AMARILLO BIOSCIENCES INC (Form: 10-K, Received: 04/16/2019 17:23:10)

Exhibit 10.72

AMARILLO BIOSCIENCES, INC.

2018 EMPLOYEE STOCK OPTION PLAN

ADOPTED SEPTEMBER 24, 2018

ARTICLE I -- GENERAL

1.01. Purposes.

The purposes of this 2018 Employee Stock Option Plan (the "Plan") are to: (1) closely associate the interests of the management of AMARILLO BIOSCIENCES, INC. ("ABI") and its Subsidiaries and Affiliates (collectively referred to as the "Company") with the share-holders by reinforcing the relation-ship between participants' rewards and shareholder gains; (2) provide management with an equity ownership in the Company commensu-rate with Company perfor-mance, as reflected in increased shareholder value; (3) maintain competitive compen-sation levels; and (4) provide an incentive to management for continuous employment with the Company.

1.02. Administration.

(a) The Plan shall be administered by the Board of Directors of ABI or by a committee of directors appointed by the Board of Directors of ABI (the "Committee"), as constituted from time to time. The appointment of a Committee shall not deprive the Board of Directors of authority to administer the Plan, and the Committee shall not make Plan determinations, grants, or take other actions which are contrary to or inconsistent with prior Plan actions taken by the Board of Directors. The Committee shall consist of at least two members of the Board who are non-employee directors within the meaning ascribed to such term in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the “1934 Act”), or within any successor definition or under any successor rule.

(b) The Board and/or Committee shall have the authority, in its sole discretion and from time to time to:

(i)

designate the employees or classes of employees eligible to partici-pate in the Plan;

(ii)

grant awards provided in the Plan in such form and amount, and subject to such vesting, as the Board and/or Committee shall deter-mine, provided that in no event shall the period for vesting be longer than that set forth in Section 2.04, below.

(iii)

impose such limitations, restrictions and conditions upon any such awards as the Board and/or Committee shall deem appropriate; and

(iv)

interpret the Plan, adopt, amend and rescind rules and regulations relating to the Plan, and make all other determina-tions and take all other action necessary or advisable for the implementation and administration of the Plan.

(c) Decisions and determinations of the Board and/or Committee on all matters relating to the Plan shall be in their sole discretion and shall be conclusive. No member of the Board and/or Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any award thereunder.

(d) With respect to persons subject to Section 16 of the Securities Exchange act of 1934 (the "1934 Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successor under the 1934 Act. To the extent any provision of the Plan or action by the Board of Directors or the Board and/or Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board of Directors or the Committee, as applicable.

(e) All usual and reasonable expenses of the Board and/or Committee shall be paid by the Company, and no member shall receive compensation with respect to his services for the Board and/or Committee except as may be authorized by the Board of Direc-tors. The Board of Directors and the Committee may employ attorneys, consultants, accountants or other persons, and the Board of Directors, the Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Board of Directors or the Committee in good faith shall be final and binding upon all Employees who have received awards, and upon the Company and all other interested persons. No member of Board of Directors or the Committee shall be personally liable for any action, determination, or interpre-tation taken or made in good faith with respect to the Plan or awards made thereunder, and the Company shall indemnify and hold harmless each member of the Board of Directors or the Committee against all loss, cost, expenses or damages, occasioned by any act or omission to act in connection with any such action, determination or interpretation under or of the Plan, consistent with the Company's certificate of incorporation and bylaws.

1.03. Eligibility for Participation.

Participants in the Plan shall be selected by the Board and/or Committee from among the employees of the Company. In making this selection and in determining the form and amount of awards, the Board and/or Committee shall consider any factors deemed relevant, including the individual's functions, responsibili-ties, value of services to the Company and past and potential contributions to the Company's profitability and sound growth.

1.04. Types of Awards Under Plan.

Awards under the Plan will be in the form of Incentive Stock Op-tions, as described in Article II; provided, however, that Limited Rights, as de-scribed in Article III, may be awarded with respect to Op-tions concurrently or previously awarded.

1.05. Aggregate Limitation on Awards.

(a) Shares of stock which may be issued under the Plan shall be authorized and unissued or treasury shares of common stock of ABI ("Common Stock"). The maximum number of shares of Common Stock which may be issued under the Plan shall be one million (1,000,000) shares.

(b) In addition to shares of Common Stock actually issued pursuant to the exercise of Incentive Stock Options, there shall be deemed to have been issued a number of shares equal to the number of shares of Common Stock in respect of which Limited Rights (as described in Article III) shall have been exercised.

(c) Any shares of Common Stock subject to an Incen-tive Stock Option which for any reason is terminated unexer-cised or expires shall again be available for issuance under the Plan, but shares subject to an Incen-tive Stock Option which are not issued as a result of the exercise of Limited Rights shall not again be available for issuance under the Plan.

1.06. Effective Date and Term of Plan.

(a) The Plan shall become effective on the date approved by the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at a duly called and noticed meeting of the Shareholders of ABI.

(b) No awards shall be made under the Plan after 2027 provided, however, that the Plan and all awards made under the Plan prior to such date shall remain in effect until such awards have been satisfied or terminated in accordance with the Plan and the terms of such awards.

ARTICLE II -- INCENTIVE STOCK OPTIONS

2.01. Award of Incentive Stock Options.

The Board and/or Committee may, from time to time and subject to the provisions of the Plan and such other terms and conditions as the Board and/or Committee may prescribe, grant to any participant in the Plan one or more "Incentive Stock Options," intended to qualify as such under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Stock Options") to purchase for cash the number of shares of Common Stock allotted by the Board and/or Committee. The date an Incentive Stock Option is granted shall mean the date selected by the Board and/or Committee as of which the Board and/or Committee allots a specific number of shares to a participant pursuant to the Plan.

2.02. Incentive Stock Option Agreements.

The grant of an Incentive Stock Option shall be evidenced by a written Incentive Stock Option Agreement, executed by the Company and the holder of an Incentive Stock Option (the "Optionee"), stating the number of shares of Common Stock subject to the Incentive Stock Option evidenced thereby, and in such form as the Board and/or Committee may from time to time determine.

2.03. Incentive Stock Option Price.

The Option Price per share of Common Stock deliver-able upon the exercise of an Incentive Stock Option shall be 100% of the Fair Market Value of a share of Common Stock on the date the Incentive Stock Option is granted; provided, however, that with respect to any Optionee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of ABI or of its parent or Subsidiary corporation (with such ownership determined in view of the attribution provisions of Section 424(d) of the Code), the Option Price per share of Common Stock deliver-able upon the exercise of an Incentive Stock Option shall be 110% of the Fair Market Value of a share of Common Stock on the date the Incentive Stock Option is granted. The Board and/or Committee shall determine the date on which an option is granted, provided that such date is consistent with the Code and any applicable rules or regulations thereunder; in the absence of such determination, the date on which the Board and/or Committee adopts a resolution granting an option shall be considered the date on which such option is granted, provided the Employee to whom the option is granted is promptly notified of the grant and a written option agreement is duly executed as of the date of the resolution.

2.04. Term and Exercise.

Each Incentive Stock Option for employees who are not 10% owners is exercisable during a period of ten years from the date of grant thereof , subject to the Vesting Schedule for Employees who are not 10% Owners, set forth below. With respect to any Optionee who at the time the Option is granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of ABI or of its parent or Subsidiary corporation (with such owner-ship deter-mined pursuant to the attribution rules set forth in Section 424(d) of the Code), each Incentive Stock Option is exercisable during a period of five years from the date of grant thereof, subject to the Vesting Schedule for Employees who are 10% Owners, set forth below. The term during which an option is exercisable pursuant to this Section 2.04, whether five or ten years as the case may be, shall be known as the “Option Term”. No Incentive Stock Option shall be exercisable after the expira-tion of its Option Term. The Board and/or Committee may also in its sole discretion acceler-ate the exerciseability or vesting of any option or install-ment thereof at any time.

Vesting Schedule for Employees who are not 10% Owners. Options awarded shall be exercis-able, subject to the other terms and conditions of the Plan, only upon the expira-tion of the designated number of years of active employment with the Company from date of award, as provided below:

20% of Options awarded - 1 year

40% of Options awarded - 2 years

60% of Options awarded - 3 years

80% of Options awarded - 4 years

100% of Options awarded - 5 years

Vesting Schedule for Employees who are 10% Owners.

25% of Options awarded - 1 year

50% of Options awarded - 2 years

75% of Options awarded - 3 years

100% of Options awarded - 4 years

Except as provided in Sections 2.06, 2.07 and 2.08 hereof, no Incentive Stock Option shall be exercised at any time unless the holder thereof is then a regular full-time employee of the Company or one of its subsidiaries.

2.05. $100,000 Per Year Limitation.

To the extent that the aggregate fair market value of stock with respect to which incentive stock options within the meaning of Section 422 of the Code (determined without regard to this section or Section 422(d) of the Code) are exercisable for the 1 ^st time by any individual during any calendar year (under all plans of the individual’s employer corporation and its parent and subsidiary corporations) exceeds $100,000, such options shall be treated as options which are not incentive stock options within the meaning of Section 422 of the Code.

2.06. Death of Optionee.

(a) Upon the death of the Optionee, any Incentive Stock Option exercisable on the date of death may be exercised by the Optionee's estate or by a person who acquires the right to exercise such Incentive Stock Option by bequest or inheri-tance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining Option Term of the Incentive Stock Option and one year after the Optionee's death.

(b) The provisions of this Section shall apply notwithstanding the fact that the Optionee's employment may have terminated prior to death, but only to the extent of any Incentive Stock Options exercisable on the date of death.

2.07. Retirement or Disability.

Upon the termination of the Optionee's employment by reason of permanent and total disability (as defined herein) or retire-ment (as determined by the Board and/or Committee), the Optionee may, within 36 months from the date of such termination of employ-ment, exercise any Incentive Stock Options to the extent such Incentive Stock Options were exercisable at the date of such termination of employment. Notwithstanding the forego-ing, neither retirement nor disability shall extend the Option Term of any Incentive Stock Option, and the tax treatment available pursuant to Section 422 of the Code upon the exercise of an Incen-tive Stock Option will not be available to an Optionee who exercises any Incentive Stock Option more than (i) 12 months after the date of termination of employment due to permanent disability or (ii) three months after the date of termination of employment due to retirement. For purposes hereof, "permanent and total disability" shall have the meaning set forth in Section 22(e)(3) of the Code or any successor provision thereto.

2.08. Termination for Other Reasons.

Except as provided in Sections 2.06 and 2.07 or except as otherwise determined by the Board and/or Committee, all Incentive Stock Options shall terminate upon the termination of the Optionee's employment; provided, however, that if the Optionee's employment was involuntarily terminated (with or without cause), Optionee may exercise, during a 90-day period commencing with date of termination, all Options theretofore vested, or which vest during said 90-day period, under the Vesting Schedules set forth in Paragraph 2.04, above. At the end of the 90-day period, all rights of such Optionee under any then outstanding option or right shall terminate and shall be forfeited immediately as to any unexercised portion thereof.

2.09. Other Limitations.

The tax treatment available pursuant to Sec. 422(a)(1) of the Code upon the exercise of an Incentive Stock Option will not be available to an optionee who after exercise of any Incentive Stock Option, disposes of the underlying share(s) earlier than 2 years from the date of the granting of the Option, or within 1 year of the transfer of such share(s) to him.

2.10. Manner of Payment.

Each Stock Option Agreement shall set forth the procedure governing the exercise of the Stock Option granted thereunder, and shall provide that, upon such exercise in respect of any shares of Common Stock subject thereto, the Optionee shall pay to the Company, in full, the Option Price for such shares with cash or in shares of the Common Stock, valued at the Fair Market Value per Share on the date of exercise.

2.11. Issuance of Shares.

As soon as practicable after receipt of payment, the Company shall deliver to the Optionee a certificate or certificates for such shares of Common Stock. The Optionee shall become a shareholder of the Company with respect to Common Stock represented by share certificates so issued and as such shall be fully entitled to receive dividends, to vote and to exercise all other rights of a shareholder.

2.12. Effect of Exercise.

The exercise of any Stock Option shall cancel that number of related Limited Rights, if any, which is equal to the number of shares of Common Stock purchased pursuant to said Option.

2.13. Rule 16b-3 Exemption.

Options granted under the Plan shall comply with the applicable provisions of Rule 16b-3 promulgated under the 1934 Act, or any successor, and shall contain such additional condi-tions or restrictions as may be required thereunder to qualify for the maximum exemp-tion from Section 16 of the 1934 Act with respect to Plan transactions.

ARTICLE III -- LIMITED RIGHTS

3.01. Award of Limited Rights.

Concurrently with or subsequent to the award of any Incentive Stock Option, the Board and/or Committee may, subject to the provisions of the Plan and such other terms and conditions as the Board and/or Committee may prescribe, award to the Optionee with respect to each Option, a related limited right permitting the Optionee, during a specified limited time period, to be paid the appreciation on the Common Stock in lieu of exercising the Option ("Limited Right").

3.02. Limited Rights Agreement.

Limited Rights granted under the Plan shall be evidenced by written agreements in such form as the Board and/or Committee may from time to time determine.

3.03. Exercise Period.

Limited Rights shall (and must) be exercised immediately preceding or simultaneous with the date of a Change in Control of ABI (the "Exercise Period"), and all Limited Rights held by the Optionee shall be exercised during such Exercise Period, without regard to the Vesting Schedules set forth in Paragraph 2.04; provided, however, that if a Change in Control shall have occurred without notice or opportunity for exercise of Limited Rights, then the Limited Rights shall be exercised as soon as practicable after a determi-nation has been made that a "Change in Control" has occurred, or has been deemed to have occurred.

As used in the Plan, a "Change in Control" shall be deemed to have occurred if

(a) individuals who were directors of ABI, immedi-ately prior to a Control Transaction shall cease, within one year of such Control Transaction, to constitute a majority of the Board of Directors of ABI (or of the Board of Directors of any successor to ABI or to all or substan-tially all of its assets), or

(b) any entity, person or Group other than ABI or a Subsidiary of ABI or an Affiliate thereof acquires shares of ABI in a transaction or series of transac-tions that result in such entity, person or Group directly or indirectly owning benefi-cially fifty-one percent (51%) or more of the outstand-ing shares.

As used herein, "Control Transaction" shall be

(i)

any tender offer for or acquisition of capital stock of ABI,

(ii)

any merger, consol-idation, or sale of all or substan-tial-ly all of the assets of ABI which has been approved by the sharehold-ers,

(iii)

any contested election of directors of ABI, or

(iv)

any combination of the fore-going;

which results in a change in voting power suf-ficient to elect a majority of the Board of Direc-tors of ABI. As used here-in, "Group" shall mean persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securi-ties Ex-change Act of 1934, as amended.

3.04. Amount of Payment.

The amount of payment to which an Optionee shall be entitled upon the exercise of each Limited Right shall be equal to 100% of the amount, if any, which is equal to the difference between the Option Price of the Common Stock covered by the related Option(s) as determined under Section 2.03, above, and the Market Price of such Common Stock , but only if and to the extent said Market Price is greater than said Option Price. Market Price is defined to be the greater of (i) the highest price per share of the Company's Common Stock paid in connec-tion with any Change in Control and (ii) the highest price per share of the Company's Common Stock paid pursuant to an unsolicited brokerage transaction during the 60-day period prior to the Change in Control, in each case, multiplied by the number of shares subject to such Option(s).

3.05. Form of Payment.

Payment of the amount to which an Optionee is entitled upon the exercise of Limited Rights, as determined pursuant to Section 3.04, shall be made solely in cash.

3.06. Effect of Exercise.

3.07. Retirement or Disability.

Upon termination of the Optionee's employment with the Company by reason of permanent disability or retire-ment (as each is determined by the Board and/or Committee), the Optionee may, within 36 months from the date of termination, exercise any Limited Right to the extent such Limited Right is otherwise exercis-able during such 36-month period.

3.08. Death of Optionee or Termination for Other Reasons.

Except as provided in Section 3.07, or except as otherwise determined by the Board and/or Committee, all Limited Rights granted under the Plan shall terminate upon the termination of the Optionee's employment with the Company, or upon the death of the Optionee. Notwithstanding the foregoing, neither retirement nor disability shall extend the Option Term of any Incentive Stock Option, nor the term of any Limited Rights.

ARTICLE IV -- MISCELLANEOUS

4.01. General Restriction.

the issue or purchase of shares of Common Stock thereunder, such award may not be consummated in whole or in part unless such listing, registration, qualifica-tion, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board and/or Committee.

4.02. Non-Assignability.

No award under the Plan shall be assignable or transferable by the recipient thereof, except by will or by the laws of descent and distribution. During the life of the recipient, such award shall be exercisable only by such person or by such person's guardian or legal representative.

4.03. Right to Terminate Employment.

Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in the employment of the Company or affect any right which the Company may have to terminate the employ-ment of such participant.

4.04. Non-Uniform Determinations.

The Board’s and/or Committee's determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and timing of such awards, the terms and provisions of such awards and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

4.05. Rights as a Shareholder.

The recipient of any award under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for shares of Common Stock are issued to him.

4.06. Definitions.

In this Plan the following definitions (along with other definitions set forth elsewhere in the Plan) shall apply:

(a) "Affiliate" means any person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with ABI.

(b) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:

(i)

If the Common Stock is listed on any established stock exchange or a national market system, including without limita-tion the National Market System of the National Association of Securities Deal-ers, Inc. Automated Quotation (“NASDAQ”) System, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the clos-ing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the date of grant, as reported in The Wall Street Journal or such other source as the Board deems reliable;

(ii)

If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or regularly quot-ed by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the bid and asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable;

(iii)

impose such limitations, restrictions and conditions upon any such awards as the Board and/or Committee shall deem appropriate; and

(iv)

In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board and/or Committee.

(d) "Option Price" means the purchase price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option.

(e) "Subsidiary" means any corporation of which, at the time more than 50% of the shares entitled to vote general-ly in an election of directors are owned directly or indirect-ly by ABI or any Subsidiary thereof.

4.07. Leaves of Absence.

The Board and/or Committee shall be entitled to make such rules, regulations and determina-tions as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any award. Without limiting the generality of the foregoing, the Board and/or Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of employment within the meaning of the Plan and (ii) the impact, if any, of any such leave of absence on awards under the Plan theretofore made to any recipient who takes such leave of absence.

4.08. Newly Eligible Employees.

The Board and/or Committee shall be entitled to make such rules, regulations, determinations and awards as it deems appropriate in respect of any employee who becomes eligible to participate in the Plan or any portion thereof after the commencement of an award or incentive period.

4.09. Adjustments.

In the event of any change in the outstanding Common Stock by reason of a stock dividend or distribution, recapi-talization, merger, consolidation, split-up, combination, exchange of shares or the like, the Board and/or Committee shall appropri-ate-ly adjust the number of shares of Common Stock which may be issued under the Plan, the number of shares of Common Stock subject to Options theretofore granted under the Plan, the Option Price of Options theretofore granted under the Plan, the amount and terms of any Limited Rights theretofore awarded under the Plan, and any and all other matters deemed appropri-ate by the Board and/or Committee.

4.10. Amendment of the Plan.

(a) The Board and/or Committee may, without further action by the shareholders and without receiving further consideration from the participants, amend this Plan or condition or modify awards under this Plan in response to changes in taxation, securities or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with stock exchange rules or requirements.

(b) The Board and/or Committee may at any time and from time to time terminate or modify or amend the Plan in any respect, except that without shareholder approval the Board and/or Committee may not (i) increase the maximum number of shares of Common Stock which may be issued under the Plan (other than increases pursuant to Section 4.10), (ii) extend the period during which any award may be granted or exercised, or (iii) extend the term of the Plan. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not without the consent of a participant, affect his or her rights under an award previously granted to him or her.

4.11. Disposition of Option Shares; Withholding Taxes.

Upon the disposition (within the meaning of Code Section 424(c)) of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to the expiration of the holding period requirements of Code Section 422(a)(1)(see Section 2.09, above), the Optionee shall be required to give notice to the Company of such disposition and the Company shall have the right to require the Optionee to pay to the Company the amount of any taxes that are required by law to be withheld with respect to such disposition.

4.12. Shares Unregistered.

Shares issued upon exercise of any Stock Option shall be restricted, and shall bear any required or appropriate legends. There is no assurance that a market for the shares will be available or that the Company’s securities will continue to qualify for resale pursuant to Rule 144 promulgated under the Securities Act of 1933 (the “1933 Act”). The Company makes no representation that its securities will continue to qualify for resale under Rule 144 nor that its securities will continue to be traded on the over-the-counter bulletin board or any other exchange and the Optionee is solely responsible for determining that any resale by him of the shares is lawful under applicable federal and state securities laws.

ARTICLE I – GENERAL

1.01. Purposes.

The purposes of this 2018 Officers, Directors, Employees and Consultants Nonqualified Stock Option Plan (the “Plan”) are to: (1) closely associate the interests of the officers, directors, employees and consultants of AMARILLO BIOSCIENCES, INC. (“the “Company” or “ABI”) with the interests of the share-holders by reinforcing the relation-ship between participants’ rewards and shareholder gains; (2) provide participants with an equity ownership in the Company commensu-rate with Company perfor-mance, as reflected in increased shareholder value; (3) maintain competitive compen-sation levels; and (4) provide an incentive to participants for continued association with the Company.

1.02. Administration.

(b) The Board and/or Committee shall have the authority, in its sole discretion and from time to time to:

(i)

designate the employees or classes of employees eligible to partici-pate in the Plan;

(ii)

(iii)

impose such limitations, restrictions and conditions upon any such awards as the Board and/or Committee shall deem appropriate; and

(iv)

1.03. Eligibility for Participation.

Participants in the Plan shall be selected by the Board and/or Committee from among the officers, directors, employees and consultants of the Company. In making this selection and in determining the form and amount of awards, the Board and/or Committee shall consider any factors deemed relevant, including the individual’s functions, responsibili-ties, value of services to the Company and past and potential contributions to the Company’s profitability and sound growth.

1.04. Types of Awards Under Plan.

Awards under the Plan will be in the form of Nonqualified Stock Op-tions, as described in Article II; provided, however, that Limited Rights, as de-scribed in Article IV, may be awarded with respect to Op-tions concurrently or previously awarded.

1.05. Aggregate Limitation on Awards.

(a) Shares of stock which may be issued under the Plan shall be authorized and unissued or treasury shares of Common Stock of ABI (“Common Stock”). The maximum number of shares of Common Stock which may be issued or reserved under the Plan shall be four million (4,000,000) shares.

(b) In addition to shares of Common Stock actually issued or reserved for exercise of Nonqualified Stock Options, there shall be deemed to have been issued under the Plan a number of shares equal to the number of shares of Common Stock in respect of which Limited Rights (as described in Article IV) shall have been exercised.

(c) Any shares of Common Stock subject to a Nonqualified Stock Option which for any reason is terminated unexer-cised or expires shall again be available for issuance under the Plan, but shares subject to a Nonqualified Stock Option which are not issued as a result of the exercise of Limited Rights shall not again be available for issuance under the Plan.

1.06. Effective Date and Term of Plan.

(a) The Plan shall become effective on the date of adoption, as first above written.

ARTICLE II – NONQUALIFIED STOCK OPTIONS

2.01. Award of Nonqualified Stock Options.

The Board and/or Committee may, from time to time and subject to the provisions of the Plan and such other terms and conditions as the Board and/or Committee may prescribe, grant to any participant in the Plan one or more nonqualified stock options (“Nonqualified Stock Options” or “Options”), to purchase for cash the number of shares of Common Stock allotted by the Board and/or Committee. The date a Nonqualified Stock Option is granted shall mean the date selected by the Board and/or Committee as of which the Board and/or Committee allots a specific number of shares to a participant pursuant to the Plan.

2.02. Nonqualified Stock Option Agreements.

The grant of a Nonqualified Stock Option shall be evidenced by a written Nonqualified Stock Option Agreement, executed by the Company and the holder of a Nonqualified Stock Option (the “Optionee”), stating the number of shares of Common Stock subject to the Nonqualified Stock Option evidenced thereby, and in such form as the Board and/or Committee may from time to time determine.

2.03. Nonqualified Stock Option Price.

The Option Price per share of Common Stock deliver-able upon the exercise of a Nonqualified Stock Option shall be as determined by the Board and/or Committee, but in no event less than 100% of the Fair Market Value of a share of Common Stock on the last trading date preceding the date of grant. The Board and/or Committee shall determine the date on which an Option is granted; in the absence of such determination, the date on which the Board and/or Committee adopts a resolution granting an Option shall be considered the date on which such Option is granted, provided the Employee to whom the Option is granted is promptly notified of the grant and a written Option agreement is duly executed as of the date of the resolution.

2.04. Term and Exercise.

Each Nonqualified Stock Option is exercisable during a period of ten (10) years from the date of grant thereof or such shorter period as may be designated by the Board and/or Committee at the time of grant (the “Option Term”), subject always to the Vesting Schedule set forth below. No Nonqualified Stock Option shall be exercisable after the expira-tion of its Option Term. The Board and/or Committee may also in its sole discretion acceler-ate the exerciseability or vesting of any Option or install-ment thereof at any time.

Vesting Schedule. Options awarded shall be exercis-able, subject to the other terms and conditions of the Plan, and if the Board and/or Committee shall not have accelerated vesting, only upon the expira-tion of the designated number of years of active association with the Company from date of award, as provided below:

20% of Options awarded - 1 year

40% of Options awarded - 2 years

60% of Options awarded - 3 years

80% of Options awarded - 4 years

100% of Options awarded - 5 years

Except as provided in Sections 2.05, 2.06 and 2.07 hereof, no Nonqualified Stock Option shall be exercised at any time unless the holder thereof is then associated with the Company as an officer, director, employee or consultant.

2.05. Death of Optionee.

(a) Upon the death of the Optionee, any Nonqualified Stock Option exercisable on the date of death may be exercised by the Optionee’s estate or by a person who acquires the right to exercise such Nonqualified Stock Option by bequest or inheri-tance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining Option Term of the Nonqualified Stock Option and one year after the Optionee’s death.

(b) The provisions of this Section shall apply notwithstanding the fact that the Optionee’s association with the Company may have terminated prior to death, but only to the extent of any Nonqualified Stock Options exercisable on the date of death.

2.06. Retirement or Disability.

Upon termination of the Optionee’s association with the Company by reason of permanent disability or retire-ment (as each is determined by the Board and/or Committee), the Optionee may, within 36 months from the date of termination, exercise any Nonqualified Stock Option to the extent such Stock Option is otherwise exercis-able during such 36-month period. Notwithstanding the foregoing, neither retirement nor disability shall extend the Option Term of any Nonqualified Stock Option.

2.07. Termination for Other Reasons.

Except as provided in Sections 2.05 and 2.06 or except as otherwise determined by the Board and/or Committee, all Nonqualified Stock Options shall terminate upon the termination of the Optionee’s association with the Company; provided, however, that if the Optionee’s association was involuntarily terminated (with or without cause), Optionee may exercise, during a 90-day period commencing with date of such termination, all Options theretofore vested, or which vest during said 90-day period, under the Vesting Schedules set forth in Paragraph 2.04, above. At the end of the 90-day period, all rights of such Optionee under any then outstanding Option or right shall terminate and shall be forfeited immediately as to any unexercised portion thereof.

2.08. Manner of Payment.

Each Stock Option Agreement shall set forth the procedure governing the exercise of the Stock Option granted thereunder, and shall provide that, upon such exercise in respect of any shares of Common Stock subject thereto, the Optionee shall transfer to the Company, in full, the Option Price for such shares either in cash, or in shares of the Common

Stock of the Company previously held by the Optionee, valued at the Fair Market Value per share on the last trading date preceding the date of exercise.

2.09. Issuance of Shares.

2.10. Effect of Exercise.

The exercise of any Stock Option shall cancel that number of related Limited Rights, if any, which is equal to the number of shares of Common Stock purchased pursuant to said Option.

2.11. Rule 16b-3 Exemption.

ARTICLE III – SHARES UNREGISTERED

3.01. Shares Unregistered.

ARTICLE IV – LIMITED RIGHTS

4.01. Award of Limited Rights.

Concurrently with or subsequent to the award of any Nonqualified Stock Option, the Board and/or Committee may, subject to the provisions of the Plan and such other terms and conditions as the Board and/or Committee may prescribe, award to the Optionee with

respect to each Option, a related limited right permitting the Optionee, during a specified limited time period, to be paid the appreciation on the Common Stock in lieu of exercising the Option (“Limited Right”).

4.02. Limited Rights Agreement.

Limited Rights granted under the Plan shall be evidenced by written agreements in such form as the Board and/or Committee may from time to time determine.

4.04. Exercise Period.

Limited Rights must be exercised (if at all) immediately preceding or simultaneous with the date of a Change in Control of ABI (the “Exercise Period”), and all Limited Rights held by the Optionee shall be exercised during such Exercise Period, without regard to the Vesting Schedules set forth in Paragraph 2.04; provided, however, that if a Change in Control shall have occurred without notice or opportunity for exercise of Limited Rights, then the Limited Rights shall be exercised as soon as practicable after a determi-nation has been made that a “Change in Control” has occurred, or has been deemed to have occurred.

As used in the Plan, a “Change in Control” shall be deemed to have occurred if

As used herein, “Control Transaction” shall be

(i)

any tender offer for or acquisition of capital stock of ABI,

(ii)

any merger, consolidation, or sale of all or substantially all of the assets of ABI which has been approved by the shareholders,

(iii)

any contested election of directors of ABI, or

(iv)

any combination of the fore-going;

which results in a change in voting power suf-ficient to elect a majority of the Board of Direc-tors of ABI. As used here-in, “Group” shall mean persons who act in concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securi-ties Ex-change Act of 1934, as amended.

4.05. Amount of Payment.

The amount of payment to which an Optionee shall be entitled upon the exercise of each Limited Right shall be equal to 100% of the amount, if any, which is equal to the difference between the Option Price of the Common Stock covered by the related Option(s) as determined under Section 2.03, above, and the Market Price of such Common Stock , but only if and to the extent said Market Price is greater than said Option Price. Market Price is defined to be the greater of (i) the highest price per share of the Company’s Common Stock paid in connec-tion with any Change in Control and (ii) the highest price per share of the Company’s Common Stock paid pursuant to an unsolicited brokerage transaction during the 60-day period prior to the Change in Control, in each case, multiplied by the number of shares subject to such Option(s).

4.06. Form of Payment.

Payment of the amount to which an Optionee is entitled upon the exercise of Limited Rights, as determined pursuant to Section 4.05, shall be made solely in cash.

4.07. Effect of Exercise or Non-Exercise.

If Limited Rights are exercised, the Stock Op-tions related to such Limited Rights cease to be exercisable to the extent of the number of shares with respect to which the Limited Rights were exercised. Upon the exercise or termina-tion of the Options related to such Limited Rights, the Limited Rights granted with respect thereto terminate to the extent of the number of shares as to which the related Options were exercised or terminated. If Limited Rights have not been awarded to an Optionee, or if Limited Rights have been awarded but the Optionee elects not to exercise the same, then all Nonqualified Stock Options held by such Optionee must be exercised (if at all) within thirty (30) days after the Optionee has received notice of an impending Control Transaction; and if not so exercised, shall lapse in their entirety.

4.08. Retirement or Disability.

Upon termination of the Optionee’s association with the Company by reason of permanent disability or retire-ment (as each is determined by the Board and/or Committee), the Optionee may, within 36 months from the date of termination, exercise any Limited Right to the extent such Limited Right is otherwise exercis-able during such 36-month period. Notwithstanding the foregoing, neither retirement nor disability shall extend the Option Term of any Nonqualified Stock Option, nor the term of any Limited Rights.

ARTICLE V - REGISTRATION OF SHARES

5.01. Registration of Shares.

The Board and/or Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Board and/or Committee may prescribe, authorize the Company to register with the Securities and Exchange Commission on Form S-8 or other appropriate form, at the Company’s expense, shares of stock which are issuable under Stock Options to be granted or awarded to participants in the Plan who are employees or consultants, including without limitation, shares underlying unexercised Stock Options, shares which have been issued pursuant to the exercise of Stock Options, and such shares as may be reserved from time to time for issuance upon future exercise of the Stock Options.

ARTICLE VI – MISCELLANEOUS

6.01. General Restriction.

Each award under the Plan shall be subject to the requirement that, if at any time the Board and/or Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the grantee of an award with respect to the disposition of shares of Common Stock, is necessary or desirable as a condition of, or in connection with, the granting of such award or the issue or purchase of shares of Common Stock thereunder, such award may not be consummated in whole or in part unless such listing, registration, qualifica-tion, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board and/or Committee.

6.02. Assignability.

The Options shall not be assignable or transferable by Optionee except by Will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986 or Title I of the Employee Retirement Income Security Act of 1974, as amended, or to a person or entity approved by ABI, in writing, or, provided there is no consideration for the transfer, to a member of Optionee’s immediate family, a trust or trusts for the benefit of such immediate family members, or a partnership in which the Optionee and such immediate family members are the only partners. For this purpose, “immediate family member” shall include the Optionee’s descendants, spouse, and spouses of descendants.

6.03. Right to Terminate Association.

Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in association with the Company or affect any right which the Company may have to terminate the association of such participant.

6.04. Non-Uniform Determinations.

The Board’s and/or Committee’s determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and timing of such awards, the terms and provisions of such awards and the agreements evidencing same) need not be uniform and may be made by them selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

6.05. Rights as a Shareholder.

The recipient of any award under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for shares of Common Stock are issued to him.

6.06. Definitions.

In this Plan the following definitions (along with other definitions set forth elsewhere in the Plan) shall apply:

(a) “Affiliate” means any person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with ABI.

(b) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i)

(ii)

(iii)

If the Common Stock is traded on the Over-the-Counter Bulletin Board, the Fair Market Value of a share of a Common Stock shall be the closing price of the Common Stock on the last market trading day, prior to the day of determination; or

(iv)

In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board and/or Commit-tee.

(d) “Option Price” means the purchase price per share of Common Stock deliverable upon the exercise of a Nonqualified Stock Option.

6.07. Leaves of Absence.

The Board and/or Committee shall be entitled to make such rules, regulations and determina-tions as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any award. Without limiting the generality of the foregoing, the Board and/or Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of association within the meaning of the Plan and (ii) the impact, if any, of any such leave of absence on awards under the Plan theretofore made to any recipient who takes such leave of absence.

6.08. Adjustments.

6.9. Amendment of the Plan.

(a) The Board and/or Committee may, without further action by the Board of Directors and without receiving further consideration from the participants, amend this Plan or condition or modify awards under this Plan in response to changes in securities or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with stock exchange rules or requirements.

(b) The Board and/or Committee may at any time and from time to time terminate or modify or amend the Plan in any respect, except that without Board of Directors approval the Committee may not (i) increase the maximum number of shares of Common Stock which may be issued under the Plan (other than increases pursuant to Section 6.08), (ii) extend the period during which any award may be granted or exercised, or (iii) extend the term of the Plan. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not without the consent of a participant, affect his or her rights under an award previously granted to him or her.

6.10. Disposition of Option Shares; Withholding Taxes.

Upon the exercise of any Nonqualified Stock Option, the Optionee shall pay to the Company, in cash, the amount of any taxes that are required by law to be withheld with respect to such event. The Optionee shall notify the Company within ten (10) days of exercising all or any portion of the Nonqualified Stock Options, and shall pay to the Company the amount of taxes required to be withheld, within five (5) days of notification by the Company of the amount thereof.

[ X ]	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the Fiscal Year Ended December 31, 2018

[ ]	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] Commission File Number 0-20791
	AMARILLO BIOSCIENCES, INC. (Exact name of Registrant as specified in its charter)
	Texas (State of other jurisdiction of incorporation or organization)	75-1974352 (I.R.S. Employer Identification No.)
	4134 Business Park Drive, Amarillo, Texas (Address of principal executive offices)	79110-4225 (Zip Code)
	Issuer’s telephone number, including area code: (806) 376-1741

Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [ ] (do not check if smaller reporting company)		Smaller reporting company [√]

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

Stock Plans ¹	Issue Date Range	Total Shares Authorized		Shares Issued		Shares Remaining
2008 Stock Incentive Plan	5/23/08 – 10/11/11		600,000		463,420		136,580
Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan ²	9/26/18 – 9/26/28		6,000,000		950,000		5,050,000
Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan ²	9/26/18 – 9/26/28		20,000,000		3,995,000		16,005,000

Date	Number of Options Qualified*		Number of Options Nonqualified		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance December 31, 2017		-		-		-		-		-
Granted September 26, 2018		950,000		3,995,000	$	0.38	5 years
Exercised		-		-		-		-		-
Expired		-		-		-		-		-
Balance December 31, 2018		950,000		3,995,000	$	0.38	5 years

	December 31, 2018		December 31, 2017
Convertible Note payable – related party	$	144,426	$	144,426
Convertible Note payable – related party		262,500		262,500
Convertible Note payable – related party		106,430		384,555
Convertible Note payable – related party		-		70,000
Convertible Note payable – related party		-		25,000
Convertible Notes payable – related party	$	513,356	$	886,481

Note #.	Date	Payee	Principal Amount	Maturity	Annual Interest AFR ¹	Conversion Price
1	1/11/2016	Stephen T. Chen	$144,426.00	On Demand	0.75%	$0.1680
2	3/18/2016	Stephen T. Chen	$262,500.00	On Demand	0.65%	$0.1875
3	6/30/2016	Stephen T. Chen	$106,430.00	On Demand	0.64%	$0.1875
Total Convertible Notes Payable			$513,356.00

Shareholder/Recipient	Issue Date	Number of Shares
Seu Chi Kuo	July 12, 2018	179,852
Po Ya Tseng	July 12, 2018	179,852
Yasushi Chikagami	July 12, 2018	53,891
Stephen/Virginia Chen Living Trust	July 12, 2018	125,852
Total		539,447

Name	Age	Position
Stephen Chen, Ph.D.	69	Chairman of the Board, Chief Executive Officer President, Chief Finance Officer, Chief Operating Officer and Director
Bernard Cohen	65	Vice President and Chief Financial Officer
Yasushi Chikagami	79	Director
Daniel Fisher……………………………	74	Director
Nicholas Moren…………………………	72	Director
Edward L. Morris	73	Corporate Secretary, General Counsel, and Director

Name and Principal Position	Number of Late Reports	Known Failures to File a Required Form
Dr. Stephen T. Chen, Chairman of the Board, President, and Chief Executive Officer	0	0
Bernard Cohen, Vice President and Chief Financial Officer	0	0
Yasushi Chikagami, Director	0	0
Daniel Fisher, Director	0	0
Nicholas Moren, Director	0	0
Edward L. Morris, Director	0	0

Summary Compensation Table
		Annual Compensation			Long Term Compensation
Name and Principal Position	Year	Salary	Bonus	Other Compensation		Securities Underlying Options
Dr. Stephen T. Chen,Chairman of the Board, President and Chief Executive Officer	2018	$ 240,000	$ -	$100,000		-
	2017	$ 86,250	$ 93,750	$ -		-
	2016	$ 40,000	$ 60,500	$ -		-

Mr. Bernard Cohen, Vice President and Chief Financial Officer	2018	$ 70,000	$ -	$ 12,000	-
	2017	$ 62,292	$ 12,500	$ -	-
	2016	$ 40,000	$ 17,500	$ -	-

Name and Address	Amount and Nature of Beneficial Ownership	Percent of Class Owned ⁽¹⁾
Stephen T Chen & Virginia M Chen TTEES Stephen T & Virginia M Chen Living Trust DTD 04/12/2018 19 Pine Plain Road Wellesley Hills MA 02481	9,417,665	22.21%
Hung Lan Lee FL 20 NO 19 Lane 8, SEC 5 RD XIN-YI Taipei 110 (R.O.C.) Taiwan	4,000,000	9.43%

Name and Address of Owner	Amount and Nature of Beneficial Ownership	Percent of Class Owned ¹
Stephen T. Chen 31 Service Drive Wellesley, MA 02482	9,417,665 ²	22.21%
Bernard Cohen 2803 S. Travis St. Amarillo, TX 79109	94,074	0.22%
Yasushi Chikagami 9F, No. 29, Ln. 107, Sec. 2 Heping E. Rod., Da’an Dist. Taipei City 106, Taiwan (ROC)	2,459,153	5.80%
Daniel Fisher 36 Marlee Road Pleasant Hill, CA 94523	-	-
Nicholas Moren PO Box 6873 Incline Village, NV 89450	-	-
Edward L. Morris 3501Cindarella Lane Amarillo, TX 79121	105,758	0.25%
Total Group (all directors and executive officers – 6 persons)	12,076,650 ³	28.48%

3(i)		Restated Certificate of Formation of the Company, dated and filed July 27, 2015.
3(ii)		Bylaws of the Company, as amended July 10, 2015.
4.1*		Specimen Common Stock Certificate.
4.2*		Form of Underwriter's Warrant.
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.
10.30***		Amendment No. 1 dated September 28, 1998 to License Agreement of March 22, 1988 between The Texas A&M University System and the Company.
10.71**		License and Supply Agreement dated January 7, 2010, between the Company and Intas Pharmaceuticals, Ltd.
10.72 ***		2018 Employee Stock Option Plan
10.73***		2018 Officer, Directors, Employees and Consultants Nonqualified Stock Option Plan
10.74***		Stock Option Agreement – Nonqualified Stock Option
10.75***		Stock Option Agreement – Employee Plan

		2018				2017
LBB & Associates Ltd., LLP		$	42,250			$	32,250


Contents


Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets	F-3

Consolidated Statements of Operations	F-4

Consolidated Statements of Stockholders’ Equity	F-5

Consolidated Statements of Cash Flows	F-6

Notes to Consolidated Financial Statements	F-7

/s/LBB & Associates Ltd., LLP

We have served as the Company’s auditor since 2006.

Houston, Texas

April 16, 2019

	December 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	1,276,654		$	2,038,150
Inventory		-			22,666
Prepaid expense and other current assets		26,580			23,635
Total current assets		1,303,234			2,084,451
Patents, net		146,456			182,386
Property and equipment, net		14,010			26,997
Total assets	$	1,463,700		$	2,293,834

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued expenses	$	115,313		$	159,300
Advances from investors		104,952			777,258
Convertible notes payable – related party		513,356			886,481
Total current liabilities		733,621			1,823,039
Total liabilities		733,621			1,823,039

Commitments and contingencies

Stockholders’ equity
Preferred stock, $0.01 par value:
Authorized shares – 10,000,000,
Issued and outstanding shares – 0 at December 31, 2018 and December 31, 2017, respectively		-			-
Common stock, $0.01 par value:
Authorized shares – 100,000,000,
Issued and outstanding shares –39,117,524 and 23,156,563 at December 31, 2018 and 2017, respectively		391,175			231,565
Additional paid-in capital		3,527,238			2,123,205
Accumulated deficit		(3,188,334	)		(1,883,975	)
Total stockholders’ equity		730,079			470,795
Total liabilities and stockholders’ equity	$	1,463,700		$	2,293,834

	AMARILLO BIOSCIENCES, INC.
Date: April 16, 2019	By: /s/ Stephen Chen Stephen Chen, Chairman of the Board, and Chief Executive Officer
Date: April 16, 2019	By: /s/ Stephen Chen Stephen Chen, Chief Financial Officer

Signature	Title	Date
/s/ Stephen Chen	Chairman of the Board, Director and Chief Executive Officer	April 16, 2019
Stephen Chen

/s/ Yasushi Chikagami	Director	April 16, 2019
Yasushi Chikagami
/s/ Daniel Fisher	Director	April 16, 2019
Daniel Fisher
/s/ Nicholas Moren	Director	April 16, 2019
Nicholas Moren
/s/ Edward L. Morris	Director	April 16, 2019
Edward L. Morris

	Years ended December 31,
	2018			2017
Revenues	$	77,724		$	250,928
Cost of revenues		(64,877	)		(60,316	)
Gross margin		12,847			190,612

Operating expenses:
Research and development expenses		32,591			-
Selling, general and administrative expenses		1,314,932			770,375
Total operating expenses		1,347,523			770,375

Operating loss		(1,334,676	)		(579,763	)

Other income (expense):
Interest expense		(3,963	)		(37,612	)
Net loss	$	(1,338,639	)	$	(617,375	)

Basic and diluted net loss per average share available to common shareholders	$	(0.04	)	$	(0.03	)

Weighted average common shares outstanding – basic and diluted		35,643,804			22,663,476

	Preferred Stock				Common Stock				Additional Paid			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		in Capital			Deficit			Equity (Deficit)
Balance at December 31, 2016		-	$	-		21,916,143	$	219,161	$	237,540		$	(1,266,600	)	$	(809,899	)
Issuance of stock for cash in private placements						770,000		7,700		136,657			-			144,357
Issuance of stock for service		-		-		57,000		570		10,118			-			10,688
Issuance of stock for compensation bonus		-		-		413,420		4,134		102,116			-			106,250
Conversion feature on Chen demand note		-		-		-		-		28,200			-			28,200
Stock subscription		-		-		-		-		1,608,574			-			1,608,574
Net loss for the year ended December 31, 2017		-		-		-		-		-			(617,375	)		(617,375	)
Balance at December 31, 2017		-	$	-		23,156,563	$	231,565	$	2,123,205		$	(1,883,975	)	$	470,795

Reversal of dividends on preferred stock		-		-		-		-		-			34,280			34,280
Issuance of stock for compensation		-		-		451,480		4,515		111,735			-			116,250
Issuance of stock for subscription		-		-		8,579,061		85,791		(85,791	)		-			-
Issuance of common stock for cash		-		-		5,440,973		54,410		1,067,875			-			1,122,285
Issuance of stock for debt		-		-		950,000		9,500		168,625			-			178,125
Acquisition of voting interest of ACTS		-		-		539,447		5,394		13,458			-			18,852
Warrant expense		-		-		-		-		27,765			-			27,765
Option expense		-		-		-		-		100,366			-			100,366
Net loss for the year ended December 31, 2018		-		-		-		-					(1,338,639	)		(1,338,639	)
Balance at December 31, 2018		-	$	-		39,117,524	$	391,175	$	3,527,238		$	(3,188,334	)	$	730,079

	Year Ended December 31, 2018			Year Ended December 31, 2017
Cash flows from Operating Activities
Net loss	$	(1,338,639	)	$	(617,375	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		56,194			39,990
Stock issued for services		27,765			10,688
Stock compensation		100,366			106,250
Amortization of debt discount		-			28,200
Changes in operating assets and liabilities:
Inventory		22,666			(7,966	)
Prepaid expense and other current assets		67,400			89,939
Accounts payable and accrued expenses		54,844			(9,461	)
Accrued interest – related party		206			-
Customer deposits		-			(124,833	)
Net cash used in operating activities		(1,009,198	)		(484,568	)
Cash flows from Investing Activities
Investment in patents		(2,369	)		(49,096	)
Capital expenditures		(4,908	)		-
Net cash used in investing activities		(7,277	)		(49,096	)
Cash flows from Financing Activities
Cash received from stock subscription		-			1,421,074
Proceeds from private placement offering, net		401,250			144,357
Advances from investors		48,729			777,258
Proceeds from convertible note payable – related party		-			95,000
Repayment on convertible note payable – related party		(195,000	)		-
Net cash provided by financing activities		254,979			2,437,689
Net change in cash		(761,496	)		1,904,025
Cash and cash equivalents at beginning of period		2,038,150			134,125
Cash and cash equivalents at end of period	$	1,276,654		$	2,038,150
Supplemental Cash Flow Information
Cash paid for interest	$	3,818		$	29,318
Cash paid for income taxes	$	-		$	-
Non-Cash Transactions
Stock issued for accrued liabilities	$	116,250		$	-
Stock issued for subscription	$	85,791		$	-
Conversion of debt to common stock	$	178,125		$	-
Reversal of accrued dividends	$	34,280		$	-
Stock issued for advances from investors	$	721,035		$	187,500


	2018			2017
Furniture and equipment	$	92,988		$	92,988
Automobiles		4,911			-
Software		8,012			8,012
		105,911			101,000
Less: accumulated depreciation		(91,901	)		(74,003	)
Property, equipment and software, net	$	14,010		$	26,997


	2018			2017
Patents	$	228,669		$	338,324
Less: accumulated amortization		(82,213	)		(155,938	)
Patents, net	$	146,456		$	182,386

2019		11,582
2020		11,494
2021		9,838
2022		9,434
Thereafter		104,108
Total expense	$	146,456

Date	Number of Options Qualified	Number of Options Nonqualified	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance December 31, 2017	-	-	-	-	-
Granted September 26, 2018*	*950,000	3,995,000	$0.38	5 years
Exercised	-	-	-	-	-
Expired	-	-	-	-	-
Balance December 31, 2018*	*950,000	3,995,000	$0.38	5 years

	December 31, 2018			December 31, 2017
Provision (benefit) at statutory rate	$	(281,000	)	$	(210,000	)
Effect of rate change on deferred assets		-			3,010,000
Change in valuation allowance		281,000			(2,800,000	)
	$	-		$	-

	December 31, 2018			December 31, 2017
Deferred tax assets:
Net operating loss carryforward	$	5,082,000		$	4,801,000
Deferred tax assets		5,082,000			4,801,000

Deferred tax liabilities:		-			-
Net deferred tax assets		5,082,000			4,801,000
Valuation allowance		(5,082,000	)		(4,801,000	)
	$	-		$	-