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, 2004
                               -------------------------------------------------

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

                         Commission File Number 0-20791

                           AMARILLO BIOSCIENCES, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

    TEXAS                                                75-1974352
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


 4134 Business Park Drive, Amarillo, Texas                          79110-4225
--------------------------------------------------------------------------------
(Address of principal executive offices)                           (Zip Code)

     806-376-1741                                             FAX 806-376-9301
--------------------------------------------------------------------------------
(Issuer's telephone number, including area code)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
 Yes |X| . No |_| .

      As of September 30, 2004 there were 13,235,296 shares of the issuer's
common stock outstanding.


                                     1
<PAGE>

                           AMARILLO BIOSCIENCES, INC.

                                      INDEX

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

ITEM 1.              Financial Statements

                     Consolidated Balance Sheet - September 30, 2004............................... 3

                     Consolidated Statements of Operations - Nine Months Ended
                     September 30, 2004 and September 30, 2003..................................... 4

                     Condensed Consolidated Statements of Cash Flows - Nine
                     Months Ended September 30, 2004 and 2003...................................... 5

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

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

ITEM 3.              Controls and Procedures....................................................... 11

PART II:             OTHER INFORMATION

ITEM 6.              Exhibits and Reports on Form 8-K.............................................. 11

Signatures           .............................................................................. 12

</TABLE>


                                      2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.        Financial Statements

                   Amarillo Biosciences, Inc. and Subsidiaries
                           Consolidated Balance Sheet
                               September 30, 2004
                                   (unaudited)

Assets
Current assets:
  Cash                                                             $      3,191
  Other current assets                                                   23,992
                                                                   ------------
Total current assets                                                     27,183

Equipment, net                                                            1,117
Patents, net of accumulated amortization of $166,223                    143,927
                                                                   ------------
Total assets                                                       $    172,227
                                                                   ============

Liabilities and Stockholders' Deficit
Current liabilities:
  Accounts payable                                                 $    163,731
  Accrued interest expense                                              423,728
  Accrued payroll expense                                               145,393
  Other accrued expense                                                     304
  Notes payable, including notes payable to stockholder               2,103,500
                                                                   ------------
Total current liabilities                                             2,836,656

                                                                   ------------
Total liabilities                                                     2,836,656

Commitments and contingencies

Stockholders' deficit
  Preferred stock, $.01 par value:
     Authorized shares - 10,000,000
  Issued shares - none -
Common stock, $.01 par value:
     Authorized shares - 20,000,000
     Issued shares - 13,235,296                                         132,353
  Additional paid-in capital                                         19,565,645
  Accumulated deficit                                               (22,362,427)
                                                                   ------------
Total stockholders' deficit                                          (2,664,429)
                                                                   ------------
Total liabilities and stockholders' deficit                        $    172,227
                                                                   ============


                                       3
<PAGE>

                   Amarillo Biosciences, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                                   (unaudited)

<TABLE>
<CAPTION>
                                               Three months ended               Nine months ended
                                                  September 30,                    September 30,
                                           --------------------------      --------------------------
                                                2004            2003          2004              2003
------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>            <C>             <C>
Revenues:
  Dietary supplement sales                 $     11,053    $      6,420   $     34,879    $     24,633
  Interferon sales                                   --              --          6,490          10,000
  Federal research grants                            --              --             --           6,586
  Gain on sale of building and equipment             --              --             --          34,790
  Income from reversal of accrued
    contingent liability                             --         750,965             --         750,965
  Gain on sale of intangible assets                  --          50,298          2,663          50,298
  Other                                              --              --             36           5,858
------------------------------------------------------------------------------------------------------
                                                 11,053         807,683         44,068         883,130
Expenses:
  Cost of sales                                     368             600         14,915           2,512
  Research and development expenses              43,090          50,175        128,382         129,102
  Selling, general and administrative
     expenses                                    51,507          64,795        278,365         270,502
  Interest expense                               24,613          24,341         72,831          71,553
  Loss on dissolution of subsidiary                  --           1,000             --           1,000
  Impairment of intangible assets                    --          50,298             --          50,298
------------------------------------------------------------------------------------------------------
                                                119,578         191,209        494,493         524,967
------------------------------------------------------------------------------------------------------

Net income (loss)                          $   (108,525)   $    616,474   $   (450,425)   $    358,163
======================================================================================================

Basic and diluted net loss per share       $      (0.01)   $       0.06   $      (0.04)   $       0.04
======================================================================================================

Weighted average shares outstanding          12,871,713      10,220,391     12,054,425       9,742,661
======================================================================================================
</TABLE>


                                       4
<PAGE>

                   Amarillo Biosciences, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              Nine months ended
                                                                September 30,
                                                           ---------------------

                                                              2004        2003
                                                           ---------    ---------

<S>                                                        <C>          <C>
Net cash used in operating activities                      $(164,039)   $(209,250)
                                                           ---------    ---------
Cash provided by (used in) investing activities                   --      132,008
                                                           ---------    ---------
Cash from financing activities:

  Proceeds from issuance of common stock                     155,930      141,600

  Repayments of notes payable                                     --      (52,468)
                                                           ---------    ---------
     Net cash provided by (used in) financing activities     155,930       89,132
                                                           ---------    ---------
Net increase (decrease) in cash                               (8,109)      11,889
                                                           ---------    ---------
Cash at beginning of period                                   11,300          100
                                                           ---------    ---------
Cash at end of period                                      $   3,191    $  11,989
                                                           =========    =========
Supplemental Disclosure of Cash Flow Information

Cash paid for income taxes                                 $      --    $      --
                                                           =========    =========
Cash paid for interest                                     $       0    $  11,142
                                                           =========    =========
Stock issued for debt                                      $  36,000    $      --
                                                           =========    =========
</TABLE>


                                       5
<PAGE>

                   Amarillo Biosciences, Inc. and Subsidiaries
              Notes To Condensed 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 Amarillo Biosciences, Inc. ("ABI")
      Form 10-KSB for the year ended December 31, 2003 filed with the Securities
      and Exchange Commission, are unaudited, but have been prepared in
      accordance with accounting principles generally accepted in the United
      States for interim financial information. Accordingly, they do not include
      all of the information and footnotes required by accounting principles
      generally accepted in the United States for complete financial statements.
      In the opinion of management, all adjustments (consisting only of normal
      recurring adjustments) considered necessary for a fair presentation have
      been included.

      Operating results for the nine months ended September 30, 2004 are not
      necessarily indicative of the results that may be expected for the full
      year ending December 31, 2004.

2.    Stock based compensation. The Company accounts for its employee
      stock-based compensation plans under Accounting Principles Board ("APB")
      Opinion No. 25, Accounting for Stock Issued to Employees. No options were
      granted in the three month period ending March 31, 2004. There were
      725,000 options granted to purchase common stock in the three months ended
      June 30, 2004, with an exercise price of $0.23 per share with a 5 year
      term. In the three month period ended September 30, 2004 775,000 options
      were granted to purchase common stock, with an exercise price of $0.27 per
      share with a 5 year term.

The following table illustrates the effect on net loss and net loss per share if
Amarillo had applied the fair value provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.

                                           Nine Months Ended September 30,
                                                2004           2003
                                            -----------    -----------
Net loss, as reported                       $   450,425    $   358,163
Less: stock based compensation determined
  under fair value based method                 360,199             --
                                            -----------    -----------
Pro forma net loss                          $   810,624    $   358,163
Basic and diluted net loss per share
  As reported                               $     (0.04)   $     (0.04)
  Pro forma                                 $     (0.07)   $     (0.04)

The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield 0.0%, expected volatility of 141.0%, risk-free
interest rate of 1.5% and expected life of 60 months.

                                       6
<PAGE>

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

4.    Financial Condition. The Company's viability is dependent upon successful
      commercialization of products resulting from its research and product
      development activities. The Company plans on working with commercial
      development partners in the United States and in other parts of the world
      to provide the necessary sales, marketing and distribution infrastructure
      to successfully commercialize the interferon alpha product for both human
      and animal applications. The Company's products will require significant
      additional development, laboratory and clinical testing and investment
      prior to the Company obtaining regulatory approval to commercially market
      its product(s). Accordingly, for at least the next few years, the Company
      will continue to incur research and development and general and
      administrative expenses and may not generate sufficient revenues from
      product sales to support its operations.

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

The following discussion should be read in conjunction with our financial
statements and the notes thereto which appear elsewhere in this report. The
results shown herein are not necessarily indicative of the results to be
expected in any future periods. This discussion contains forward-looking
statements based on current expectations, which involve uncertainties. Actual
results and the timing of events could differ materially from the
forward-looking statements as a result of a number of factors. Readers should
also carefully review factors set forth in other reports or documents that we
file from time to time with the Securities and Exchange Commission.

In the first nine months of 2004, the Company completed private equity financing
by selling restricted stock at a discount to 20 investors. The net proceeds to
the Company were approximately $155,930.

During the first nine months of 2004, ABI worked in five areas to improve the
Company. These are the areas 1) funding, 2) agroterrorism, 3) publishing, 4)
partner/licensing discussions and 5) sales.

Agroterrorism. Dr. Joseph Cummins met with scientists, livestock producers and
elected officials to argue for alternatives to the government's plans to
slaughter livestock if diseases are introduced by terrorists. On February 12,
2004, Dr. Joseph Cummins participated in an agroterrorism seminar held at the
Texas A&M Research and Extension Center in Amarillo, Texas. Working with Dr.
Albert Paszek of Cargill, a manuscript entitled "Interferon Alpha in the Feed to
Control Foot-and-Mouth Disease" was presented June 23, 2004 at the 57th
Reciprocal Meat Conference in Lexington, KY. At various times, Dr. Cummins met
with members of the staff of US Senator Cornyn and US Senator John Rockefeller
to discuss agroterrorism. Members of the Emergency Management team in Amarillo
and the Randall County Judge met with Dr. Cummins on April 27, 2004, to hear his
concerns that the livestock in the Texas Panhandle are completely vulnerable to
an attack with foot-and-mouth disease virus. On July 20, 21, 23, 24, 26, 27, and
31, 2004 Dr. Cummins presented seminars in Japan at which agroterrorism and oral
interferon were discussed; approximately 700 veterinarians attended the
seminars.

                                       7
<PAGE>

Publishing. A manuscript entitled "Orally Administered Interferon Alpha has
Systemic Effects" was submitted and accepted by the American Journal of
Veterinary Research. A chapter entitled "The Clinical Use of Low Dose Orally
Administered Interferon Alpha, with Emphasis on Treatment of Patients Positive
for Human Immunodeficiency Virus" appeared in the book, AIDS Vaccines and
Related Topics. Publishing this information, ABI believes, will help the Company
gain recognition for our technology.

Partner/License Discussions. September 14, 2004 the announcement was made that
Amarillo Biosciences had executed a licensing and supply agreement with a
leading Turkish pharmaceutical company, NOBEL ILAC SANAYII VE TICARET A.S.,
providing the rights to oral low-dose interferon-alpha for the treatment of
Behcet's disease in Turkey and in Azerbaijan, Bosnia & Herzegovina, Bulgaria,
Croatia, Georgia, Kazakhstan, Kyrghyzstan, Macedonia, Romania, Russia, Saudi
Arabia, Slovenia, Tajikistan, Turkmenistan, Uzbekistan, and Federal Republic of
Yugoslavia. The U.S. Food and Drug Administration (FDA) has granted Orphan Drug
Designation for this product for the clinical indication of Behcet's Disease to
Amarillo Biosciences. The Orphan Drug Designation is designed to promote the
development of treatments for diseases rare in the United States and provides
certain marketing exclusivity incentives outlined under the Orphan Drug Act.
U.S. FDA approval will be sought and this FDA approval will be owned by Amarillo
Biosciences, but will be used by NOBEL to seek regulatory approval in each
country of the Territory.

On July 22, 2004 ABI announced that BioVet, Inc., a Tokyo based animal health
company with whom Amarillo Biosciences has been collaborating, has been granted
regulatory approval for production and marketing of oral interferon for
treatment of rotavirus in cattle in Japan. Rotavirus diarrhea is a major cause
of disease and death in animals and humans.

The animal health approval is for low dose oral administration of human
interferon alpha supplied by Hayashibara Biochemical Laboratories (HBL). The
product was launched in Japan in August 2004. Amarillo Biosciences owns the
distribution rights to HBL interferon for animal health outside Japan; will
receive a royalty on all Japanese HBL interferon sales.

Nutraceutical Product. ABI reached agreement with Global Kinetics of Kent,
Washington to become the US distributor of Dry Mouth Relief (DMR), replacing
Natrol. Global Kinetics' sales of DMR are expected to begin in the first quarter
of 2005.

On September 16, 2004, to discuss the nation's response to agroterrorism, Dr.
Cummins met with Dr. Chuck Lambert, Deputy Undersecretary of Agriculture, USDA,
Dr. Richard McDonald, President of Texas Cattle Feeders Association (TCFA) and
Dr. Ross Wilson, Vice President of TCFA.

The Company is presently negotiating with human health and animal health
commercial development partners in various regions of the world including the
United States, Canada, Southeast Asia, Europe and the Middle East. The Company
believes that one or more of these agreements will be executed during 2004.
These agreements are expected to include provisions for the commercial partner
to pay ABI a technology access fee, payments for a portion of the clinical trial
expenses, payment obligations to ABI upon the accomplishment of certain defined
tasks and/or provide for payments relating to the future sales of commercial
product. These agreements could be an important source of funds for ABI.
However, there can be no assurance that the Company will be successful in
obtaining additional funding from either human health and animal health
commercial development partners or private investors. If the Company is not
successful in raising additional funds, it will need to significantly curtail
clinical trial expenditures and to further reduce staff and administrative
expenses and may be forced to cease operations.

                                       8
<PAGE>

Results of Operations:

Revenues. During the nine-month period ended September 30, 2004 $41,369 from
product sales was generated compared to revenues from product sales for the
nine-month period ended September 30, 2003, of $34,633, an increase of $6,736 or
approximately 19%.

Selling, General and Administrative Expenses. Selling, General and
Administrative expenses of $278,365 were incurred for the nine-month period
ended September 30, 2004, compared to $270,502 for the nine-month period ended
September 30, 2003.

Non-Cash Consulting Activities. During the first nine-months of 2004, the Board
of Directors authorized the issuance of shares of restricted common stock to
three consultants in lieu of cash payments. Based upon the common stock trading
price at the times of issuance, non-cash consulting expense of approximately
$2,900 was recorded for the issuance of these shares during the three-month
period ended September 30, 2004, and approximately $90,000 for the three-month
period ended June 30, 2004.

Net Income (Loss). As a result of the above, in the nine-month period ended
September 30, 2004, the Company's Net Loss was ($450,425) compared to a Net Loss
for the nine-month period ended September 30, 2003 of ($358,163). This increased
loss is due primarily to increased cost of sales in 2004.

Liquidity Needs:

At September 30, 2004, the Company had available cash of approximately $3,191,
and had a working capital deficit of approximately ($2,809,473). Assuming there
is no decrease in current accounts payable, and accounting for various one-time
expenses, the Company's negative cash flow is approximately $39,000 per month.
The Company's continued losses and lack of liquidity indicate that the Company
may not be able to continue as a going concern for a reasonable period of time.
The Company's ability to continue as a going concern is dependent upon several
factors including, but not limited to, the Company's ability to generate
sufficient cash flows to meet its obligations on a timely basis, obtain
additional financing and continue to obtain supplies and services from its
vendors. The Company will need to raise additional funds in order to fully
execute its 2004 Plan.

Forward-Looking Statements:

Certain statements made in this Plan of Operations and elsewhere in this report
are "forward-looking statements" within the meaning of the Private 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-QSB and
10-KSB 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
clinical trials, including without limitation, costs of clinical supplies,
packaging and inserts, patient recruitment, trial monitoring, trial evaluation
and publication; and possible difficulties in enrolling a sufficient number of
qualified patients for certain clinical trials. The Company is also dependent
upon a broad range of general economic and financial risks, such as possible
increases in the costs of employing and/or retaining qualified personnel and
consultants and possible inflation which might affect the Company's ability to
remain within its budget forecasts. The principal 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.

                                       9
<PAGE>

The risks cited here are not exhaustive. Other sections of this report may
include additional factors which could adversely impact the Company's business
and future prospects. Moreover, the Company is engaged in a very competitive and
rapidly changing industry. New risk factors emerge from time to time and it is
not possible for management to predict all such risk factors, nor can it assess
the impact of all such risk factors on the Company's business, or the extent to
which any factor or combination of factors may cause actual results to differ
materially from those projected in any forward-looking statements. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual future events.


                                       10
<PAGE>

Item 3.           Controls and Procedures

Based on the evaluation conducted by Dr. Joseph M. Cummins, both the Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as of a date
within 90 days of the filing date of this quarterly report ("Evaluation Date"),
of the effectiveness of the Company's disclosure controls and procedures, Dr.
Joseph M. Cummins concluded that, as of the Evaluation Date, (1) there were no
significant deficiencies or material weaknesses in the Company's disclosure
controls and procedures, (2) there were no significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the Evaluation Date and (3) no corrective actions were required to
be taken.

PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

            (1)   Form 8-K filed on August 20, 2004, to report a change in the
                  Company's certifying accountant.

            No reports on Form 8-K were filed during the quarter ended September
            30, 2004.


                                       11
<PAGE>

                                   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 15, 2004          By: /s/ Joseph M. Cummins
                                       -----------------------------------------
                                       Joseph M. Cummins
                                       President, Chief Executive Officer
                                       and Chief Financial Officer


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