UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
__________________________
(Mark One)

[√]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020
or

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____to____      Commission File No. 0-20791
__________________________
AMARILLO BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
__________________________

TEXAS 75-1974352
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
   
   
4134 Business Park Drive, Amarillo, Texas 79110
(806) 376-1741
(Address and telephone number, including area code, of registrant's principal executive offices)
__________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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   [ ]No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  [√]Yes   [ ]No

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

Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer   [ ] Smaller reporting company [√]
  Emerging growth company [  ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. D
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) [ ] Yes   [√] No
40,216,35140,516,351 shares of common stock, par value $0.01 per share, outstanding as of August 9, 2019
May 15, 2020
1
AMARILLO BIOSCIENCES, INC.

INDEX

  PAGE NO.
PART I:
FINANCIAL INFORMATION
 
 
ITEM 1.
 
Financial Statements
 

Consolidated
Balance Sheets– June 30, 2019March 31, 2020 and December 31, 20182019 (unaudited)
3
 Consolidated
Statements of Operations – Three and Six Months Ended June 30,March 31, 2020 and 2019 and 2018 (unaudited)
4
 
Statement of Stockholders’ Equity (Deficit) – Three Months Ended March 31, 2020 and 2019………………………………………….
5
Condensed Consolidated Statements of Cash Flows – SixThree Months Ended June 30,March 31, 2019 and 2018 (unaudited)
5

Notes to Consolidated Financial Statements (unaudited)
6
Notes to Financial Statements (unaudited) 
7
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
89

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk
14
ITEM 4.

ITEM 4.
Controls and Procedures 
14
   
PART II:
OTHER INFORMATION
 

ITEM 1.
Legal Proceedings 
16

Legal ProceedingsITEM 2.
15
ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds
16
ITEM 3.

ITEM 3.
Defaults Upon Senior Securities 
16
ITEM 4.

ITEM 4.
Mine Safety Disclosures 
16
ITEM 5.

ITEM 5.
Other Information 
16

ITEM 6.

Exhibits……………………………………………………………
1617
 
Signatures
 
 
1618


2
PART I - FINANCIAL INFORMATION
ITEM 1.Financial Statements
Amarillo Biosciences, Inc.
Consolidated Balance Sheets
(Unaudited)
 
June 30,
2019
  
December 31,
2018
  
March 31,
2020
  
December 31,
2019
 
Assets            
Current assets:            
Cash and cash equivalents $723,441  $1,276,654  
$
289,557
  
$
409,039
 
Accounts receivable
 
12,578
  
-
 
Inventory  9,905   -  
4,071
  
4,131
 
Prepaid expense and other current assets  64,632   26,580   
25,658
   
32,124
 
Total current assets  797,978   1,303,234  
331,864
  
445,294
 
Patents, net  140,635   146,456  
143,130
  
146,263
 
Property and equipment, net  6,384   14,010   
4,486
   
5,069
 
Total assets $944,997  $1,463,700  
$
479,480
  
$
596,626
 
              
Liabilities and Stockholders' Equity        
Liabilities and Stockholders' Equity (Deficit)
      
Current liabilities:              
Accounts payable and accrued expenses $173,262  $115,313  
$
300,393
  
$
208,727
 
Advances from investors  56,225   104,952  
100,000
  
100,000
 
Convertible notes payable – related party  475,856   513,356   
512,464
   
444,581
 
Total current liabilities  705,343   733,621   
912,857
   
753,308
 
Total liabilities  705,343   733,621   
912,857
   
753,308
 
              
        
        
Stockholders' equity        
Stockholders' equity (deficit)
      
Preferred stock, $0.01 par value:              
Authorized shares - 10,000,000,              
Issued and outstanding shares – 0 at June 30, 2019 and December 31, 2018  -   - 
Issued and outstanding shares – 0 at March 31, 2020 and December 31, 2019 
-
  
-
 
Common stock, $0.01 par value:              
Authorized shares - 100,000,000,              
Issued and outstanding shares –39,664,199 and 39,117,524 at June 30, 2019 and December 31, 2018, respectively  396,642   391,175 
Issued and outstanding shares –40,516,351 and 40,516,351 at March 31, 2020 and December 31, 2019, respectively 
405,164
  
405,164
 
Additional paid-in capital  3,876,311   3,527,238  
4,307,970
  
4,207,786
 
Accumulated deficit  (4,033,299)  (3,188,334)  
(5,146,511
)
  
(4,769,632
)
Total stockholders’ equity  239,654   730,079 
Total liabilities and stockholders’ equity $944,997  $1,463,700 
Total stockholders’ equity (deficit)
  
(433,377
)
  
(156,682
)
Total liabilities and stockholders’ equity (deficit)
 
$
479,480
  
$
596,626
 

See accompanying notes to financial statements.
3

Amarillo Biosciences, Inc.
Consolidated Statements of Operations
(Unaudited)
  Three Months Ended March 31, 
  2020  2019 
Revenues $15,200  $4,076 
Cost of revenues  (10,806)  (2,718)
Gross margin  4,394   1,358 
         
Operating expenses:        
  Research and development expenses  0   2,386 
  Selling, general and administrative expenses  380,268   389,476 
     Total operating expenses  380,268   391,862 
         
Operating loss  (375,874)  (390,504)
         
Other income (expense):        
  Interest expense, net  (1,005)  (885)
Net loss  (376,879)  (391,389)
Less:  Net Income attributable to non-controlling interests  -   - 
Net loss attributable to common shareholders $(376,879) $(391,389)
         
Basic and diluted net loss per average share available to common shareholders $(0.01) $(0.01)
         
Weighted average common shares outstanding – basic and diluted  40,516,351   39,262,668 



  Three months ended June 30  Six months ended June 30 
  2019  2018  2019  2018 
             
Revenues $606
  $250
  $4,682  $56,840 
Cost of revenues  (563
)
  (707)
  (3,281)
  (44,046)
Gross margin  43

  (457)
  1,401   12,794 
       
         
Operating expenses:      
         
  Research and development expenses  50,124
   -
   52,510
   -
 
  Selling, general and administrative expenses  404,958   353,682   794,493   552,991 
     Total operating expenses  (455,082)
  (353,682
)
  (847,003)
  (552,991)
       
         
Operating income (loss)  (455,039)  (354,139)
  (845,602
)
  (540,197)
       
         
Other income (expense)      
         
  Interest expense, net
  1,522

  (973)  637
  (2,353)
Net income (loss) 
(453,517) 
(355,112)
 
(844,965) 
(542,550)
       
         
Basic and diluted net loss per average share available to common shareholders $(.01) $(.01)
 $(0.02) $(0.02)
       
         
Weighted average common shares outstanding – basic and diluted  39,624,247   34,635,799   39,444,456   33,943,536 

See accompanying notes to financial statements.
4
Amarillo Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

  Six months ended June 30, 
  2019  2018 
       
Net cash used in operating activities $(539,076) $(389,433)
         
Cash flows from investing activities        
         
     Investment in equipment  -   - 
Investment in patents  (1,637)  (2,108)
Net cash used in investing activities  (1,637)  (2,108)
         
Cash flows from financing activities        
Payments on convertible notes  (37,500)  (195,000)
     Proceeds from private placement offering  25,000   - 
Net cash used in financing activities  (12,500)  (195,000)
         
Net change in cash  (553,213)  (586,541)
Cash and cash equivalents at beginning of period  1,276,654   1,980,015 
Cash and cash equivalents at end of period $723,441  $1,393,474 
Supplemental Cash Flow Information        
  Cash paid for interest $203  $- 
  Cash paid for income taxes $-  $- 
Non-Cash Transactions        
Stock issued for accrued liabilities $93,250   - 
Stock issued for advances from investors $25,000  $496,736 
Conversion of debt to common stock $-  $178,125 
 
  Reversal of previously accrued dividend
 $-  $34,277 
         
Amarillo Biosciences, Inc.
Statements of Stockholders’ Equity (Deficit)
For the three months ended March 31, 2020 and 2019
(Unaudited)

  Preferred Stock  Common Stock  Additional     Total 
  Shares  Par Value  Shares  Par Value  Paid in Capital  Accumulated Deficit  Stockholders’ Equity (Deficit) 
                      
Balance December 31, 2019  -  $-   40,516,351  $405,164  $4,207,786  $(4,769,632) $(156,682)
Issuance of stock for compensation  -   -   -   -   -   -   - 
Issuance of stock for cash  -   -   -   -   -   -   - 
Issuance of stock for debt  -   -   -   -   -   -   - 
Warrant expense  -   -   -   -   9,496   -   9,496 
Option expense  -   -   -   -   90,688   -   90,688 
Net loss  -   -   -   -   -   (376,879)  (376,879)
Balance March 31, 2020  -  $-   40,516,351  $405,164  $4,307,970  $(5,146,511) $(433,377)
                             
                             
  Preferred Stock  Common Stock  Additional      Total 
  Shares  Par Value  Shares  Par Value  Paid in Capital  Accumulated Deficit  Stockholders’ Equity (Deficit) 
                             
Balance December 31, 2018  -  $-   39,117,524  $391,175  $3,527,238  $(3,188,334) $730,079 
Issuance of stock for compensation  -   -   136,000   1,360   32,640   -   34,000 
Issuance of stock  -   -   315,000   3,150   70,600   -   73,750 
Warrant expense  -   -   -   -   9,496   -   9,496 
Option expense  -   -   -   -   96,149   -   96,149 
Net loss  -   -   -   -   -   (391,389)  (391,389)
Balance March 31, 2019  -  $-   39,568,524  $395,685  $3,736,123  $(3,579,723) $552,085 

See accompanying notes to financial statements.
5
Amarillo Biosciences, Inc.
Statements of Cash Flows
(Unaudited)

  Three months ended March 31, 
  2020  2019 
       
Net cash used in operating activities $(119,482) $(216,202)
         
Cash flows from investing activities        
     Investment in equipment  -   (1,638)
Investment in patents  -   - 
Net cash used in investing activities  -   (1,638)
         
Cash flows from financing activities        
Payments on convertible notes  -   (37,500)
     Proceeds from private placement offering  -   25,000 
Net cash used in financing activities  -   (12,500)
         
Net change in cash  (119,482)  (230,340)
Cash and cash equivalents at beginning of period  409,039   1,276,654 
Cash and cash equivalents at end of period $289,557  $1,046,314 
Supplemental Cash Flow Information        
  Cash paid for interest $-  $69 
  Cash paid for income taxes $-  $- 
Non-Cash Transactions        
Stock issued for accrued liabilities $-  $82,750 

See accompanying notes to financial statements.
6
Amarillo Biosciences, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.
Organization and Business.  Amarillo Biosciences, Inc. (the "Company" or "ABI"), is a diversified healthcare company engaged in the discovery and development of novel biopharmaceuticals, technologically innovative medical treatments,pharmaceutical and specialty consumerbiotech products.  ABI is a Texas corporation which was formed in 1984.

2.ABI primarily operates through three divisions:  Pharmaceutical, Medical and Consumer.  The Pharmaceutical division leverages our dataextensive library of clinical research by applying the Company's experience in the use of low-dose oral interferon (IFN) for the treatment of neoplastic, viral, and fibrotic diseases. ABI seeks to engage in patent licensing and commercialization opportunities with global partners. The Medical division is focused on developing technology to treat metabolism related diseases such as Type 1type-1 and Type 2type-2 diabetes in Asia, in addition to licensed distribution of professional medicalsurgical wound care products.  The Consumer division includes a range of nutraceutical and food supplement products.products that utilize a liposomal delivery system.  ABI currently has offices in the United States and Taiwan.  ABI operates in Taiwan under the name AMARILLO BIOSCIENCES, INC. TAIWAN BRANCH (美(美商康華全球生技股份有限公司 台灣分公司).

2.3.
Basis of presentation. The accompanying consolidated financial statements, which should be read in conjunction with the audited financial statements and footnotes included in the Company's Form 10-K for the year ended December 31, 2018,2019, as filed with the Securities and Exchange Commission on April 16, 2019,March 30, 2020, 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 and three months ended June 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019.2020.

3.4.
Financial Condition.  These financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has not yet achieved sustained operating income, and its operations are funded primarily from related-party convertible debt and equity financings. However, losses are anticipated in the ongoing development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability.
The continuing operations of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

7

There can be no assurance that capital will be available as necessary to meet the Company's working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining
6

commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected and the Company may cease operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

4.5.
Common Stock.  The shareholders have authorized 100,000,000 shares of voting common shares for issuance.  On June 30, 2019,March 31, 2020, a total of 48,090,74849,969,579 shares of common stock were either issued (39,664,199)(40,516,351), reserved for conversion of convertible debt to stock (2,627,305)(3,529,417), issuance to two Company officers as compensation (80,157)(333,912), one Company employee (4,294)(6,309), heldreserved for future issueissuance to prepaid private placement investments (300,000)investor (400,000), held for future compensation issue to a consultant (17,176)(73,973), or held for future exercise of nonqualified options (3,995,000), qualified stock options (950,000)(4,657,000), and warrants (452,617). The 300,000 share reservation was generated by the receipt of $56,225 for investment in Private Placement Offering 2016-2 in November 2017.  The investment is listed as “Pending” since the Executed Private Placement Memorandum and Subscription documents were not received until after the balance sheet date.  The Company subsequently received those documents on July 1, 2019, and, although the shares will be issued as of the documents receipt date, they will not be issued until after the date this report is filed.

In February 2019, the Company issued 200,000 shares of common stock at $0.25 per share to a private placement investor through the 2016-3 Private Placement Offering.  Also in February 2019, the Company issued 24,000 shares of common stock as payment for the fourth quarter 2018 stock compensation grant for a consultant.  On March 26, 2019, the Company issued 115,000 shares of common stock at $0.25 per share representing aggregate payment of a finder’s fee in the amount of $28,750.  Effective March 31, 2019, the Company issued 100,000 shares to Dr. Stephen T. Chen, Chairman, CEO, President, and CFO, and 12,000 shares to Bernard Cohen, Vice President; both distributions were compensation.

On April 26, 2019, the Company made the following stock compensation distributions by issuing shares to three employees and one consultant: (1) Stephen T Chen Trust (Dr. Stephen T. Chen, Chairman, CEO, President, and CFO) - 67,377 shares; (2) Bernard Cohen – 8,085 shares; (3) Dr. Celee Spidel – 4,043 shares; and (4) Lawrence Lin (Consultant) – 16,170.  The price per share for this distribution was $0.3710.

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

5.6.
Convertible Notes Payable – Related Party. As of December 31, 2018,2019, the amount of convertible debt, including principal and accrued interest, on the Company’s balance sheet was $513,356.$452,040.  The total balance of the principal and accrued interest for convertible promissory notes as of March 31, 2020, is $521,115. This amount consisted of the following convertible promissory notes payable to Dr. Stephen T. Chen, Chairman, CEO, President, and President,CFO, and i2China, a consultant, as shown in the table below.

  June 30, 2019  December 31, 2018 
Convertible Note payable – related party $144,426  $144,426 
Convertible Note payable – related party  262,500   262,500 
Convertible Note payable – related party  68,930   106,430 
Convertible Notes payable – related party $475,856  $513,356 
Note #. Conversion Rate  Interest Rate  March 31, 2020  December 31, 2019 
Note 1 - Chen $0.1680   0.75% $117,644  $117,433 
Note 2 - Chen $0.1875   0.65% $266,702  $266,281 
Note 3.19 - Chen $0.2500   1.85% $39,801  $39,620 
Note 4.19 - Chen $0.2500   1.61% $12,502  $12,453 
Note 5.19 – i2China $0.2500   1.85% $16,326  $16,253 
Note 6.20 - Chen $0.2500   1.85% $54,315  $- 
Note 7.20 - Chen $0.2500   1.60%  1,789  $- 
Note 8.20 – i2China $0.2500   1.85% $12,036  $- 
Total Convertible Notes – Related Party  $521,115  $452,040 

As previously stated, Dr. Stephen T. Chen, Chairman, CEO, President, and CFO, and i2China Management Group, LLC, the Company’s management consultant, elected to defer cash compensation during a period of development and fundraising.

On January 1, 2020, the Company issued Note #6.20 for deferred compensation to Dr. Stephen T. Chen, Chairman, CEO, President, and CFO, in the amount of $216,600, the maximum amount of cash compensation that could be deferred for 2020.  The Note is payable on January 1, 2021, or on demand and bears interest at the AFR1 short-term rate of 1.85%.  The note is an advancing note with a maximum limit of $216,600 whereby the Company promises to repay the aggregate Principal Amount advanced to date up to the stated maximum amount at Maturity.  ABI may request and the payee shall advance up to $9,025 on the 15th and last day of each month until the note matures.  The Note may be convertible in whole or in part at a conversion price of  $0.25 per share into Amarillo Biosciences, Inc., Common voting stock.  


1 Applicable Federal Rate
78

All shares issued are to be restricted subject to Rule 144 promulgated under the U.S. Securities Act of 1933. The Company may prepay the Note in whole or in part at any time without penalty.

On January 30, 2019,1, 2020, the Company issued Note #7.20 to Dr. Stephen T. Chen demandedfor deferred reimbursement of expenses advanced on behalf of ABI for $30,000, the maximum amount of reimbursable expense that could be deferred.  The Note is payable on January 1, 2021, or on demand and bears interest at the AFR1 short-term rate of 1.85%.  The note is an advancing note with a partial repayment inmaximum limit of $30,000 whereby the Company promises to repay the aggregate Principal Amount advanced to date up to the stated maximum amount at Maturity.  ABI may request and the payee shall advance against the Note, until Maturity, the amount of $37,500.  The repayment reduced the outstanding balance ofsubmitted on a convertible promissory note from $106,430 to $68,930.  The total balancecompleted and approved reimbursement form along with documentation of the aggregateamount to be advanced.  The Note may be convertible promissory notes as of March 31, 2019, is $475,856.

On June 30, 2019, the total balance of the convertible promissory notes was $475,856.

Subsequent to the balance sheet date, on July 1, 2019, Dr. Chen notified the Company of his intent to convert the remaining principal balance and accrued interest, $69,600, of the promissory note dated June 30, 2016, to ABI Common Voting Sharesin whole or in part at a conversion price of $.1875.  $0.25 per share into Amarillo Biosciences, Inc., Common voting stock.  All shares issued are to be restricted subject to Rule 144 promulgated under the U.S. Securities Act of 1933. The Company may prepay the Note in whole or in part at any time without penalty.

On July 10, 2019, 371,200January 1, 2020, the Company issued Note #8.20 for deferred compensation to i2China Management Group, LLC in the amount of $48,000, the maximum amount of cash compensation that could be deferred in 2020.  The Note is payable on January 1, 2021, or on demand and bears interest at the AFR1 short-term rate of 1.85%.  The note is an advancing note with a maximum limit of $48,000 whereby the Company promises to repay the aggregate Principal Amount advanced to date up to the stated maximum amount at Maturity.  ABI may request and the payee shall advance up to $4,000 on the last day of each month until the note matures.  The Note may be convertible in whole or in part at a conversion price of $0.25 per share.

The notes are unsecured and are due on demand.  All shares were issued on conversion are to be restricted subject to Rule 144 promulgated under the U.S. Securities Act of 1933.  The Company may prepay the notes in full and final satisfaction of the aforementioned promissory note.  On July 1, 2019,whole or in part at any time without penalty. The convertible notes due to Dr. Chen also notified ABI of his intent to convert $30,400 into Company shares at a price of $.168 per share.  The conversion was applied to the principal and accrued interest on the promissory note dated January 11, 2016, reducing the balance of the note from $144,426 to $114,026.  On July 10, 2019, 180,952 ABI shares were issued.  As of the filing date of this report, the outstanding balance of convertible promissory notes was $376,526.

Other Related Party Transactions. Other than the aforementioned common stock and convertible notes activity, there were noare related party transactions that occurred during the period from January 1, 2019 to June 30, 2019.notes.

6.7.
Other Related Party Transactions. Other than the aforementioned convertible notes activity, there were no related party transactions that occurred during the period from January 1, 2020 to March 31, 2020.

8.Subsequent Events.Events
Subsequent to the balance sheet date, through theBalance Sheet date of this filing, the Company has issued 552,152 shares of common stockMarch 31, 2020, 452,617 Warrants granted to Dr. Chen for conversion of debt to Common Stock.

i2China Management Group, LLC. on April 15, 2018, expired unexercised at 5:00 P.M. on April 14, 2020.  The Company subsequently received outstanding executed Private Placement investment documents on July 1, 2019, related to funds that were previously received on November 23, 2017.  The 300,000 shares have not been issued asWarrant Certificate was part of the date this report was filed.Consulting Agreement dated May 3, 2018, effective April 15, 2018, between Amarillo Biosciences, Inc., and i2Management Group, LLC.  No other subsequent events occurred.


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.
9

Forward-Looking Statements: Certain statements made throughout this document are "forward-looking statements" within the meaning of the Private Securities 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," "estimate," "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 uncertainties are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K and include among others the following: promulgation and implementation of regulations by the U.S. Food and Drug
8

Administration ("FDA"); promulgation and implementation of regulations by foreign governmental instrumentalities with functions similar to those of the FDA; costs of research and development and 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 uncertainties 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 operations. 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.

Overview. ABIAmarillo Biosciences, Inc. (the "Company” or “ABI”) is a Texas corporation formed in 1984 engaged in developing biologics for the treatment of human and animal diseases. Our current focus is research aimed at the treatment of human disease indications, particularly influenza, hepatitis C, thrombocytopenia, and other indications using natural human interferon alpha that is administered in a proprietary low dose oral form lozenge.form.  In addition to its core technology ABI is working to expand the Company’s current focus into a diversified healthcare business portfolio in order to generate new revenue streams.

ABI currently owns or licenses 5five issued patents, four in the U.S., and one in Taiwan, of which four patents are related to the low-dose oral delivery of interferon and one patent is associated with a dietary supplement, Maxisal®Maxisal®.  Since inception, the Company hasIn our history, we have completed more than 100 pre-clinical animal(animal) and human studies on the safety and efficacy of low-dose orally administered interferon, including two phase 3 clinical trials.
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The Company primarily operates three business units:  the Medical, Pharmaceutical, and Consumer Product Divisions.  Historically, the Company has focused on R&D involving low-dose, orally administered lozenges containing the natural immune system activator interferon-alpha as a treatment for a variety of disease indications. ABI owns a proprietary library of over thirty years of scientific and clinical data on the human and animal applications of low-dose oral interferon. Through the Pharmaceutical Division, ABI seeks to out-license or leverage in other ways its core technology by forming partnerships to develop current and new discoveries and commercialize the resulting products.

An integral part of the company’s operating strategy is to create multiple revenue streams through the implementation of programs (including but not limited to in-licensing) of medical and healthcare products and therapeutics. The Medical Division and Consumer Products Division facilitate the enhancement of these revenue streams. These programs will be the catalysts that allow ABI to enter markets in Taiwan, Hong Kong, China, and other Asian countries for the distribution of new medical and healthcare products.

Diabetes is a global epidemic with an estimated cost topping $2.5 trillion world-wide.  Taiwan, gateway to China and representative of the upward trend in diabetes prevalence and cost throughout Asia, saw a 70% increase in total diabetes cases between 2000-2009 with a 35% increase in standardized prevalence rate.  Currently, almost 2 million people suffer from diabetes in Taiwan, which equals 11% prevalence or 1 in 9 people, for a country with a population of around 18 million adults. The adoption of a Western diet and lifestyle has had more detrimental effects on East Asian countries with diabetes prevalence in Taiwan and China now outpacing the US and other Western nations.  Studies have shown that East Asians have weaker insulin secretions compared with other ethnicities which make controlling blood glucose more challenging which in turn makes them more susceptible to type-2 diabetes. The weaker insulin response seen in Taiwanese and Chinese populations could be due to certain genetic polymorphisms or differential intestinal secretions and helps explain why only 30-40% of East Asians with type-2 diabetes are overweight or obese compared to over 80% of Americans. So while obesity is on the rise in China, diabetes is climbing at a faster rate than other obesity-related diseases such as heart disease and cancer. Diabetic complications such as retinopathy which is a leading cause of blindness, peripheral neuropathies which contribute to delayed wound healing and amputations, and nephropathy which can necessitate dialysis and kidney transplant, are catastrophic both to quality of life and cost of care.

Currently, type-2 diabetes is treated as a chronic progressive disease with increases in both number and dose of drugs seen across a patient’s lifetime. Generally one or more oral hypoglycemic drugs are used for months or years until a combination of short and long-acting insulin is required to keep the patient’s blood glucose within normal limits. Unfortunately, once a patient’s pancreas is exhausted and they are finally forced to go on insulin, they require insulin for the rest of their lives. And even more unfortunate is that even with fairly well-controlled blood glucose levels, diabetics will face one or more undesirable complications with poor outcomes from cardiovascular, eye, nerve, or kidney disease secondary to their diabetes. This unsuccessful model of diabetes care is not satisfactory.

Over the past several years the Company has focused its research efforts towards the development of a novel pulsatile insulin infusion therapy in Taiwan that consists of delivering insulin intravenously by pump in pulses, as opposed to the typical subcutaneous route of administration, in order to more closely imitate how the pancreas secretes insulin in healthy non-diabetics.

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When the liver receives insulin in discreet pulses, it appears to be better able to regulate blood glucose levels. Patients suffering from peripheral neuropathies have reported less numbness and pain after receiving pulsatile insulin infusion treatments for several weeks or months. Pulsatile-insulin treatments given once or twice a week for a number of months show promise in lessening the incidence and severity of microvascular complications of diabetes such as retinopathy, neuropathy, and nephropathy.  In addition, certain endpoints such as reduction of patient medications and avoidance of worsening kidney function leading to kidney dialysis can be achieved. ABI’s Medical Division has developed a proprietary insulin infusion pump dedicated for administering its pulsatile insulin therapy and is currently in the process of obtaining patents and medical device approvals, including 510k FDA clearance.

ABI plans to soon be able to offer an innovative and comprehensive diabetes treatment that provides solutions to all stages of diabetes from pre-diabetes through late-stage diabetes with advanced complications.  We plan to target Taiwan first as an R&D base and demonstration platform in Greater China, with plans to subsequently open clinics in China. Within the Medical division, ABI is also a licensed distributor of TissueAid™ biodegradable wound closure products in Taiwan.  ABI became the official distributor of TissueAid™ for the Taiwan market in the fourth quarter of 2017. The TissueAid™ product is developed by the first and only medical material research company for wound care, GJ Biotech Co Ltd.

The Consumer Product Division is presently focused on sales of liposomal nutraceuticals and food supplements that include Vitamin C, Glutathione, CoQ10, Curcumin/Resveratrol, DHA, and a Multi-Vitamin.

ABI maintains a representative branch office in Taiwan – Amarillo Biosciences, Inc. (Taiwan Branch) (美商康華全球生技股份有限公司 台灣分公司) (“ABI Taiwan”) to increase the Company's presence in Taiwan and serve as an operational hub to access growing Asian markets.

Core Technology. Injectable high-dose interferon is FDA-approved to treat some neoplastic, viral and autoimmune diseases.  Many patients experience moderate to severe side-effects, causing them to discontinue injectable interferon therapy.  Our core technology is a natural human interferon-alpha that is delivered into the oral cavity as a lozenge in low (nanogram) doses. The lozenge dissolves in the mouth where interferon binds to surface (mucosal) cells in the mouth and throat, resulting in activation of hundreds of genes in the peripheral blood that stimulate the immune system.  Human studies have shown that oral interferon is safe and effective against viral and neoplastic diseases. Oral interferon is given in concentrations 10,000 times less than that usually given by injection. The Company’s low-dose formulation results in almost no side effects, in contrast to high dose injectable interferon, which causes adverse effects in at least 50% of recipients.

Governmental or FDA approval is required for low-dose oral interferon.  Our progress toward approval is discussed under each specific indication, below.  We believe that our technology is sound and can be commercialized.commercialized for various indications.  Due to occurrences in the interferon supply market over the past several years, we have been unsuccessful at such commercialization to date.  However, with the recent novel coronavirus incident seemingly originating from Wuhan and the China government health authorities recommended use of anti-AIDS drugs and interferon, the Company believes this could bring renewed attention in the importance of incorporating low dose interferon to combat various anti-viral indications.  In light of the circumstances in China, ABI is uniquely positioned to potentially develop safe, low-dose interferon applications in the country with its China partner, Xiamen Weiyang Pharmaceutical Co., Ltd.
912


Interferon Supply. The Company’s long-time human interferon producer is no longer manufacturing interferon.  Plans for further clinical trials and commercialization of a low-dose interferon product have been placed on hold until a new cGMP source of interferon is found.  ABI is actively seeking a new manufacturing partner and exploring sourcing options with pharmaceutical companies that have a supply of either recombinant interferon or natural human interferon made in a similar manner.manner, but from a different cell line as our previous product.

Procuring a new source of interferon may require some studies demonstrating comparability and further clinical trials maywill have to be performed.  Although these studies involve cost and time, theThe Company will be able to utilizeuse optimized protocols from its thirty years of experience in conducting trials with natural human interferon.  Rather than having to start from a greenfield development stage, the Company will be able to leverage its history, past results, and data library to target the most appropriate disease states with the best dosage regimens and minimize the time wasted by trial-and-error searching prevalent in pharmaceutical research.

While the pharmaceutical industry is creating and marketing new and effective anti-viral medications, ABI believes that there is still sufficient time to develop and commercialize low-dose interferon as a safer anti-viral treatment for Influenza, Hepatitis, and other conditions caused by viruses such as genital warts and canker sores. Interferon also has powerful cytotoxic effects which in combination with its immune stimulating activities could play a role in the rapidly expanding field of cancer immunotherapy.  Other demonstrated effects of interferon offer opportunities to commercialize low-dose interferon for the treatment of Thrombocytopenia and chronic cough in lung diseases such as COPD and Idiopathic Pulmonary Fibrosis (IPF).  The Company has the opportunity to capitalize on its relationship channels in the Asian markets to explore sources of raw materials, capital, production facilities, and to target a significant and growing sales market.

In additionIntellectual Property. Since inception, the company has worked to its core technology, ABI is currently working to expandbuild an extensive patent portfolio for low dose orally administered interferon.  This portfolio consists of patents with claims that encompass method of use or treatment, and/or composition of matter and manufacturing.  As listed below, the Company’s current focus into a diversified healthcare business portfolio in order to generate new revenue streams. An integral facet of the Company’s strategic plan is to create multiple revenue streams through the implementation of programs (including but not limited to in-licensing) of medical and healthcare products and processes. The Medical Division and Consumer Products Division will facilitate the enhancement of those revenue streams. These programs will be the catalyst which allows ABI to enter markets in Taiwan, Hong Kong, China, and other Asian countries for the distribution of these new medical and healthcare products.Company presently owns or licenses five issued patents.

Diabetes is a global epidemic. Diabetic complications suchACTIVE PATENTS:

"TREATMENT OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as retinopathy which is a leading cause of blindness, peripheral neuropathies which contribute to delayed wound healingdescribed and amputations,claimed in U.S. Patent No. 9,526,694 B2 issued December 27, 2016, Owned. Expiration: April 2033.

“TREATMENT OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as described and nephropathy which can necessitate dialysisclaimed in U.S. Patent No. 9,750,786 B2 issued September 5, 2017, Owned. Expiration: April 2033.

“TREATMENT OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as described and kidney transplant, are catastrophic both to quality of lifeclaimed in U.S. Patent No. 9,839,672 B2 issued December 12, 2017, Owned. Expiration: April 2033.

"TREATMENT OF THROMBOCYTOPENIA USING ORALLY ADMINISTERED INTERFERON" as described and cost of care.  Currently, type 2 diabetes is treatedclaimed in TAIWAN Patent No. I592165 issued July 21, 2017, Owned. Expiration: May 2033.

"COMPOSITION AND METHOD FOR PROMOTING ORAL HEALTH" as a chronic progressive disease with increasesdescribed and claimed in both number and dose of drugs seen across a patient’s lifetime. Generally one or more oral hypoglycemic drugs are used for months or years until a combination of short and long-acting insulin is required to keep the patient’s blood glucose within normal limits. Unfortunately, once a patient’s pancreas is exhausted and they are finally forced to go on insulin, they require insulin for the rest of their lives. And even more unfortunate is that even with fairly well-controlled blood glucose levels, diabetics will face one or more undesirable complications with poor outcomes from cardiovascular, eye, nerve, or kidney disease secondary to their diabetes. This unsuccessful model of diabetes care is not satisfactory.U.S. Patent No. 6,656,920 B2 issued December 2003, Owned. Expiration: April 2021.
1013

ABI has been developing pulsatile insulin therapy in Taiwan that consists of delivering insulin intravenously by pump in pulses, as opposed to the typical subcutaneous route of administration, in order to more closely imitate how the pancreas secretes insulin in healthy non-diabetics. Our Medical Division is currently investigating medical equipment options for pulsatile insulin infusion and plans to be able to offer innovative and comprehensive diabetes treatment that provide solutions to all stages of diabetes from prediabetes through late-stage diabetes with advanced complications targeting Taiwan and Hong Kong first, with plans to open clinics in China within 3 years.

Within the Medical Division, ABI is also a licensed distributor of TissueAid™ biodegradable wound closure products in Taiwan.  ABI became the official distributor of TissueAid™ for the Taiwan market in the fourth quarter of 2017.  The TissueAid™ product is developed by the first and only medical material research company for wound care, GJ Biotech Co Ltd.

The Consumer Product Division is presently working on multiple endeavors. We currently offer a unique proprietary liposomal delivery system for nutraceuticals and food supplements including Vitamin C, Glutathione, CoQ10, Curcumin/Resveratrol, DHA, and a Multi-Vitamin. The Company also has a dietary supplement product, Maxisal® that is useful in the symptomatic relief of dry mouth.

ABI maintains a representative branch office in Taiwan – Amarillo Biosciences, Inc. (Taiwan Branch) (美商康華全球生技股份有限公司 台灣分公司) (“ABI Taiwan”) to increase the Company's presence in Taiwan and serve as an operational hub to access growing Asian markets.

Results of Operations for Three MonthsQuarters Ended June 30, 2019March 31, 2020 and 2018:2019:

Revenues.  ABI reported revenue of $606 for the quarter ended June 30, 2019, mostlyMarch 31, 2020, of $15,200 from sales of liposomal nutraceuticals.  Revenue for the same period in 20182019 was $250.$4,076 also from sales of nutraceuticals.  The cost of sales for the secondfirst quarter of 20192020 was $563$10,806 as compared to $707$2,718 for cost of sales in the same quarter2019.  The cost of 2018.goods sold in 2020 was 71% of sales making gross profit on sales for 2020 29%.  The 2019 cost of sales and gross margin for the quarter ended June 30, 2019profit was $43 as compared to $(457) for the same period in 2018.67% and 33%, respectively.

Research and Development Expenses.  The R&D activity in for three months ended June 30, 20192020 was $50,124$0 as compared to $0 for the same period in 2018.2019 when there were $2,386 direct R&D expenses.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $404,958 for the second quarter$9,208 (2%) lower in 2020 than 2019 as compared to $353,682 for the second quarter of 2018, an increase of $51,276 (14%). The increase was largely due to additional accounting and consulting support services; option expense for the “2018 Employees Stock Option Plan” and the “2018 Officers, Directors, Employees and Consultants Nonqualified Stock Option Plan”.reduction in salary expense.

Operating Loss.  The Company's operating loss for the three months ended June 30, 2019 was $455,039,$ 375,874 which was $100,900 (28%$14,630 (4%) higherlower for 2020 than the operating loss of $354,139 for the same period in 2018,2019 mostly due to the SG&A expense increasedecrease constituted by additional accounting and consulting support services; option expense for the 2018 Employees Stock Option Plan and the 2018 Officers, Directors, Employees and Consultants Nonqualified Stock Option Plan.  (Stock Option Plan expenses are non-cash requiring expenses.)
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salary decreases.

Interest Expense.  ForDuring the three months ended June 30, 2019,March 31, 2020, interest expense,net was $1,010, as$1,005, compared to $973$885 for the three months ended June 30, 2018.March 31, 2019. The interest expense recognized in the three months ended June 30, 2019March 31, 2020 is primarilymostly due to accrued interest for convertible debt notes.  For the three months ended June 30, 2019, the Company has interest income of $2,532, resulting a net interest income of $1,522.

Net Loss. Net loss attributable to common shareholders was $453,517 for the second quarter of 2019,$376,879 which was $121,718 (37%$14,510 (4%) moreless during 2020 than the net loss of $331,799 for the same period in 2018.2019. This increasedecrease was mainly due to augmenteda reduction of selling, general and administrative expenses in 2019.2020.

Results of Operations for the Six Months Ended June 30, 2019Liquidity and 2018:Capital Resources

Revenues.  The total revenue recognized fromAt March 31, 2020, the sale of nutraceuticals was $4,682 through June 30, 2019, as compared to $56,840 for the first six months of 2018, a decrease of $52,158 or 92%.  Additionally, there were no sales of surgical products whereas the same period in 2018 showed revenue of $2,053.

Cost of Revenues.  Cost of sales for the six months ended June 30, 2019 was $3,281. For the six months ended June 30, 2018, the cost of sales was $44,046.  The decrease in cost of sales for 2019 as compared to 2018 for the six month period was $40,765, or 93%.  Gross profit for six months ended June 30, 2019 was $1,401 against $12,794 for the six months ended June 30, 2018, a decrease of $11,393 or 89%.

Research and Development Expenses.  There was an increase in R&D activity for the six months ended June 30, 2019, of $52,510 whereas there were no expenditures recognized in the first six months ended June 30, 2018.  An increase in R&D expenditures is anticipated with the roll-out of ABI’s core technology and other new technologies.  Most of the R&D activity is anticipated to occur in the Asian markets generated through AMARILLO BIOSCIENCES, INC’s. TAIWAN BRANCH (美商康華全球生技股份有限公司 台灣分公司).

Selling, General and Administrative Expenses.  Selling, general and administrative expenses of $794,493 were incurred for the first six months of 2019, compared to $552,991 for the first six months of 2018, an increase of $241,502 (44%).  The 2019 increase was due in large part to increases in line items used to grant, record, track, and expense stock compensation and the qualified and non-qualified option programs.  Some of the expense increases of 2019 over 2018 include:  (1) travel, meals-entertainment, $30,060 against $12,576; (2) professional fees – accounting, $74,103 against $25,240; (3) Other professional Fees, $98,501 versus $70,588; and (4) rent, $29,280 against $11,827.  There were also several areas where the expenses showed either minor increases or even decreases for the 2019 – 2018 comparative period.  These expense items included:  (1) salaries, $225,457 versus $215,416, an increase of $10,041 (5%); (2) D&O Liability Insurance, $26,289 versus $24,831 an increase of $1,458 (6%); (3) Group (Health) Insurance, $5,677 versus $17,057, a decrease of $11,380 (67%); and (4) Transfer Agent Fees, $6,989 versus $6,905, an increase of $84 (1%).

Operating Loss.  In the six month period ended June 30, 2019, the Company's operating loss was $845,602 compared to an operating loss for the six month period ended June 30, 2018 of $540,197, a $305,405 (57%) increase.  The increased selling, general, and administrative expense increases along with minimal sales in 2019 was a major factor in the operating loss increase.  However, major portion of the expense increases continue to be driven by expanded international operations and activities.
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Interest Expense, net.  During the six month period ended June 30, 2019, there was an interest income of $2,532 versus $0 for the same period of 2018. Management capitalized on cash management opportunities.  The interest expense was $1,895 for the six month ended June 30, 2019, compared to $2,353 for the six month period ended June 30, 2018, a decrease of $458 (19%).  The reduced interest expense for the six month 2019 period is mostly due to debt reduction of Dr. Stephen Chen’s loans to the Company by partial repayments of the debt as well as Dr. Chen’s conversion of debt to equity.

Net Loss. The Net Loss for the first half of 2019, increased to $844,965 from $524,229 in 2018, an increase of $320,736 (61%) for the period.  The major constituents to the increase in net loss are the decrease in revenue in the first six months of 2019 and the increase in expenses as discussed above for that period.

Liquidity Needs. At June 30, 2019, we had available cash of $723,441$289,557 whereas weit had a cash position of $1,275,654$409,039 as of December 31, 2018.2019. The Company had working capital of $92,635$(580,993) at the end of June 30, 2019.  AtMarch 2020. As of December 31, 2018,2019, the working capital was $569,613.  Historically$(308,014). The average monthly burn rate in 2020 was $41,000, with a 12-month trailing average of $67,500. Moving forward we expect the burn rate has beenwill be between $65,000$41,000 and $75,000 per month.  It is difficult$67,500. ABI continues to estimatedevelop and establish new revenue streams to become, and maintain the burn rate at this point insomuch as foreign operations have increased and new budgets are being developed for escalations in R&D spending and foreign operations.  One of the Company’s main goals is to return to the statusposition of, a profitable going concern by having reduced operating losses and subsequently becoming profitable.  As indicated throughout this document,  two otherconcern. Two major goalsareas of ABIfocus are to (1) continue to leverage theABI’s core technology pharmaceutical development platform, low-dose oral interferon, and (2) diversify Company operations to incorporate additional linescommercialize its metabolic restoration therapy for the treatment of business which will extend the reach ofdiabetes. ABI into additional economic sectors such as biotech / bio-pharmaceutical / health care products and life sciences business.  Current investors and potential new investors have indicated the willingness to assist in future financing of operations as ABIaggressively seeks to monetize its existing (andand any newly developed)developed intellectual property. ABIproperty and estimates its short-term project development financing needs to be between $3,000,000 and $5,000,000 depending upon project negotiated terms and $6,000,000structuring yet to support our core technology, which is included in the Pharmaceutical Division, and instituting new revenue streams with the Medical Division and the Consumer Products Division.  The Company has also instituted a new corporate division, the Business Development Division dedicated to finding and developing new customers, markets, distribution channels, strategic partners, joint ventures, and other growth and expansion vehicles and opportunities.be determined.

There can be no assurance that we will be successful in our efforts to make the Company profitable.  If those efforts are not successful, we couldwill be forced to cease operations.

Forward-Looking Statements: Certain statements made throughout this document are "forward-looking statements" within the meaning of the Private Securities 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," "estimate," "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 uncertainties are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K and include among others the following: promulgation and implementation of regulations by the U.S. Food and Drug Administration ("FDA"); promulgation and implementation of regulations by foreign governmental instrumentalities with functions similar to those of the FDA; costs of research and development and 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
13

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 uncertainties 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 operations. 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.


ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company,” we are not required to provide the information under this Item 3.


ITEM 4. Controls and Procedures
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Disclosure Controls and Procedures

At the end of the period covered by the Annual Report on Form 10-K for the fiscal year ended  December 31, 2018,2019, and this Form 10-Q Quarterly Report for the quarter ending June 30, 2019,March 31, 2020, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer (“CEO”) and /Chief Financial Officer (“CFO”), ofand Accounting Consultant as to the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEOCEO/CFO and the CFOAccounting Consultant have concluded that as of the end of the period covered by thethis Annual Report and Quarterly Report, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEOCEO/CFO and CFO,accounting consultant, as appropriate, to allow for accurate and timely decisions regarding required disclosure.


Changes to Internal Controls and Procedures over Financial Reporting

In an effortThere were no changes in our internal controls over financial reporting that occurred during the annual period covered by this report that have materially affected, or are reasonably likely to augmentmaterially affect, our internal financial controls and reporting, the Company recently engaged a managerial accounting services provider to begin the oversight and internal management of Company accounting processes andcontrol over financial reporting.
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Management’s Remediation Plans

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). Management has assessed the effectiveness of internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses in internal control over financial reporting that were identified are:

a) We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the financial statements, including disclosures, will not be prevented or detected on a timely basis; and

b) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.
15

The Company intendsAs a result of the existence of these material weaknesses as of December 31, 2019, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2019, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to and has begunattestation by our independent registered public accounting firm pursuant to increase its personnel resources and technical accounting expertise withintemporary rules of the accounting function. Management believesSEC that hiring additional knowledgeable personnel with technical accounting expertise will remedypermit the following material weakness: insufficient personnel with an appropriate level of technical accounting knowledge, experience, and trainingcompany to provide only management's report in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements.

this annual report.

PART II - OTHER INFORMATION

ITEM 1.
ITEM 1.Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this report, we were not aware of any such legal proceedings or claims against us.
15

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.

From January 1, 20192020 through the date this report was filed, 200,000no Company shares were issued for proceeds of $50,000.

Use of the proceeds from the offering included research and development projects, selling, general, and administration expenses, capital expenditures, compensation expenses, and repayment of convertible debt.issued.

ITEM 3.Defaults Upon Senior Securities.
None

ITEM 4.Mine Safety Disclosures.
Not applicable

ITEM.5.Other Information.
None
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ITEM 6.Exhibits.
None
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.
10.72***
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
31.1
Certification of Chief Executive Officer (Principal Executive Officer) required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

99.1906 Certification
*The Exhibit is incorporated by reference to the exhibit of the same number to the Company's Registration Statement on Form SB-2 filed with and declared effective by the Commission (File No. 333-4413) on August 8, 1996.
**The Exhibit is incorporated by reference to the Company's 1998 Annual Report on Form 10-KSB filed with the Commission on or before March 31, 1999.
(11) The Exhibit is incorporated by reference to the Company’s Report on Form S-8 filed with the SEC on May 22, 2008.
***Incorporated as required by: Item 601, Regulation S-K. Each compensatory Plan required to be filed as an Exhibit per Item 15(b) of Form 10K.
† The Exhibit is incorporated by reference to the Company's 2015 Annual Report on Form 10-K filed with the Commission on or before March 30, 2016.
†† The Exhibit is incorporated by reference to the Company's 2015 Annual Report on Form 10-K filed with the Commission on or before March 30, 2016.

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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:   August 9, 2019May 15, 2020
 
By: /s/ Stephen T. Chen
Stephen T. Chen, Chairman of the Board,
Chief Executive Officer and Chief Financial Officer
 
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