 yearsthe 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 15-17 years. Amortization expense amountedthe estimated 8 to $14,27120 year life of the patent. The Company continually evaluates the amortization period and $13,970carrying basis of patents to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. No patent costs were written off for the years ended December 31, 20082021, or December 31, 2020.

Income Taxes

The asset and 2007, respectively.

Long-lived Assets

Impairment losses are recorded on long-livedliability approach is used to account for income taxes by recognizing deferred tax assets used in operations when indicatorsand liabilities for the expected future tax consequences of impairment are presenttemporary differences between the carrying amounts and the undiscounted cash flows estimatedtax 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 generatedrealized.

Research and Development

Internal research and development (“R&D”) costs are expensed as incurred. Clinical trial costs incurred by thosethird parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development collaborations, prior to regulatory approval, the payment obligations are expensed when the milestone results are achieved. Payments made to third parties subsequent to regulatory approval are capitalized as intangible assets are less thanand amortized to cost of products sold over the assets' carrying amount. No impairment losses have been recorded since inception.

MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the Over-the-Counter Bulletin Board ("OTC.BB") under the symbol "AMAR." The following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the OTC.BB for the periods indicated. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.


Table of Contents

 Calendar Quarter
High Bid
 
Low Bid
 
 2007 First Quarter$1.08 $0.59 
 2007 Second Quarter$0.92 $0.55 
 2007 Third Quarter$0.62 $0.36 
 2007 Fourth Quarter$0.50 $0.22 
 2008 First Quarter$0.39 $0.25 
 2008 Second Quarter$0.33 $0.22 
 2008 Third Quarter$0.24 $0.12 
 2008 Fourth Quarter$0.20 $0.05 
 2009 First Quarter$0.10 $0.0401 
 2009 Second Quarter$0.21 $0.0511 
 2009 Third Quarter$0.30 $0.142 
 2009 Fourth Quarter*$0.28 $0.145 

* As of November 30, 2009.

On November 30, 2009, the last sale price reported on the OTC Bulletin Board for our common stock was $0.17 per share.

Penny Stock Rules

Our shares of common stock are subject to the "penny stock" rulesremaining useful life of the Securities Exchange Actrelated product.

Use of 1934 and various rules under this Act. In general terms, "penny stock" is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Estimates

The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, authorized for quotation from the NASDAQ stock market, issued by a registered investment company, and excluded from the definition on the basispreparation of price (at least $5.00 per share), or based on the issuer's net tangible assets or revenues. In the last case, the issuer's net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years, or the issuer's average revenues for each of the past three years must exceed $6,000,000.

Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock, to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.

Holders

As of December 22, 2009, there were 51,970,576 shares of common stock issued and outstanding and approximately 1,600 holders of record of our common stock. There are no shares of our preferred stock issued and outstanding. The approximate holders of record of common stock was estimated by adding the number of shareholder accounts on the American Stock Transfer & Trust Company list dated October 28, 2009 (381) to the number of shareholders on the Broadridge NOBO list dated February 12, 2008 (1,217).

Dividends

We have not declared any dividends on our common stock to date. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.

Equity Compensation Plan Information

Stock Plans *
Issue Date Range
Total Shares
Authorized
Shares Issued
Shares
Remaining
2008 Consultants Stock Grant Plan3/31/08 - 12/31/08100,000100,0000
2008 Stock Incentive Plan5/23/08600,000166,667433,333
2008-B Consultants Stock Grant Plan10/15/0875,00075,0000



Table of Contents

Stock Plans *
Issue Date Range
Total Shares
Authorized
Shares Issued
Shares
Remaining
2008 Executive Officers Compensatory Stock Plan7/10/08 - 9/17/08200,00051,563148,437
2008 Amended and Restated Directors, Officers and Consultants
Stock Purchase Plan		10/22/08 - 11/30/0910,000,0003,246,5576,753,443
2009 Consultants Stock Grant Plan7/13/09 - 10/31/09100,00050,00050,000
Non Stock Plan Issuances6/2/08 - 10/31/09929,562929,5620

Stock Option Plans *
Issue Date Range
Total Options
Authorized**
Options Issued
Options Remaining
2009A Officers, Directors, Employees and Consultants
Nonqualified Stock Option Plan ***		4/30/09 - 6/4/093,000,0002,000,0001,000,000
Non Stock Option Plan Issuances1/2/08 - 11/9/092,506,9122,506,9120

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

**    One option reserves one share of common stock.

*** This plan replaces and supersedes in their entirety the Company's Outside director and Advisor Stock Option Plan, as amended and restated as of May 11, 1999; the Company's 1996 Employee's Stock Option Plan, as amended and restated as of May 11, 1999; and the Company's First Amended 2006 Employee's Stock Option and Stock Bonus Plan; provided however, that options already issued and outstanding under said superseded plans shall continue to be outstanding and exercisable in accordance with their terms, as such may have been extended or re-priced from time to time, and the terms of any applicable option agreements entered into between the Company and the Optionee.

The following table gives information about our common stock that may be issued upon the exercise of options and warrants granted to employees, directors and consultants, under the plans discussed above as of September 30, 2009:

 Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights		  Weighted
Average
Exercise Price
of
Outstanding
Options,
Warrants and
Rights		 Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plan		  
Equity Compensation approved by Security Holders-  $- -  
Equity Compensation not approved by Security Holders24,923,763(2) $0.16 8,385,213(1) 
TOTAL24,923,763  $0.16 8,385,213  


(1) This figure represents shares available for future issuance under our Incentive Plan, our Executive Officers Compensatory Plan, our Directors, Officers and Consultants Plan, our Consultant's Grant Plan, and our 2009A Option Plan which have not been approved by our stockholders.
(2) This figure includes 600,000 of options not yet vested.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our directors are elected at the annual meeting of shareholders to hold office until the annual meeting of shareholders for the ensuing year or until their successors have been duly elected and qualified. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The directors and executive officers of the Company are as follows:


Table of Contents

Directors and Executive Officers
Age
Position
Joseph M. Cummins, DVM, PhD (1)67Chairman of the Board, President, Chief Executive Officer
Bernard Cohen56Vice President and Chief Financial Officer
Martin J. Cummins42Vice President of Clinical and Regulatory Affairs
Stephen Chen, PhD (2)(3)(4)59Director
Thomas D'Alonzo (1)(2)(3)(4)(5)65Director
Dennis Moore, DVM (1)(4)(5)62Director
James Page, MD (2)(3)(5)81Director

(1) Member of the Executive Committee.
(2) Member of the Compensation & Stock Committee.
(3) Member of the Audit Committee.
(4) Member of the Search Committee.
(5) Member of the Plan Committee.*

*The Plan Committee administers the Amended and Restated 2008 Directors, Officers, and Consultants Stock Purchase Plan.

Joseph M. Cummins has been the Chairman of the Board of the Company since he founded it in June 1984. Dr. Cummins has also served as President of the Company since December 1994. Dr. Cummins has been conducting research on oral cytokines, most particularly interferon alpha, in animals and humans for over 30 years. Dr. Cummins has 54 publications and is the inventor on 21 issued or pending patents many of which reflect his work in the field of oral interferon. He received a PhD degree in microbiology from the University of Missouri in 1978 and a doctor of veterinary medicine degree from the Ohio State University in 1966.

Bernard Cohen was hired to be a Vice-President and Chief Financial Officer of the Company on October 1, 2009. Mr. Cohen has been Director of Finance and Data Base Manager at the Harrington Regional Medical Center, Inc. (HRMCI), which is the management and development entity for the Harrington Regional Medical Center in Amarillo, Texas. Previously, he held various executive positions at Colbert's of Amarillo, a department store. His positions included: Chief Executive Officer, Vice President, Chief Financial Officer, and Controller. He has been and continues to be a member of the Texas Tech University Health Sciences Center at Amarillo (TTUHSC) Institutional Review Board (IRB) where he reviews clinical trial protocols to monitor the safety and protection of human research and testing subjects. Neither HRMCI nor TTUHSC has any connection whatsoever with the Company.

Martin J. Cummins has held several positions within the Company since joining the Company full-time in June 1992. Mr. Cummins currently oversees all research studies involving human participants as Vice President of Clinical and Regulatory Affairs. Mr. Cummins has received extensive training in the fields of clinical trial design, monitoring and analysis, as well as regulatory affairs and compliance and has 12 publications to reflect his work. He received a BS degree in microbiology from Texas Tech University. He is the son of Joseph Cummins.

Stephen Chen has been a director of the Company since February 1996. He has been President and Chief Executive Officer of STC International, Inc., a health care investment firm, since May 1992. From August 1989 to May 1992 he was Director of Pharmaceutical Research and Development for the Ciba Consumer Pharmaceuticals Division of Ciba-Geigy. He received a PhD degree in Pharmaceuticals from Purdue University in 1977.

Thomas D'Alonzo has been a director of the Company since June 2006. Mr. D'Alonzo is a seasoned executive with experience in all major facets of pharmaceutical operations: sales and marketing, manufacturing, quality assurance, finance and licensing and strategic planning. Mr. D'Alonzo served as President of Pharmaceutical Product Development, Inc., a multi-national clinical research organization with 3,000 employees operating in 14 countries and generating $300 million in revenues from analytical labs and Phase 1, 2, 3 and 4 clinical trials. Previously, Mr. D'Alonzo was President of Genevec, Inc., a gene therapy biotech company. Before that, Mr. D'Alonzo was President of Glaxo, Inc., the US unit of what is now Glaxo SmithKline. He received a BS degree in Business Administration from University of Delaware in 1965 and a JD degree from University of Delaware in 1970.

Dennis Moore has been a director of the Company since 1986. Dr. Moore has been a doctor of veterinary medicine since 1972 and was in private practice from 1972 to 1995. Since 1995, Dr. Moore has been involved in managing his personal investments. He received a DVM degree from Colorado State University in 1972.

James Page has been a director of the Company since February 1996. Prior to retiring in 1991 as a Vice President with Adria Laboratories, Inc., a pharmaceutical company specializing in therapy given to cancer and AIDS patients, Dr. Page held various upper management level positions with Carter Wallace, Inc., Merck Sharpe & Dohme Research Laboratories and Wyeth Laboratories. He received a MB.BS London and MRCS, LRCP England from University of London St. Mary's Hospital Medical School in 1950.



Table of Contents

The Company's directors are elected at the annual meeting of shareholders to hold office until the annual meeting of shareholders for the ensuing year or until their successors have been duly elected and qualified. Directors receive compensation of $1,000 per day for attendance at meetings, $250 per day for regularly scheduled teleconference meetings, and are reimbursed for any out-of-pocket expenses in connection with their attendance at meetings.

Officers are elected annually by the Board of Directors and serve at the discretion of the Board.

Family Relationships

Our CEO, Joseph M. Cummins, is the father of Martin J. Cummins, our Vice President of Clinical and Regulatory Affairs.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following executive compensation disclosure reflects all compensation awarded to, earned by or paid to the executive officers below. The following table summarizes all compensation in 2008 and 2007. No other officers received annual compensation in excess of $100,000 during the last two fiscal years.

Name and
Principal
Position		 Year  Salary  Bonus Stock
Awards		  Option
Awards		  Non-Equity
Incentive Plan
Compensation		 Nonqualified
Deferred
Compensation
Earnings		 All Other
Compensation		  Total
Joseph M.
Cummins,
Chairman of the
Board,
President and Chief
Executive Officer		 2008 $175,000  2,500 - $28,220(1) - - 2,500 $208,220
  2007 $175,000  - -  -  - - - $175,000
               
Martin J.
Cummins,
Vice President of
Clinicaland
Regulatory Affairs		 2008 $125,000 $- - $1,670(2) - - - $126,670
  2007 $125,000 $500 - $-  - - -  125,500
               
Dr. Gary W. Coy,Vice President and ChiefFinancial Officer 2008 $125,000 $- - $-  - - - $125,000
  2007 $125,000 $500 - $-  - - - $125,500
               
Dr. Peter R.
Mueller, Chief
Operating Officer
and Director of
Research (4)		 2008 $148,750 $  $63,856(3)    $212,606
                  
Bernard Cohen,
Vice-President and
Chief Financial
Officer (5)		    -  - -  -  - - -  -

(1) Dr. Cummins was granted 490,000 three-year stock options on December 16, 2008, at $0.10. The fair value ($28,220) of the options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, expected volatility of 165.75% and risk-free interest rate of 1%.


Table of Contents

(2) Mr. Cummins was granted 29,000 three-year stock options on December 16, 2008, at $0.10. The fair value ($1,670) of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, expected volatility of 165.75% and risk-free interest rate of 1%.
(3) Dr. Mueller was granted 700,000 stock options on April 15, 2008, at $0.32. 100,000 of the options are five-year options vesting on April 15, 2008; 200,000 are six-year options vesting on April 15, 2009; 200,000 are seven-year options vesting on April 15, 2010; and 200,000 are eight-year options vesting on April 15, 2011. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, expected volatility of 109.6% and risk-free interest rate of 3.34%. During 2008, $25,516 was recognized for options vesting on April 15, 2008 and $38,340 was recognized for the options vesting on April 15, 2009. During 2009, $2,057 was recognized for options vesting on April 15, 2009 and $7,011 for options vesting on April 15, 2010.
(4) Dr. Mueller was hired by the Company on April 15, 2008, and earned the salary amount in the table above from that date through December 31, 2008 ($210,000 per year annualized). Dr. Mueller resigned from the Company effective May 31, 2009, and all unvested stock options were forfeited on that date. All vested options owned by Dr. Mueller were forfeited on July 30, 2009, in accordance with the plan under which they were issued.
(5) Mr. Cohen began his employment with the Company on October 1, 2009, and was paid and earned no compensation before that date.

Director Compensation for Year Ending December 31, 2008

Directors who are also employees of the Company (consisting in 2008 of Joseph Cummins) receive no additional remuneration for their services as directors. Non-employee directors receive $1,000 for attendance at directors' meetings and $250 for regularly scheduled teleconference meetings, and are reimbursed for necessary travel expenses incurred in connection with board meetings. There were no regularly scheduled director meetings during 2008.

The following table summarizes the compensation for our non-employee board of directors for the fiscal year ended December 31, 2008:

Name Fees Earned
or Paid in
Cash ($) (1)		 Stock
Awards ($)		 Option
Awards ($) (2)		 All Other
Compensation
($)		  Total
($)
Stephen Chen, PhD - - (3)3,693 - $3,693
Thomas D'Alonzo - - (4)392 - $392
Dennis Moore, DVM - - (5)3,693 - $3,693
James Page, MD - - (6)3,693 - $3,693

(1) There were no regularly scheduled board meetings in 2008.
(2) Options were granted to directors on December 16, 2008 with $0.10 exercise price and 3-year term. The closing price of stock on the date of grant was $0.07. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, expected volatility of 165.75% and risk-free interest rate of 1%.
(3) The number of securities underlying the option grants to Mr. Chen was 64,125 ($3,693 fair value). The aggregate number of option awards to Mr. Chen outstanding at the end of 2008 was 774,125.
(4) The number of securities underlying the option grants to Mr. D'Alonzo was 6,800 ($392 fair value). The aggregate number of option awards to Mr. D'Alonzo outstanding at the end of 2008 was 6,800.
(5) The number of securities underlying the option grants to Mr. Moore was 64,125 ($3,693 fair value). The aggregate number of option awards to Mr. Moore outstanding at the end of 2008 was 814,125.
(6) The number of securities underlying the option grants to Mr. Page was 64,125 ($3,693 fair value). The aggregate number of option awards to Mr. Page outstanding at the end of 2008 was 814,125.

The following sets forth information concerning individual grants of stock options outstanding to our named executive officers as of December 31, 2008:



Table of Contents

  
Outstanding Equity Awards at December 31, 2008

Option Awards
Name 
Option
Grant Date
 
Number of
Securities
Underlying
Unexercised
Options(#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options(#)
Unexercisable(1)
 
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
 
Option
Expiration
Date
 
Joseph M. Cummins, Chairman, President, CEO (2) 05/14/04 490,000 - - $0.23 5/13/09 
  08/27/04 150,000 - - $0.27 8/27/09 
  02/26/05 100,000 - - $0.40 2/25/10 
  08/23/05 500,000 - - $0.30 8/22/10 
  09/10/06 200,000 200,000 - $0.85 9/10/12(3)
  12/16/08 490,000 - - $0.10 12/16/11 
         
Gary W. Coy, Vice President, CFO (2) 04/15/06 200,000 200,000 - $0.75 3/31/12(4)
         
Martin J. Cummins, Vice President of Clinical and 05/14/04 150,000 - - $0.23 5/13/09 
Regulatory Affairs 08/23/05 500,000 - - $0.30 8/22/10 
  09/10/06 200,000 200,000 - $0.85 9/10/12(3)
  12/16/08 29,000 - - $0.10 12/16/11 
               
Peter Mueller, COO, Director of Research (5) 04/15/08 100,000 600,000   $0.32 4/15/16(5)
               


Table of Contents



Stock Awards
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)
 
Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($)
 
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout
Valueof
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
Joseph M. Cummins0 0 0 0
Gary W. Coy0 0 0 0
Martin J. Cummin0 0 0 0

(1) Vesting schedule by individual for 2008 share option grants is included in footnotes to Summary Compensation Table above.
(2) Prior to Dr. Coy's employment in 2006, Joseph Cummins served as Chief Financial Officer; the Company had no position of Vice President prior to April 2006.
(3) Options vest 100,000 per year beginning on September 10, 2007 through September 10, 2010. Options expire on fifth anniversary of the options' vesting dates, beginning September 10, 2007 through September 10, 2010. Exercisable during term while employee of the Company, for 90 days after a voluntary termination, and for 3 years after an involuntary termination.
(4) Options vest 100,000 per year beginning April 1, 2007 through April 1, 2010. Options expire on fifth anniversary of the options' vesting dates, beginning March 31, 2007 through March 31, 2010.
(5) 100,000 options vested on April 15, 2008. The unexercisable options vest 200,000 per year beginning on April 15, 2009 through April 15, 2011. Options expire on the fifth anniversary of the options' vesting dates, beginning on April 15, 2013.

Compensation Committee Interlocks and Insider Participation

We have a compensation and stock option committee consisting of Stephen Chen, James Page, and Thomas D'Alonzo. During the fiscal year ended December 31, 2008, none of our executive officers served on the compensation committee or board of directors of any other entity, one of whose executive officers served as a director or served on our compensation and stock option committee.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of September 30, 2009, by:

•each person known by us to be a beneficial owner of more than 5.0% of our outstanding common stock;
•each of our directors;
•each of our named executive officers; and
•all directors and executive officers as a group.
•each of our named executive officers; and
•all directors and executive officers as a group.

The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire beneficial ownership of within 60 days of September 30, 2009, through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, each person has sole voting and investment power with respect to the shares shown as beneficially owned. A total of 47,147,196 shares of our common stock were issued and outstanding as of September 30, 2009.


Table of Contents

Name of and Address of Beneficial Owner Amount and
Nature
of Beneficial
Ownership		  Percent of
Class (1)
5% Stock Holders   
Hayashibara Biochemical Laboratories, Inc.
2-3 Shimoishii 1-chome
Okayama 700, Japan		 3,118,655  6.61 %
    
Cyto Biotech
6F No. 6 Sec 1 Jhongshing Road
Wugu Shiang Taipei County
24872 Taiwan		 6,000,000(10) 11.96 %
    
Paul and Marian Tibbits
2371 Blue Ball Road
Rineyville, KY 40162		 4,600,000(11) 9.30 %
    
Directors and Named Executive Officers   
Joseph M. Cummins
Chairman, President and Chief Executive Officer
7635 Stuyvesant Ave.
Amarillo, TX 79121		 2,244,572(2) 4.60 %
Peter R. Mueller
Chief Operating Officer and Director of Research
3 Busch CourtClinton, NJ 08809		 1,678,324(3) 3.56 %
Bernard Cohen
Vice President and Chief Financial Officer
2803 Travis
Amarillo, Texas 79109		 0  *
Gary W. Coy
Former Vice President and Chief Financial Officer
(resigned on September 4, 2009)
907 Cat Hollow Club Drive
Spicewood, TX 78669		 1,801,514(4) 3.76 %
Martin J. Cummins
Vice President, Clinical and Regulatory Affairs
6615 Sandie Dr.
Amarillo, TX 79109		 1,176,692(5) 2.44 %
Dennis Moore
Director
402 Fish Hatchery
Hamilton, MT 59840 970,741 (6) 2.03 %		   
Thomas D'Alonzo
Director
908 Vance Street
Raleigh, NC 27608		 135,472(7) *
Stephen Chen
Director
Floor 7-1, No. 18, Xin Yi Road, Sec. 5
Taipei, Taiwan		 1,203,625(8) 2.50 %
James PageDirector
103 Clubhouse Lane, #182
Naples, FL 34105		 805,034(9) 1.68 %
All directors and executive officers listed above, as a group. (9 persons) 10,015,974(12) 18.79 %

* Less than 1%.


Table of Contents

(1) Applicable percentage ownership is based on 47,147,196 shares of common stock outstanding as of September 30, 2009, plus the additional shares that the stockholder is deemed to beneficially own. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of September 30, 2009, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(2) Includes options to purchase 1,690,000 shares of our common stock beneficially owned by Dr. Cummins that are exercisable within 60 days.

(3) Dr. Mueller resigned on May 31, 2009, at which time all unvested options were forfeited. All vested options owned by Dr. Mueller were forfeited on July 30, 2009. This figure was pulled from Form 4 filed by Dr. Mueller with the SEC on May 8, 2009. The Company has no information on any changes to Dr. Mueller's beneficial ownership since that date.

(4) Includes options to purchase 750,000 shares of our common stock beneficially owned by Mr. Coy exercisable within 60 days.

(5) Includes options to purchase 1,029,000 shares of our common stock beneficially owned by Mr. Cummins that are exercisable within 60 days.

(6) Includes options to purchase 764,125 shares of our common stock beneficially owned by Mr. Moore exercisable within 60 days.

(7) Includes options to purchase 106,800 shares of our common stock beneficially owned by Mr. D'Alonzo exercisable within 60 days.

(8) Includes options to purchase 1,064,125 shares of our common stock beneficially owned by Mr. Chen exercisable within 60 days.

(9) Includes options to purchase 764,125 shares of our common stock beneficially owned by Mr. Page exercisable within 60 days.

(10) Includes options to purchase 3,000,000 shares of our common stock beneficially owned by Cyto Biotech, Inc. exercisable within 60 days.

(11) Includes warrants to purchase 2,300,000 shares of our common stock beneficially owned by Paul and Marian Tibbits exercisable within 60 days. One-half of the interests disclosed as owned by Paul and Marian Tibbits in this table are registered solely in the name of Paul Tibbits and the other one-half are registered solely in the name of Marian Tibbits. Thus, Paul Tibbits and Marian Tibbits each have sole voting and investment power over exactly one-half of the interests disclosed as owned by them together in this table.

(12) Directors and officers percentage ownership is calculated based on 47,147,196 total shares outstanding and reserved.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND CORPORATE GOVERNANCE

Certain Relationships and Related Transactions

The Company has relied significantly on HBL, the largest shareholder of the Company, for a substantial portion of its capital requirements. Pursuant to the Development Agreement previously described, HBL advanced $9,000,000 for funding of research. In addition, HBL has purchased substantial amounts of the Company's common stock from time to time, to the point where it now owns 6.61% of the issued and outstanding shares of common stock of the Company. HBL loaned $1 million to us on November 30, 1999 and an additional $1 million on February 29, 2000, both loans bearing interest at 4.5% per annum. The November 30, 1999 loan has been extended until June 3, 2008 and the February 29, 2000 loan has been extended to August 28, 2008. The aggregate balance on both loans at December 31, 2008, including principal and accrued interest, was $2,572,773. HBL offered to extend the November 30, 1999 loan until December 3, 2009 and the February 29, 2000 loan until February 28, 2010 if $145,000 of accrued interest is paid (in addition to $200,000 already paid in January 2008) before August 31, 2008. The Company is currently in default of these loans but HBL has not demanded payment yet.

In addition to the above, HBL and the Company are parties to various license and manufacturing and supply agreements pursuant to which we license certain technology to or from HBL. HBL supplies formulations of its interferon alpha and other products to us at contractual prices.



Table of Contents

Additional information on these agreements is set forth in Notes 3, 4 and 5 to the Financial Statements reported in our Form 10-K for the year ended December 31, 2008 and included in this prospectus.

Additionally, the Company is obligated to pay HBL a percentage of sublicense fee income the Company receives. There were no sales of interferon alpha and no royalty payments made to HBL in 2007. A $19,991 sublicense fee to HBL was paid in 2007. $53,971 of sublicense fees to HBL were recorded in 2008 and were owed to HBL as of December 31, 2008.

HBL is obligated to pay the Company an 8% royalty on sales of oral interferon in Japan. The Company received $0 in 2008 and $27,919 of royalties in 2007 from HBL animal health sales of oral interferon.

During 2006, 2007, and 2008, the Company used the law firm of SandersBaker, P.C. Mr. Edward Morris, Secretary of the Company was a partner in that firm during 2006, 2007, and 2008. The Company was invoiced $61,707 by said firm in 2006, $59,387 in 2007, and $47,677 in 2008. As of January 1, 2009, the Company uses the law firm of Underwood, Wilson, Berry, Stein & Johnson, P.C., and Mr. Edward Morris is a partner of that firm.

All future transactions and loans between the Company and its officers, directors and 5% shareholders will be on terms no less favorable to the Company than could be obtained from independent third parties. There can be no assurance, however, that future transactions or arrangements between the Company and its affiliates will be advantageous, that conflicts of interest will not arise with respect thereto or that if conflicts do arise, that they will be resolved in favor of the Company.

Between February 2008 and April 2008; we received financial and marketing consulting services from Epicenter Consulting, Inc., a company wholly-owned by Peter R. Mueller. Consulting services ceased when Mr. Mueller began his employment with the Company in April 2008 as chief operating officer and director of research.

Director Independence

Messrs. Chen, D'Alonzo, Moore, and Page are independent as that term is defined under the Nasdaq Marketplace Rules.

MATERIAL CHANGES

There have been no material changes in our affairs since the year ended December 31, 2008 that have not been described in a subsequent Form 10-Q or Form 8-K filed under the Exchange Act.

ADDITIONAL INFORMATION

Federal securities laws require us to file information with the Commission concerning our business and operations. Accordingly, we file annual, quarterly, and special reports, and other information with the Commission. You can inspect and copy this information at the public reference facility maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W, Room 1024, Washington, D.C. 20549.

You can get additional information about the operation of the Commission's public reference facilities by calling the Commission at 1-800-SEC-0330. The Commission also maintains a web site (http://www.sec.gov) at which you can read or download our reports and other information.

We have filed with the Commission a registration statement on Form S-1 under the Securities Act of 1933 with respect to the common stock being offered hereby. As permitted by the rules and regulations of the Commission, this prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to Amarillo and the common stock offered hereby, reference is made to the registration statement, and such exhibits and schedules. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission at the addresses set forth above, and copies of all or any part of the registration statement may be obtained from such offices upon payment of the fees prescribed by the Commission. In addition, the registration statement may be accessed at the Commission's web site.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Art. 2.02-1 of the Texas Business Corporation Act allows a corporation to indemnify any officer, director, employee or agent who is a party or is threatened to be made a party to a litigation by reason of the fact that he or she is or was an officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as an officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such director or officer, or only for reasonable expenses actually incurred in connection with the proceeding if the person is found liable on the basis that personal benefit was improperly received by him or is found liable to the corporation, if:



Table of Contents

•     there was no breach by the officer, director, employee or agent of his or her fiduciary duties to the corporation involving intentional or willful misconduct; or

•     the officer, director, employee or agent acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Article IV of our By-Laws provides for indemnification of our current or former directors and officers or any person who may have served at request as a director or officer of another corporation in which it owned shares of capital stock or of which it is a creditor. Such indemnification extends to liabilities imposed upon the director or officer and expenses reasonably incurred by him in connection with any claim made against him, or any action, suit or proceeding to which he may be a party by reason of his being, or having been such director or officer, and against such sums as independent counsel selected by the Board of Directors shall deem reasonable payment made in settlement of any such claim, action, suit or proceeding primarily with a view of avoiding expenses of litigation; provided, however, that no director or officer shall be indemnified with respect to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in performance of duty, or with respect to any matters which shall be settled by the payment of sums which counsel selected by the Board of Directors shall not deem reasonable payment made primarily with a view to avoiding expenses of litigation, or with respect to matters for which such indemnification would be against public policy.

The Officers and Directors do not have indemnification agreements with the Company. The Company does have $5,000,000 of Directors and Officers Liability Insurance, which it will use to indemnify such directors and executive officers, to the extent permitted by our By-Laws or the laws of the State of Texas, against any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any actual or threatened action or proceeding to which such director or officer is made or threatened to be made a party by reason of the fact that such person is or was a director or officer of the Company.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Amarillo Biosciences, Inc. pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

EXPERTS

The balance sheets of Amarillo and the related statements of operations, stockholders' deficit, and cash flows for each of the years ended December 31, 2008 and 2007 have been included in the registration statement on Form S-1 of which this prospectus forms a part, in reliance on the reports of LBB & Associates Ltd., LLP, an independent registered public accounting firm, given on the authority of that firm as experts in auditing and accounting.

Underwood, Wilson, Berry, Stein & Johnson, P.C. (500 S. Taylor, Suite 1200, LB 233, Amarillo, Texas 79101) has passed upon the validity of the shares being offered and certain other legal matters and is representing the Company in connection with this offering.

None of the above experts or counsel have been hired on a contingent basis and none of them will receive a direct or indirect interest in the Company, except that Underwood, Wilson, Berry, Stein & Johnson, P.C. or one or more of its members were issued shares of our common stock as payment for its services in connection with this offering. Underwood, Wilson, Berry, Stein & Johnson, P.C. shall return shares issued to it back to the Company to the extent that the sale of such shares would yield net proceeds to it an amount greater than $60,000.00 in the aggregate.


Table of Contents

FINANCIAL STATEMENTS

Amarillo Biosciences, Inc.
Balance Sheets
        
        
  September 30, 2009   December 31,
2008		 
Assets (unaudited)     
Current assets:       
     Cash and cash equivalents$39,975  $10,853 
     Other current assets 14,271   12,813 
Total current assets 54,246   23,666 
Property, equipment, and software, net 5,188   9,575 
Patents, net 124,586   126,828 
Total assets$184,020  $160,069 
        
Liabilities and Stockholders' Deficit       
Current liabilities:       
     Accounts payable and accrued expenses$420,964  $511,236 
     Accrued interest - related party 639,904   572,773 
     Accrued expenses - related party 78,360   53,971 
     Derivative liabilities 3,424,372   - 
     Notes payable - related party 2,000,000   2,000,000 
Total current liabilities 6,563,600   3,137,980 
Total liabilities 6,563,600   3,137,980 
        
Commitments and contingencies       
        
Stockholders' deficit       
     Preferred stock, $0.01 par value:       
          Authorized shares - 10,000,000       
          Issued and outstanding shares - 0 at September 30, 2009 and 0 at December 31, 2008, -   - 
     Common stock, $0.01par value:       
          Authorized shares - 100,000,000       
          Issued and outstanding shares - 47,147,196 at September 30, 2009 and 35,953,377 at December 31, 2008 471,472   359,534 
     Additional paid-in capital 29,582,308   28,322,564 
     Accumulated deficit (36,433,360)  (31,660,009)
Total stockholders' deficit (6,379,580)  (2,977,911)
Total liabilities and stockholders' deficit$184,020  $160,069 
        
See accompanying notes to financial statements.       


Table of Contents


Amarillo Biosciences, Inc.
Statements of Operations - Unaudited
                
  Three months
ended September 30,		   Nine months
ended September 30,		 
  2009   2008   2009   2008 
                
Revenues:               
     Dietary supplement sales$36  $234  $264  $1,518 
     Sublicense fee revenue 48,000   30,000   48,795   60,000 
          Total revenues 48,036   30,234   49,059   61,518 
            
Cost of revenues:                 
     Product 21   104   75   540 
     Sublicense fees 24,009   14,991   24,407   29,981 
          Total cost of revenues 24,030   15,095   24,482   30,521 
Gross Margin 24,006   15,139   24,577   30,997 
           
Operating expenses:           
     Research and development 110,032   42,398   389,969   388,014 
     Selling, general and administrative 235,484   281,113   917,572   1,085,098 
          Total operating expenses 345,516   323,511   1,307,541   1,473,112 
            
Operating loss (321,510)  (308,372)  (1,282,964)  (1,442,115)
            
Other income (expense)           
     Change in fair value of derivative instruments (744,913)  -   (2,736,649)  - 
     Interest expense (23,697)  (23,568)  (69,406)  (68,524)
     Interest and other income -   -   3,391   2,696 
Net loss (1,090,120)  (331,940)  (4,085,628)  (1,507,943)
             
Deemed dividend for beneficial conversion feature -   -   -   (562,841)
Dividend on preferred stock -   (25,000)  -   (73,056)
Net loss applicable to common shareholders$(1,090,120) $(356,940) $(4,085,628) $(2,143,840)
                
Basic and diluted net loss per share$(0.02) $(0.01) $(0.10) $(0.07)
                
Weighted average shares outstanding 45,689,709   30,301,432   42,508,318   29,877,198 
                
                
See accompanying notes to financial statements.



Table of Contents

Amarillo Biosciences, Inc.
Condensed Statements of Cash Flows - Unaudited

  Nine months ended
September 30,		 
  2009   2008 
        
Net cash used in operating activities$(660,471) $(843,210)
        
Cash from investing activities:       
     Purchases of equipment and software -   (980)
     Patent expenditures (10,142)  (20,089)
          Net cash used in investing activities (10,142   (21,069)
       
Cash from financing activities:      
     Proceeds from sale of convertible preferred stock -   793,793 
     Proceeds from sale of common stock 699,735   25,000 
          Net cash provided by financing activities 699,735   818,793 
      
Net increase (decrease) in cash 29,122   (45,486)
Cash and cash equivalents at beginning of period 10,853   47,184 
Cash and cash equivalents at end of period$39,975  $1,698 
        
Supplemental disclosure of cash flow information       
     Cash paid for interest$1,393  $201,147 
        
     Cash paid for income taxes$-  $- 
        
Non cash transactions       
     Deemed dividend for beneficial conversion feature of preferred stock$-  $562,841 
        
     Stock dividend to preferred shareholders$-  $73,056 
        
        
        
See accompanying notes to financial statements.


Table of Contents

Amarillo Biosciences, Inc.

Notes To Financial Statements - Unaudited

1.Basis of presentation. The accompanying financial statements which should be read in conjunction with the financial statements and footnotes included in the Company's Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission, are unaudited, but have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2009. The Company has evaluated subsequent events for recognition or disclosure through the date these financials statements were available to be issued, November 10, 2009.
2.Financial Condition. Our viability as a company is dependent upon successful commercialization of products resulting from its research and product development activities. We plan on working with commercial development partners in the United States and in other parts of the world to provide the necessary sales, marketing and distribution infrastructure to successfully commercialize the interferon alpha product for both human and animal applications. Our products will require significant additional development, laboratory and clinical testing and investment prior to obtaining regulatory approval to commercially market our product(s). Accordingly, for at least the next few years, we will continue to incur research and development and general and administrative expenses and may not generate sufficient revenues from product sales or license fees to support its operations.The Company continues to pursue a broad range of financing alternatives to improve its financial condition. These alternatives may include the sale or issuance of a substantial amount of common stock, common stock warrants or stock options. These financing alternatives could require an increase in the number of authorized shares of the Company's common stock and result in significant dilution to existing shareholders and, possibly, a change of control of the Company.
3.Common Stock. The shareholders have authorized 100,000,000 shares of voting common shares for issuance. On September 30, 2009, a total of 76,144,957 shares of common stock were either outstanding (47,147,196) or reserved for issuance upon exercise of options and warrants (28,997,761). Common stock issuances in the first, second and third quarters of 2009 are as follows:

Common Stock Issued in Q1 2009    
Shares
   
Issue Price
   
Net Price
 
Private placements - cash     3,550,000  $0.10  $320,000 
Directors, officers, consultants plan - cash     62,500   0.08   5,000 
Directors, officers, consultants plan - salaries     1,407,905   0.05-0.08   105,846 
Directors, officers, consultants plan - services     636,364   0.06   35,000 
     Total Common Stock Issued in Q1 2009     
5,656,769
  $
0.05-0.10
  $
465,846
 
                

Finders' fees totaled $35,000 during the first quarter of 2009. Net price above reflects net proceeds after finders' fees are deducted. Private placement stock issued during the first quarter of 2009 included 100% warrant coverage (3,550,000 warrants) with $0.10 - $0.20 exercise price and 3-year term.

Common Stock Issued in Q2 2009     
Shares
   
Issue Price
   
Net Price
 
Private placements - cash     2,320,290  $0.10  $227,029 
Exercise of cashless warrants     183,375   0.10   - 
Directors, officers, consultants plan - salaries     419,367   0.10   41,937 
     Total Common Stock Issued in Q2 2009     
2,923,032
  $
0.10
  $
268,966
 
                
Finders' fees totaled $5,000 during the second quarter of 2009. Net price above reflects net proceeds after finders' fees are deducted. 2,280,000 shares of the private placement stock issued during the second quarter of 2009 included 100% warrant coverage (2,280,000 warrants) with $0.10 exercise price and 3-year term.

Common Stock Issued in Q3 2009     
Shares
   
Issue Price
   
Net Price
 
Private placements - cash     1,507,060  $0.10  $147,706 
Exercise of cashless warrants     602,479   0.10   - 
Directors, officers, consultants plan - salaries     504,479   0.06-0.26   55,512 
     Total Common Stock Issued in Q3 2009     
2,614,018
  $
0.06-0.26
  $
203,218
 
                


Table of Contents

Finders' fees totaled $3,000 during the third quarter of 2009. Net price above reflects net proceeds after finders' fees are deducted. 1,507,060 shares of private placement stock issued during the third quarter of 2009 included 100% warrant coverage (1,507,060 warrants) with $0.10 exercise price and 3-year term.
4.Common Stock Options. We recognized $243,826 of employee options expense, related to previously issued options during the first nine months ended September 30, 2009. The remaining cost expected to be recognized if these options vest is $153,919.

The 2009A Officers, Directors, Employees and Consultants Non-Qualified Stock Option Plan was adopted on April 28, 2009 by the Board of Directors. We recognized $166,558 for 1,600,000 stock options approved by the Plan Committee and granted to officers, directors and employees on April 30, 2009. The options vest immediately with three-year term and $0.125 exercise price.

The Plan Committee approved the grant of 400,000 options to Dr. Steve Chen, a Director, on June 4, 2009 for his work with Cyto Biotech and CytoPharm on behalf of the Company. We recognized $23,268 for 200,000 options that vested immediately with 3 year term. The remaining 200,000 options vest if the Company receives $50,000 of royalty payments from South American sales by Cyto Biotech within four years.
5.Common Stock Warrants. During the second quarter of 2009 warrant holders exercised 395,156 cashless warrant shares with a $0.10 exercise price. Warrant holders were issued 183,375 net shares of common stock. During the third quarter of 2009 warrant holders exercised 1,076,842 cashless warrant shares with a $0.10 exercise price. Warrant holders were issued 602,479 net shares of common stock, respectively.

Warrants issued in connection with a preferred stock financing in the first quarter of 2008 ("Firebird warrants") have an embedded derivative feature (full-ratchet anti-dilution provision). We are at risk of triggering the warrant anti-dilution provisions of previously issued warrants if we sell stock below $0.10 per share to any non-exempt parties. Options and warrants issued prior to January 8, 2008 plus officers, directors and consultants under stock plans approved by outside board of director members are exempt from the anti-dilution provisions. In accordance with Financial Account Standards Board Accounting Standards Codification ("FASB ASC") Topic 815, the Company reclassified the warrants to liabilities at fair value on January 1, 2009 and reported the change in fair value of the warrants at the end of each quarter to date in 2009.

The binomial Black-Scholes pricing model was used to calculate the value of the warrants. In the binomial model, the most likely price which will trigger the anti-dilution ratchet and the most likely price that will not trigger the anti-dilution ratchet are given estimated probabilities for occurrence. The probability of private placement issuances triggering a reset at the closing stock price on January 1 was estimated as 50%. The probability of not triggering the reset at $0.10 per share was also estimated as 50%. Valuation consists of 50% of the Black-Scholes value for each probable occurrence. The Black-Scholes option-pricing model was utilized with the following assumptions: dividend yield 0.0%, expected volatility of 138% , risk-free interest rate of 0.76% and expected life of approximately 2 years. The valuation for the 13.92 million warrants with embedded features was $687,723 on January 1, 2009. The $687,723 was reclassified from the retained earnings account to the derivative liabilities account on January 1, 2009 as the cumulative effect of the change in accounting principle.

The binomial Black-Scholes pricing model was used similar to the valuations above to calculate the fair value of the warrants with embedded features on September 30, 2009. The probability of not triggering the reset at $0.10 per share was estimated as 75% since the stock closing price was $0.26 on September 30, 2009. The probability of private placement issuances triggering a reset at the estimated stock price of $0.06 per share was estimated as 25%. The Black-Scholes option-pricing model was utilized with the following assumptions: dividend yield 0.0%, expected volatility 232.97%, risk free interest rate 0.4%, and expected life of approximately 1.27 years. The valuation for the remaining 12,447,999 warrants outstanding was $3,424,372 on September 30, 2009. The derivative loss for the first nine months of 2009 was $2,736,649.
6.Notes Payable - Related Party. Two $1,000,000 notes are payable under an unsecured loan agreement with Hayashibara Biochemical Laboratories, Inc. ("HBL"), a major stockholder, dated July 22, 1999. Although we are currently in default of the notes, HBL has not demanded payment.
7.Line of Credit. 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 on September 30, 2009 of $1,180 which is included in accounts payable.



Table of Contents

8.License and Sublicense Agreements. During the third quarter of 2009, a $48,000 license fee was received. A $23,991 sublicense fee payable was recorded in the third quarter of 2009.

On February 6, 2009, we entered into a 15-year License and Supply agreement with Cyto Biotech, Inc. a Taipei, Taiwan animal health company. Cyto Biotech purchased common stock, included in the above first quarter 2009 issuances in Amarillo Biosciences; paid an initial license fee; and will pay a royalty on low dose oral interferon sales.
9.Employment Contract. On May 31, 2009, Dr. Peter R. Mueller resigned as Chief Operating Officer and Director of Research. The Company currently has no plan to replace Dr. Mueller.

On September 4, 2009, Dr. Gary W. Coy resigned as Vice President and Chief Financial Officer. The Company executed a 1-year consulting contract with Biotech Financial, Inc., an entity controlled by Dr. Coy. Consulting services are payable in registered stock at $75 hourly rate. The 400,000 employment contract options issued to Dr. Coy shall remain outstanding. The Board of Directors changed the vesting date for 100,000 of these employment contract options from April 1, 2010 to September 4, 2009. An additional 350,000 options awarded on April 30, 2009 will remain outstanding contingent on Dr. Coy's reasonable availability as a consultant.

Bernard Cohen joined the Company as Chief Financial Officer (CFO) and Vice President of Finance on October 1, 2009. An employment contract was executed on September 29, 2009. Mr. Cohen will be paid up to $60,000 per year. Dr. Coy will assist in training Mr. Cohen.
10.Related Party Transactions. The Company engaged the law firm of Underwood, Wilson, Berry, Stein and Johnson P.C. of which Mr. Morris is a shareholder. Mr. Morris is also the Secretary of the Company. During the nine months ended September 30, 2009 the Company incurred approximately $40,285 of legal fees from this law firm. During the first quarter of 2009, Dr. Steve Chen, Director, referred the Company to Cyto Biotech and collected a $30,000 finder's fee for the $300,000 stock purchase by Cyto Biotech.
11.Subsequent Events. On October 5, 2009, the Company issued 250,000 shares of common stock in payment for $60,000 of legal services. If cash receipts from the sale of shares do not generate $60,000, the Company will be required to issue sufficient additional shares. If less than the sales of 250,000 shares is required, any remaining shares will be returned.

On October 31, 2009, the Company issued 355,995 shares of common stock to three consultants for services valued at $64,079.

On November 9, 2009 the Board of Directors extended a consulting contract and stock option agreement with a consultant. A total of 650,000 options were extended until September 26, 2010. Of these, 150,000 options are vested at the modification date, resulting in the recognition of $10,850 of additional compensation expense. The remaining options require achievement of milestones before vesting.

Since September 30, 2009, the Company sold 100,000 unregistered shares of common stock for $0.10 per share together with 100,000 warrants with 3-year term and exercisable at $0.10 per share. Net proceeds totaled $10,000.

The Board approved incentives to induce certain option and warrant holders to exercise options and warrants prior to November 30, 2009. Option and Warrant holders may exercise up to one third of the options or warrants they hold, at a price of $0.10 per share. For each option or warrant so exercised, two additional will be converted to cashless options/warrants with an exercise price of $0.10 per share, and will be deemed exercised immediately, on a cashless basis.


Table of Contents

Amarillo Biosciences, Inc.

Financial Statements

Year ended December 31, 2008

Contents

Report of Independent Registered Public Accounting FirmF-2
Audited Financial Statements Balance SheetsF-3
Statements of OperationsF-4
Statements of Stockholders' DeficitF-5
Statements of Cash FlowsF-6
Notes to Financial StatementsF-7





Table of Contents


Report of Independent Registered Public Accounting Firm

To the Board of Directors of
Amarillo Biosciences, Inc.
Amarillo, TX

We have audited the accompanying balance sheets of Amarillo Biosciences, Inc. (the "Company") as of December 31, 2008 and 2007, and the related statements of operations, stockholders' deficit, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amarillo Biosciences, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1America 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

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding during the year. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first year for any potentially dilutive debt or equity.

As of December 31, 2021, potentially dilutive shares are not included in the calculation of fully diluted net loss per share as the effect with a net loss would be antidilutive.

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 U.S. financial institution which, from time to time, could exceed the federally insured limit of $250,000. The Company maintains multiple accounts in its Taiwan Branch office which help to mitigate risk. Our bank deposits in Taiwan are insured by the Central Deposit Insurance Corp. (“CDIC”) with an insured limit of NT$3,000,000 per account.

No loss has been incurred related to the aforementioned concentration of cash.

Recent Accounting Pronouncements

There have been no new accounting pronouncements issued or adopted during the year ended December 31, 2021 that are of significance to us.

2. Basis of presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company's absence of significant revenues, recurring losses from operations,Form 10-K/A for the year ended December 31, 2021, as filed with the Securities and its needExchange Commission on April 15, 2022  have been prepared in accordance with the Generally Accepted Accounting Principles (“GAAP”) for additional financing in order to fund its projected loss in 2009 raise substantial doubt about its ability to continue as a going concern. The 2008interim financial statementsinformation. Accordingly, they do not include all of the information and footnotes required by for audited financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022.

2. Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation and consist of the following at December 31, 2021 and 2020:

 

 

December 31,

 

 

 

2021

 

 

2020

 

Machinery and equipment

 

$938,047

 

 

$-

 

Furniture and fixture

 

 

47,960

 

 

 

107,549

 

Construction in process

 

 

232,729

 

 

 

-

 

Total cost

 

 

1,218,736

 

 

 

107,549

 

Less: accumulated depreciation

 

 

(31,034)

 

 

(104,300)

Property and equipment, net

 

$1,187,702

 

 

$3,249

 

Depreciation expense for the year ended December 31, 2021 and 2020 was $31,395 and $1,820, respectively. Construction in process represents assets that are not available for their intended use as of the balance sheet date.

Net property and equipment were $1,187,702 and $3,249 as of December 31, 2021 and 2020, respectively. We acquired $944,152 of machinery and equipment from Ainos KY pursuant to the Asset Purchase Agreement entered in November 2021.

3. Intangible assets, net

Intangible assets are stated at cost less accumulated amortization and consist of the following at December 31, 2021 and 2020:

 

 

December 31,

 

 

 

2021

 

 

2020

 

Patents and technology

 

$39,371,317

 

 

$245,898

 

Less: accumulated amortization

 

 

(2,042,126)

 

 

(65,270)

Patents and technology, net

 

$37,329,191

 

 

$180,628

 

Amortization expense amounted to $2,000,302 for the year ended December 31, 2021 and $12,878 for the year ended December 31, 2020 respectively, and is included in R&D, selling, general and administrative expenses.

Patents were $37,329,191 and $180,628 as of December 31, 2021 and 2020 respectively. We acquired intellectual properties related to VOC and COVID-19 technologies from Ainos KY pursuant to a Securities Purchase Agreement dated December 24, 2020, by and between the Company (under its former name “Amarillo Biosciences, Inc.”) and Ainos KY (the “Securities Purchase Agreement”) and the Asset Purchase Agreement.

Estimated future amortization expense is as follows:

2022

 

 

4,522,141

 

2023

 

 

4,522,141

 

2024

 

 

4,534,493

 

2025

 

 

4,522,141

 

2026

 

 

4,521,973

 

Thereafter

 

 

14,706,301

 

Total expense

 

$37,329,191

 

4. Convertible Notes Payable and Other Notes Payable

All convertible and other notes payable were issued either as a result of financing or deferred compensation provided by executives of the Company. As of December 31, 2021 and December 31, 2020, convertible and other notes payable totaled $3,589,931 and $953,001, respectively; including notes payable for related parties totaling $3,505,931 and $805,001, respectively. Refer to disclosure in Note 5 below.

The details of the convertible notes payable and other notes payable are shown in the table below:

Payee

No.

Effective Date

Due Date

From Effective

Following

Maturity

Conversion

Rate

Issuing Purpose

1/1/2021

 Addition

Payment

12/31/2021

Accrued Interest

Convertible notes payable:

Stephen Chen

#1.16

1/30/2016

Payable on demand

0.75%

NA

$ 0.17

working capital

114,026

114,026

5,839

Stephen Chen

#2.16

3/18/2016

Payable on demand

0.65%

NA

$ 0.19

working capital

262,500

262,500

9,878

Stephen Chen

#3.19

912019

9/1/2020

1.85%

10%

$ 0.25

salary

39,620

(39,620)

0

0

Stephen Chen

#4.19

1212019

12/31/2020

1.61%

10%

$ 0.25

working capital

14,879

(14,879)

0

0

Stephen Chen

#6.20

112020

1/1/2021

1.85%

10%

$ 0.25

salary

216,600

(216,600)

0

0

Stephen Chen

#7.20

112020

1/2/2021

1.60%

10%

$ 0.25

working capital

23,366

(23,366)

0

0

Stephen Chen

#10.21

112021

4/1/2021

1.85%

1.85%

$ 0.25

salary

59,025

(59,025)

0

0

Stephen Chen

#11.21

412021

5/1/2021

1.85%

10%

$ 0.25

salary

10,000

(10,000)

0

0

670,991

69,025

(363,490)

376,526

15,717

Ainos KY

#12.21

4/27/2021

10/27/2021

1.85%

NA

$ 0.20

working capital

15,000

15,000

189

Ainos KY

#13.21

5/5/2021

11/5/2021

1.85%

NA

$ 0.20

working capital

20,000

20,000

243

Ainos KY

#14.21

5/25/2021

11/25/2021

1.85%

NA

$ 0.20

working capital

30,000

30,000

335

Ainos KY

#15.21

5/28/2021

11/28/2021

1.85%

NA

$ 0.20

working capital

35,000

35,000

385

Ainos KY

#16.21

6/9/2021

12/9/2021

1.85%

NA

$ 0.20

working capital

300,000

300,000

3,117

Ainos KY

#17.21

6/21/2021

12/21/2021

1.85%

NA

$ 0.20

working capital

107,000

107,000

1,047

Ainos KY

#18.21

7/2/2021

1/2/2022

1.85%

NA

$ 0.20

working capital

54,000

54,000

498

Ainos KY

#19.21

912021

3/1/2022

1.85%

NA

$ 0.20

working capital

120,000

120,000

742

Ainos KY

#20.21

9/28/2021

3/28/2022

1.85%

NA

$ 0.20

working capital

300,000

300,000

1,429

Ainos KY

#21.21

11102021

5102022

1.85%

NA

$ 0.20

working capital

50,000

50,000

129

Ainos KY

#22.21

11252021

11/25/2022

1.85%

NA

$ 0.20

working capital

450,000

450,000

798

Ainos KY

#23.21

11/29/2021

5/29/2022

1.85%

NA

$ 0.20

working capital

300,000

300,000

471

Ainos KY

#24.21

12292021

6/29/2022

1.85%

NA

$ 0.20

working capital

1,219,000

1,219,000

124

0

3,000,000

0

3,000,000

9,507

 Total convertible notes payable- related parties

670,991

3,069,025

(363,490)

3,376,526

25,224

i2 China

#5.19

9/1/2019

9/1/2020

1.85%

10%

$ 0.25

consulting fee

16,000

(16,000)

0

0

i2 China

#8a.20

1/1/2020

1/1/2021

1.85%

10%

$ 0.25

consulting fee

48,000

(48,000)

0

0

i2 China

#11.21

112020

4/1/2021

1.85%

10%

$ 0.25

consulting fee

37,000

(37,000)

0

0

 Total convertible notes payable- non-related party

64,000

37,000

(101,000)

0

0

Total Convertible notes payable

734,991

3,106,025

(464,490)

3,376,526

25,224

Notes payable:

Stephen Chen

#9.21

1/1/2021

4/14/2021

0.13%

10%

NA

working capital

134,010

145,395

(150,000)

129,405

312

Notes payable-related party

134,010

145,395

(150,000)

129,405

312

i2 China

#8b.20

1/1/2020

1/1/2021

1.85%

10%

NA

consulting fee

84,000

84,000

3,137

 Notes payable- non-related party

84,000

0

0

84,000

3,137

Total notes payable

218,010

145,395

(150,000)

213,405

3,449

Total convertible and non-convertible

953,001

3,251,420

(614,490)

3,589,931

28,673

All of the aforementioned convertible promissory notes and other notes payable are unsecured and due on demand upon maturity. The Company may prepay the notes in whole or in part at any adjustments that might result fromtime. The Payee has the outcomeoption to convert some or all of this uncertainty.

LBB & Associates Ltd., LLP
/s/ LBB & Associates Ltd., LLP
Houston, Texas
March 18, 2009




Table of Contents

Amarillo Biosciences, Inc.
Balance Sheets
        
Assets December 31, 
Current assets: 2008   2007 
     Cash and cash equivalents$10,853  $47,184 
     Other current assets 12,813   31,688 
Total current assets 23,666   78,872 
Property, equipment, and software, net 9,575   14,098 
Patents, net 126,828   120,925 
Total assets$160,069  $213,895 
        
Liabilities and Stockholders' Deficit       
Current liabilities:       
     Accounts payable and accrued expenses$511,236  $98,203 
     Accrued interest - related party 572,773   682,773 
     Accrued expenses - related parties 53,971   - 
     Notes payable - related party 2,000,000   2,000,000 
Total current liabilities 3,137,980   2,780,976 
Total liabilities 3,137,980   2,780,976 
      
Commitments and contingencies     
Stockholders' deficit     
     Preferred stock, $.01 par value:     
          Authorized shares - 10,000,000     
          Issued and outstanding shares 0 at December 31, 2008 and 0 at December 31, 2007 -   - 
     Common stock, $.01 par value:     
          Authorized shares - 100,000,000     
          Issued and outstanding shares 35,953,377 at December 31, 2008 and 29,465,261 at December 31, 2007 359,534   294,653 
     Additional paid-in capital 28,322,564   25,598,217 
     Accumulated deficit (31,660,009)  (28,459,951)
Total stockholders' deficit (2,977,911)  (2,567,081)
Total liabilities and stockholder's deficit$160,069  $213,895 
        


the unpaid principal and accrued interest to our common voting stock.

The accompanyingconvertible promissory notes are an integral partconvertible on demand. The following convertible notes due to Stephen T. Chen – Notes 3.19, 4.19, 6.20, 7.20, 10.21, and 11.21 -- with a total principal and accrued interest amount of these financial statements.

F-3


Table$372,988 were assigned by the holder to Top Calibre Corporation, a British Virgin Islands corporation, and subsequently converted in common stock of Contents

Amarillo Biosciences, Inc.
Statements of Operations
Years ended December 31, 2008 and 2007
        
        
  Year ended December 31, 
 2008   2007 
Revenues:       
      Product sales$1,836  $2,150 
      Sublicense fee revenue 108,000   40,000 
      Royalty revenue - related party -   27,919 
            Total revenues 109,836   70,069 
      
Cost of revenues:     
      Product sales 644   680 
      Sublicense fee revenue 53,971   19,991 
            Total cost of revenues 54,615   20,671 
Gross margin 55,221   49,398 
      
Operating expenses:     
      Research and development expenses 525,903   530,867 
      Selling, general and administrative expenses 1,366,076   1,936,847 
            Total operating expenses 1,891,979   2,467,714 
      
Operating loss (1,836,758)  (2,418,316)
      
Other income (expense)     
      Interest expense (92,435)  (90,648)
      Interest and other income 6,126   2,891 
Net loss (1,923,067)  (2,506,073)
      
Deemed dividend for beneficial conversion feature (562,841)  - 
Deemed dividend for warrant anti-dilution (636,247)  - 
Preferred stock dividend (77,903)  - 
Net loss applicable to common shareholders$(3,200,058) $(2,506,073)
        
Basic and diluted net loss per average share available to common shareholders$(0.10) $(0.09)
        
Weighted average shares outstanding 31,047,516   26,569,803 
        


our company at a conversion price of $0.25 per share on December 27, 2021. No convertible notes were assigned in 2020.

During 2021, the Company received funding from Dr. Stephen T. Chen and Ainos KY totaling $214,420 and $3,000,000, respectively. Amounts owed to Dr. Stephen T. Chen of $150,000 were repaid. In 2020, the Company received funding from Dr. Stephen T. Chen totaling $373,976.

Note holders, i2China Management Group, LLC (“i2China”) and Dr. Stephen T. Chen (together the “Payees”), agreed to waive their rights pertaining to the conditional term “Annual Interest Rate on Matured, Unpaid Amounts: 10% per annum, compounded annually of Convertible Notes” in regards to interest charged on unpaid amounts following maturity for all of their respective notes. The accompanyingCompany and the Payees agree that the originally agreed annual interest rate will continue to be valid for any unpaid amounts after maturity. The amended terms of the above convertible notes are an integral partand other notes payable were made during on September 1, 2021. Interest waived totaled $45,875.

The total interest expense for 2021 and 2020 totaled $21,727 and $10,702 respectively; the cumulative related accrued interest as of these financial statements.

F-4


Table of Contents

Amarillo Biosciences, Inc.
Statements of Stockholders' Deficit
Years Ended December 31, 2008 and 2007
                         
Issuance Preferred Stock Common Stock Additional
Paid in		 Accumulated Total
Stockholders'
 Price Shares  Amount  Shares  Amount  Capital   Deficit   Deficit 
Balance at December 31, 2006  - $-  24,476,767 $244,768 $23,345,445  $(25,953,878) $(2,363,665)
Net loss for year ended
December 31, 2007		  -  -  -  -  -   (2,506,073)  (2,506,073)
Fair value of options and
warrants issued		  -  -  -  -  879,662   -   879,662 
Exercise of options and
warrants for cash		$0.06-0.44 -  -  529,486  5,295  97,194   -   102,489 
Conversion and exercise
of cashless options		0.06-0.44 -  -  171,853  1,719  (1,719)  -   - 
Issuance of common stock
for cash in private placements		0.20-0.45 -  -  4,087,155  40,871  1,113,635   -   1,154,506 
Issuance of common
stock for services		0.82-0.84 -  -  200,000  2,000  164,000   -   166,000 
Balance at December 31, 2007  -  -  29,465,261  294,653  25,598,217   (28,459,951)  (2,567,081)
                  
Net loss for year ended
December 31, 2008		  -  -  -  -  -   (1,923,067)  (1,923,067)
Fair value of options
and warrants issued		  -  -  -  -  392,292   -   392,292 
Issuance of preferred
stock for cash, net		$1,000 1,000  10  -  -  793,783   -   793,793 
Conversion of preferred
stock to common stock		  (1,000) (10) 4,000,000  40,000  (39,990)  -   - 
Issuance of common stock
for cash in private
placements and stock plan		0.10-0.25 -  -  1,348,404  13,484  126,357   -   139,841 
Issuance of common
stock for services		0.06-0.33 -  -  702,439  7,024  179,287   -   186,311 
Stock dividend to
preferred shareholders		0.09-0.27 -  -  437,273  4,373  73,530   (77,903)  - 
Deemed dividend for
beneficial conversion feature		  -  -  -  -  562,841   (562,841)  - 
Deemed dividend for
warrant modification		  -  -  -  -  636,247   (636,247)  - 
Balance at December 31, 2008  - $-  35,953,377 $359,534 $28,322,564  $(31,660,009) $(2,977,911)
                         
                         

The accompanying notes are an integral part of these financial statements.

F-5

Table of Contents

Amarillo Biosciences, Inc.
Statements of Cash Flows
Years Ended December 31, 2008 and 2007
        
 Year ended December 31,
Operating Activities 2008   2007 
Net loss$(1,923,067) $(2,506,073)
Adjustments to reconcile net loss to net cashused for operating activities:     
       Depreciation and amortization 19,774   18,783 
       Common stock issued for services 186,311   166,000 
       Fair value of options issued 392,292   879,662 
       Changes in operating assets and liabilities:     
              Other current assets 18,875   2,683 
              Accounts payable and accrued expenses 413,033   (55,179)
              Accrued interest - related party (110,000)  82,072 
              Accrued expenses - related party 53,971   - 
Net cash used in operating activities (948,811)  (1,412,052)
      
Investing Activities     
Purchase of property and equipment (980)  (2,578)
Investment in patents (20,174)  (9,025)
Net cash used in investing activities (21,154)  (11,603)
      
Financing Activities     
Proceeds from exercise of warrants and options -   102,489 
Issuance of common stock for cash 139,841   1,154,506 
Issuance of convertible preferred stock for cash 793,793   - 
Net cash provided by financing activities 933,634   1,256,995 
Net increase (decrease) in cash (36,331)  (166,660)
Cash and cash equivalents at beginning of period 47,184   213,844 
Cash and cash equivalents at end of period$10,853  $47,184 
        
Supplemental Cash Flow Information       
Cash paid for interest$202,435  $2,891 
        
Cash paid for income taxes$-  $- 
        
Non-cash financing and investing activities:     
Stock dividend to preferred shareholders$77,903  $- 
        
Deemed dividend for beneficial conversion feature of preferred stock$562,841  $- 
        
Deemed dividend for anti-dilution warrants$636,247  $- 
        

The accompanying notes are an integral part of these financial statements.

F-6

Table of Contents

Amarillo Biosciences, Inc.
Notes to Financial Statements
December 31, 2008


1. Organization2021 and Summary of Significant Accounting Policies

Organization2020 were $28,673 and Business

Amarillo Biosciences, Inc. (the "Company" or "AMAR" or "Amarillo"), a Texas corporation formed in 1984, is engaged in developing biologics for the treatment of human and animal diseases. The Company is continuing its clinical studies as part of the process of obtaining regulatory approval from the United States Food and Drug Administration ("FDA"), so that commercial marketing can begin in the United States. The Company has developed a dietary supplement and an interferon alpha lozenge, but has not commenced any significant product commercialization activities.

Going Concern

$24,196, respectively.

3. Financial Condition.These financial statements have been prepared in accordance with United States generally accepted accounting principles,GAAP, 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 profitability,sustained operating income, and its operations are funded primarily from related-party convertible debt and equity financings. LossesHowever, 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'sCompany’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'sCompany’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.

7. Non-Current Convertible Notes Payable. As of March 31, 2022 and December 31, 2021, the amount of non-current convertible notes payable was $26,900,000 and $0, respectively.

On January 30, 2022, we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 (the “APA Convertible Note”) for the Asset Purchase Transaction as more particularly described below in Item 8 in these Notes to Financial Statements. The principal sum of the APA Convertible Note is payable in cash on January 30, 2027, although we may prepay the APA Convertible Note in whole or in part without penalty. The APA Convertible Note is noninterest bearing. If not earlier repaid, the APA Convertible Note will be converted into shares of our common stock or such other securities or property for which the APA Convertible Note may become convertible, immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be 80% of the initial public offering price of the offering.

Convertible Note Offering Pursuant to Regulation S

The Company issued Convertible Notes pursuant to certain Convertible Note Purchase Agreements under Regulation S. The transactions are more particularly described below:

·

$50,000 Convertible Note issued on March 31, 2022 to Yun-Han Liao. The purchaser is the daughter of Wu Hui-Lan, the Company’s Chief Financial Officer (the “Liao Convertible Note”).

·

$850,000 aggregate Convertible Notes issues on March 28, 2022 to Chih-Cheng Tsai, Ming-Hsien Lee, Yu-Yuan Hsu, and Top Calibre Corporation, a British Virgin Islands company (collectively the “Regulation S Notes”).

·

The Liao Convertible Note and the Regulation S Notes are collectively referred to as the “Convertible Notes”.

The Principal Amount of the Convertible Notes are payable in cash on March 30, 2027, although the Company may prepay the Convertible Notes in whole or in part without penalty. The Convertible Notes are non-interest bearing. If not earlier repaid, the Convertible Notes will be converted into shares of common stock, $0.01 par value per share of the Company, or such other securities or property for which the Convertible Notes may become convertible, immediately prior to the closing of any public offering of the Company’s common stock as result of which the Company’s common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be eighty percent (80%) of the initial public offering price of the offering.

5. Related Party Transactions

The following is a summary of related party transactions in 2021 and 2020 to which we have been a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets as of December 31, 2021 and 2020, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest, other than compensation arrangements which are described in Part II, Item 5 “Market for the Registrant’s Common Equity and Related Shareholder Matters, and Issuer Purchases of Equity Securities,” and Part III, Item 11 “Executive Compensation.”

Name of the related party

Relationship

Description

Taiwan Carbon Nano Technology Corporation (“TCNT”)

Affiliated company

TCNT is the majority shareholder of Ainos KY

Ainos, Inc. (Cayman Island) (“Ainos KY”)

Affiliated company

Ainos KY is the majority shareholder of the Company

ASE Technology Holding

Affiliated company

Sole owner of ASE Test Inc. which is Ainos KY’s board member and has more than 10% of the voting rights in Ainos KY

Dr. Stephen T. Chen

Ainos’ former Chairman, President, CEO and CFO

Shareholder with more than 5% of the Company voting rights in 2021 and 2020

Purchase of intangible assets and equipment

Securities Purchase Agreement

On April 15, 2021, we consummated the Securities Purchase Agreement with Ainos KY. Pursuant to the Securities Purchase Agreement, we issued 100,000,000 shares of common stock at $0.20 per share to Ainos KY in exchange for certain patent assignments, increased its authorized common stock to 300,000,000 shares, and changed the Company’s name to “Ainos, Inc.” Immediately after the consummation of the transaction Ainos KY owned approximately 70.30% of the Company’s issued and outstanding shares of common stock.

Asset Purchase Agreement

On November 18, 2021, we entered into an Asset Purchase Agreement as modified by an Amended and Restated Asset Purchase Agreement dated as of January 29, 2022 (the “Asset Purchase Agreement”) with Ainos KY. We closed the transaction on January 30, 2022. See Notes 2, 3, and 12 for a discussion of the transaction.

Related Party Financing

All convertible and other notes payable were issued either as a result of financing or deferred compensation provided by shareholders. As of December 31, 2021 and 2020, the convertible notes payable and non-convertible notes payable for related parties totaled $3,505,931 and $805,001, respectively. Refer to Note 4 of the Notes to Financial Statements, which are incorporated herein by this reference, for more information.

Other transactions

COVID-19 Test Kits Sales and Marketing Agreement with Ainos KY

On June 14, 2021, we entered into an exclusive agreement with Ainos KY to serve as the master sales and marketing agent for the Ainos COVID-19 antigen rapid test kit and COVID-19 nucleic acid test kits which are manufactured by TCNT. On June 7, 2021, the TFDA issued an emergency use authorization to TCNT for the Ainos COVID-19 antigen rapid test kit that will be sold and marketed under the “Ainos” brand in Taiwan. As TCNT secures regulatory authorizations from foreign regulatory agencies, we expect to partner with regional distributors to promote sales in other strategic markets. We purchased $183,444 of COVID-19 antigen rapid test kit inventory from TCNT for the year ended December 31, 2021 and $0 in 2020.

Ainos – TCNT Product Development

On August 1, 2021, we entered into a five-year product development agreement with TCNT. Pursuant to the agreement both parties will endeavor to work together to develop pharmaceutical, medical and preventive medicine related products, with the Company being the exclusive sales agent. We will bear the cost associated with product development and TCNT will make accessible its personnel and facilities. Both parties shall each jointly own the intellectual property rights of all research results of the co-development collaboration. As a result, we incurred product development expenses totaling $205,883 as of December 31, 2021 of which $65,156 is in accrued payable as of December 31, 2021 and $0 in product development expenses in 2020.

COVID-19 Antigen Rapid Test Kits Sales

We sold Covid-19 antigen rapid test kits to ASE Technology Holding totaling $209,468 for the year ended December 31, 2021 and $0 in 2020.

8. Related Party Transactions. The following is a summary of related party transactions that met our disclosure threshold for the three months ended March 31, 2022 and 2021:

Asset Purchase Agreement

Ainos KY and the Company entered into an Asset Purchase Agreement dated as of November 18, 2021(the “Asset Purchase Agreement”), as modified by an Amended and Restated Asset Purchase Agreement dated as of January 29, 2022 (the “Amended Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the Company acquired certain intellectual property assets and certain manufacturing, testing, and office equipment for a total purchase price of $26,000,000. Pursuant to the Asset Purchase Agreement, the Company agreed to hire certain employees of Ainos KY who are responsible for research and development of the IP Assets and/or Equipment on terms at least equal to the compensation arrangements undertaken by Ainos KY. From and after the closing, we will have no responsibility, duty or liability with respect to any employee benefit plans of Ainos KY. As payment of the purchase price, we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 upon closing on January 30, 2022 (the “APA Convertible Note”). Refer to Note 7 of the Notes to Financial Statements for more information.

Related Party Working Capital

All convertible and other notes payable were issued either as a result of financing or deferred compensation provided by related parties. As of March 31, 2022 and December 31, 2021, the convertible and non-convertible notes payable for related parties totaled $4,355,931 and $3,505,931, respectively. Refer to Note 6 and 7 of the Notes to Financial Statements for more information.

Purchase related to COVID-19 Antigen Rapid Test Kits

We incurred costs associated with finished goods, raw materials and manufacturing fees for Covid-19 antigen rapid test kits from TCNT pursuant to a Sales and Marketing Agreement, totaling $386,412 for the three months ended March 31, 2022. There were no purchases from TCNT during the same period last year.

Product Co-development Agreement

Pursuant to the five-year product co-development agreement effective on August 1, 2021 with TCNT (the “Product Co-Development Agreement”) we incurred development expenses totaling $167,422 for the three months ended March 31, 2022 of which $109,131 is in accrued payable as of March 31, 2022.

Promissory Note Extension Agreement

On March 17, 2022, we executed a Promissory Note Extension Agreement with Ainos KY in which the due dates for certain convertible notes enumerated as #12.21 to #24.21 issued by the Company to Ainos KY were extended to February 28, 2023 (the “Promissory Note Extension Agreement”). The total unpaid principal for these extended period convertible notes amount to $3,000,000 in the aggregate. Refer to Footnote 1 of Note 6 of the Notes to Financial Statements for more information.

6. Common Stock

We have 300,000,000 shares of voting common shares authorized for issuance. As of December 31, 2021, a total of 163,915,625 shares of common stock were either issued (144,379,308), reserved for conversion of convertible debt to stock (17,213,700), reserved for future issuance of RSUs for non-employee directors (1,320,000), held for future exercise of stock options (550,000) and shares reserved for warrant conversion (452,617).

F-25

Table of Contents

From January 1, 2021 to December 31, 2021, we granted common stock to the following:

·

On April 7, 2021, we issued 48,077 shares of common stock to Stephen T. Chen and/or Stephen T. Chen and Virginia M. Chen, Trustees, Stephen T. & Virginia M. Chen Living Trust Dated April 12, 2018 (Chen) as partial compensation payable for the period January 1, 2021 through March 31, 2021 under the Employment Agreement by and between the Company and Chen effective January 1, 2021 (“Chen Agreement”).

·

On April 7, 2021, we issued 5,769 shares of common stock to Bernard Cohen (“Cohen”) as partial compensation payable for the period January 1, 2021 through March 31, 2021 under the Employment Agreement by and between the Company and Cohen effective January 1, 2021 (“Cohen Agreement”).

·

On April 7, 2021, we issued 11,538 shares of common stock to Lawrence Lin (“Lin”) as compensation payable for the period January 1, 2021 through March 31, 2021 under the Consulting Agreement by and between the Company and Lin’s company, i2China Management Group, LLC, effective April 15, 2018 (“Lin Agreement”), as amended and made effective on January 1, 2020 (“Lin Amendment”).

·

On April 7, 2021, we issued 109,038 shares of common stock to John Junyong Lee as compensation payable for the period January 1, 2021 through March 31, 2021 under the Legal Retainer Agreement by and between the Company and Lee effective June 21, 2019 (“Lee Agreement”).

·

On April 15, 2021, we consummated the Securities Purchase Agreement and issued 100,000,000 shares of common stock at $0.20 per share to Ainos KY in exchange for certain patent assignments.

·

On June 30, 2021, we issued 5,342 shares of common stock as compensation payable for the period April 1, 2021 through April 15, 2021 under the Chen Agreement as amended by Amendment No. 2 that extended the termination date to April 15, 2021.

·

On June 30, 2021, we issued 107 shares of common stock to Bernard Cohen as compensation payable for the period April 1, 2021 through April 5, 2021 under the Cohen Agreement as amended by Amendment No. 1 that extended the termination date to April 5, 2021.

·

On June 30, 2021, we issued 3,846 shares of common stock to Lawrence Lin as compensation payable for the period April 1, 2021 through June 30, 2021 under the Lin Agreement and Lin Amendment.

·

On June 30, 2021, we issued 21,926 shares of common stock to John Junyong Lee as compensation payable for the period April 1, 2021 through June 30, 2021 under the Lee Agreement.

·

On July 30, 2021, we issued 20,000 shares of voting common stock to Ya-Ju (“Maggie Wang”), previously a branch manager of the Company’s Taiwan branch office. The Company received payment of $7,600 ($0.38 per share) in accordance to a Stock Option Agreement under the Company’s 2018 Employee Stock Option Plan.

·

On July 30, 2021, we issued 150,400 shares of voting common stock to Daniel Fisher, previously a Company board director. The Company received payment of $57,152 ($0.38 per share) in accordance to a Stock Option Agreement under the Company’s 2018 Officers, Directors, Employees and Consultants Nonqualified Stock Option Plan.

·

On December 27, 2021, we issued 1,491,953 shares of common stock to Top Calibre Corporation (“TCC”) resulting from an assignment of convertible promissory notes from Dr. Stephen T. Chen to TCC under that certain Assignment Agreement by and between Dr. Stephen T. Chen and TCC, dated December 15, 2021 (“TCC Agreement”). Convertible promissory notes #3.19, #4.19, #6.20, #7.20, #10.21 and #11.21 were exercised at its entirety at a strike price of $0.25 per share based on a combined aggregate principal and accrued interest amount of $372,988.

·

On December 27, 2021, we issued 413,368 shares of common stock to i2China Management Group LLC (“i2China”) resulting from a notice of demand from i2China to initiate the conversion of convertible promissory notes #5.19, #8.20a, and #11 exercised at its entirety at a strike price of $0.25 per share based on a combined aggregate principal and accrued interest amount of $103,342.

·

On December 27, 2021, we issued 2,946 shares of common stock to Lawrence Lin as compensation payable for the period July 1, 2021 through August 1, 2021 under the Lin Agreement and Lin Amendment.

·

On December 27, 2021, we issued 28,826 shares of common stock to John Junyong Lee as compensation payable for the period July 1, 2021 through September 31, 2021 under the Lee Agreement.

We did not pay any dividends to its common stock shareholders in 2021 and has no plans to do so in the immediate future.

4. Common Stock. We have 300,000,000 shares of voting common shares authorized for issuance. On March 31, 2022, a total of 163,987,550 shares of common stock were either issued (144,379,308), reserved for conversion of convertible debt to stock (17,285,625), reserved for future issuance of RSUs for non-employee directors (1,320,000), held for future exercise of stock options (550,000) and shares reserved for warrant conversion (452,617). We also have $26.9 million outstanding in convertibles notes which are convertible into shares of common stock upon and at a conversion price equal to 80% of the offering price of any public offering as a result of which the Company's common stock is listed on a national exchange.

We have not paid any dividends to our common stock shareholders to date, and have no plans to do so in the immediate future.

7. Preferred Stock

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

No shares of preferred stock were outstanding as of December 31, 2021 and 2020 and none are outstanding as of the date of this report.

5. Preferred Stock. We have 10,000,000 shares of preferred stock authorized for issuance. No shares of preferred stock were outstanding as of March 31, 2022.

8. Stock Option and Stock Plans

2018 Employee Stock Option Plan (the “2018-ESOP”)

On September 26, 2018, the Board adopted the Company 2018 Employee Stock Option Plan (the “2018-ESOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan” in prior filings. 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. A stockholders meeting was not convened within the one year period and, as a result, any qualified options automatically became non-qualified options effective September 26, 2019.

The 2018-ESOP is administered by the Board or by a committee of directors appointed by the Board (the “Compensation Committee”) as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-ESOP is 1,000,000 shares which will be reserved for issuance upon exercise of 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 on the date of grant. 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.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-ESOP. As of December 31, 2021, options to acquire 550,000 shares of common stock remained outstanding.

2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”)

On September 26, 2018, the Board adopted the Company 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan (the “2018-NQSOP”), formerly referred to as the “Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan” in prior filings. The 2018-NQSOP provides for the grant of nonqualified incentive stock options to employees. The 2018-NQSOP is administered by the Board or by the Compensation Committee as constituted from time to time. The maximum number of shares of common stock which may be issued under the 2018-NQSOP is 4,000,000 which will be reserved for issuance upon exercise of options. The option price for the nonqualified options is $0.382 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.

Effective as of October 6, 2021, with the adoption by the Board of the 2021 SIP, no further awards may be granted under the 2018-NQSOP. As of December 31, 2021, options to acquire 550,000 shares of common stock remained outstanding.

Equity Compensation Plans Information:

Stock Plans 1

 

Issue Date Range

 

Total Options Authorized

 

 

Options Issued

 

 

Options Remaining2

 

2018 Employee Stock Option Plan3, 4

 

9/26/18 – 9/26/28

 

 

1,000,000

 

 

 

950,000

 

 

 

0

 

2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan3

 

9/26/18 – 9/26/28

 

 

4,000,000

 

 

 

4,495,000

5

 

 

0

 

____________

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

2 Effective October 6, 2021, no further stock option issuance from 2018-ESOP and 2018-NQSOP as per provision in newly adopted 2021 Stock Incentive Plan.

3 Details of the option plans are also disclosed in Financial Statements footnote 8,Stock Options and Stock Plans.

4 On September 26, 2019, all qualified options under the 2018-ESOP became non-qualified options since the 2018-ESOP was not ratified by the Company’s shareholders within one year of adoption.

5 3,844,600 non-qualified options were forfeited as of July 15, 2021, while an additional 500,000 non-qualified options were reissued on August 1, 2021.

A summary of option activity for the years ended December 31, 2020 and December 31, 2021 are presented below.

Date

 

Number of

Options

1Qualified

 

 

Number of

Options

Nonqualified

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining Contractual Term

 

 

Aggregate

Intrinsic

Value

 

Balance December 31, 2019

 

 

850,000

 

 

 

3,807,000

 

 

$0.38

 

 

8 years

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expired or Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance December 31, 2020

 

 

850,000

 

 

 

3,807,000

 

 

$0.38

 

 

7 years

 

 

 

 

 

Granted 2021

 

 

-

 

 

 

500,000

 

 

$0.38

 

 

10 years

 

 

 

 

 

Exercised

 

 

20,000

 

 

 

150,400

 

 

$0.38

 

 

 

-

 

 

 

-

 

Expired or Forfeited

 

 

780,000

 

 

 

3,656,600

 

 

$0.38

 

 

 

-

 

 

 

-

 

Balance December 31, 2021

 

 

50,000

 

 

 

500,000

 

 

$0.38

 

 

9.54 years

 

 

 

-

 

Vested as of December 31, 2021

 

 

30,000

 

 

 

0

 

 

$0.38

 

 

6.74 years

 

 

 

-

 

1 Because the 2018 Employee Stock Option Plan was not ratified by the Company’s shareholders, the qualified options became non-qualified on September 26, 2019. These totals remain separated since the two different plans are still in existence.

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 was chosen although the full option term is 10 years to be more commensurate with the 5-year vesting portion of the plan; (3) Discount – 2.96%.

____________

2 See footnote 4 above.

As of December 31, 2021, there is $410,022 in unrecognized option expense that will be recognized over the next 2.58 years.

2021 Employee Stock Purchase Plan

On September 28, 2021, the Board approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP” or “Plan”). The purpose of the 2021 ESPP is to provide an opportunity for eligible employees of the company and its designated companies (as defined in the Plan) to purchase common stock at a discount through voluntary contributions, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such persons and the Company’s stockholders. The Company intends for offerings under the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code; provided, that the Plan administrator may also authorize the grant of rights under offerings that are not intended to comply with the requirements of Section 423, pursuant to any rules, procedures, agreements, appendices, or sub-plans adopted by the administrator. Subject to adjustments as provided in the Plan, the maximum number of shares of common stock that may be issued under the Plan may not exceed 750,000 shares. Such shares may be authorized but unissued shares, treasury shares or shares purchased in the open market. The Plan is be subject to approval by the Company’s stockholders within twelve months after the date of Board approval. The Plan will become effective on the date that stockholder approval is obtained, and will continue in effect until it expires on the tenth anniversary of the effective date of the Plan, unless terminated earlier.

2021 Stock Incentive Plan

On September 28, 2021, the Board approved the 2021 Stock Incentive Plan (the “2021 SIP” or “Plan”). The purpose of the 2021 SIP is to provide a means through which the Company, and the other members of the Company Group, defined by Section 2(n) of the Plan as the Company and its subsidiaries, and any other affiliate of the Company designated as a member of the Company Group by the Committee, may attract and retain key personnel, and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation measured by reference to the value of common stock, thereby strengthening their commitment to the interests of the Company Group and aligning their interests with those of the Company’s stockholders. The types of awards that may be granted from the Plan include individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent Rights and Other Equity-Based Award granted under the Plan. The Plan will be effective upon shareholder approval. The expiration date of the Plan, on and after which date no awards may be granted, will be the tenth anniversary of the date of Board approval of the Plan, provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the Plan will continue to apply to such Awards. The aggregate number of shares which may be issued pursuant to awards under the Plan is 20,000,000 shares of Common Stock (the “Plan Share Reserve”), subject to adjustments as provided in the Plan. The number of shares underlying any award granted under 2018 ESOP or 2018 NQSOP (the “Prior Plans”) that expires, terminates or is canceled or forfeited for any reason whatsoever under the terms of the Prior Plans, will increase the Plan Share Reserve. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares underlying the award. No more than 10,000,000 shares may be issued in the aggregate pursuant to the exercise of incentive stock options granted under the Plan. The maximum number of shares subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such director during the fiscal year, will not exceed $600,000 in total value (calculating the value of any such awards based on their grant date fair value for financial reporting purposes).

6. Current Convertible Notes Payable and Other Notes Payable. As of March 31, 2022 and December 31, 2021, the amount of convertible and other notes payable totaled $4,389,931 and $3,589,931, respectively. The details of the convertible notes payable and other notes payable are shown in the table below:

Payee

No.

Effective Date

Due Date

From Effective

Following Maturity

Conversion Rate

Issuing Purpose

As of 12/31/2021

Addition

Payment

As of 3/31/2022

Accrued Interest

Current Convertible Notes Payable:

Stephen Chen

#1.16

1/30/2016

Payable on demand

0.75%

N/A

$ 0.17

working capital

114,026

-

-

114,026

6,050

Stephen Chen

#2.16

3/18/2016

Payable on demand

0.65%

N/A

$ 0.19

working capital

262,500

-

-

262,500

10,298

376,526

-

-

376,526

16,348

Ainos KY

#12.21

4/27/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

15,000

-

-

15,000

257

Ainos KY

#13.21

5/5/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

20,000

-

-

20,000

335

Ainos KY

#14.21

5/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

30,000

-

-

30,000

471

Ainos KY

#15.21

5/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

35,000

-

-

35,000

545

Ainos KY

#16.21

6/9/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

4,486

Ainos KY

#17.21

6/21/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

107,000

-

-

107,000

1,535

Ainos KY

#18.21

7/2/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

54,000

-

-

54,000

744

Ainos KY

#19.21

9/1/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

120,000

-

-

120,000

1,289

Ainos KY

#20.21

9/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

2,798

Ainos KY

#21.21

11/10/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

50,000

-

-

50,000

357

Ainos KY

#22.21

11/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

450,000

-

-

450,000

2,851

Ainos KY

#23.21

11/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

1,840

Ainos KY

#24.21

12/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

1,219,000

-

-

1,219,000

5,684

 

 

 

 

 

 

 

 

3,000,000

-

-

3,000,000

23,192

 Total convertible notes payable- related parties

3,376,526

-

-

3,376,526

39,540

Non-Convertible Notes Payable:

Stephen Chen

#9.21

1/1/2021

4/14/2021

0.13%

N/A

N/A

working capital

129,405

-

-

129,405

354

Ainos KY

#26.22 (2)

3/4/2022

3/31/2023

1.85%

N/A

N/A

working capital

-

800,000

-

800,000

1,135

Non-convertible notes payable-related party

129,405

800,000

-

929,405

1,489

i2 China

#8b.20

1/1/2020

1/1/2021

1.85%

N/A

N/A

consulting fee

84,000

-

-

84,000

3,527

 

 

 

Non-Convertible Notes payable- non-related party

84,000

 

 

84,000

3,527

 

 

 

Total non-convertible notes payable

213,405

800,000

-

1,013,405

5,016

Total convertible and non-convertible

3,589,931

800,000

-

4,389,931

44,556

Notes:

(1) On March 17, 2022, we executed a Promissory Note Extension Agreement with Ainos KY in which the due dates for certain convertible notes enumerated as #12.21 to #24.21 issued by the Company to Ainos KY were extended to February 28, 2023. The total unpaid principal for these extended period convertible notes amount to $3,000,000 in the aggregate.

(2) On March 11, 2022, the Board approved a Non-Convertible Note dated March 4, 2022 in favor of Ainos KY with a principal amount of $800,000, interest of 1.85% per annum on unpaid principal and accrued interest, and a maturity date of February 28, 2023. The Note includes standard provisions for notice, default, and remedies for default.

All of the aforementioned convertible promissory notes and other notes payable are unsecured and due on demand upon maturity. The Company may prepay the notes in whole or in part at any time. The holder of convertible notes has the option to convert some or all of the unpaid principal and accrued interest to our common voting stock.

The total interest expense of convertible notes payable and other notes payable for the three months ended March 31, 2022 and as of December 31 2021 was $15,883 and $11,897 respectively; the cumulative related accrued interest as of March 31, 2022 and December 31, 2021 were $44,556 and $28,673, respectively.

9. Warrants

As of December 31, 2021, there is only one warrant certificate outstanding between the Company and i2China Management Group, LLC, deemed for the purposes of related party transactions to be a related party of the company from August 1, 2021 to December 1, 2021, effective from November 25, 2020 until November 25, 2025. The warrant entitles the holder to purchase 452,617 shares of common stock at an exercise price of $0.27 per share. The warrant was valued at $68,349 and will be expensed over sixty (60) months. The Company used the Black-Scholes option pricing model to value the warrants with the following assumptions applied: (1) Volatility – 201%; (2) Term – 5 years (3) Discount Rate – 0.11%.

No warrants were exercised in 2020 or 2021.

10. Income Taxes

The Company accounts for income taxes under FASB Accounting Standard Codification ASC 740, Income Taxes. ASC 740 requires use of the liability method. ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. Federal income tax of 21% to pretax income from continuing operations as a result of the following:

 

 

December 31,

 

 

 

2021

 

 

2020

 

Provision (benefit) at statutory rate

 

$(816,000)

 

$(305,000)

Permanent differences

 

 

-

 

 

 

1,000

 

Temporary differences

 

 

206,000

 

 

 

79,000

 

Change in valuation allowance

 

 

610,000

 

 

 

225,000

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020, are presented below:

 

 

December 31,

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforward

 

$4,357,000

 

 

$4,328,270

 

Other assets

 

 

248,000

 

 

 

217,000

 

Deferred tax assets

 

 

4,605,000

 

 

 

4,545,270

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

-

 

 

 

-

 

Net deferred tax assets

 

 

4,605,000

 

 

 

4,545,270

 

Valuation allowance

 

 

(4,605,000)

 

 

(4,545,270)

At December 31, 2021, we estimate net operating loss carryforwards of approximately $20,747,517 for federal income tax purposes expiring in 2022 through 2041. The ability of the Company to utilize these carryforwards may be difficult and directly dependent upon many factors outside of our control, including, but not limited to, changes in the legal and regulatory framework and the operational and corporate structure of the Company and shareholders, or sales or transfers of stock by or among shareholders. For example, when the Company has experienced a change of control as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended, the use of any existing tax attributes would be severely limited. Also, obtaining value from the tax attributes is a function our return to profitable operations and the timeframe of that return. While we believe it is possible, there is no assurance that the Company will return to profitability in the future.

As of December 31, 2021, the Company had open tax years of 2020, 2019 and 2018 which are subject to examination by tax authorities.

11. Commitments and Contingencies

Lease and contract commitment

Our executive and administrative offices in the U.S. are located at 8880 Rio San Diego Drive, Suite 800, San Diego, CA 92108. The lease term began on April 1, 2021 as a semi-annual term and automatically renewed currently as a month-to-month renewal agreement.

Our Taiwan branch office is located in New Taipei City, Taiwan (“R.O.C.”) under a three-year office lease contract from June 2021 to May 2024. The office space is 1,250 square feet. We also have staff at a product development facility of approximately 8,517 square feet located in Miaoli County, Taiwan, pursuant to our Product Development Agreement with TCNT.

We have several construction work related contracts to build out our office and lab facilities in Taiwan. As of December 31, 2021, the total contract amount and outstanding contract amount for construction in progress were approximately US$670,000 and US$464,000, respectively.

Litigation

We not at this time involved in any legal proceedings.

Officer Compensation

Effective April 15, 2021, our Board appointed Mr. Chun-Hsien Tsai to serve as Chief Executive Officer. Mr. Tsai will receive a monthly salary of 250,000 New Taiwan Dollars (equivalent to approximately $8,929), a year-end bonus of two months’ salary, and a variable compensation based on Company profit targets decided by the Company’s Compensation Committee, and payable as 10-30% of total annual compensation in the form of cash, securities and/or other discretionary remuneration. An initial equity grant to Mr. Tsai will be determined by the Compensation Committee at a later date. Other benefits, including labor insurance, health insurance and other benefits, will be based on local regulations and the Company’s policies.

Effective August 11, 2021, our Board appointed Ms. Hui-Lan (“Celia”) Wu to serve as Chief Financial Officer. Ms. Wu will receive a monthly salary of 230,000 New Taiwan Dollars (equivalent to approximately $8,214), a year-end bonus of 2 months’ salary, and a variable compensation based on Company profit targets decided by the Company’s Compensation Committee, and payable as 10-30% of total annual compensation in the form of cash, securities and/or other discretionary remuneration. An initial equity grant to Ms. Wu will be determined by the Compensation Committee at a later date. Other benefits, including labor insurance, health insurance and other benefits, will be based on local regulations and the Company’s policies.

Effective August 1, 2021, we entered into an employment contract with Mr. Lawrence K. Lin in connection with his election as Executive Vice President of Operations (the “LL Agreement”). The LL Agreement is effective for three years and may be extended for additional years on the same terms and conditions upon mutual agreement. Under the LL Agreement, Mr. Lin will receive a monthly salary of $12,000, vesting stock options for 500,000 shares in the Company’s 2018 Officers, Directors, Employees and Consultants Non-Qualified Stock Option Plan, and a bonus of 10,000 shares in the Company’s common stock upon the Company’s successful listing on a Major National Exchange (as defined in the LL Agreement), and normal and customary benefits available to the Company’s employees. Mr. Lin is the sole member of i2China Management Group, LLC (“i2China”), a consultant previously engaged by the Company. Mr. Lin indirectly owns 452,617 warrants issued on November 25, 2020 to i2China; a non-convertible note issued to i2China on January 1, 2020 with a principal amount of $84,000; and convertible notes issued to i2China with a total principal and accrued interest amount of $103,342, that were converted into 413,368 shares of common stock on December 27, 2021 at a conversion price of $0.25 per share.

We previously hired Dr. Stephen T. Chen under an employment contract for the period January 1, 2018 through December 31, 2020 (“Prior Chen Contract”). On January 1, 2021 an employment agreement for a 3-month term was executed reflecting the same material terms and conditions of the Prior Chen Contract which includes (i) a $240,000 annual salary, (ii) $100,000 in Company shares payable quarterly based on the average share price of the closing quotes for the one month preceding issuance (referred to in the table as “Other Compensation”), (iii) certain employee benefits available to the our employees, and (iv) reimbursement of expenses made on behalf of the Company. The Company and Dr. Chen also executed a Settlement Agreement and Mutual General Release made effective December 24, 2020 covering any employment-related claims arising under the Prior Chen Contract. The Company and Dr. Chen also entered into an Intellectual Property Assignment Agreement made effective January 19, 2021 whereby Dr. Chen has assigned all right, title, and interest to certain patents, trademarks, and other intellectual property created or developed during Dr. Chen’s employment with the Company.

We previously hired Mr. Cohen under an employment contract for the period January 1, 2018 through December 31, 2020 (“Prior Cohen Contract”). On January 1, 2021 an employment agreement for a 3-month term was executed reflecting the same material terms and conditions of the Prior Cohen Contract which includes, (i) a $70,000 annual salary, (ii) $1,000 per month in Company shares paid monthly based on the average share price of the closing quotes for the one month preceding issuance (referred to in the table as “Other Compensation”), (iii) certain employee benefits available to the Company’s employees, and (iv) reimbursement of expenses made on behalf of the Company. The Company and Mr. Cohen also executed a Settlement Agreement and Mutual General Release made effective December 24, 2020 covering any employment-related claims arising under the Prior Cohen Contract. The Company and Mr. Cohen also entered into an Intellectual Property Assignment Agreement made effective January 19, 2021 whereby Mr. Cohen has assigned all right, title, and interest to certain patents, trademarks, and other intellectual property created or developed during Mr. Cohen’s employment with the Company.

12. Subsequent Events

Asset Purchase Agreement

Ainos KY and the Company entered into an Asset Purchase Agreement dated as of November 18, 2021 as modified by an Amended and Restated Asset Purchase Agreement dated as of January 29, 2022 (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the Company acquired certain intellectual property assets (the “IP Assets”) and certain manufacturing, testing, and office equipment (the “Equipment”) for a total purchase price of $26,000,000.

Pursuant to the Asset Purchase Agreement, the Company agreed to hire certain employees of Ainos KY (the “Employees”) who are responsible for research and development of the IP Assets and/or Equipment on terms at least equal to the compensation arrangements undertaken by Ainos KY. From and after the closing, we will have no responsibility, duty or liability with respect to any employee benefit plans of Ainos KY.

As payment of the purchase price, we issued to Ainos KY a Convertible Promissory Note in the principal amount of $26,000,000 (the “Convertible Note”) upon closing on January 30, 2022.

The principal sum of the Convertible Note is payable in cash on January 30, 2027, although we may prepay the Convertible Note in whole or in part without penalty. The Convertible Note is noninterest bearing. If not earlier repaid, the Convertible Note will be converted into shares of our common stock or such other securities or property for which the Convertible Note may become convertible, immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be 80% of the initial public offering price of the offering.

On March 11, 2022, the Board approved a Non-Convertible Note dated March 4, 2022 in favor of Ainos KY with a principal amount of $800,000, interest of 1.85% per annum on unpaid principal and accrued interest, and a maturity date of February 28, 2023. The Note includes standard provisions for notice, default, and remedies for default. Ainos KY is the Company’s majority and controlling shareholder. 

On March 17, 2022, we executed a Promissory Note Extension with Ainos KY dated March 17, 2022. Pursuant to the Agreement, the due dates for certain convertible notes enumerated as #12.21 to #24.21 issued by the Company to Ainos KY was extended to February 28, 2023. As of December 31, 2021 the total unpaid principal amount of $3,000,000, along with $9,507 in accrued interest were owed and outstanding to Ainos KY.

9. Subsequent Events.

On April 11, 2022, we issued to ASE Test Inc., a minority owner of Ainos KY, a convertible note in the principal amount of $500,000 due on March 30, 2027 (the “ASE Note”). The convertible note will automatically convert into shares of our common stock immediately prior to the closing of any public offering of our common stock as a result of which our common stock will be listed on a U.S. stock exchange. The conversion price, subject to certain adjustments, will be 80% of the initial public offering price of the offering.

We are engaged in developing medical technologies for point-of-care (“POCT”) testing and safe and novel medical treatment for a broad range of disease indications. Since our inception in 1984, we have concentrated our resources on business planning, raising capital, research and clinical development activities for our programs, securing related intellectual property and commercialization of proprietary therapeutics using low-dose non-injectable interferon (“IFN”). In addition to our core IFN technology, we are committed to developing a diversified healthcare business portfolio to include medical devices and consumer healthcare products.

Although we have historically been involved in extensive pharmaceutical research and development of low-dose oral interferon as a therapeutic, we are prioritizing the commercialization of medical devices as part of our diversification strategy. Since the beginning of 2021, we have acquired significant intellectual property from our majority shareholder, Ainos KY, to expand our potential product portfolio into Volatile Organic Compounds (“VOC”) and COVID-19 POCTs. This includes 51 issued and pending patents related to VOC technologies and 3 issued patents for COVID-19 POCT products. We expect our underlying intellectual property to enable us to expedite the commercialization of our medical device pipeline, beginning with Ainos-branded COVID-19 POCT product candidates.

The basis is United States generally accepted accounting policies (“U.S. GAAP”).

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 the Fair Value Measurement Topic of Financial Instruments

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 Company's financial instruments consist ofhierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

·

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

·

Level 2, 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 3, 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 1 assets and liabilities primarily include our cash and cash equivalents, receivables and debt.equivalents. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. The carrying amountamounts of accounts receivable, prepaid expense, accounts payable, accrued liabilities, advances from investors, and notes payable approximate fair value due to the immediate or short-term maturities of these financial instruments approximates fair value due eitherinstruments.

In order to lengthobtain the necessary capital to sustain operations, management’s plans include, among other things, the possibility of maturity pursuing new equity sales and/or interest ratesmaking additional debt borrowings, There can be no assurances, however, that approximate prevailing market rates unless otherwise disclosedthe Company will be successful in theseobtaining additional financing, or that such financing will be available on favorable term, if at all. 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. The accompanying financial statements.

Stock Based Compensation

Stock basedstatements 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.

Stock-based compensation expense is recorded in accordance with SFAS 123R (Revised 2004)FASB ASC Topic 718, Compensation – Stock Compensation, Share-Based Payment, 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 estimateshas adopted the simplified method to account for forfeitures that it expects willof employee awards as they occur and records expense based uponas a result, we will record compensation cost assuming all option holders will complete the number of awards expectedrequisite service period. If an employee forfeits an award because they fail to vest.

The fair value of each option grantedcomplete the requisite service period, we will reverse compensation cost previously recognized in 2007the period the award is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, expected volatility of 103.2%, risk-free interest rate of 4.34% and expected life of 1.57 years. The fair value of each option granted in 2008 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%, expected volatility of between 109.6 and 165.75%, risk-free interest rate between 1.00 and 3.34%, and expected life between 2 and 8 years.

Cash and Cash Equivalents

forfeited.

The Company classifies investments as cash equivalents if the original maturity of an investment is three months or less.

Allowance

We account for Doubtful Accounts

revenue from contracts with customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (“Topic 606”).” The unit of account in Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided at a point in time or over a period of time. Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.

Total revenues include sales of products to customers, net of discounts or allowances, if any, and include freight and delivery costs billed to customers. Revenues for product sales are recognized when control of the promised good is transferred to unaffiliated customers, typically when finished products are shipped. Shipping costs are deemed fulfillment costs and are not recognized as a separate performance obligation.

The Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to uncollectibility.non-collectability. The Company'sCompany’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, 2008 and 2007.



Table of Contents

Inventory

2021 or 2020.

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, 2008 and 2007 the Company had $2,342 and $3,133, respectively, of inventory included in other current assets.

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 to seven year estimated useful lives of the assets.

Patents and Patent Expenditures

AMAR

The Company holds patent license agreements and holdsmaintains 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 15-17 yearsthe 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 15-17 years. Amortization expense amountedthe estimated 8 to $14,27120 year life of the patent. The Company continually evaluates the amortization period and $13,970carrying basis of patents to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. No patent costs were written off for the years ended December 31, 2008 and 2007, respectively.

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

2021, or December 31, 2020.

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.

Revenue Recognition

Dietary supplement

Internal research and interferon sales

Revenues for the dietary supplement sales are recognized when an arrangement exists, the price is fixed and it has been determined that collectibility is reasonably assured. This generally occurs at the point when the goods are shipped to the customer.

Sublicense fee revenue

Sublicense revenue is calculated based on fees relating to a license. Amarillo recognizes revenue on these sublicense fees in the month the revenue is generated by the licensee.

Royalty revenue

Royalty revenue is calculated based on royalty fees as a percent of net sales relating to a license. Amarillo recognizes revenue on these royalty payments in the year the revenue is generated by the licensee. Royalty revenue of $27,919 was reported in the year ended December 31, 2007 for HBL sales of Bimron to BioVet. HBL reported no sales of Bimron to Bio Vet for 2008.

Research and Development

Research and development (“R&D”) costs are expensed as incurred.



Table Clinical trial costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development collaborations, prior to regulatory approval, the payment obligations are expensed when the milestone results are achieved. Payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized to cost of Contents


Useproducts sold over the remaining useful life of Estimates

the related product.

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

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares issued and Diluted Net Loss Per Share

Netoutstanding during the year. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first year for any potentially dilutive debt or equity.

As of December 31, 2021, potentially dilutive shares are not included in the calculation of fully diluted net loss per share is based onas the number of weighted average shares outstanding. The effect of warrants and options outstanding is anti-dilutive.

Concentration of Credit Risk

with a net loss would be antidilutive.

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

cash. The Company has cash balances in a single U.S. financial institution which, from time to time, could exceed the federally insured limit of $100,000. $250,000. The Company maintains multiple accounts in its Taiwan Branch office which help to mitigate risk. Our bank deposits in Taiwan are insured by the Central Deposit Insurance Corp. (“CDIC”) with an insured limit of NT$3,000,000 per account.

No loss has been incurred related to thisthe aforementioned concentration of cash.

Other Concentrations

The Company and its sublicensees are reliant on a single, foreign supplier for its products. The loss of this supplier could adversely affect the Company's future revenues. During 2008 and 2007 the majority of revenue came from royalties from its foreign supplier and sublicense fees from one of its sublicensees. The loss of revenue from one these revenue sources could adversely affect the Company's future revenues.

Reclassifications

Certain 2007 amounts

There have been reclassified to conform to 2008 presentation.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issuedno new accounting pronouncements to have a significant impact onissued or adopted during the Company's results of operations, financial position or cash flow.

2. Property and Equipment

Property and equipment is stated at cost and consists of the following at December 31, 2008 and 2007:

  2008   2007  
 Furniture and equipment$41,540  $58,528  
 Software 8,012   7,033  
   49,552   65,561  
 Less: accumulated depreciation (39,977)  (51,463) 
 Property and equipment, net$9,575  $14,098  
          
Depreciation expense amounted to $5,503 and $4,813 for the yearsyear ended December 31, 20082021 that are of significance to us.

 

 

December 31,

 

 

 

2021

 

 

2020

 

Machinery and equipment

 

$938,047

 

 

$-

 

Furniture and fixture

 

 

47,960

 

 

 

107,549

 

Construction in process

 

 

232,729

 

 

 

-

 

Total cost

 

 

1,218,736

 

 

 

107,549

 

Less: accumulated depreciation

 

 

(31,034)

 

 

(104,300)

Property and equipment, net

 

$1,187,702

 

 

$3,249

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

Patents and technology

 

$39,371,317

 

 

$245,898

 

Less: accumulated amortization

 

 

(2,042,126)

 

 

(65,270)

Patents and technology, net

 

$37,329,191

 

 

$180,628

 

2022

 

 

4,522,141

 

2023

 

 

4,522,141

 

2024

 

 

4,534,493

 

2025

 

 

4,522,141

 

2026

 

 

4,521,973

 

Thereafter

 

 

14,706,301

 

Total expense

 

$37,329,191

 

Payee

No.

Effective Date

Due Date

From Effective

Following

Maturity

Conversion

Rate

Issuing Purpose

1/1/2021

 Addition

Payment

12/31/2021

Accrued Interest

Convertible notes payable:

Stephen Chen

#1.16

1/30/2016

Payable on demand

0.75%

NA

$ 0.17

working capital

114,026

114,026

5,839

Stephen Chen

#2.16

3/18/2016

Payable on demand

0.65%

NA

$ 0.19

working capital

262,500

262,500

9,878

Stephen Chen

#3.19

912019

9/1/2020

1.85%

10%

$ 0.25

salary

39,620

(39,620)

0

0

Stephen Chen

#4.19

1212019

12/31/2020

1.61%

10%

$ 0.25

working capital

14,879

(14,879)

0

0

Stephen Chen

#6.20

112020

1/1/2021

1.85%

10%

$ 0.25

salary

216,600

(216,600)

0

0

Stephen Chen

#7.20

112020

1/2/2021

1.60%

10%

$ 0.25

working capital

23,366

(23,366)

0

0

Stephen Chen

#10.21

112021

4/1/2021

1.85%

1.85%

$ 0.25

salary

59,025

(59,025)

0

0

Stephen Chen

#11.21

412021

5/1/2021

1.85%

10%

$ 0.25

salary

10,000

(10,000)

0

0

670,991

69,025

(363,490)

376,526

15,717

Ainos KY

#12.21

4/27/2021

10/27/2021

1.85%

NA

$ 0.20

working capital

15,000

15,000

189

Ainos KY

#13.21

5/5/2021

11/5/2021

1.85%

NA

$ 0.20

working capital

20,000

20,000

243

Ainos KY

#14.21

5/25/2021

11/25/2021

1.85%

NA

$ 0.20

working capital

30,000

30,000

335

Ainos KY

#15.21

5/28/2021

11/28/2021

1.85%

NA

$ 0.20

working capital

35,000

35,000

385

Ainos KY

#16.21

6/9/2021

12/9/2021

1.85%

NA

$ 0.20

working capital

300,000

300,000

3,117

Ainos KY

#17.21

6/21/2021

12/21/2021

1.85%

NA

$ 0.20

working capital

107,000

107,000

1,047

Ainos KY

#18.21

7/2/2021

1/2/2022

1.85%

NA

$ 0.20

working capital

54,000

54,000

498

Ainos KY

#19.21

912021

3/1/2022

1.85%

NA

$ 0.20

working capital

120,000

120,000

742

Ainos KY

#20.21

9/28/2021

3/28/2022

1.85%

NA

$ 0.20

working capital

300,000

300,000

1,429

Ainos KY

#21.21

11102021

5102022

1.85%

NA

$ 0.20

working capital

50,000

50,000

129

Ainos KY

#22.21

11252021

11/25/2022

1.85%

NA

$ 0.20

working capital

450,000

450,000

798

Ainos KY

#23.21

11/29/2021

5/29/2022

1.85%

NA

$ 0.20

working capital

300,000

300,000

471

Ainos KY

#24.21

12292021

6/29/2022

1.85%

NA

$ 0.20

working capital

1,219,000

1,219,000

124

0

3,000,000

0

3,000,000

9,507

 Total convertible notes payable- related parties

670,991

3,069,025

(363,490)

3,376,526

25,224

i2 China

#5.19

9/1/2019

9/1/2020

1.85%

10%

$ 0.25

consulting fee

16,000

(16,000)

0

0

i2 China

#8a.20

1/1/2020

1/1/2021

1.85%

10%

$ 0.25

consulting fee

48,000

(48,000)

0

0

i2 China

#11.21

112020

4/1/2021

1.85%

10%

$ 0.25

consulting fee

37,000

(37,000)

0

0

 Total convertible notes payable- non-related party

64,000

37,000

(101,000)

0

0

Total Convertible notes payable

734,991

3,106,025

(464,490)

3,376,526

25,224

Notes payable:

Stephen Chen

#9.21

1/1/2021

4/14/2021

0.13%

10%

NA

working capital

134,010

145,395

(150,000)

129,405

312

Notes payable-related party

134,010

145,395

(150,000)

129,405

312

i2 China

#8b.20

1/1/2020

1/1/2021

1.85%

10%

NA

consulting fee

84,000

84,000

3,137

 Notes payable- non-related party

84,000

0

0

84,000

3,137

Total notes payable

218,010

145,395

(150,000)

213,405

3,449

Total convertible and non-convertible

953,001

3,251,420

(614,490)

3,589,931

28,673

Payee

No.

Effective Date

Due Date

From Effective

Following Maturity

Conversion Rate

Issuing Purpose

As of 12/31/2021

Addition

Payment

As of 3/31/2022

Accrued Interest

Current Convertible Notes Payable:

Stephen Chen

#1.16

1/30/2016

Payable on demand

0.75%

N/A

$ 0.17

working capital

114,026

-

-

114,026

6,050

Stephen Chen

#2.16

3/18/2016

Payable on demand

0.65%

N/A

$ 0.19

working capital

262,500

-

-

262,500

10,298

376,526

-

-

376,526

16,348

Ainos KY

#12.21

4/27/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

15,000

-

-

15,000

257

Ainos KY

#13.21

5/5/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

20,000

-

-

20,000

335

Ainos KY

#14.21

5/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

30,000

-

-

30,000

471

Ainos KY

#15.21

5/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

35,000

-

-

35,000

545

Ainos KY

#16.21

6/9/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

4,486

Ainos KY

#17.21

6/21/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

107,000

-

-

107,000

1,535

Ainos KY

#18.21

7/2/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

54,000

-

-

54,000

744

Ainos KY

#19.21

9/1/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

120,000

-

-

120,000

1,289

Ainos KY

#20.21

9/28/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

2,798

Ainos KY

#21.21

11/10/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

50,000

-

-

50,000

357

Ainos KY

#22.21

11/25/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

450,000

-

-

450,000

2,851

Ainos KY

#23.21

11/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

300,000

-

-

300,000

1,840

Ainos KY

#24.21

12/29/2021

2/28/2023 (1)

1.85%

N/A

$ 0.20

working capital

1,219,000

-

-

1,219,000

5,684

 

 

 

 

 

 

 

 

3,000,000

-

-

3,000,000

23,192

 Total convertible notes payable- related parties

3,376,526

-

-

3,376,526

39,540

Non-Convertible Notes Payable:

Stephen Chen

#9.21

1/1/2021

4/14/2021

0.13%

N/A

N/A

working capital

129,405

-

-

129,405

354

Ainos KY

#26.22 (2)

3/4/2022

3/31/2023

1.85%

N/A

N/A

working capital

-

800,000

-

800,000

1,135

Non-convertible notes payable-related party

129,405

800,000

-

929,405

1,489

i2 China

#8b.20

1/1/2020

1/1/2021

1.85%

N/A

N/A

consulting fee

84,000

-

-

84,000

3,527

 

 

 

Non-Convertible Notes payable- non-related party

84,000

 

 

84,000

3,527

 

 

 

Total non-convertible notes payable

213,405

800,000

-

1,013,405

5,016

Total convertible and non-convertible

3,589,931

800,000

-

4,389,931

44,556

 

 

December 31,

 

 

 

2021

 

 

2020

 

Provision (benefit) at statutory rate

 

$(816,000)

 

$(305,000)

Permanent differences

 

 

-

 

 

 

1,000

 

Temporary differences

 

 

206,000

 

 

 

79,000

 

Change in valuation allowance

 

 

610,000

 

 

 

225,000

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforward

 

$4,357,000

 

 

$4,328,270

 

Other assets

 

 

248,000

 

 

 

217,000

 

Deferred tax assets

 

 

4,605,000

 

 

 

4,545,270

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

-

 

 

 

-

 

Net deferred tax assets

 

 

4,605,000

 

 

 

4,545,270

 

Valuation allowance

 

 

(4,605,000)

 

 

(4,545,270)

Stock Plans 1

 

Issue Date Range

 

Total Options Authorized

 

 

Options Issued

 

 

Options Remaining2

 

2018 Employee Stock Option Plan3, 4

 

9/26/18 – 9/26/28

 

 

1,000,000

 

 

 

950,000

 

 

 

0

 

2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan3

 

9/26/18 – 9/26/28

 

 

4,000,000

 

 

 

4,495,000

5

 

 

0

 

Date

 

Number of

Options

1Qualified

 

 

Number of

Options

Nonqualified

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining Contractual Term

 

 

Aggregate

Intrinsic

Value

 

Balance December 31, 2019

 

 

850,000

 

 

 

3,807,000

 

 

$0.38

 

 

8 years

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expired or Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance December 31, 2020

 

 

850,000

 

 

 

3,807,000

 

 

$0.38

 

 

7 years

 

 

 

 

 

Granted 2021

 

 

-

 

 

 

500,000

 

 

$0.38

 

 

10 years

 

 

 

 

 

Exercised

 

 

20,000

 

 

 

150,400

 

 

$0.38

 

 

 

-

 

 

 

-

 

Expired or Forfeited

 

 

780,000

 

 

 

3,656,600

 

 

$0.38

 

 

 

-

 

 

 

-

 

Balance December 31, 2021

 

 

50,000

 

 

 

500,000

 

 

$0.38

 

 

9.54 years

 

 

 

-

 

Vested as of December 31, 2021

 

 

30,000

 

 

 

0

 

 

$0.38

 

 

6.74 years

 

 

 

-

 

Name of the related party

Relationship

Description

Taiwan Carbon Nano Technology Corporation (“TCNT”)

Affiliated company

TCNT is the majority shareholder of Ainos KY

Ainos, Inc. (Cayman Island) (“Ainos KY”)

Affiliated company

Ainos KY is the majority shareholder of the Company

ASE Technology Holding

Affiliated company

Sole owner of ASE Test Inc. which is Ainos KY’s board member and has more than 10% of the voting rights in Ainos KY

Dr. Stephen T. Chen

Ainos’ former Chairman, President, CEO and CFO

Shareholder with more than 5% of the Company voting rights in 2021 and 2020

10108916P20YP8Y25000030000001075491218736107549479600938047012187361043003103431395182094415224589839371317652702042126180628373291914522141452214145344934522141452197314706301180628128783732919120003025839Payable on demandPayable on demand2020/09/012020/12/312021/01/012021/01/022021/04/012021/05/0110/27/20213/1/202220000500005/10/20220.0185111020214500000.200.205/29/20220.018511/29/20213000003000000.206/29/2022122920210.018512190001125202112190000.201240.20200000.2045000011/25/20220.0185500001/1/20214/1/20214/14/202111/25/202111/28/202112/9/202112/21/20211/2/20223/28/20220.00750.00650.01850.016100.018500.01647100.01850.01850.01850.01850.01850.01850.00130.01850.01850.01850.01850.01850.01850.01851/30/20163/18/201691201912120191120201120201/1/20214120214/27/20219120215/5/20211/1/20205/25/20211120206/9/20211/1/20213125/28/20216/21/20217/2/20219/28/20211140260.1711402626250098780.1926250000396200.253962000148790.251487902166000.25216600233660.25233660.250590255902500.25100001000015717690253765263634902522430000363490670991150000.2018915000300003500038530000031171070001047540000.204983000000.2030690251200001200000.20742243129798142933765266709911600001600000.10.018511/5/20210.259/1/20209/1/20190.01850.2504800001/1/20211/1/2020480008400035000300000107000540003000008400037000370000.250.200.200.200025224337652646449015000014539512940513401015000014595312310602584000840003137213405218010145395150000344935899319530013251420614490286737349910.10.10.10.10.01850.10.10.1313703350.10.1300000030000009507370001010006400021727107022867324196358993135059318050013729880.25458752144203739761500003000000953001Dr. Stephen T. ChenASE Technology HoldingAinos, Inc. (Cayman Island) (“Ainos KY”)Taiwan Carbon Nano Technology Corporation (“TCNT”)Ainos’ former Chairman, President, CEO and 2007, respectively.

3. Notes Payable

The Company has two $1,000,000 notes payable under an unsecured loan agreementCFOAffiliated companyAffiliated companyAffiliated companyShareholder 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 maturity. $1,000,000 was payable on or before June 3, 2008. The other $1,000,000 was payable on or before August 28, 2008. On December 10, 2008, HBL proposed to extend the two notes and accrued interest until December 3, 2009 and February 28, 2010 if payment of $200,000 of accrued interest was received by February 28, 2009. We have requested more time to pay the $200,000 to extend the notes. 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, apart from the pending arrangement above.



Table of Contents

The Company has a line of credit with Wells Fargo for $20,000, with interest at the prime rate plus 6.75 percent. There was an outstanding balance at December 31, 2008 and 2007 of $19,941 and $1,915, respectively, which is included in accounts payable and accrued expenses. This line is used from time to time for purchases. The Company paid $2,435 and $2,891 of interest under the line of credit in 2008 and 2007, respectively.

4. Manufacturing and Supply Agreements

The Company was a party to the following manufacturing and supply agreements at December 31, 2008.

The Company has a joint development and manufacturing/supply agreement with HBL (the Development Agreement), a major stockholder under which HBL will formulate, manufacture and supply HBL interferon for the Company or any sublicensee. In exchange, HBL is entitled to receive a transfer fee, specified royalties and a portion of any payment received by the Company for sublicense of rights under this agreement. The agreement further provides that the Company sublicense to HBL the right to market HBL interferon for oral use in humans and in non-human, warm-blooded species in Japan, in exchange for the Company receiving a royalty fee based on net sales. The Company is the exclusive agent for the development of HBL interferon for non-oral use in humans and in non-human, warm-blooded species in North America, in exchange, HBL is entitled to receive a transfer fee based on units of interferon supplied and the agreement also provides that a royalty fee be paid to HBL.

As part of the license agreement with Atrix Laboratories, Inc. (executed September 7, 2001, terminated May 22, 2003) a second amendment to the Development Agreement was executed extending the Development Agreement to March 12, 2005 and will be renewed automatically for successive three-year terms. The current expiration date of the Development Agreement is March 12, 2011.

The Company has a supply agreement with HBL under which the Company gained an exclusive right to purchase and distribute anhydrous crystalline maltose for the treatment of dry mouth (xerostomia). This exclusive supply agreement is worldwide, excluding Japan.

5. License and Sublicense Agreements

The Company holds patent rights for which the Company has paid certain license fees under three license agreements. Under these agreements, the Company will pay the licensor a portion of any sublicense fee received by the Company with respect to the manufacturing, use or sale of a licensed product, as well as a royalty fee based on the net selling price of licensed products, subject to a minimum annual royalty.

A $7,500 minimum cash royalty was paid by the Company to Texas A&M University System during 2008. A total of $53,971 in sublicense fees are owed to HBL based on sublicense fee income earned by the Company during 2008 and are included in accounts payable and accrued expenses. The Company has also entered into various sublicense agreements under which the Company is entitled to receive royalties based on the net sales value of licensed products.

6. Research Agreements

The Company contracts with third parties throughout the world to conduct research including studies and clinical trials. These agreements are generally less than one year in duration. The Company plans to pay third parties approximately $116,000 to complete enrollment of 21 HIV+ patients in the oral warts Phase 2 clinical trials in 2009. The Company plans to pay third parties approximately $45,000 for expenses related to the winter colds and influenza symptoms study that will be completed in Australia in 2009.

7. Common Stock

The Company has 100,000,000 shares of voting common shares authorized for issuance. The shareholders approved an increase in authorized shares from 50,000,000 to 100,000,000 in 2007. On December 31, 2008, the Company had 60,195,789 shares of common stock outstanding and reserved for issuance upon exercise of options and warrants. The Company issued common stock in 2008 and 2007 as follows:

Common Stock Issued in 2008
Shares
 
Issue Price
 
Net Price
 
Private placements - cash1,160,000  $0.10-$0.25  $121,000  
Directors, officers, consultants plan - cash188,404  0.10  18,841  
Officers - salaries280,772  0.11-0.33  52,086  
Consultants - services421,667  0.06-0.33  134,225  
Preferred stock dividends437,273  0.09-0.27  77,903  
Conversion of preferred stock to common4,000,000  0.01  40,000  
     Total Common Stock Issued in 2008
6,488,116
  
$0.01-0.33
  
$444,055
  
          



Table of Contents

Common Stock Issued in 2007
Shares
 
Issue Price
 
Net Price
 
Private placements - cash4,087,155  $0.20-$0.45  $1,154,506  
Options exercised - cash529,486  0.06-0.44  102,489  
Options exercised - cashless171,853  0.06-0.44  -  
Consultants - services200,000  0.82-0.84  166,000  
     Total Common Stock Issued in 2007
4,988,494
  
$0.06-0.84
  
$1,422,995
  
          

During the years ended December 31, 2008 and 2007, finder's fees paid related to private placements of stock totaled $10,000 and $34,950, and are included as general and administrative expenses in the accompany statements of operations.

8. Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized for issuance which is issuable in series. During the first quarter of 2008, the Company completed a private placement by selling 1,000 shares of Series A convertible preferred stock for $1,000 per share in a private placement offering; generating gross proceeds of $1,000,000 and net proceeds of $793,793. The convertible preferred stock is convertible into 4,000,000 shares of common stock. The investor also received five year warrants to purchase 4,000,000 shares of common stock at $0.30 per share. The investment banker was paid a commission of $80,000 plus received five year warrants to purchase 640,000 shares of common stock at $0.30 per share.

The Series A preferred shareholder was paid $77,903 (10% annualized return) of stock dividends during 2008. A total of 437,273 shares were issued at $0.09 to $0.27 per share. The preferred stock shareholder converted all the outstanding preferred stock into common stock at $0.25 per share in three stages on October 15, 17 and 20, 2008. Currently there is no preferred stock outstanding and no future dividends required to be paid.

9. Stock Option and Stock Plans

The Company has six stock option plans: the 1996 Employee Stock Option Plan (1996 Employee Plan), the Outside Director and Advisor Stock Option Plan (1996 Director Plan), the 2006 Employee Stock Option and Stock Bonus Plan (2006 Employee Plan), 2008 Consultant's Stock Grant Plan, 2008 Stock Incentive Plan (Consultants), and 2008 Directors, Officers and Consultants Stock Purchase Plan.

The 1996 Employee Plan has authorized the grant of options to employees for up to 590,000 shares of the Company's common stock; however, none of such options are currently outstanding to employees of the Company. All options granted have five to ten year terms and become exercisable over a four to five year period. The option price is equal to 100% to 110% of the fair value of the common stock on the date of grant depending on the percentage of common stock owned by the optionee on the grant date.

The 1996 Director Plan allows options to purchase a maximum of 410,000 shares of the Company's common stock to be granted to outside directors and scientific advisors to the Company at an exercise price equivalent to 100% of the fair market value of the common stock on the date of grant. These are ten-year options and become exercisable over a period of five years. No options are current outstanding to directors under the plan.

The 2006 Employee Plan has authorized a maximum of 500,000 shares of the Company's common stock to be issued or reserved. During 2006, 300,000 shares under this plan were issued to an employee of the Company. The plan shall remain in effect until the end of the Company's fiscal year 2011. Options granted under the plan have a ten-year term and become exercisable over a five-year period. The option price is equal to 100% of the fair value of the common stock on the date of grant.

The 2008 Consultant's Stock Grant Plan was approved by the Board of Directors on March 24, 2008. This plan has authorized a maximum of 100,000 shares of the company's common stock to be issued for consultants. During 2008, 100,000 shares were issued under this plan to a consultant.

The 2008 Stock Incentive Plan was approved by the Board of Directors on May 20, 2008. This plan has authorized a maximum of 600,000 shares of the Company's common stock to be issued for consultants. The purpose of the plan is to assist in attracting, retaining, and compensating highly competent consultants and to act as an incentive in motivating selected consultants to achieve long-term corporate objectives, as well as to reduce debts5% of the Company throughvoting rights in 2021 and 2020Sole owner of ASE Test Inc. which is Ainos KY’s board member and has more than 10% of the issuancevoting rights in Ainos KYAinos KY is the majority shareholder of the CompanyTCNT is the majority shareholder of Ainos KY4355931386412260000001674222600000010913130000000.010.010.050.051000000000.2030000000035059318050010.7031834440209468020588306515616391562517213700550000452617132000026900000.01320000000000144379308550000452617172856253000000003000000001443793084807757691153810903810000000053421073846219262000015040014919534133682946288261639875500.200.387600571520.380.253729880.251033429/26/18 - 9/26/289/26/18 - 9/26/28100000040000009500004495000000.000.000.000.000.380.380.380.380.38P8YP9Y6M15DP7YP10YP6Y8M27D000.38000000085000085000020000007800000912021300003807000380700050000001504003656600000410022P2Y6M29D10000000.38P10YP5Y0.255000055000040000000.328P10Y0.2P5Y2.76P5Y0.0296750000The aggregate number of shares which may be issued pursuant to awards under the Plan is 20,000,000 shares of Common Stock rather than payment of cash. During 2008, 321,667 shares were issued(the “Plan Share Reserve”), subject to three consultants.

The 2008 Directors, Officers and Consultants Stock Purchase Plan was approved by the Board of Directors on October 22, 2008. This plan has authorized a maximum of ten million shares of the Company's common stock to be issued for directors, officers and consultants. Awards under the Plan shall beadjustments as provided in the form of Purchase Rights to purchase a specifiedPlan. The number of shares of common stock of the Company at market value. During 2008, 294,175 shares were issued to one Director and three Officers.



Table of Contents

10. Stock Options and Warrants

During 2007, the Company issued 1,600,000 options to consultants and 10,000 options to an Scientific Advisory Committee member and recognized $644,723 expense related to these options. During 2008, 1,076,912 options were issued to consultants, advisors, directors, employees and two former employees, and the Company recognized $76,745 of expense related to these options.

During 2006, the Company issued 1,200,000 options to officers of the Company. These options vest through 2010. In 2008, Company issued 700,000 to a new officer. These options vest through 2011. The Company recognized $234,939 expense in 2007 and $304,025 expense in 2008 related to these options. The remaining cost expected to be recognized if these options vestunderlying any award granted under 2018 ESOP or 2018 NQSOP (the “Prior Plans”) that expires, terminates or is $514,195. No options were issued to employees during 2007.

During 2007, two Directors and two employees received 171,853 shares of common stock from the cashless exercise of 214,000 options. No cashless options were exercised by Directorscanceled or employees in 2008.

During 2007, consultants exercised 350,000 options at $0.20 per shareforfeited for cash. A Board member exercised 20,000 options at $0.27 per share. Employees exercised 90,486 shares at $0.06, 10,000 shares at $0.23 and 25,000 shares at $0.44. A former employee exercised 4,000 shares at $0.44. An investor exercised 30,000 warrants at $0.22 per share. No options were exercised by Directors or employees in 2008.

A summary of the Company's stock option activity and related information for the years ended December 31, 2008 and 2007 is as follows:

  2008   2007 
 Options   Price   Options   Price 
Outstanding Beg of Year 9,193,412  $0.20-0.87   8,589,237  $0.06-4.00 
Granted 1,776,912   0.10-0.35   1,610,000   0.20-0.40 
Cancelled/Expired (2,087,912)  0.20-0.48   (292,339)  0.44-4.00 
Exercised -   -   (713,486)  0.06-0.44 
Outstanding End of Year 8,882,412   0.10-0.87   9,193,412   0.20-0.87 
Exercisable End of Year 7,172,412  $0.10-0.87   7,773,412  $0.20-0.87 
                

Options reserved for Director, employee and consultant plans but not issued (11,176,583) are not included in the table above since this stock may be utilized for other purposes if not used for the plans.

The weighted-average remaining contractual life of the above options is 2.36 years.

During 2008, 15,160,000 warrants were issued. Of these 12,000,000 were issued to a preferred shareholder, 1,920,000 to an investment banking company, 80,000 to a consultant and 1,160,000 to purchasers of unsecured private placement stock. Deemed dividends for $548,489 and $87,758 were recognized for the warrants issued to the preferred shareholder and investment banking company respectively. $11,522 was recognized as stock compensation expense for the warrants issued to a consultant. The Company recognized the total purchase price for private placement stock and warrants as the cost to purchase the stock.

We recognized $636,247 of deemed dividends for anti-dilution benefits received by warrant holders on November 21, 2008. Holders of 4,640,000 warrants exercisable at $0.30 per share with January 8, 2013 expiration date received 9,280,000 additional warrants. We sold private placement stock on November 21, 2008 for $0.10 per share which triggered the warrant anti-dilution provisions. Total warrants were increased by a factor of three and the exercise price reduced to $0.10. We are at risk of triggering the warrant anti-dilution provisions again in the future if we sell stock below $0.10 per share to any non-exempt parties. Holders of options and warrants prior to January 8, 2008 plus officers, directors and consultantsreason whatsoever under stock plans approved by outside board of director members are exempt from the anti-dilution provisions.

A summary of the Company's stock warrant activity and related information for the years ended December 31, 2008 and 2007 is as follows:

  2008   2007 
 Warrants   Price Range   Warrants   Price Range 
Outstanding Beg of Year 260,000  $0.47-2.00   290,000  $0.22-2.00 
Granted 15,160,000   0.10-0.30   -   - 
Cancelled/Expired (60,000)  0.47-0.50   -   - 
Exercised -   -   (30,000)  0.22 
Outstanding End of Year 15,360,000   0.10-2.00   260,000   0.47-2.00 
Exercisable End of Year 15,360,000  $0.10-2.00   260,000  $0.47-2.00 
                
The weighted-average remaining contractual life of the warrants outstanding at December 31, 2008 is 3.2 years.


Table of Contents

11. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. The Company's deferred tax asset of approximately $8,976,000 and $8,000,000 at December 31, 2008 and 2007 respectively, was subject to a valuation allowance of $8,976,000 and $8,000,000 at December 31, 2008 and 2007 respectively, because of uncertainty regarding the Company's ability to realize future tax benefits associated with the deferred tax assets. Deferred tax assets were comprised primarily of net operating loss carryovers under the cash method of accounting used by the Company for federal income tax reporting.

At December 31, 2008, the Company has net operating loss carryforwards of approximately $24,676,000 for federal income tax purposes expiring in 2009 through 2028 The ability of the Company to utilize these carryforwards may be limited should changes in stockholder ownership occur.

The difference between the reported income tax provision and the benefit normally expected by applying the statutory rate to the loss before income taxes results from the change during 2008 and 2007 of the deferred tax asset valuation allowance. As a result, the reported effective tax rate is 0%.

12. Commitments and Contingencies

Delinquent payroll

During 2008, the Company curtailed payment of salaries payable to senior management of the Company. As of December 31, 2008, approximately $270,000 of unpaid salaries due to senior management of the Company is included in accounts payable and accrued expenses.

The significance of the amounts owed to senior management subjects the Company to the risk of resignation by these officers, as well as possible litigation.

Lease commitment

During 2006, the Company entered into an operating lease agreement for its offices in Amarillo, TX. The lease for 3,675 square feet is for a period of 24 months commencing in January 2007. Minimum lease payments under this operating lease were a combined $44,400 for 2007 and 2008. The Company began leasing 1,800 square feet for $1,000 per month on a month-to-month basis on January 1, 2009.

Minimum Royalties

The agreement with Texas A&M University requires the Company to make minimum annual royalty payments of $7,500 through 2019.

Clinical Trial Costs

Twelve clinical investigation sites throughout the United States are participating in an FDA Phase 2 study of oral interferon treatment of oral warts in HIV+ patients. The Company estimates the clinical trial costs for this study to be approximately $116,000 in 2009. The Company plans to pay third parties approximately $45,000 for expenses related to a winter colds and influenza symptoms study that will be completed in Australia in 2009.

Litigation

The Company is not a party to any litigation and is not aware of any pending litigation or unasserted claims or assessments as of December 31, 2008.

13. Related Party Transactions

The Company has relied significantly on HBL, the largest shareholder of the Company, for a substantial portion of its capital requirements. Pursuant to the Development Agreement previously described, HBL advanced $9,000,000 for funding of research. In addition, HBL has purchased substantial amounts of the Company's common stock from time to time, to the point where it now owns 8.67% of the issued and outstanding shares of common stock of the Company.

HBL and the Company are parties to various license and manufacturing and supply agreements pursuant to which the Company licenses certain technology to or from HBL. HBL supplies formulations of its interferon alpha and other products to the Company at contractual prices. The Company pays HBL a 12% royalty on the first $100 million of interferon alpha net sales and a 10% royalty on additional net sales.



Table of Contents

Additionally, the Company is obligated to pay HBL a percentage of sublicense fee income the Company receives. There were no sales of interferon alpha and no royalty payments made to HBL in 2007. A $19,991 sublicense fee to HBL was paid in 2007. $53,971 of sublicense fees to HBL were recorded in 2008 and were owed to HBL as of December 31, 2008.

HBL is obligated to pay the Company an 8% royalty on sales of oral interferon in Japan. The Company received $0 in 2008 and $27,919 of royalties in 2007 from HBL animal health sales of oral interferon.

During 2007 and 2008, the Company engaged the law firm of SandersBaker, P.C. Mr. Edward Morris, Secretary of the Company, is a partner in that firm. The Company was invoiced for $47,677 in 2008 and $59,387 during 2007 for legal services rendered by SandersBaker.

14. Subsequent Events

Since December 31, 2008, the Company has sold 3,050,000 unregistered shares of common stock for $0.10 per share plus 3,050,000 3-year warrants with $0.20 exercise price and 500,000 unregistered shares of common stock for $0.10 per share plus 500,000 3-year warrants with $0.10 exercise price. Private placement stock sales totaled $355,000. Also, the Company sold 1,470,405 unregistered shares of stock to Officers and Consultants through the 2008 Directors, Officers and Consultants Stock Purchase Plan at $0.05 - $0.08 per share. Plan purchases of stock totaled $110,846.

On February 6, 2009, the Company entered into a 15-year License and Supply agreement with Cyto Biotech, Inc. a Taipei, Taiwan animal health company. Under the terms of the agreement, Cyto Biotech,Prior Plans, will at its sole expense and cost, conduct all clinical trials and studies and seekincrease the Plan Share Reserve. Each Award granted under the Plan will reduce the Plan Share Reserve by the number of shares underlying the award. No more than 10,000,000 shares may be issued in the aggregate pursuant to obtain regulatory approvals in China, Taiwan, Thailand, the Philippines, Cambodia, Vietnam and Malaysia ("exercise of incentive stock options granted under the Territory"),Plan. The maximum number of shares subject to the existing license and supply agreementsawards granted during a single fiscal year to any non-employee director, taken together with CytoPharm, Inc. and Bumimedic SDN. BHD., required for the commercial launch of the Company's low dose oral interferon in the Territory for any animal and human health indications.

Cyto Biotech purchased common stock, included in the above issuances in Amarillo Biosciences;cash fees paid an initial license fee to AMAR; and will pay a net royalty on low dose oral interferon sales. In addition, the agreement calls for certain minimum royalty payments to be made.



Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.Other Expenses of Issuance and Distribution

We will pay all expenses in connection with the registration and sale of the common stock by the selling shareholders. The estimated expenses of issuance and distribution are set forth below.

 Registration Fees$213.90  
 Costs of Printing and Engraving$2,000* 
 Legal Fees$55,000* 
 Accounting Fees$500* 
 State Blue Sky Qualification Fees$5,000* 
 Total Estimated Costs of Offering$62,713.90* 
 * Estimate    

Item 14.Indemnification of Directors and Officers

Art. 2.02-1 of the Texas Business Corporation Act allows a corporation to indemnify any officer, director, employee or agent who is a party or is threatened to be made a party to a litigation by reason of the fact that he or she is or was an officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation as an officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such director or officer, or only for reasonable expenses actually incurredduring the fiscal year, will not exceed $600,000 in connection withtotal value (calculating the proceeding if the person is found liable on the basis that personal benefit was improperly received by him or is found liable to the corporation, if:

•     there was no breach by the officer, director, employee or agent of his or her fiduciary duties to the corporation involving intentional or willful misconduct; or

•     the officer, director, employee or agent acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.



Table of Contents

Article IV of our By-Laws provides for indemnification of our current or former directors and officers or any person who may have served at request as a director or officer of another corporation in which it owned shares of capital stock or of which it is a creditor. Such indemnification extends to liabilities imposed upon the director or officer and expenses reasonably incurred by him in connection with any claim made against him, or any action, suit or proceeding to which he may be a party by reason of his being, or having been such director or officer, and against such sums as independent counsel selected by the Board of Directors shall deem reasonable payment made in settlementvalue of any such claim, action, suit or proceeding primarilyawards based on their grant date fair value for financial reporting purposes)2.010.2745261768349P5Y0.0011P60M305000816000100007900020600022500061000043570004328270217000248000460500045452700045452704605000454527046050002074751720012508517670000464000250000892910-30%230000821410-30%1200050000010000452617840004133680.2524000010000024000010000070000100010334226000000260000002027-01-300.82023-02-285000000.80.0185800000300000095071013405213405501680000438993180000044556605010298163482573354715454486153574412892798357285118405684231923527354352711353/31/2023Payable on demandPayable on demand02/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/202302/28/20234/14/20211/1/20210.01850.00750.00650.01850.01850.01850.01850.01850.01850.01850.01850.01850.01850.01850.01850.01850.00130.01853/4/20221/30/20163/18/20164/27/20215/5/20215/25/20215/28/20216/9/20216/21/20217/2/20219/1/20219/28/202111/10/202111/25/202111/29/202112/29/20211/1/20211/1/20208000001140262625003765261500015000200003000035000300000107000540001200003000005000045000030000012190003000000840001294051294050.200.170.190.200.200.200.200.200.200.200.200.200.10.18000000.200.200.203376526337652639540129405929405148980000084000840001588343899311189744556286738000002690000000.012600000050000850000

As filed with a view of avoiding expenses of litigation; provided, however, that no director or officer shall be indemnified with respect to matters as to which he shall be adjudged in such action, suit or proceeding to be liable for negligence or misconduct in performance of duty, or with respect to any matters which shall be settled by the payment of sums which counsel selected by the Board of Directors shall not deem reasonable payment made primarily with a view to avoiding expenses of litigation, or with respect to matters for which such indemnification would be against public policy.

The Officers and Directors do not have indemnification agreements with the Company. The Company does have $5,000,000 of Directors and Officers Liability Insurance, which it will use to indemnify such directors and executive officers, to the extent permitted by our By-Laws or the laws of the State of Texas, against any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any actual or threatened action or proceeding to which such director or officer is made or threatened to be made a party by reason of the fact that such person is or was a director or officer of the Company.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Amarillo Biosciences, Inc. pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policyon August 2, 2022

Registration No. 333-264527

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1/A

AMENDMENT NO. 4 TO REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

________________________

AINOS, INC.

 (Exact name of registrant as specified in its charter)

Texas

2834

75-1974352

State or other jurisdiction

(Primary Standard Industrial

(I.R.S. Employer

incorporation or organization

Classification Code Number)

Identification Number)

8880 Rio San Diego Drive, Ste. 800

San Diego, CA 92108

(858) 869-2986

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

CT Corporation System

1999 Bryan St., Suite 900 Dallas, TX 75201-3136

(214) 979-1172

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of Communications to:

Carol B. Stubblefield

Baker & McKenzie LLP

452 Fifth Avenue

New York, New York 10018

Phone: (212) 626-4100

Mitchell S. Nussbaum, Esq.

Angela M. Dowd, Esq.

Loeb & Loeb LLP

345 Park Avenue

New York, New York 10154

Phone: (212) 407-4000

Approximate date of commencement of proposed sale to the public: As soon as expressed inpracticable after the Securities Act and is, therefore, unenforceable.

Item 15.Recent Sales of Unregistered Securities

In September 2006, the Company issued 1,200,000 options to officerseffective date of the Company. These options vest through 2010. In 2008, Company issued 700,000 to a new officer. These options vest through 2011. The Company recognized $304,025 expense in 2008 related to these options. The remaining cost expectedthis registration statement.

If any securities being registered on this Form are to be recognized if these options vest is $514,195.

In January 2008, we entered into agreements with Firebird Global Master Fund, Ltd. ("Firebird") for the sale of 1,000 shares of our Series A Preferred Stock, which was convertible into 4,000,000 shares of common stock, and warrants to purchase an additional 4,000,000 shares of common stock at $0.30 per share. The Company completed the private placement to Firebird in the first quarter of 2008 selling Firebird 1,000 shares of our Series A Preferred Stock for $1,000 per share generating gross proceeds of $1,000,000 and net proceeds of $793,793. Firebird also received warrants to purchase an additional 4,000,000 shares of common stock at $0.30 per share. Firebird converted all the outstanding preferred stock into common stock at $0.25 per share in three stagesoffered on October 15, 17, and 20, 2008. We also issued to MidSouth Capital Markets Group, Inc. ("MidSouth"), the selling/placement agent in the private placement, warrants to purchase 640,000 shares of our common stock on the same terms and conditions as the warrants issued to Firebird. The warrants were issued to MidSoutha delayed or continuous basis pursuant to an agreement entered into with MidSouth in September 2007 to engage MidSouth to act as our placement agent in connection with a future private placement. Pursuant to the agreement, MidSouth was to receive for its services a warrant to purchase shares of our common stock equal to 8% of the number of common shares to be issued on an as converted basis in the private placement, with an exercise price of $.30 per share and exercisable for 5 years from the date of issuance.

On April 1, 2008, July 7, 2008, and October 3, 2008, Firebird Global Master Fund, Ltd. was issued 84,198 shares, 121,913 shares, and 184,142 shares of common stock respectively, as dividends on the Series A Preferred Stock. These dividends were valued at $23,056, $25,000, $25,000, and recorded on March 31, 2008, June 30, 2008, and September 30, 2008 respectively. The price of the common stock was calculated at 90% of the average of the 2 lowest VWAP (volume weighted average price) for the 5 trading days prior to the dividend payment due date. Dividends on the Series A Preferred Stock, at the rate of 10% per annum, payable in cash or common stock in the discretion of the Company, are due quarterly on January 1, April 1, July 1 and October 1 beginning on the first such date after the original issue date (January 8, 2008). Firebird has converted all outstanding preferred stock into common stock so no preferred stock is outstanding and no future preferred dividends are required to be paid to Firebird.

In January 2008, Joe Cummins received a $2,500 cash bonus and a $2,500 stock bonus (7,575 shares) as an award for closing the above $1 million funding with Firebird Global Master Fund, Ltd.

In January 2008, 100,000 options with 25,000 options vesting quarterly were issued to two consultants with exercise prices at market ($0.35) and 2 year terms.

In February 2008, the company entered into a 1 year consulting agreement to provide investor relations, public relations and shareholder relations services. The Company agreed to pay the Consultant $30,000 plus a common stock grant of 90,000 shares in payment of the first 3 months. The Company terminated the agreement for the remaining nine months of services. The Company paid the $30,000 and issued the 90,000 shares of common stock.



Table of Contents

In March 2008, 100,000 shares of common stock ($29,000 fair value) were authorized to be issued in 25,000 increments on March 31, June 30, September 30, and December 31, 2008, to David Stewart. An expense of $17,750 was recognized in the nine months ending September 30, 2008. Subsequently a S-8 registration statement was filed on April 21, 2008 for the 2008 Consultants Stock Grant Plan to register the shares.

During the second quarter 2008, 100,000 restricted shares of common stock were sold at a discount with 100,000 three year warrants exercisable at $0.30 per share to two investors, generating $25,000 in cash. No finder's fees were paid on this issuance.

During the second quarter 2008, 166,667 shares of common stock ($55,000 fair value) were issued to a law firm in lieu of $30,000 cash owed for fees related to filing amendments to the Registration Statement filed on April 24, 2008, for the common stock reserved for the preferred stock and warrants issued in the Firebird transaction.

During June 2008, a consultant was issued 40,000 unregistered common stock ($9,200 fair value) and 80,000 warrants ($11,522 fair value) in payment of $10,000 due on June 15, 2008, under an agreement for public and investor relations services. Terms of the issuance are $0.25 per share of unregistered common stock with 100% warrant coverage, three year term, and exercisable at $0.30 per share. The same consultant was issued 20,000 shares of common stock ($3,600 fair value) on July 15, 2008, and was issued another 20,000 shares of common stock ($4,400 fair value) on August 15, 2008, in payment of the remaining $10,000 owed under the agreement for public and investor relations services.

During June 2008, Dr. Peter Mueller was paid 54,627 shares of stock ($16,652) in salary.

Dr. Peter Mueller, Dr. Joe Cummins, Dr. Gary Coy and Martin Cummins were paid 99,438 shares of stock on July 10, 2008 ($18,893 fair value) in salaries. Dr. Gary Coy was paid 13,361 shares of stock on September 17, 2008 ($2,405 fair value) in salary.

In November 2008, 60,000 shares of common stock were sold in a private placement to Terry Lynn Gehm for $0.10 per share with gross proceeds to the Company of $6,000. 600,000 shares of common stock were sold in a private placement to Paul Tibbits for $0.10 per share with gross proceeds to the Company of $60,000. 400,000 shares of common stock were sold in a private placement to Marian Tibbits for $0.10 per share with gross proceeds to the Company of $40,000.

During July 2008, 121,913 shares of common stock ($25,004 fair value) were issued to FGS Advisors, LLC as a dividend. During September 2008, 184,142 shares of common stock ($25,006 fair value) were issued to FGS Advisors, LLC as a dividend.

On both July 15, 2008, and August 15, 2008, RJ Falkner was paid 20,000 shares of stock ($3,600 and $4,400 fair value, respectively).

In September 2008, David Stewart was granted 25,000 shares of stock ($5,000 fair value).

In October 2008, 75,000 shares of common stock ($15,000 fair value) were issued to Marilyn Phillips as compensation.

On October 15, 17, and 20, 2008, Firebird Global Master Fund, Ltd. was issued 10,684 shares, 15,642 shares, and 20,694 shares of common stock respectively, as dividends on the Series A Preferred Stock. These dividends were valued at $1,250, $1,653, and $1,945, respectively. The price of the common stock was calculated at 90% of the average of the 2 lowest VWAP (volume weighted average price) for the 5 trading days prior to the dividend payment due date. Dividends on the Series A Preferred Stock, at the rate of 10% per annum, payable in cash or common stock in the discretion of the Company, are due quarterly on January 1, April 1, July 1 and October 1 beginning on the first such date after the original issue date (January 8, 2008). Firebird has converted all outstanding preferred stock into common stock so no preferred stock is outstanding and no future preferred dividends are required to be paid to Firebird.

On October 16, 27, and 20, 2008, 1,200,000, 1,400,000, and 1,400,000 shares of common stock, respectively, were issued to Firebird Global Master Fund on the conversion of 1,000 shares of Series A Preferred Stock (being all issued and outstanding convertible preferred owned by Firebird) into common stock.

On October 22, 2008, Edward Morris, Dr. Peter Mueller, Dr. Gary Coy, and Stephen Chen were issued 50,000 shares, 67,488 shares, 60,916 shares, and 10,000 shares, respectively ($18,840 fair value total) under the 2008 Directors, Officers, and Consultants Stock Purchase Plan.

During November 2008, Dr. Peter Mueller was paid 105,771 shares of stock ($11,635) in salary.

In December 2008, David Stewart was granted 25,000 shares of stock ($1,375 fair value).

During the first quarter of 2009, we sold 3,550,000 restricted shares of common stock at $0.10 per share with 3,550,000 three year warrants exercisable at $0.10 - - $0.20 per share (private placements) to four investors, generating net proceeds of $320,000 in cash after $35,000 of commissions and finder fees were paid. Also, a consultant purchased 62,500 shares of common stock at $0.08 per share (Directors, Officers, Consultants Plan), generating $5,000 in cash.


Table of Contents

During the first quarter of 2009, officers were paid 1,407,905 shares of common stock at $0.05 - $0.08 per share in lieu of salaries (Directors, Officers, Consultants Plan). Also, consultants were paid 636,364 shares of common stock at $0.055 per share in lieu of cash (Directors, Officers, Consultants Plan). Salaries and services paid in stock totaled $140,846.

During the second quarter of 2009, we sold 2,280,000 restricted shares of common stock at $0.10 per share with 2,280,000 three year warrants exercisable at $0.10 per share (private placements) to five investors, generating $223,000 after $5,000 of commissions and finder's fees were paid. We sold 40,290 shares at $0.10 per share to Bumimedic, a licensee, generating $4,029.

During the second quarter of 2009, an officer was paid 419,367 shares of common stock at $0.10 per share in lieu of salary (Directors, Officers, Consultants Plan). Two warrant holders exercised 395,156 cashless warrants at $0.10 per share and received 183,375 shares of common stock.

On July 17, 2009, David B. Min was issued 50,000 shares of stock in a private placement that resulted in $5,000 gross proceeds to the Company.

On July 28, 2009, Marian Tibbits and Paul Tibbits were each issued 150,000 share of stock in a private placement that resulted in $30,000 gross proceeds to the Company.

In July 2009, David Stewert was granted 25,000 shares of stock ($4,875 fair value) in salary.

On August 3, 2009, 155,102 shares, 152,500 shares, and 123,000 shares of common stock were issued to Adam Cabibi, Jerry Choate, and Biomed Cap, LLC, respectively, pursuant to the cashless exercise of options.

On August 13, 2009, Raymond Karlin was issued 100,000 shares of common stock in a private placement that resulted in $10,000 gross proceeds to the Company.

On August 27, 2009, Jerry Choate was issued 59,877 shares of common stock pursuant to the cashless exercise of options.

On September 1, 2009, Shailesh Ardhapurkar was issued 500,000 shares of common stock in a private placement that resulted in $50,000 gross proceeds to the Company.

On September 1, 2009, 60,119 shares ($4,208.33 fair value), 80,128 shares ($5,208.33 fair value), 74,405 shares ($5,208.33 fair value), 86,806 shares ($5,208.33 fair value), 29,762 shares ($5,208.33 fair value), 37,202 shares ($5,208.33 fair value), and 40,064 shares ($5,208.33 fair value) of common stock were issued to Biotech Financial for compensation owed as of February 28, 2009, March 15, 2009, March 31, 2009, April 15, 2009, April 30, 2009, May 15, 2009, and May 31, 2009, respectively.

On September 1, 2009, Tyler Jones was issued 75,000 shares of common stock in a private placement that resulted in $7,500 gross proceeds to the Company. On September 21, 2009, Tyler Jones was issued 125,000 shares of common stock in a private placement that resulted in $12,500 gross proceeds to the Company.

On September 3, 2009, Dipayan Sarkar was issued 100,000 shares of common stock in a private placement that resulted in $10,000 gross proceeds to the Company.

On September 16, 2009, Joseph Cummins was issued 50,443 shares of common stock ($9,836 fair value) in salary.

On September 18, 2009, Marvin Pflaumer and Ann Pflaumer were each issued 53,530 shares of stock in a private placement that resulted in $10,706 gross proceeds to the Company.

On September 23, 2009, Timothy Moody was issued 112,000 shares of stock pursuant to the cashless exercise of options.

On September 25, 2009, Dawn McTaggart was issued 100,000 shares of stock in a private placement that resulted in $10,000 gross proceeds to the Company.

On September 30, 2009, Terrance Oder was issued 50,000 shares of stock in a private placement that resulted in $5,000 gross proceeds to the Company.

On October 5, 2009, the Company sold 100,000 unregistered shares of common stock for $0.10 per share together with 100,000 warrants with 3-year term and exercisable at $0.10 per share. Net proceeds totaled $10,000.



Table of Contents

On November 9, 2009 the Board of Directors extended a consulting contract and stock option agreement with a consultant. A total of 650,000 options were extended until September 26, 2010. Of these, 150,000 options are vested at the modification date, resulting in the recognition of $10,850 of additional compensation expense. On 11/13/2009, 140,000 options were exercised. On 11/23/09, the Board of Directors reduced the exercise price from $0.72 to $0.18 for the remaining 10,000 vested options ($448 increase in fair value) and 500,000 unvested options that require achievement of milestones before vesting.

On November 12, 2009, the Company sold 500,000 unregistered shares of common stock for $0.10 per share together with 500,000 warrants with 3-year term and exercisable at $0.10 per share. Net proceeds totaled $50,000.

The Board also approved incentives to encourage option and warrant holders to exercise options and warrants prior to December 31, 2009. Option and Warrant holders may exercise up to one third of the options or warrants they hold, at a price of $0.10 per share cash to the Company, and for each option or warrant so exercised, two will be converted to cashless options/warrants with an exercise price of $0.10 per share, and will be deemed exercised immediately, on a cashless basis. A total of 1,774,889 options and warrants were exercised at $0.10 per share generating $177,489 gross proceeds. Net proceeds totaled $163,822. A total of 3,549,109 of cashless options and warrants were exercised at $0.10 per share resulting in the issuance of 1,743,025 shares of common stock with 1,806,084 shares of common stock previously held in reserve for options and warrants returned to the Treasury. This resulted in no incremental expense to the Company since the reduction of the warrant exercise terms offset the reduction of the warrant exercise prices.

In connection with the foregoing, we relied upon the exemption from securities registration afforded by Rule 506 of Regulation D as promulgated by the United States Securities and Exchange Commission415 under the Securities Act of 1933, as amended (the "Securities Act") and/check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐  

Accelerated filer

☐ 

Non-accelerated filer 

☒ 

Smaller reporting company

☒ 

Emerging growth company

☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 4(2)7(a)(2)(B) of the Securities Act, and transfer was restricted by AmarilloAct. ☐

_______________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with the requirementssection 8(a) of the Securities Act of 1933. All of1933 or until the above-referenced persons were provided with access to ourregistration statement shall become effective on such date as the Securities and Exchange Commission filings.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield 0.0%acting pursuant to said section 8(a), expected volatility of 109.6 -217.2%, risk-free interest rate of 0.04 - 4.617% and expected life of 0.06 - 5 years.

may determine.

Item 16.Exhibits

Exhibit NumberDescription of Document
3.1‡
 Restated Articles of Incorporation of the Company, dated July 5, 2007.
3.3*Bylaws of the Company.
4.1*Specimen Common Stock Certificate.

4.2*Form of Underwriter's Warrant.
4.3(5)
Form of Series A Common Stock Purchase Warrant, dated January 8, 2008, between the Company and Firebird Global Master Fund, Ltd.
5.1Opinion of Underwood, Wilson, Berry, Stein & Johnson, P.C.
10.1(11)
2008 Stock Incentive Plan dated May 20, 2008.
10.2*License Agreement dated as of March 22, 1988 between the Company and The Texas A&M University System.
10.3(9)
2006 Employee Stock Option and Stock Bonus Plan
10.4(9)
Office/Warehouse Lease Agreement dated December 22, 2006, between Wild Pony Holdings, L.P. and the Company.
10.5*Joint Development and Manufacturing/Supply Agreement dated March 13, 1992 between the Company and HBL, as amended.
10.6(9)
Engagement Letter dated September 22, 2007, between MidSouth Capital Markets Group,

EXPLANATORY NOTE

Ainos, Inc. and the Company.10.7*Japan Animal Health License Agreement dated January 20, 1993 between the Company and HBL.10.11*Manufacturing/Supply Agreement dated June 1, 1994 between the Company and HBL.10.12*Settlement Agreement dated April 27, 1995 among the Company, ISI, Pharma Pacific Management Pty. Ltd. ("PPM"), Pharma Pacific Pty. Ltd., Pharma Pacific Ltd. and Fernz Corporation Limited.10.14*PPM/ACC Sublicense Agreement dated April 27, 1995 between PPM and the Company.10.18*Form of Consulting Agreement between the Company and the Underwriter.

10.19(10)
Stock Option Agreement, dated July 18, 2007, between the Company and Commonwealth Associates10.20†1996 Employee Stock Option Plan, Amended and Restated as of May 11, 1999.10.21†Outside Director and Advisor Stock Option Plan, Amended and Restated as of May 11, 1999.10.22*Form of Indemnification Agreement between the Company and officers and directors of the Company.10.23*Indemnification Agreement between HBL and the Company.
10.24(10)
Warrant Agreement, dated June 27, 2006, between the Company and Marks Value Partners, LLC
10.25(10)
Engagement Letter, dated November 3, 2006, between the Company and MidSouth Capital, Inc.10.26**License Agreement dated July 22, 1997 between Hoffmann-La Roche, Inc. and the Company.10.27**Distribution Agreement dated January 12, 1998 between Global Damon Pharmaceutical and the Company.


Table of Contents

10.28**Distribution Agreement dated September 17, 1997 between HBL and the Company (tumor necrosis factor-alpha).
10.29**Distribution Agreement dated September 17, 1997 between HBL and the Company (interferon gamma).
10.30***Amendment No. 1 dated September 28, 1998 to License Agreement of March 22, 1988 between The Texas A&M University System and the Company.
10.36††License Agreement dated February 1, 2000 between Molecular Medicine Research Institute and the Company (interferon gamma administered orally).
10.37†† a
License and Supply Agreement dated April 3, 2000 with Key Oncologics (Pty) Ltd. and the Company.
10.38††Amendment No. 1 dated April 4, 2000, to Interferon Gamma Distribution Agreement dated September 17, 1997 between HBL and the Company (interferon gamma).
10.39†† a
License and Supply Agreement dated April 25, 2000 between Biopharm for Scientific Research and Drug Industry Development and the Company.
10.40†† a
Sales Agreement dated May 5, 2000 between Wilke Resources, Inc. and the Company.
10.41††Engagement Agreement dated September 26, 2000 between Hunter Wise Financial Group, LLC and the Company.
10.42†† a
Supply Agreement (Anhydrous Crystalline Maltose) dated October 13, 2000 between Hayashibara Biochemical Laboratories, Inc. and the Company.
10.43†† a
Supply Agreement dated December 11, 2000 between Natrol, Inc. and the Company.
10.44††† a
License Agreement dated September 7, 2001 between Atrix Laboratories, Inc. and the Company.
10.45†††† a
Supply Agreement dated June 20, 2004 between Global Kinetics, Inc. and the Company.
10.46†††† a
License and Supply Agreement dated September 13, 2004 between Nobel ILAC SANAYII VE TICARET A.S. and the Company
10.47(3)a
License and Supply Agreement dated October 19, 2005 between Global Kinetics, Inc. and the Company.
10.48(3)a
License and Supply Agreement dated January 18, 2006, between Bumimedic (Malaysia) SDN. BHD., and the Company.
10.49(4)
Employment Contract dated March 13, 2006, between Gary W. Coy and the Company.
10.50(4)
Employment Contract dated September 10, 2006, between Joseph M. Cummins and the Company.
10.51(4)
Employment Contract dated September 10, 2006, between Martin J. Cummins and the Company.
10.52(4)a
Supply Agreement (Anhydrous Crystalline Maltose) dated October 16, 2006 between Hayashibara Biochemical Laboratories, Inc. and the Company
10.53(4)a
License and Supply Agreement dated November 16, 2006, between CytoPharm, Inc. and the Company.
10.54(5)
Securities Purchase Agreement dated January 8, 2008, between the Company and Firebird Global Master Fund, Ltd.
10.55(5)
Registration Rights Agreement dated January 8, 2008, between the Company and Firebird Global Master Fund, Ltd.*
10.56(5)
Certificate of Designation of Preferences dated January 8, 2008, executed by the Company
10.57(5)
Series A Common Stock Purchase Warrant dated January 8, 2008, between the Company and Firebird Global Master Fund, Ltd.
10.58(7)
Amendment No. 1 to the Securities Purchase Agreement dated February 14, 2008, between the Company and Firebird Global Master Fund, Ltd.
10.59(7)
Amendment No. 1 to the Registration Rights Agreement dated February 14, 2008, between the Company and Firebird Global Master Fund, Ltd.
10.60(8)a
Supply Agreement, dated March 20, 2008, between the Company and CytoPharm, Inc.
10.61(8)
Employment Contract, dated April 15, 2008, between the Company and Peter Mueller
10.62(9)a
Engagement Letter dated September 22, 2007, between MidSouth Capital Markets Group, Inc. and the Company.
10.63(10)
Consulting Agreement, dated July 18, 2007, between the Company and Commonwealth Associates
10.64(10)
Stock Option Agreement, dated June 21, 2006, between the Company and Teel Bivins
10.65(10)
Consulting Agreement, dated April 21, 2006, between the Company Teel Bivins
10.66(10)
Investor Direct Marketing Services Agreement, dated June 26, 2006, between the Company and Marks Value Partners LLC
10.67(12)
License and Supply Agreement Between Cyto Biotech, Inc. and Amarillo Biosciences, Inc.
10.68Addendum dated February 20, 2009, to the License and Supply Agreement dated February 6, 2009, between Cyto Biotech, Inc. and the Company
10.69Consulting Agreement dated September 4, 2009, between the Company and Biotech Financial, Inc.
10.70Employment Contract, dated October 1, 2009, between the Company and Bernard Cohen.
10.71Agreement dated October 6, 2009, between the Company and Moody Capital, LLC and Moody Capital Solutions
23.1Consent of LBB & Associates Ltd., L.L.P., Independent Registered Public Accounting Firm.
23.2Consent of Underwood, Wilson, Berry, Stein & Johnson, P.C. (included in exhibit 5.1)
24.1Power of Attorney authorizing Dr. Joseph M. Cummins to sign the Registration Statement on Form S-1 on behalf of Stephen Chen, James Page, Dennis Moore, and Thomas D'Alonzo


Table of Contents


*The Exhibit is incorporated by referencefiling this Amendment No. 4 (this “Amendment”) to the exhibit of the same number to the Company'sits Registration Statement on Form SB-2S-1 (File No. 333-264527) (the “Registration Statement”) as an exhibits-only filing. Accordingly, this Amendment consists only of the facing page, this explanatory note, Item 16(a) of Part II of the Registration Statement, the signature page to the Registration Statement and the filed exhibits. The remainder of the Registration Statement is unchanged and has been omitted.

2

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

The following exhibits are filed with and declared effective by the Commission (File No. 333-4413) on August 8, 1996.
**The Exhibit is incorporated by reference to the Company's 1997 Annual Report on Form 10-KSB filed with the Commission on or before March 31, 1998.
***The Exhibit is incorporated by reference to the Company's 1998 Annual Report on Form 10-KSB filed with the Commission on or before March 31, 1999.
† The Exhibit is incorporated by reference to the Company's Report on Form 10-QSB for the quarterly period ended June 30, 1999, filed with the Commission on August 12, 1999 and subsequently amended on September 13, 1999.
†† The Exhibit is incorporated by reference to the Company's 2000 Annual Report on Form 10-KSB filed with the Commission on or before April 16, 2001.
††† The Exhibit is incorporated by reference to the Company's Report on Form 8-K filed with the Commission on September 24, 2001.
†††† The Exhibit is incorporated by reference to the Company's 2004 Annual Report on Form 10-KSB filed with the Commission on or before April 15, 2005.
‡ The Exhibit is incorporated by reference to the Company's 2007 Annual Report on Form 10-KSB filed with the Commission on or before March 31, 2008.
a Portions of this exhibit have been omitted and filed separately with the commission.

registration statement:

(3)

Exhibit

Number

The

Exhibit is incorporatedDescription

1.1+

Form of Underwriting Agreement.

3.1*

Restated Certificate of Formation, dated as of April 15, 2021 (incorporated by reference to the Company's 2005 Annual report on Form 10-KSB filed with the SEC on April 3, 2006.

(4)The Exhibit is incorporated by reference3.1 to the Company's 2006 Annual report on Form 10-KSB filed with the SEC on March 26, 2007.
(5)The Exhibit is incorporated by reference to the Company's Report on Form 8-K filed with the SEC on January 15, 2008.
(6)The Exhibit is incorporated by reference to the Company's Report on Form 8-K/A filed with the SEC on January 22, 2008.
(7)The Exhibit is incorporated by reference to the Company's Report on Form 8-K filed with the SEC on February 21, 2008.
(8)The Exhibit is incorporated by reference to the Company'sAinos Inc.’s Current Report on Form 8-K filed with the SEC on April 21, 2008.2021).

(9)

The

3.2+

Form of Certificate of Amendment to the Restated Certificate of Formation, to be effective upon completion of this offering

3.3*

Amended and Restated Bylaws of the Company, effective August 20, 2021

4.1+

Form of Warrant

4.2+

Form of Warrant Agency Agreement

4.3+

Form of Representative’s Warrant (included in Exhibit is incorporated1.1). 

5.1+

Opinion of Baker McKenzie LLP as Counsel.

10.1*

Sales and Marketing Agreement, dated as of June 14, 2021 (incorporated by reference to the Company's Registration StatementExhibit 10.3 to Ainos Inc.’s Annual Report on Form S-1 (No. 333-150421)10-K filed with the SEC on March 21, 2022).

10.1*

Oral Antiviral Therapy Development and Sales Agreement by and between Ainos, Inc. and Innopharmax, Inc., dated as of December 7, 2021 (incorporated by reference to Exhibit 10.7 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 21, 2022).

10.2*

Securities Purchase Agreement between the Company and Ainos, Inc., dated December 24, 2020 (incorporated by reference to Exhibit 2.1 to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on December 30, 2020).

II-1

10.3**

2018 Employee Stock Option Plan (incorporated by reference to Exhibit 10.72 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on April 24, 2008.16, 2019).

(10)

The Exhibit is incorporated

10.4**

2018 Officer, Directors, Employees and Consultants Nonqualified Stock Option Plan (incorporated by reference to Exhibit 10.73 to Ainos Inc.’s Annual Report on Form 10-K filed with the Company's SEC on April 16, 2019).

10.5**

Form of 2018 Stock Option Agreement - Nonqualified Stock Option (incorporated by reference to Exhibit 10.74 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on April 16, 2019).

10.6**

Form of 2018 Stock Option Agreement - Employee Plan (incorporated by reference to Exhibit 10.75 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on April 16, 2019).

10.7**

2021 Stock Incentive Plan (incorporated by reference to Exhibit 10.13 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 21, 2022).

10.8**

2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.12 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 21, 2022).

10.9**

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.14 to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 21, 2022).

10.10**

Employment Agreement between Company and Stephen T. Chen, Ph.D. dated December 31, 2020 and effective January 1, 2021 (incorporated by reference to Exhibit 10.1(f) to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).

10.11**

Amendment No. 1 to Registration StatementEmployment Agreement between Company and Stephen T. Chen, Ph.D. effective January 1 2021 (incorporated by reference to Exhibit 10.1(g) to Ainos Inc.’s Annual Report on Form S-1 (No. 333-150421)10-K filed with the SEC on March 30, 2021).

10.12**

Amendment No. 2 to Employment Agreement between Company and Stephen T. Chen, Ph.D. dated March 31, 2021 (incorporated by reference to Exhibit 10.1(l) to Ainos Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 21, 2008.14, 2021).

(11)

The Exhibit is incorporated

10.13**

Employment Agreement between Company and Bernard Cohen dated December 31, 2020 and effective January 1, 2021 (incorporated by reference to the Company'sExhibit 10.1(h) to Ainos Inc.’s Annual Report on Form S-810-K filed with the SEC on March 30, 2021).

10.14**

Amendment No. 1 to Employment Agreement between Company and Bernard Cohen dated March 31, 2021 (incorporated by reference to Exhibit 10.1(m) to Ainos Inc.’s Quarterly Report on Form 10-Q filed with the SEC on May 22, 2008.14, 2021).

(12)

The Exhibit is incorporated

10.15**

Employment Agreement by and between Lawrence K. Lin and the Company effective August 1 2021 (incorporated by reference to Exhibit 10.1(a) to Ainos Inc.’s Current Report on Form 8-K filed with the Company'sSEC on August 16, 2021).

10.16**

Legal Retaining Agreement between John Junyong Lee and the Company effective August 1, 2021 (incorporated by reference to Exhibit 10.1(b) to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on August 16, 2021).

II-2

10.17*

Settlement Agreement and Mutual General Release, effective December 24, 2020 (incorporated by reference to Exhibit 10.1(i) to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).

10.18*

Extension of the consulting agreement and pre-existing warrant certificate between the Company and i2China Management Group, LLC (originally dated April 15, 2018), dated November 30, 2020 (incorporated by reference to Exhibit 10.1(J) to Ainos Inc.’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).

10.19*

Patent Assignment, dated April 15, 2021, by Ainos, Inc. (incorporated by reference to Exhibit 10.1 to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on April 21, 2021).

10.20*

Asset Purchase Agreement, dated as of November 18, 2021, between the Company and Ainos Inc. (incorporated by reference to Exhibit 2.1 to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on November 22, 2021).

10.21*

Amended and Restated Asset Purchase Agreement, dated as of January 29, 2022, between Ainos Inc. and Ainos, Inc. (incorporated by reference to Exhibit 2.1 to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on February 26, 2009.


Item 17.Undertakings

A.The undersigned registrant hereby undertakes:3, 2022).

1.

10.22*

To file, during any period in which offers or sales are being made, a post-effective amendment

Convertible Promissory Note, dated as of January 30, 2022, issued by the Company to this Registration Statement:


(i)To include any prospectus requiredAinos Inc. (incorporated by Section 10(a)(3) of the Securities Act of 1933;
(ii)To reflect in the prospectus any facts or events after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectusreference to Exhibit 10.1 to Ainos Inc.’s Current Report on Form 8-K filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; andSEC on February 3, 2022).

(iii)

10.23*

To include any material information

Non-Convertible Promissory Note, dated March 4, 2022, issued by the Company to Ainos Inc. (incorporated by reference to Exhibit 10(i) to Ainos Inc.’s Current Report on Form 8-K filed with respectthe SEC on March 17, 2022).

10.24*

Note Extension Agreement, dated March 17, 2022, between the Company and Ainos Inc. (incorporated by reference to Exhibit 10(ii) to Ainos Inc.’s Current Report on Form 8-K filed with the planSEC on March 17, 2022).

10.25*

Employment Agreement, dated March 17, 2022, by and between the Company and Chun-Hsien Tsai (incorporated by reference to Exhibit 10(iii) to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on March 17, 2022).

10.26*

Employment Agreement, dated March 17, 2022, by and between the Company and Hui-Lan Wu (incorporated by reference to Exhibit 10(iv) to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on March 17, 2022).

10.27*

Employment Agreement, dated March 17, 2022, by and between the Company and Chih-Heng Jack Lu (incorporated by reference to Exhibit 10(v) to Ainos Inc.’s Current Report on Form 8-K filed with the SEC on March 17, 2022).

10.28*

Form of distribution not previously disclosed inConvertible Note Purchase Agreement, between the Registration Statement or any material change to such information in the Registration Statement.



Table of Contents

2.That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein,Company and the offering of such securities at that time shall be deemedpurchasers party thereto (incorporated by reference to beExhibit 2.1 to Ainos Inc.’s Current Report on Form 8-K filed with the initial bona fide offering thereof.SEC on April 4, 2022).

3.

10.29*

To remove from registration

Form of Convertible Promissory Note (incorporated by means of a post-effective amendment any ofreference to Exhibit 10.1 to Ainos Inc.’s Current Report on Form 8-K filed with the securities being registered which remain unsold at the termination of the offering.SEC on April 4, 2022).

4.

23.1*

That, for the purpose

Consent of determining liabilityPWR CPA, LLP, Independent Registered Public Accounting Firm.

II-3

23.2+

Consent of the registrant under the Securities ActBaker McKenzie LLP (included in Exhibit 5.1).

24.1*

Power of 1933 to any purchaser in the initial distribution of the securities:


The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuantAttorney (included on signature page to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);registration statement).

(ii)

107*

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

Filing Fee Table

(iii)

101.INS***

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

XBRL PLACEHOLDER

(iv)

101.SCH***

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

XBRL PLACEHOLDER


B.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

101.CAL***

XBRL PLACEHOLDER

101.DEF***

XBRL PLACEHOLDER

101.LAB***

XBRL PLACEHOLDER

101.PRE***

XBRL PLACEHOLDER


SIGNATURES

+ Documents filed herewith.

* Previously filed

** The referenced exhibit is a management contract or compensation plan or arrangement described in Item 601(b)(10)(iii) of Regulation S-K.

***In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed to be “furnished” not “filed”.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be singedsigned on its behalf by the undersigned, thereunto duly authorized, in the cityCity of Amarillo,Taipei, Taiwan (R.O.C.), on August 2, 2022.

AINOS, INC.

By:

/s/ Chun-Hsien Tsai

Chun-Hsien Tsai, Chairman of the Board,

President, and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the State of Texas,capacities and on December 22, 2009.

the dates indicated.

Signature

AMARILLO BIOSCIENCES, INC.
A Texas corporation

By:

Title

/s/ Joseph M. Cummins

Date

Joseph M. Cummins

/s/ Chun-Hsien Tsai

Its:

President, CEO

 Chairman of the Board, Chief Executive Officer and Chairman
President

August 2, 2022

Chun-Hsien Tsai

(Principal Executive Officer)

By:

/s/ Bernard Cohen

Hui-Lan Wu

Bernard Cohen
Its:

Chief Financial Officer

August 2, 2022

Hui-Lan Wu

(Principal Financial and Accounting Officer)

*

Director

August 2, 2022

Chung-Yi Tsai

*

Director 

August 2, 2022

Chung-Jung Tsai

*

Director 

August 2, 2022

Yao-Chung Chiang

*

Director 

August 2, 2022

Wen-Han Chang

*

Director

August 2, 2022

Pao-Sheng Wei



46

*By:

/s/ Chun-Hsien Tsai

Name: Chun-Hsien Tsai

Attorney-in-fact

II-5