<PAGE>   1
                                  United States
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB


[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended              September 30, 1997
                               ----------------------------------------



[ ]   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
incorporation or organization)                              Identification No.)

800 West Ninth, Amarillo, TX                                   79101
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

  806-376-1741
--------------------------------------------------------------------------------
(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   .
   ---    ---

As of October 17, 1997, there were 5,414,232 shares of the issuer's common stock
outstanding.



                                        1

<PAGE>   2

                           AMARILLO BIOSCIENCES, INC.


                                      INDEX

<TABLE>
<CAPTION>
PART I:  FINANCIAL INFORMATION                                      PAGE NO.
                                                                    --------

<S>                                                                    <C>
Item 1.  Financial Statements
         Consolidated Balance Sheets - December 31, 1996 and
         September 30, 1997 .........................................  3

         Consolidated Statements of Operations - Three Months and
         Nine Months Ended September 30, 1996 and 1997 and
         Cumulative from June 25, 1984 (Inception) through
         September 30, 1997 .........................................  4

         Condensed Consolidated Statements of Cash Flows - Nine
         Months Ended September 30, 1996 and 1997 and
         Cumulative from June 25, 1984 (Inception) through
         September 30, 1997 .........................................  5

         Notes to Consolidated Financial Statements .................  6

Item 2.  Management's Discussion and Analysis of Results of
         Operations and Financial Condition..........................  7

PART II: OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K ........................... 10
Signatures........................................................... 11
</TABLE>



                                        2
<PAGE>   3

                   AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
                      (COMPANIES IN THE DEVELOPMENT STAGE)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               December 31,       September 30,
                                                                                   1996              1997
                                                                               ------------       ------------

<S>                                                                            <C>                <C>   
ASSETS
Current assets:
  Cash and cash equivalents                                                    $  2,799,297       $    786,215
  Marketable securities                                                           5,984,370          5,984,370
  Prepaid expenses                                                                  107,535            108,000
  Other current assets                                                                   --            272,027
                                                                               ------------       ------------
   Total current assets                                                           8,891,202          7,150,612
Property and equipment, net                                                         144,507            122,472
Patent license, net of accumulated amortization of $66,471 and $71,970 at
December 31, 1996 and September 30, 1997, respectively                               58,529             53,030
Organization costs, net of accumulated amortization of $4,667 and
  $4,799 at December 31, 1996 and September 30, 1997, respectively                      330                198
Investment in ISI common stock                                                      471,500            625,000
                                                                               ------------       ------------
Total assets                                                                   $  9,566,068       $  7,951,312
                                                                               ============       ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                             $    138,298       $     70,872
  Accrued interest expense                                                          273,296            362,171
  Other accrued expenses                                                             65,357             18,991
                                                                               ------------       ------------
    Total current liabilities                                                       476,951            452,034
Notes payable to related party                                                    2,300,000          2,300,000
                                                                               ------------       ------------
Total liabilities                                                                 2,776,951          2,752,034
STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value:
    Authorized shares - 10,000,000
    Issued shares - 5,414,232                                                        54,142             54,142
  Additional paid-in capital                                                     13,312,638         13,312,638
  Deficit accumulated during the development stage                               (6,574,163)        (8,317,502)
  Unrealized gain (loss) on marketable securities                                    (3,500)           150,000
                                                                               ------------       ------------
Total stockholders' equity                                                        6,789,117          5,199,278
                                                                               ------------       ------------
Total liabilities and stockholders' equity                                     $  9,566,068       $  7,951,312
                                                                               ============       ============
</TABLE>

                             See accompanying notes.


                                        3
<PAGE>   4

                   AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
                      (COMPANIES IN THE DEVELOPMENT STAGE)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                              Cumulative
                                                                                                                 from
                                                                                                               June 25,
                                                                                                                 1984
                                                                                                             (Inception)
                                         Three months ended                       Nine months ended            through
                                            September 30,                           September 30,             September 
                                      ------------------------                 --------------------                30,
                                      1996                1997                 1996            1997              1997
                                 ---------------------------------------------------------------------------------------

<S>                              <C>                 <C>                 <C>              <C>             <C>           
Revenues:
  Contract revenues              $        --         $        --         $   417,140      $        --     $    9,000,000
  Interferon sales                        --                 402               6,805              402            420,980
  Interest income                     37,194             101,821              57,289          323,491          1,029,609
  Sublicense fees                      5,000                  --               5,000               --            113,334
  Royalty income                          --                  --                  --               --             31,544
  Other                               43,000              26,000              43,000           52,000            604,371
                                 ---------------------------------------------------------------------------------------
                                      85,194             128,223             529,234          375,893         11,199,838

Expenses:
  Research and
    development expenses             168,095             341,015             422,540          927,042          8,022,272
  Selling, general, and
    administrative expenses          820,430             397,018           1,156,040        1,103,315         10,789,309
  Interest expense                    34,799              29,625              96,466           88,875            670,759
                                 ---------------------------------------------------------------------------------------
                                   1,023,324             767,658           1,675,046        2,119,232         19,482,340
                                 ---------------------------------------------------------------------------------------

Loss before income taxes            (938,130)           (639,435)         (1,145,812)      (1,743,339)        (8,282,502)
Income tax expense                        --                  --                  --               --             35,000
                                 ---------------------------------------------------------------------------------------
Net loss                         $  (938,130)        $  (639,435)        $ 1,145,812)     $(1,743,339)    $   (8,317,502)
                                 =======================================================================================
Net loss per share               $     (0.22)        $     (0.12)        $     (0.33)     $     (0.32)
                                 ====================================================================
Weighted average shares
  outstanding                      4,255,286           5,414,232           3,444,885        5,414,232
                                 ====================================================================
</TABLE>



                             See accompanying notes.


                                        4
<PAGE>   5

                   AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
                      (COMPANIES IN THE DEVELOPMENT STAGE)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                  Nine months ended             Cumulative from
                                                    September 30,                June 25,1984
                                           -----------------------------      (Inception) through
                                              1996              1997           September 30, 1997
                                           -----------       -----------       ------------------

<S>                                        <C>               <C>               <C>          
Net cash used in operating activities      $(1,728,305)      $(2,019,952)      $ (7,377,580)

Net cash provided by (used in)
investing activities                        (4,926,391)            6,870         (7,013,224)
                                           -----------       -----------       ------------ 
Net cash provided by financing
activities                                   9,772,702                --         15,177,019
                                           -----------       -----------       ------------ 
Net increase (decrease) in cash and
cash equivalents                             3,118,006        (2,013,082)           786,215
                                           -----------       -----------       ------------ 
Cash and cash equivalents at
beginning of period                          1,108,527         2,799,297                 --
                                           -----------       -----------       ------------ 
Cash and cash equivalents at end of
 period                                    $ 4,226,533       $   786,215       $    786,215
                                           ===========       ===========       ============
Supplemental Disclosure of Cash
Flow Information

Cash paid for income taxes                 $        --       $        --       $     37,080
                                           ===========       ===========       ============
Cash paid for interest                     $        --       $        --       $      6,466
                                           ===========       ===========       ============
</TABLE>



                             See accompanying notes.



                                        5
<PAGE>   6

                   AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
                      (COMPANIES IN THE DEVELOPMENT STAGE)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, are
     unaudited (except for the December 31, 1996 consolidated balance sheet
     which was derived from the Company's audited financial statements), but
     have been prepared in accordance with generally accepted accounting
     principles for interim financial information. Accordingly, they do not
     include all of the information and footnotes required by generally accepted
     accounting principles 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 three months and nine months ended September 30,
     1997 are not necessarily indicative of the results that may be expected for
     the full year ending December 31, 1997.

2.   Loss per share. Loss per share is computed based on the weighted average
     number of common shares outstanding.

     During March 1997, the Financial Accounting Standards Board issued
     Statement No. 128, "Earnings per Share". This statement currently has no
     effect on the computation of loss per share as the Company is in a net loss
     position and the potential dilutive effect of common stock equivalents is
     not considered in the computation.

3.   Initial public offering. On August 13, 1996, the Company completed its
     initial public offering of 2,000,000 shares of its common stock. Net
     proceeds to the Company were approximately $8,072,000. On August 29, 1996,
     the underwriter exercised its option to acquire an additional 300,000
     shares of common stock with net proceeds to the Company of $1,305,000.




                                        6
<PAGE>   7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

        RESULTS OF OPERATIONS

        Three Months Ended September 30, 1997 Compared to Three Months Ended
        September 30, 1996.

        During the three months ended September 30, 1997, the Company had total
        revenues of $128,223 compared to total revenues of $85,194 during the
        three months ended September 30, 1996. The 1997 third-quarter revenues
        consisted of income from interferon sales of $402, interest income of
        $101,821, and other income of $26,000. 1996 revenues consisted of
        interest income of $37,194, sublicense fees of $5,000, and other income
        of $43,000. The significant increase in interest income was due
        primarily to the fact that the Company's 1996 initial public offering
        was concluded on August 13, 1996, and the proceeds of that offering were
        therefore available for investment by the Company during only a portion
        of the 1996 third quarter.

        During the 1997 third quarter, research and development expenses were
        $341,015 as compared to $168,095 during the 1996 quarter. The increase
        of $172,920 in 1997 was the result of certain clinical studies being
        commenced in 1997.

        During 1997 and 1996, the Company incurred selling, general and
        administrative expenses of $397,018 and $820,430, respectively. The 1997
        third-quarter expenses were $423,412 less than the 1996 third quarter
        due primarily to the issuance of common stock to three officers of the
        Company in 1996, pursuant to stock grants. The amount of compensation
        associated with the stock granted was $630,000 of which $134,453 had
        been accrued as of June 30, 1996 leaving a balance of $495,547 to be
        expensed in the third quarter of 1996.




                                        7
<PAGE>   8

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996.

During the nine months ended September 30, 1997, the Company had total revenues
of $375,893 compared to total revenues of $529,234 during the nine months ended
September 30, 1996. Revenues for 1997 consisted of interferon sales of $402,
interest income of $323,491, and other income of $52,000. Revenues for 1996
consisted of contract revenues of $417,140, interferon sales revenues of $6,805,
interest income of $57,289, sublicense fees of $5,000 and other income of
$43,000. The significant difference in interest income is due to the fact that
proceeds from the Company's 1996 initial public offering were available for
investment by the Company during the entire nine month period for 1997, but were
only available during 1996 after August 13. The difference in contract revenue
income is due to the fact that the Company recognized during 1996 all remaining
revenue amounts under its Joint Development and Manufacturing/Supply Agreement
with Hayashibara Biochemical Laboratories, Inc.

During 1997, research and development expenses were $927,042 as compared to
$422,540 during 1996. The increase of $504,502 in 1997 was the result of certain
clinical studies being commenced in 1997.

During 1997 and 1996, the Company incurred general and administrative expenses
of $1,103,315 and $1,156,040, respectively. Total general and administrative
expenses for 1997 are therefore $52,725 lower than for the same nine months in
1996. However, 1997 expenses overall are higher than for 1996 due to the
substantial increase in research and development expenses, reflecting
expenditure of a portion of the proceeds received by the Company pursuant to its
1996 initial public offering.

Although selling, general and administrative expenses are down by $52,725 from
the corresponding nine month period in 1996, that is only the case because
nonrecurring compensation expense was incurred during 1996, due to the issuance
of common stock pursuant to stock grants. If said nonrecurring compensation
expense in 1996 is disregarded, selling, general and administrative expenses
increased by $442,822 in the first three quarters of 1997, compared to the
corresponding period in 1996. The primary cause of such increase is that the
Company has operated as a public company for all nine months of 1997, compared
to only two months of 1996, resulting in the following increases in the
categories indicated: consultant expenses, $129,144; travel, $51,740; general
insurance, $35,528; legal expense, $77,560; and investor relations, $102,090.




                                        8
<PAGE>   9

     LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 1997, the Company had cash of $786,215 and marketable
     securities of $5,984,370 with accounts payable of $70,872 and other funding
     commitments for clinical studies of approximately $1,169,863.

     The Company intends to focus its development activities on the treatment of
     Sjogrens syndrome, oral mucositis in cancer patients, hepatitis B and C,
     fibromyalgia, opportunistic infections in HIV patients and the common cold
     ("Primary Development Projects").

     The Company anticipates, based on its currently proposed plans and
     assumptions relating to its operations (including assumptions regarding the
     progress of its research and development and the timing and costs
     associated with its Primary Development Projects), that the Company's
     existing capital resources will be sufficient to satisfy the Company's
     estimated cash requirements for at least the next 21 months. Unless the
     Company generates significant revenues during such period, which the
     Company believes is unlikely, the Company will need additional financing to
     fully fund such development. Moreover, the Company's estimate of the amount
     required to complete its Primary Development Projects may prove to be
     inaccurate. The Company has no current arrangements with respect to, or
     sources of, additional financing and it is not anticipated that any of the
     officers, directors or stockholders of the Company will provide any portion
     of the Company's future financing requirements. There can be no assurance
     that, when needed, additional financing will be available to the Company on
     commercially reasonable terms, or at all. In the event that the Company's
     plans change, its assumptions change or prove inaccurate, or if the
     remaining net proceeds of the Company's initial public offering, together
     with other capital resources, otherwise prove to be insufficient to fund
     operations, the Company could be required to seek additional financing
     sooner than currently anticipated. Any inability to obtain additional
     financing when needed would have a material adverse effect on the Company,
     including requiring the Company to significantly curtail or possibly cease
     its operations.




                                        9
<PAGE>   10

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        Exhibit 27.   Financial Data Schedule



        No reports on Form 8-K were filed during the quarter ended 
        September 30, 1997.



                                       10
<PAGE>   11

                                   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:  November   12  , 1997            By: /s/ JOSEPH M. CUMMINS
                ------                     -----------------------------------
                                                Joseph M. Cummins
                                                   President,
                                           Chief Executive Officer, and
                                             Chief Financial Officer



                                       11
<PAGE>   12

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT NO.              DESCRIPTION
-----------              -----------

<S>             <C>                                
    27          Financial Data Schedule
</TABLE>