United
        States
 **SECURITIES
        AND EXCHANGE COMMISSION**
 WASHINGTON,
        D.C. 20549
 
 **FORM
        10-QSB/A**
 **(AMENDMENT
        NO.1)**
 
 [
                  X
                  ]
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 For
        the
        quarterly period ended **June
        30, 2006**
 
 [
                  ]
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 
 Commission
        File Number 0-20791
 
 
 **AMARILLO
        BIOSCIENCES, INC.**
 (Exact
        name of small business issuer as specified in its charter)
 
 TEXAS
              75-1974352(State
                  or other jurisdiction of
              (IRS
                  Employer Identification No.)incorporation
                  or organization)
 
 4134
                  Business Park Drive, Amarillo, Texas
              79110(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 806-376-1741
              FAX
                  806-376-9301(Issuer's
                  telephone number, including area code)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes X .
        No  .
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act) Yes  No X .
 
 As
        of
        June 30, 2006 there were 22,346,235 shares of the issuer's common stock
        outstanding.
 
 Transitional
        Small Business Disclosure Format (check one) Yes ___. No X .
  1
 **Explanatory
        Note**
  This
        Quarterly Report on Form 10-QSB/A is being filed as Amendment Number 1 to
        our
        Quarterly Report on Form 10-QSB which was originally filed with the Securities
        and Exchange Commission (‘‘SEC’’) on August 10, 2006. This Form 10-QSB/A has
        been amended to provide currently-dated certifications in the form required
        by
        Item 601(b)(31) of Regulation S-B. These certifications are attached to this
        Form 10-QSB/A as Exhibits 31.1a and 31.1b.
 
 For
        the
        convenience of the reader, this Form 10-QSB/A sets forth the entire Form
        10-QSB
        which was prepared and relates to the Company as of June 30, 2006. However,
        this
        Form 10-QSB/A only amends and restates the Items described above and no attempt
        has been made to modify or update other disclosures presented in our June
        30,
        2006 Form 10-QSB. Accordingly, except for the foregoing amended information,
        this Form 10-QSB/A continues to speak as of August 10, 2006 (the original
        filing
        date of the June 30, 2006 Form 10-QSB), and does not reflect events occurring
        after the filing of our June 30, 2006 Form 10-QSB and does not modify or
        update
        those disclosures affected by subsequent events. Forward looking statements
        made
        in the June 30, 2006 Form 10-QSB have not been revised to reflect events,
        results or developments that have become known to us after the date of the
        original filing (other than the current restatements described above), and
        such
        forward looking statements should be read in their historical context. Unless
        otherwise stated, the information in this Form 10-QSB/A not affected by such
        current restatements is unchanged and reflects the disclosures made at the
        time
        of the original filing.
   2
  **AMARILLO
        BIOSCIENCES, INC.**
  INDEX
 
 
 PAGE
                  NO.PART
                  I:
              FINANCIAL
                  INFORMATIONITEM
                  1.
              Financial
                  StatementsConsolidated
                  Balance Sheet - June 30, 2006
              4Consolidated
                  Statements of Operations - Three and Six Months Ended June 30,
                  2006 and
                  June 30, 2005
              5Condensed
                  Consolidated Statements of Cash Flows - Six Months Ended June 30,
                  2006 and
                  2005
              6Notes
                  to Consolidated Financial Statements
              7ITEM
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              9ITEM
                  3.
              Controls
                  and Procedures
              13PART
                  II:
              OTHER
                  INFORMATIONITEM
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              13ITEM
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              14ITEM
                  6.
              Exhibits
              15Signatures
              
              16
 
  3
  **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1.**  **Financial
        Statements**
 
 Amarillo
        Biosciences, Inc. and Subsidiaries
 Consolidated
        Balance Sheet - Unaudited
 June
        30,
        2006
 **Assets**Current
                    assets:Cash
                
                $
                232,282Other
                    current assets
                
                
                6,300Total
                    current assets
                
                
                238,582Property
                    & Equipment, net of accumulated depreciation of
                    $53,765
                
                
                11,234Patents,
                    net of accumulated amortization of $197,979
                
                
                112,717Software,
                    net of accumulated amortization of $44
                
                
                1,535Total
                    assets
                
                $
                364,068**Liabilities
                    and Stockholders' Deficit**Current
                    liabilities:Accounts
                    payable
                
                $
                63,003Accrued
                    interest expense
                
                
                555,209Notes
                    payable - related parties
                
                
                2,025,000Total
                    current liabilities
                
                
                2,643,212Total
                    liabilities
                
                
                2,643,212Commitments
                    and contingenciesStockholders'
                    deficitPreferred
                    stock, $.01 par value:Authorized
                    shares - 10,000,000Issued
                    shares - none
                
                
                -Common
                    stock, $.01 par value:Authorized
                    shares - 50,000,000Issued
                    shares - 22,346,235
                
                
                223,462Additional
                    paid-in capital
                
                
                22,233,425Accumulated
                    deficit
                
                
                (24,736,031
                )Total
                    stockholders' deficit
                
                
                (2,279,144
                )Total
                    liabilities and stockholders' deficit
                
                $
                364,068
 
 *See
        accompanying notes to financial statements.*
  4
  Amarillo
        Biosciences, Inc. and Subsidiaries
 Consolidated
        Statements of Operations - Unaudited
 
 Three
                    months ended
                Six
                    months endedJune
                    30,
                June
                    30,2006
                2005
                2006
                2005Revenues:Sales
                    - Nutraceutical
                $
                    1,392
                $
                    39,898
                $
                    2,245
                $
                    40,774Sublicense
                    Fee Revenue
                -
                42,134
                30,000
                42,134Federal
                    research grants
                60,023
                13,614
                60,023
                13,614Total
                    Revenue
                61,415
                95,646
                92,268
                96,522Expenses:Cost
                    of sales
                -
                7,808
                -
                7,816Research
                    and development expenses
                159,697
                42,142
                255,935
                83,764Selling,
                    general and administrative expense
                667,573
                97,574
                1,349,016
                230,828Interest
                    expense
                22,950
                24,780
                47,131
                48,571Total
                    Expenses
                850,220
                172,304
                1,652,082
                370,979Net
                    loss
                $
                    (788,805)
                $
                    (76,658)
                $
                    (1,559,814)
                $
                    (274,457)Basic
                    and diluted net loss per share
                $
                    (0.04)
                $
                    (0.00)
                $
                    (0.07)
                $
                    (0.02)Weighted
                    average shares outstanding
                21,881,155
                16,162,290
                21,082,874
                15,605,881
 *See
        accompanying notes to financial statements.*
  5
  Amarillo
        Biosciences, Inc. and Subsidiaries
 Condensed
        Consolidated Statements of Cash Flows - Unaudited
 
 Six
                    months ended June 30,2006
                
                
                2005Net
                    cash used in operating activities
                
                $
                (665,854
                )
                $
                (188,294
                )Cash
                    from investing activities:Purchases
                    of equipment
                
                
                (10,885
                )
                
                -Purchases
                    of software
                
                
                (1,579
                )
                
                -Net
                    cash used in investing activities
                
                
                (12,464
                )
                
                -Cash
                    from financing activities:Proceeds
                    from exercise of options
                
                
                27,700
                
                
                -Proceeds
                    from issuance of common stock
                
                
                758,085
                
                
                194,499Principal
                    payments on notes payable
                
                
                (68,500
                )
                
                -Net
                    cash provided by financing activities
                
                
                717,285
                
                
                194,499Net
                    increase in cash
                
                
                38,967
                
                
                6,205Cash
                    at beginning of period
                
                
                193,315
                
                
                6,283Cash
                    at end of period
                
                $
                232,282
                
                $
                12,488Supplemental
                    Disclosure of Cash Flow InformationCash
                    paid for interest
                
                $
                2,623
                
                $
                5,154
 *See
        accompanying notes to financial statements.*
  6
  **Amarillo
        Biosciences, Inc. and Subsidiaries**
 
 **Notes
        To Consolidated Financial Statements - Unaudited**
 
 1.
            Basis
                of presentation. The accompanying consolidated financial statements,
                which
                should be read in conjunction with the consolidated financial statements
                and footnotes included in the Company's Form 10-KSB for the year
                ended
                December 31, 2005 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 six months ended June 30, 2006 are not necessarily indicative
        of
        the results that may be expected for the full year ending December 31,
        2006.
 
 2.
            Stock
                based compensation. Effective January 1,
                2006, the Company adopted SFAS No.
                123 (revised), "Share-Based Payment" (SFAS 123(R)) utilizing the
                modified prospective approach. Prior to the adoption of SFAS 123(R)
                we accounted for stock option grant in accordance with
                APB Opinion No. 25,”Accounting for Stock Issued to Employees," and
                accordingly, recognized compensation expense for stock option
                grants using the intrinsic value method. 
 Under
        the
        modified prospective approach, SFAS 123(R) applies to new awards and
        to awards that were outstanding on January 1, 2006 that
        are subsequently modified, repurchased or cancelled.  Under the
        modified prospective approach, compensation cost recognized in
        the first quarter of fiscal 2006 includes compensation cost for all
        share-based payments granted prior to, but not yet vested as of January 1,
        2006,
        based on the grant-date fair value estimated in accordance with the
        original  provisions of SFAS 123, and compensation cost for all
        share-based payments granted subsequent  to January 1, 2006 based
        on the grant-date fair value estimated in accordance with the
        provisions of SFAS 123(R).  For all quarters after the first quarter of
        fiscal 2006, compensation costs recognized will include compensation costs
        for
        all share-based payments granted based on the grant date fair value estimated
        in
        accordance with the provisions of SFAS 123(R).
 
 The
        following table illustrates the effect on net loss and net loss per share
        if
        Amarillo had applied the fair value provisions of FASB Statement No. 123,
        Accounting for Stock-Based Compensation, to stock-based employee compensation
        prior to January 1, 2006.
  7
  
 Six
                    months ended June 30, 2006Net
                    loss, as reported
                
                $
                (274,457
                )Less:
                    stock based compensation determined
                  under
                    fair value based method
                
                
                (181,105
                )Pro
                    forma net loss
                
                $
                (455,562
                )Basic
                    and diluted net loss per shareAs
                    reported
                
                $
                (0.02
                )Pro
                    forma
                
                $
                (0.02
                )
 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 of 0.0%, expected volatility of 134.0%, risk-free
        interest rate of 1.5% and expected life of 60 months.
 
 3.
            Loss
                per share. Loss per share is computed based on the weighted average
                number
                of common shares outstanding. 
 4.
            Financial
                Condition. The Company's viability is dependent upon successful
                commercialization of products resulting from its research and product
                development activities. The Company plans 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. The Company's products will require significant
                additional development, laboratory and clinical testing and investment
                prior to the Company obtaining regulatory approval to commercially
                market
                its product(s). Accordingly, for at least the next few years, the
                Company
                will continue to incur research and development and general and
                administrative expenses and may not generate sufficient revenues
                from
                product sales to support its operations. 
 5.
            Line
                of Credit. The Company has aline
                of credit with Wells Fargo for $16,000, with interest at the prime
                rate
                plus 6.75 percent. There was an outstanding balance at June 30, 2006
                of
                $7,634, which is included in accounts
                payable. 
 6.
            Equity.
                During the quarter ended March 31, 2006, the Board of Directors authorized
                the issuance of 9,033 shares of restricted common stock to consultants
                in
                lieu of cash payments. Based upon the common stock trading price
                at the
                time of issuance, a non-cash consulting expense of $5,200 was recorded
                for
                the issuance of these shares during the first quarter of 2006. 
 During
        the quarter ended June 30, 2006, the Board of Directors authorized the issuance
        of 70,415 shares of restricted common stock to consultants in lieu of cash
        payments. Based upon the common stock trading price at the time of issuance,
        a
        non-cash consulting expense of $36,400 was recorded for the issuance of these
        shares during the second quarter of 2006.
 
 During
        the six months ended June 30, 2006, the Board of Directors also authorized
        the
        issuance of 674,000 options to purchase restricted common stock at a discounted
        price to consultants for service, in lieu of cash payments. These options
        have
        not been exercised. In the first quarter of
  8
  2006,
        the
        Company issued 24,000 options to a consultant, vesting over a twelve month
        period. The value of these options will be recognized each quarter beginning
        with the first quarter of 2006 valued at $8,951 per quarter. In the first
        quarter of 2006, the Company also issued 250,000 options, vesting immediately
        valued at $249,448. In the second quarter of 2006, the Company issued 400,000
        options, vesting immediately valued at $299,914.
 
 The
        accumulated value of the above mentioned stock and stock options for the
        six
        months ended June 30, 2006 is $608,864 for non-cash consulting
        compensation.
 
 During
        the six months ended June 30, 2006, the Company recognized $216,000 (fair
        value)
        of expense in connection with the February 2006 grant of 300,000 shares of
        stock
        to an employee of the Company.  The certificate was issued in May
        2006.
 
 In
        the
        first six months of 2006, the Company completed private equity financing
        by
        selling 1,904,917 restricted shares of common stock at a discount to 12
        investors. The net proceeds to the Company were approximately
        $758,000.
  
 7.
            License
                Fee. License fee revenue is recognized upon completion of all significant
                initial services provided to the licensee and upon satisfaction of
                all
                material conditions of the license agreement.  In the first quarter
                of 2006, the Company entered into a License and Supply Agreement
                whereby
                the Company received and earned $30,000 as an initial license
                fee. 
 8.
            Subsequent
                Events.In
                July, the Company completed private equity financing by selling 110,000
                restricted shares of common stock at a discount to two investors.
                The net
                proceeds to the Company were approximately
                $60,500. 
 **Item
                  2.**
              **Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
 
 *The
        following discussion should be read in conjunction with our financial statements
        and the notes thereto which appear elsewhere in this report. The results
        shown
        herein are not necessarily indicative of the results to be expected in any
        future periods. This discussion contains forward-looking statements based
        on
        current expectations, which involve uncertainties. Actual results and the
        timing
        of events could differ materially from the forward-looking statements as
        a
        result of a number of factors. Readers should also carefully review factors
        set
        forth in other reports or documents that we file from time to time with the
        Securities and Exchange Commission.*
 
 In
        the
        second quarter, the Company completed private equity financing by selling
        restricted stock at a discount to six investors. The net proceeds to the
        Company
        were approximately $235,800.
  During
        the second quarter of 2006, the Company worked in three areas to improve
        the
        Company. These are the areas 1) agroterrorism, 2) partner discussions, and
        3)
        sales and Influenza.
  *Agroterrorism* .
        Teel
        Bivins continues to function as a consultant to help advance our position.
  *Nutraceutical
        Product* .
        The
        Company sells ACM as Maxisal® to individuals and to pharmacies in the USA and to
        licensed distributors overseas.
   9
  *Partner/License
        Discussions.* The
        Company is presently negotiating with human health commercial development
        partners in various regions of the world including South America, India,
        the
        United States and South East Asia. These agreements could generally include
        provisions for the commercial partner to pay the Company a technology access
        fee, could include payments for a portion of the clinical trial expenses,
        could
        include payment obligations to the Company upon the accomplishment of certain
        defined tasks and/or could provide for payments relating to the future sales
        of
        commercial product. These agreements could be an important source of funds
        for
        the Company. However, there can be no assurance that the Company will be
        successful in obtaining additional funding from either human health and animal
        health commercial development partners or private investors. If the Company
        is
        not successful in raising additional funds, it will need to significantly
        curtail clinical trial expenditures and to reduce staff and administrative
        expenses and may be forced to cease operations.
  *Human
        Clinical Studies* . *Houston.* The
        Company has launched a myeloproliferative diseases study at a major cancer
        center in Texas. The myeloproliferative diseases to be studied are polycythemia
        vera and essential thrombocythemia. An investigational new drug (IND)
        application was filed with the US Food and Drug Administration (FDA) in the
        second quarter of 2005. Fourteen of twenty patients planned for the final
        phase
        of the study have been enrolled to date.
  *Istanbul.* Nobel
        Ilac Sanayii Ve Ticaret A.S., a leading Middle Eastern pharmaceutical company
        that is co-sponsoring a Behçet’s Disease study with the Company, has confirmed
        that enrollment of 90 patients with Behçet’s Disease has commenced in Turkey.
        Approximately 57 patients have been screened for enrollment and 22 have been
        started on treatment as of July 24, 2006. The double-blinded Phase II Study
        is
        testing the efficacy of interferon lozenges versus placebo in the treatment
        and
        prevention of mouth ulcers. The treatment duration is 12 weeks, with completion
        of the study expected within a year. Other products used to treat mouth ulcers
        in Behçet’s Disease, such as corticosteroids, have significant side effects.
        ABI’s non-toxic oral interferon product potentially represents a substantial
        improvement in the treatment of the mouth ulcers suffered by virtually all
        Behçet’s Disease patients.
  *Multiple
        sites.* A
        protocol has been filed with the FDA and clinical sites are being enrolled
        to
        cooperate in a study of 80 HIV+ patients suffering from oral warts. This
        placebo-controlled Phase II Study is a follow-up to two successful studies
        that
        have already been completed. In the most recent study, 57% of HIV patients
        given
        the optimum dose of oral interferon experienced a complete or almost complete
        clearance of their oral warts. No products are currently approved by the
        FDA for
        this condition, so treatment of oral warts represents a unique market for
        the
        Company. Potential clinical sites are reviewing the protocol and entering
        into
        investigator agreements prior to consideration by their respective Institutional
        Review Boards (IRB). IRB approvals of the study are expected over the summer,
        so
        patient enrollment can begin this fall. The study will take approximately
        one
        year to complete.
  *Lubbock.* Enrollment
        has been completed in an ongoing study of the use of interferon lozenges
        in the
        treatment of idiopathic pulmonary fibrosis (IPF) at Texas Tech University
        Health
        Sciences Center in Lubbock, Texas (TTUHSC). The principal investigator, Lorenz
        Lutherer, MD, PhD, presented current findings from the study at the Company’s
        annual shareholders’ meeting on June 22, 2006. Dr. Lutherer reported that more
        than half of his patients treated for at least one year showed no signs of
        disease progression as assessed by pulmonary-functions testing and
        high-resolution cat scans of their lungs. IPF is normally rapidly progressive,
        so the fact that half of the patients have shown no progression of the disease
        during interferon lozenge treatment is very encouraging.
   10
  *Multiple
        sites.* In
        the
        next two weeks, the Company expects to file an IND (investigational new drug)
        application for a study of 60 IPF patients. These patients will be enrolled
        from
        approximately six clinical sites in the US. The patients will be given
        interferon or placebo for four weeks to assess the effect of treatment on
        chronic cough. Approximately 85-90% of IPF patients complain of a bothersome
        persistent cough that negatively impacts their quality of life. Dr. Lutherer
        said that five of the six IPF study patients who had a long-standing history
        of
        cough reported improvement in their cough within 1-4 weeks of starting oral
        interferon treatment, with a corresponding increase in their quality of life.
  *Animal
        Studies.* Manfred
        Beilharz, PhD, Head of Microbiology and Immunology at the School of Biomedical,
        Biomolecular and Chemical Sciences, The University of Western Australia,
        reported on an influenza study in mice sponsored by the Company at the Company’s
        annual shareholders’ meeting on June 22, 2006. An oral dose of interferon alpha
        given once daily, protected mice against the weight loss and changes in core
        body temperature normally associated with influenza infections. Mice given
        placebo or the wrong dose of oral interferon lost weight and suffered declining
        core temperature and had to be euthanized due to their deteriorating condition,
        as required by Australian regulations. Dr. Beilharz is preparing to announce
        the
        details of his findings in a major scientific journal. Dr. Beilharz is past
        President of the Australian Interferon Society and an internationally recognized
        authority on interferon. He and members of his research department have 10
        publications and three dissertations on the subject of orally administered
        interferon.
  Results
        of Operations:
  Revenues.
        During the six month period ended June 30, 2006, $2,245 from product sales
        was
        generated compared to revenues from product sales for the six month period
        ended
        June 30, 2005 of $40,744, a decrease of $38,499. This decline in revenue
        is
        largely due to the fact that there have been no sales of interferon products
        in
        2006. ABI entered into a License and Supply Agreement in the first quarter
        of
        2006 whereby the Company received and earned $30,000 as an initial license
        fee.
  Research
        and Development Expenses. Research and development expenses of $255,935 were
        incurred for the six month period ended June 30, 2006, compared to $83,764
        for
        the six month period ended June 30, 2005, an increase of $172,171. This increase
        is mainly a result of several studies that the Company has begun in order
        to
        further its business objectives.
  Selling,
        General and Administrative Expenses. Selling, general and administrative
        expenses of $1,349,015 were incurred for the six month period ended June
        30,
        2006, compared to $230,828 for the six month period ended June 30, 2005,
        an
        increase of $1,118,187. This included $608,864 in non-cash expenses in
        recognition of restricted stock issued to cover services provided by consultants
        in lieu of cash, and options to purchase restricted stock in lieu of cash.
        Also
        included in this amount is $216,000 for a stock bonus awarded on February
        20,
        2006.
  Non-Cash
        Consulting Activities. During the six month period ended June 30, 2006, the
        Board of Directors authorized the issuance of shares of restricted common
        stock
        to consultants in lieu of cash payments. Based upon the common stock trading
        price at the times of issuance a non-cash consulting expense of $41,600,
        the
        fair value, was recorded for the issuance of these shares during the six
        month
        period ended June 30, 2006. Additionally, the Board authorized the issuance
        of
        674,000 options to purchase restricted common stock at a discounted price
        to
        consultants for service, in lieu of cash payments.
  11
  Net
        Income (Loss). As a result of the above, in the six month period ended June
        30,
        2006, the Company's Net Loss was ($1,559,813) compared to a Net Loss for
        the six
        month period ended June 30, 2005 of ($274,457). This increased loss is primarily
        due to an increase in funding research activity and stock option
        recognition.
  Liquidity
        Needs:
  At
        June
        30, 2006, the Company had available cash of approximately $232,282, and had
        a
        working capital deficit of approximately ($2,404,630). Assuming there is
        no
        decrease in current accounts payable, and accounting for various one-time
        expenses, the Company’s negative cash flow is approximately $80,000 per month.
        The Company's continued losses and lack of liquidity indicate that the Company
        may not be 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
        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 2006 Plan.
  Forward-Looking
        Statements: Certain statements made in this Plan of Operations and elsewhere
        in
        this report are "forward-looking statements" within the meaning of the Private
        Securi-ties Litigation Reform Act of 1995 (the "Act"). Forward-looking
        statements include, without limitation, any statement that may predict,
        forecast, indicate or imply future results, performance, achievements, costs
        or
        expenses and may contain words such as "believe," "anticipate," "expect,"
        "esti-mate," "project," "budget," or words or phrases of similar meaning.
        Forward-looking statements involve risks and uncertainties which may cause
        actual results to differ materially from those projected in the forward-looking
        statements. Such risks and uncertain-ties are detailed from time to time
        in
        reports filed by the Company with the Securities and Exchange Commission,
        including Forms 8-K, 10-QSB and 10-KSB and include among others the following:
        promulga-tion and imple-mentation of regulations by the U.S. Food and Drug
        Administra-tion ("FDA"); promul-gation and implementation of regulations
        by
        foreign governmen-tal instru-mentalities with functions similar to those
        of the
        FDA; costs of research and develop-ment and clinical trials, including without
        limitation, costs of clinical supplies, packaging and inserts, patient
        recruitment, trial monitoring, trial evaluation and publication; and possible
        difficulties in enrolling a sufficient number of qualified patients for certain
        clinical trials. The Company is also dependent upon a broad range of general
        economic and financial risks, such as possible increases in the costs of
        employing and/or retaining qualified personnel and consultants and possible
        inflation which might affect the Company's ability to remain within its budget
        forecasts. The principal uncertain-ties to which the Company is presently
        subject are its inability to ensure that the results of trials performed
        by the
        Company will be sufficiently favorable to ensure eventual regulatory approval
        for commercial sales, its inability to accurately budget at this time the
        possible costs associated with hiring and retaining of additional personnel,
        uncertainties regarding the terms and timing of one or more commercial partner
        agreements and its ability to continue as a going concern.
  The
        risks
        cited here are not exhaustive. Other sections of this report may include
        additional factors which could adversely impact the Company's business and
        future prospects. Moreover, the Company is engaged in a very competitive
        and
        rapidly changing industry. New risk factors emerge from time to time and
        it is
        not possible for management to predict all such risk factors, nor can it
        assess
        the impact of all such risk factors on the Company's business, or the extent
        to
        which any factor or combination of factors may cause actual results to differ
        materially from those projected in any forward-looking statements. Given
        these
        risks and uncertainties, investors should not place undue reliance on
        forward-looking statements as a prediction of actual future events.
   12
  **Item
        3.**  **Controls
        and Procedures**
  As
        required by Rule 13a-15 under the Exchange Act, we have carried out an
        evaluation of the effectiveness of the design and operation of our company’s
        disclosure controls and procedures as of the end of the period covered by
        this
        quarterly report, being June 30, 2006. This evaluation was carried out under
        the
        supervision and with the participation of our company’s management, including
        our company’s president and chief executive officer. Based upon that evaluation,
        our company’s president and chief executive officer concluded that our company’s
        disclosure controls and procedures are effective as at the end of the period
        covered by this report. There have been no significant changes in our company’s
        internal controls or in other factors, which could significantly affect internal
        controls subsequent to the date we carried out our evaluation.
  Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in our company’s reports filed
        or submitted under the Exchange Act is recorded, processed, summarized and
        reported, within the time periods specified in the Securities and Exchange
        Commission’s rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed in our company’s reports filed under the Exchange Act
        is accumulated and communicated to management, including our company’s president
        and chief executive officer as appropriate, to allow timely decisions regarding
        required disclosure.
  **PART
        II - OTHER INFORMATION**
  **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
  During
        the quarter ended June 30, 2006, the Board of Directors authorized the issuance
        of 70,415 shares of restricted common stock to consultants in lieu of cash
        payments. Based upon the common stock trading price at the time of issuance,
        a
        non-cash consulting expense of $36,400 was recorded for the issuance of these
        shares during the second quarter of 2006. The first three issuances were
        to
        Biotech Financial and were exempt from registration under Rule 504 of Regulation
        D promulgated pursuant to the Securities Act of 1933. Biotech Financial provided
        financial consulting services as consideration for the shares. The fourth
        issuance was to Mr. Patrick Martin and was exempt from registration under
        Rule
        504 of Regulation D promulgated pursuant to the Securities Act of 1933. Mr.
        Martin accepted shares in lieu of cash for his finder’s fee for selling the
        Company’s stock.
 
 The
        first
        issuance occurred on April 14, 2006, in the amount of 1,184 shares, and was
        valued at $900 at a per share price of $.76, representing a discount of $.69
        per
        share, as shares of the Company closed at $1.45 on the previous
        day.
 
 The
        second issuance occurred on April 14, 2006, in the amount of 1,910 shares,
        and
        was valued at $3,100 at a per share price of $1.62, representing an increase
        of
        $.17 per share, as shares of the Company closed at $1.45 on the previous
        day.
 
 The
        third
        issuance occurred on April 30, 2006, in the amount of 938 shares, and was
        valued
        at $1,201 at a per share price of $1.28 representing an increase of $.06
        per
        share, as shares of the Company closed at $1.22 on the previous trading day.
 
 The
        fourth issuance occurred on April 18, 2006, in the amount of 66,383 shares,
        and
        was valued at $31,200 at a per share price of $.47, representing a discount
        of
        $.89 per share, as shares of the Company closed at $1.36 on that date.
  13
  
 In
        the
        quarter ended June 30, 2006, the Company completed private equity financing
        by
        selling 433,617 restricted shares of common stock at a discount to six
        investors. The shares are restricted and are transferable pursuant to Rule
        144
        promulgated under the Securities Act of 1933. The net proceeds to the Company
        were approximately $235,800. All shares sold were exempt from registration
        pursuant to Rule 506 of Regulation D, promulgated pursuant to the Securities
        Act
        of 1933. No underwriters were involved in any of the unregistered share sales
        and no commissions were paid.
  
 **Date
                  (2006)**
              **Shares**
              **Purchaser**
              **Discount*****Issue
                  Price**
              **Number**
              **Per
                  Share**
              **Total**1
              April
                  28
              .47
              33617
              Claus
                  Martin
              .75
              252132
              May
                  15
              .55
              100000
              SDP
                  Investments
              .69
              690003
              May
                  15
              .55
              100000
              Hauck
                  & Aufhaeuser
              .69
              690004
              May
                  16
              .55
              50000
              Thomas
                  Huebner
              .62
              310005
              May
                  16
              .55
              50000
              Andrea
                  Huebner
              .62
              310006
              June
                  28
              .55
              100000
              Daniel
                  Mascarenhas
              .31
              31000
 *Discounts
        were calculated based on the last transaction on each date.
 
  **Item
        4.  Submission of Matters
        to a Vote of Security Holders.**
  The
        annual meeting of shareholders was noticed and convened on June 22, 2006,
        to
        consider the election of directors, the authorization to vote proxies on
        other
        business to properly come before the meeting, and to adjourn the meeting
        to
        solicit additional votes. There were fewer than 50% of the outstanding shares
        of
        the Company represented at the meeting so the meeting was adjourned until
        July
        7, 2006, in order to solicit additional votes and obtain a quorum.
  The
        following persons were directors of the Company before the meeting and continued
        to serve as directors of the Company until the meeting was reconvened on
        July 7,
        2006: Joseph M. Cummins, Stephen Chen, James Page, Dennis Moore, and Katsuaki
        Hayashibara.
  The
        meeting reconvened on July 7, 2006, with 11,181,724 shares of the voting
        common
        stock of the Company represented, being 51.8% of the issued and outstanding
        voting common shares of the Company, and constituting a quorum.
  **Proposition
        1 - Election of Directors.**
  The
        following directors were elected at the meeting to serve until the next annual
        meeting of shareholders or until their successor shall have been duly elected
        and qualified:
  Director
        No. 1 - Joseph M. Cummins - 11,126,872 shares voted in favor and 54,852 share
        withheld;
  Director
        No. 2 - Stephen Chen - 11,163,449 shares voted in favor and 18,275 withheld;
  Director
        No. 3 - James Page - 11,159,449 shares voted in favor and 22,275 withheld;
  Director
        No. 4 - Dennis Moore - 11,109,001 shares voted in favor and 72,723 withheld;
  Director
        No. 5 - Thomas D’Alonzo - 11,159,449 shares voted in favor and 22,275 withheld;
        and
  Director
        No. 6 - Thomas Ulie - 11,109,301 shares voted in favor and 72,423 withheld.
   14
  
  **Proposition
        2 - Authorization to vote Proxies on Other Business to Properly Come Before
        the
        Meeting.**
  Proposition
        2 passed by a vote of 11,091,549 shares voted in favor, 80,900 voted against,
        and 9,275 shares not voted due to broker abstentions.
  **Proposition
        3 - Adjournment of Meeting to Solicit Additional Votes.**
  Proposition
        3 passed by a vote of 11,110,072 shares voted in favor, 63,677 shares voted
        against, and 7,975 shares not voted due to broker abstentions.
  No
        other
        business was transacted at the meeting.
  
  **Item
        6.**  **Exhibits.**
  None.
   15
  
  **SIGNATURES**
  Pursuant
        to the requirements of Securities Exchange Act of 1934, the Registrant has
        duly
        caused this report to be signed on its behalf by the undersigned thereunto
        duly
        authorized.
  **AMARILLO
        BIOSCIENCES, INC.**
  
  Date:
                  December 27, 2006
              By:/s/ Joseph M. CumminsJoseph
                  M. CumminsPresident
                  and Chief Executive Officer
 
  
  
  Date:
                  December 27, 2006
              By:/s/ Gary CoyGary
                  CoyVice
                  President and Chief Financial
                  Officer
 
   16