THE STEWART REPORT
SPECIAL HOTLINE UPDATE

Amarillo Biosciences, Inc.
(NASDAQ/BB: 60 CENTS)

9:15 p.m., Tuesday, January 31, 2006

(Next HotLine Planned for Tuesday, February 21 , 2006)
(Sooner if events should necessitate an update)

Overview:
I was born in Laramie, Wyoming, then spent the entirety of my youth in the Western states – places with mailing addresses like Tulsa, Oklahoma; Denver, Colorado; Kimball, Nebraska, and Houston, Texas. As an adult – or at least someone who’s had heaps of fun pretending to be one – my home has always been on the West Coast. So, yes, I guess you could say I’m a Westerner. If you are, too, then you may not be aware of something that all of Asia already knows: Today is the first full day of the Chinese New Year, which starts “The Year of the Dog.”

That’s more than a little ironic since it will almost certainly be the bird species rather than canines that will have the greatest impact on the Far East this year. In fact, it already has.

There’s little point in reiterating in detail what you already know about the global threat posed by the Bird Flu pandemic at hand: The 80-some lives that have been lost; the nearly two dozen nations that have reported symptoms among their populations; the panic to raise pre-emptive funds at the United Nations; the billions of dollars already lost due to the culling of hundreds of millions of birds; the inestimable number of birds left to be vaccinated; the millions of migratory birds that will never be vaccinated, or the untold collateral damage to industries like tourism and air travel – all of which has been especially hurtful to the nations that can least afford it.

As every Stewart subscriber/member knows, we were reporting on the potential devastation the H5N1 strain of influenza could have on world populations and global economies months before even the President or the popular press picked up on it. We also showed you – in very specific terms – why companies like Amarillo Biosciences, Inc., and Emergency Filtration Products, Inc., would be likely to increase greatly in value. Which they have.

We’ve also tried to keep you posted along the way. On this exact date in 2005, the HotLine price for Amarillo was 36 cents. My printed opinion then was that Amarillo Biosciences was “my all-time favorite long shot.” There was really no equivocation as to my enthusiasm for this tiny biotech’s potential at that time – or in the other 13 HotLines I’ve recorded since.

As recently as Nov. 12, 2005, when the printed price was $0.42, I labeled AMAR “a screaming BUY.” On Nov. 29, when the stock was at $0.45, I said it sported “the best upside appreciation potential.” And, on Dec. 21, with the price at $0.46, I concluded 2005 by saying, “AMAR is still the best speculative BUY I’ve seen in ages.”

Today, with the stock off – and I mean way off – none of those comments or closing prices seem too impressive, unless you phoned the HotLine two weeks ago … the week of Jan. 16. That was when I was far from a computer or a modem; AMAR CEO Dr. Joseph Cummins was far from Amarillo attending to an unexpected family matter; and everyone from Bloomberg to Barron’s was printing headlines like, “Investors Warned About Schemes to Combat Bird Flu,” “Supposed Flu Cures Everywhere You Look” and, my personal favorite, “Fraudsters Target Bird Flu Pigeons.”

The watchdogs at the NASD were all over the thing – and rightfully so. Around the end of the year, so many bad apples found their way into the bird flu barrel that you could have fermented the whole slimy ooze into enough moonshine to blind half of Kentucky. My points here are several:

1 - With senior AMAR management unavailable for comment, there was no way I was going to print anything I couldn’t support with a direct quote or a Company news release. Not in that environment.

2 - Even if I wanted to print something – and believe me, I did – it simply wasn’t possible. When Amarillo’s price started to race, I was doing the same thing on an asphalt track in the middle of the low desert, halfway between Las Vegas and my office in Dana Point. At the time, it was hard to know who was going faster – but I soon learned it was the stock.

3 - After a few quick calls, I learned that Dr. Cummins doesn’t believe in cell phones – or “slave bracelets” as Stephen King now calls them. Never has and probably never will. Before, that was never a problem. If Joe wasn’t in the office 16 hours of the day – which he usually is – then he was at home. I have both numbers, so I could nearly always find him. And, when I couldn’t, his assistant would usually provide an alternate number for whatever hotel he was in. This time, none of those options resulted in a connection with Dr. Cummins.

4 - However, after a couple more calls, it became apparent something really big was in the works because huge buying interest was coming in – most of it from the German exchanges. Millions of shares in just a few days.

From an informational standpoint, it was The Perfect Storm.

But it was also a storm that was raining diamonds from the sky. So, on Jan. 16 – that being the day this HotLine was originally scheduled – I recorded a “trust me”-style message, just a minute or so in length, saying that something was clearly in the works. “If you’ll give me two or three more days to deliver the message,” I reported, “I might have two or three times as much to talk about.”

Those of you who phoned back on Jan. 19 know that a truer statement was never muttered – even if it was largely accidental – and that the term “lucky call” now carries a double meaning. Of course, that was the day that Amarillo made the giant announcement about its agreement with the Malaysian pharmaceutical company Bumimedic, a subsidiary of Antah HealthCare Group, to seek approval to market AMAR’s low-dose interferon alpha as a potential bird flu therapy. (Though I can’t clearly document the connection, Antah reportedly has direct ties to the Malay Royal Family, which should help speed the approval process.) Since I basically read the whole release in the Jan. 19 recording, I’ll not repeat it now. But, if you missed it, we posted it to the website the same day, and it can still be accessed there.

Until today, the monster effect of the Malay deal’s announcement on Amarillo’s price and volume stats could still be seen. More importantly, it could have been acted on! TWICE.

In that same Jan.19 HotLine message – when the stock was trading just above 50 cents – I said you could “BUY to between 65 and 75 cents per share and probably be okay.” Not my exact words, perhaps, but pretty darn close.

By the market’s close on Friday, Jan. 20, us Westerners got a small taste of what “Real Money” looks like when a sliver of it gets focused on a micro-cap company. Amarillo had climbed all the way up to $0.82 a share. It had ended the previous week at just 38 cents.

This set the stage for this year’s second bit of highly actionable, very profitable advice. Thirty minutes before the opening bell on the following Monday, Jan. 23, another Stewart Report recorded HotLine message said, point blank, that the stock would likely open even higher, “… probably around $0.90 cents.” Which it did.

It wasn’t hard to be right. A colleague on the East Coast used the time differential to our advantage, phoning me at the crack of dawn to tell me the German exchanges (which are 10 hours ahead of the West Coast) had closed around that price on massive volume and had remained hungry for shares straight through to the final bell.

It was equally easy to encourage all Stewart subscriber/members to “look at your portfolios (and decide) in your own minds which shares you are playing for the short term and which ones you’re keeping for the long haul.”

Paraphrasing now, I mentioned that day (as I have several times in the past) that, short term, almost all small stocks have a difficult time around 50 cents, and then again at the $1.00 mark. These price levels are known as “glass ceilings.” Obviously, these are barriers born of human psychology, not financial reality – but they exist all the same.

So, Monday’s callers were advised six ways from Sunday to “lighten the load” … that “we’re bulls, not pigs” … to definitely “take some profits around 90 cents, maybe even as high as a dollar”… etc., etc., etc.

Within a couple hours, Amarillo Biosciences hit its 52-week high of $0.94.

But the beautiful part – the part that qualifies this particular update as a “Special HotLine” – is the idea that Wednesday morning (Feb. 1), a mere nine days after taking those profits, we might be able to repurchase our short-term shares for about 60 cents on the dollar.

At least that should be your goal.

To the absolute best of my knowledge – and I do know this Company well – Tuesday’s price action was nothing more than other investors deciding to take profits, too. The only difference is, they didn’t get the idea until several days after you did. Either that or they got greedy … or nervous … or both … whatever. None of that matters. What does matter is this:

1 - Fundamentally, nothing has changed but the price – which gives us yet another opportunity to score yet another short-term win.
2 - Long term, even less has changed. I still think we’ve got a penny stock that will be denominated in dollars by year’s end. The company has too many red hot irons in the fire – Bird Flu and otherwise – for me to believe any differently.

The whole German/Malaysian connection is entirely new. The key players – like Dr. Claus Martin and members of the Malay Royal Family – are extremely connected, and just as well-heeled. Plus, Southeast Asia – the market they will be addressing – is the geographic area most at risk from Avian Flu. It’s also one of the most heavily populated. Logically then, the recent news release that brought Amarillo stock into the international limelight is but one of many. We should look for more big news down the road – and speculate on that likelihood today.

Then there’s the whole Global Kinetics thing, which involves a privately held company that has licensed AMAR’s oral interferon for use in another hotbed for bird flu: Cambodia.

That country and the neighboring nations of Vietnam, Laos and especially Thailand are all central to the H5N1 strain of flu. Global Kinetics CEO Jerry Frasier might be close to making our pharmaceutical available there, too. Frasier, who I’ve been speaking with for more than a year now, has an almost nepotistic relationship with key people in that region, making it easy for me to be comfortable with the idea that an accord isn’t far off there, either. Seriously, I’m looking for a announcement soon because I was told that the required Certificate of Free Trade has already been signed.

Furthermore, the necessary approvals for manufacturing are virtually guaranteed. That’s because Hayashibara, Amarillo’s giant Japanese partner, already has government approval for injectable interferon in very high doses. Since the Global/Amarillo deal would be to administer low-dose oral interferon, both the dosage and, especially, the method of administration are far less hazardous. As such, the governmental green light should be far easier for Global Kinetics to obtain.

Finally, Amarillo might get it’s third major deal in a different region that has commanded much of the recent Bird Flu press: Turkey, Greece and Iraq, as well as Georgia, a border nation of the former Soviet Republic. If I understand what I’m reading at iFlu.org, Turkey has been surprisingly forthright in disclosing its Bird Flu deaths and the number of those infected. However, it claims that other nations are not – Greece, because it’s tourist season is just two months away; Georgia, because it still has a Soviet mental block and just doesn’t feel compelled to tell anybody anything. As for Iraq, it just reported its first official H5N1 fatality on Monday – a 15-year-old girl.

Anyway, you might recall an earlier 2005 release in which Amarillo said it would be working to treat Behçet’s disease in Turkey, where the prevalence for this malady is 300 times greater than in the U.S. Long story short, the Turkish government recently telephoned Dr. Cummins to initiate discussions as to the possible use of oral interferon for H5N1 influenza as well.

So, like I said, Amarillo has three very hot irons in the fire – one for each of the three hottest Bird Flu regions. These areas encompass many nations and millions of people. Some of them are already infected. Some of them have already died. In that respect, Amarillo’s assistance will be its own reward. But, if I’m right, there will be a very large financial reward as well.

I’ll begin concluding this with a comment made a couple of days ago by a Mr. Andy Granowitz, who subscribes to the Dick Davis Digest. Mr Granowitz came across The Stewart Report’s Jan. 16 BUY recommendation on Amarillo Biosciences as it appeared in Davis’ 14th Annual “Top Stock Picks” issue. Andy made good money on our idea – and, apparently, he did a lot of his own research the whole way up. Since he’s an institutional broker, this was not surprising.

When he subsequently called to subscribe to our publication, Andy concluded the transaction by saying, “You know, I’ve looked at this over and over, and it’s got everything. It’s got the catalyst (which I took him to mean the momentum of bird flu), it’s got the patents, it’s got the partners and its got a story that’s easy to tell. For the first time, it doesn’t look like money will be a problem … it really does have everything.”

I tend to agree with him on everything but the “easy to tell” part. This story was not a Page One item – not at first. In fact, a great many people still don’t appreciate the enormity of what could possibly occur. I’m even one of them. The last great plague – the Spanish flu pandemic that occurred concurrent with WWI – killed millions more than the war itself. Who among us can claim to comprehend death on such a grand scale? Not I. But what I can appreciate – quite easily, in fact – is the long-term value of what Amarillo shares could be worth in the months ahead, as well as the immediate importance of the technology it possesses.

I have no feel whatsoever for how Amarillo Biosciences, Inc. (NASDAQ/BB: 60 cents), will trade tomorrow. It could go up a dime. It could go down a dime. Or it could simply remain unchanged. But I’m not certain that I care all that much one way or another. Quick wins are fun. Hell, making money is always fun – and, if I had to wager, I’d bet that any stock bought on Feb. 1, 2006, between $0.55 and $0.65 will be at a profit well before the next HotLine. However, I think most of us have been around long enough to know that long term is where the big money is made – so I’ll continue to focus mostly on the horizon. Either way, The Stewart Report’s continued STRONG BUY rating is still very much in effect.

Finally, now that action is picking up, look for the frequency of these HotLines to follow suit. Also, if you see a pronounced move – up or down – but no corresponding e-mail that addresses it, you might think to try the HotLine itself. In between, there’s always quite a bit of information on our website, including current quotes and company press releases. In fact, Jim Webb, our aptly-named webmaster, often posts the company info to our site before the companies post it on their own. Also, several hours ago, my Editor and resident technician provided current stock charts and technical comments on all three Stewart Stocks, which can be found at his signature “Rabbit Report” link.

I’ll cover our other stocks next time. Between now and then, Emergency Filtration Products, Inc. (NASDAQ/BB: 78 cents), up six cents since the last HotLine, remains a BUY, and International Card Establishment, Inc. (NASDAQ/BB: ICRD – 16 cents), down a penny from the last HotLine, is a HOLD.

As always, thank you for listening, and for subscribing – and, if football happens to be your thing, have a super Super Bowl Sunday.

J. David Stewart
Analyst and Publisher, The Stewart Report

Note: David’s HotLines are also available by dialing (949) 583-6057, and entering
your subscriber-protected, 2-digit Pass Code at the prompt.

Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. J. David Stewart and affiliates of The Stewart Report may also have long or short positions in these and other securities discussed herein, including warrants and/or options, and may buy or sell same at their own discretion. This report contains or may contain forward-looking statements within the meaning of the "safe-harbor" provisions of the US Private Securities Litigation Reform Act of 1995. This report is intended for informational purposes only and does not have regard for or take into consideration the reader's investment objective, financial situation or suitability for this security. Consult with your financial advisor and perform your own due diligence. Copyright © The Stewart Report, 2006.