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


                                 FORM 10-QSB/1A


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


For the quarterly period ended       SEPTEMBER 30, 1998
                               ----------------------------------------


[   ]      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                          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, 1998, there were 5,414,232 shares of the issuer's common
stock outstanding.

                         This report contains 13 pages.





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<PAGE>   2





                           AMARILLO BIOSCIENCES, INC.


                                      INDEX


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

<S>                 <C>                                                                                         <C>
Item 1.              Financial Statements (unaudited)
                     Consolidated Balance Sheets - December 31, 1997 and
                     September 30, 1998..........................................................                   3
                     Consolidated Statements of Operations - Three Months and
                     Nine Months Ended September 30, 1997 and 1998 and
                     Cumulative from June 25, 1984 (Inception) through
                     September 30, 1998..........................................................                   4
                     Condensed Consolidated Statements of Cash Flows - Nine
                     Months Ended September 30, 1997 and 1998 and
                     Cumulative from June 25, 1984 (Inception) through
                     September 30, 1998..........................................................                   5
                     Notes to Consolidated Financial Statements..................................                   6

Item 2.              Update to Management's 1998 Plan of Operation...............................                   7
                     Year 2000 Disclosure........................................................                   8
                     Liquidity and Capital Resources.............................................                  10

PART II:             OTHER INFORMATION

Item 6.              Exhibits and Reports on Form 8-K............................................                  12
Signatures           ............................................................................                  13
</TABLE>






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<PAGE>   3



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

                           CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                                  December 31,        September 30,
                                                                                     1997                 1998
                                                                                  ------------        ------------
ASSETS
<S>                                                                            <C>                 <C> 
Current assets:
  Cash and cash equivalents                                                     $    879,170        $  5,335,452
  Marketable securities                                                            6,007,182                --
  Other current assets                                                                70,779              51,368
                                                                                ------------        ------------
   Total current assets                                                            6,957,131           5,386,820
Property and equipment, net                                                          125,179             120,621
Patent license, net of accumulated amortization of $73,824 and
  $79,323 at December 31, 1997 and September 30, 1998, respectively                   51,176              45,677
Organization cost, net of accumulated amortization of $4,962 and
  $6,084 at December 31, 1997 and September 30, 1998, respectively                     1,122                --
Investment in ISI common stock                                                       114,023               8,203
                                                                                ------------        ------------
Total assets                                                                    $  7,248,631        $  5,561,321
                                                                                ============        ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                              $     74,754        $    143,192
  Accrued interest expense                                                            91,356             179,106
  Other accrued expenses                                                              47,958              19,061
                                                                                ------------        ------------
    Total current liabilities                                                        214,068             341,359
Notes payable to related party                                                     2,600,000           2,600,000
                                                                                ------------        ------------
Total liabilities                                                                  2,814,068           2,941,359
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                                                      13,392,138          13,392,138
  Deficit accumulated during the development stage                                (9,045,415)        (10,754,196)
  Other comprehensive income (loss)                                                   33,698             (72,122)
                                                                                ------------        ------------
Total stockholders' equity                                                         4,434,563           2,619,962
                                                                                ------------        ------------
Total liabilities and stockholders' equity                                      $  7,248,631        $  5,561,321
                                                                                ============        ============
</TABLE>

                             See accompanying notes.



                                        3

<PAGE>   4




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

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                                  Cumulative
                                                                                                                    from
                                                                                                                   June 25,
                                                                                                                    1984
                                               Three months ended                  Nine months ended             (Inception)  
                                                  September 30,                       September 30,                through
                                        ------------------------------      ------------------------------       September 30,
                                               1997          1998                1997              1998              1998
                                        ------------------------------      ------------------------------      --------------
<S>                                     <C>               <C>               <C>               <C>               <C>         
Revenues:
  Contract revenues                     $       --        $       --        $       --        $       --        $  9,000,000
  Interferon sales                               402              --                 402              --             420,974
  Interest income                            101,821            68,494           323,491           235,969         1,353,787
  Sublicense fees                               --                --                --                --             113,334
  Royalty income                                --                --                --                --              31,544
  Gain on sale of ISI stock                     --                --                --                --             188,562
  Other                                       26,000              --              52,000              --             604,371
                                        ------------      ------------      ------------      ------------      ------------
                                             128,223            68,494           375,893           235,969        11,712,572

Expenses:
  Research and
    development expenses                     341,015           341,998         1,057,350         1,062,409        11,042,003
  Selling, general, and
    administrative expenses                  397,018           235,600           973,007           794,591        10,602,071
  Interest expense                            29,625            29,250            88,875            87,750           787,694
                                        ------------      ------------      ------------      ------------      ------------
                                             767,658           606,848         2,119,232         1,944,750        22,431,768
                                        ------------      ------------      ------------      ------------      ------------

Loss before income taxes                    (639,435)         (538,354)       (1,743,339)       (1,708,781)      (10,719,196)
Income tax expense                              --                --                --                --              35,000
                                        ------------      ------------      ------------      ------------      ------------
Net loss                                $   (639,435)     $   (538,354)     $ (1,743,339)     $ (1,708,781)     $(10,754,196)
                                        ============      ============      ============      ============      ============
Net loss per share                      $      (0.12)     $      (0.10)     $      (0.32)     $      (0.32)
                                        ============      ============      ============      ============
Weighted average shares
  outstanding                              5,414,232         5,414,232         5,414,232         5,414,232
                                        ============      ============      ============      ============
</TABLE>




                             See accompanying notes.


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<PAGE>   5





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

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>

                                                        Nine months ended           Cumulative from 
                                                          September 30,              June 25,1984      
                                                  ------------------------------  (Inception) through 
                                                       1997             1998         Sept. 30, 1998     
                                                  -------------     ------------      ------------     

<S>                                               <C>               <C>             <C>          
Net cash used in operating activities             $ (2,019,952)     $ (1,541,335)     $ (9,613,216)
                                                  ------------      ------------      ------------

Net cash provided by (used in) investing
activities                                               6,870         5,997,617          (528,351)
                                                  ------------      ------------      ------------
Net cash provided by financing
activities                                                --                --          15,477,019
                                                  ------------      ------------      ------------
Net increase (decrease) in cash and cash
equivalents                                         (2,013,082)        4,456,282         5,335,452
                                                  ------------      ------------      ------------
Cash and cash equivalents at beginning
of period                                            2,799,297           879,170              --
                                                  ------------      ------------      ------------
Cash and cash equivalents at end of
period                                            $    786,215      $  5,335,452      $  5,335,452
                                                  ------------      ------------      ------------
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes                        $       --        $       --        $     37,084
                                                  ------------      ------------      ------------
Cash paid for interest                            $       --        $       --        $      6,466
</TABLE>



                             See accompanying notes.



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<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 for the year ended December 31, 1997, are unaudited (except for
         the December 31, 1997 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 nine months ended September 30, 1998 are not
         necessarily indicative of the results that may be expected for the full
         year ending December 31, 1998.

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

3.       Reclassification. For comparison purposes with 1998, certain amounts
         have been reclassified from selling, general and administrative
         expenses to research and development expenses for the nine months ended
         September 30, 1997. The impact of the reclassification was $130,308.

4.       Comprehensive income.  As of January 1, 1998, the Company adopted 
         Financial Accounting Standards Board Statement No. 130 (Statement 130),
         Reporting Comprehensive Income. Statement 130 establishes new rules for
         the reporting and display of comprehensive income and its components;
         however, the adoption of this Statement has no impact on the Company's
         results of operations or shareholders' equity. Statement 130 requires
         unrealized gains or losses on the Company's available-for-sale
         securities, which prior to adoption are reported separately in
         shareholders' equity, to be included in other comprehensive income.
         Prior year financial statements have been reclassified to conform to
         the requirements of Statement 130.

         For the three months ended September 30, 1998 and 1997, total
         comprehensive loss amounted to ($545,323) and ($639,435). For the nine
         months ended September 30, 1998 and 1997, total comprehensive loss
         amounted to ($1,814,601) and ($1,589,839).

5.       Subsequent Event.  On November 5, 1998, the Company confirmed by 
         letter its intention to enter into an agreement with Agritek Bio
         Ingredients Corporation ("Agritek"), under which Agritek would expend
         $250,000 over the course of one (1) year for clinical studies in at
         least two (2) animal health indications. Depending upon Agritek's
         evaluation of the results of those studies, Agritek would then make an
         election to either purchase seventy percent (70%) of the voting common
         stock of the Company's animal health subsidiary, Vanguard Biosciences,
         Inc. ("Vanguard"); or, in lieu of acquiring the stock of Vanguard, to
         receive $250,000 worth of the Company's common stock, priced at its
         market value on the date of such election. If Agritek elects to
         purchase seventy percent (70%) of Vanguard, the purchase price will be
         at least $500,000, and no more than $2,000,000, with the actual price
         being contingent upon the speed with which regulatory approval to
         market two animal health products in the US is obtained.


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<PAGE>   7



ITEM 2.           UPDATE TO MANAGEMENT'S 1998 PLAN OF OPERATION

                  RESEARCH

                  A confirmatory Phase 2 clinical trial continues in subjects
                  with fibromyalgia syndrome (FMS). A market analysis estimated
                  that 7.5 million Americans suffer from FMS. Our confirmatory
                  Phase 2 trial in 120 subjects represents a significant step in
                  the Company's strategy to develop a FDA approved treatment. As
                  of now, there are no products approved in the US for FMS;
                  currently patients are treated with pain relieving drugs and
                  antidepressants which are approved for other indications.

                  Our clinical trials in human immunodeficiency virus (HIV)
                  positive subjects with oral warts (University of California
                  San Francisco) continues. Our study in subjects who are HIV
                  positive with dry mouth (University of Mississippi) was
                  completed; some improvement in oral comfort and increased
                  salivation was noted. Nineteen subjects were screened and 12
                  were enrolled; of those, only 5 completed the study but the
                  data are useful in a patent application.

                  The study in myelofibrotic disease subjects was completed. Ten
                  subjects were enrolled with agnogenic myeloid metaplasia and 9
                  completed the course of therapy; 0 of 5 evaluable subjects had
                  a response for hemoglobin improvement, 4 with high hemoglobin
                  maintained their hemoglobin and 2 of 9 evaluable subjects had
                  at least a partial response for both hepatomegaly. One of 6
                  subjects with primary thrombocytopenia had a positive response
                  and 3 of 7 subjects with polycythemia vera had at least a
                  partial response. Overall, there were some positive responses.
                  However, because other areas of research look more promising,
                  and because the principal investigator died of a heart attack,
                  the Company does not contemplate further R&D in this area.

                  The start of the Phase 3 clinical trial on Sjogren's syndrome
                  was delayed while the FDA considered protocol changes.
                  Progress in understanding the basic mechanism of action of
                  oral interferon alpha continued in the third quarter of 1998.
                  A study of topical interferon alpha in dogs and cats continued
                  in the third quarter of 1998. Our hepatitis C study in Canada
                  continues.

                  A new R&D director, Dr. Phil Fox, agreed to a contract and
                  will join the company January 1, 1999. Dr. Fox has a research
                  career spanning 23 years at the National Institutes of Health,
                  National Institute of Dental Research in Bethesda, Maryland,
                  serving most recently as clinical director of the Intramural
                  Research Program.



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<PAGE>   8



                  YEAR 2000 DISCLOSURE

I.       ABI'S STATE OF READINESS

         A.       IT SYSTEMS.

                  ABI owns relatively few information technology ("IT") systems,
                  consisting of approximately twelve (12) computers. The basic
                  input/output system ("BIOS") of each computer has been checked
                  using publicly available utilities designed for that purpose.
                  With one exception, the BIOS of each computer was found to be
                  Year 2000 compliant. The non-compliant computer was brought
                  into compliance with software, and in a subsequent test,
                  proved to be Year 2000 compliant.

                  The software used on the computers owned by ABI is all
                  commercially available, off-the-shelf software; ABI does not
                  own any custom-made software. The Year 2000 compliance of each
                  of the programs has been verified with the vendors of those
                  programs, and all software used by the Company is either Year
                  2000 compliant or compliant with minor issues.

         B.       NON-IT SYSTEMS.

                  The Company does not own any machines (other than the
                  computers mentioned above) that contain microprocessors or
                  microcontrollers. Therefore, the Company does not need to
                  assess or plan for Year 2000 issues pertaining to non-IT
                  systems.

         C.       THIRD PARTIES.

                  The Company is investigating the Year 2000 preparedness of
                  those third parties with which it has a material relationship.
                  As the principal business of the Company is testing the
                  effectiveness of new drugs, the Company sees two categories of
                  third-party Year 2000 issues.

                  First, the Company is investigating those third parties who
                  are essential in the production, packaging, and delivery of
                  the test drugs ("clinical supplies") to the clinical trial
                  sites. If any steps along the chain of production of the drugs
                  were interrupted by a Year 2000 issue, then the supply of the
                  clinical supplies to the clinical trial sites could be
                  interrupted. This would delay the clinical trials, and
                  consequently delay ultimate FDA approval for the drugs. The
                  Company is in the process of investigating the Year 2000
                  preparedness of each of the companies that plays a key role in
                  the production, packaging, and distribution of the drug.

                  Second, the Company is taking steps to insure that clinical
                  trial data is not lost due to a Year 2000 issue. This requires
                  an investigation of the company that is managing the clinical
                  trial, as well as the procedures used at the various clinical
                  trial sites, and the process by which the clinical data is
                  stored and transmitted back to the Company. We have already
                  had initial contact with PPD Pharmaco, the


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<PAGE>   9



                  clinical trial manager, and they assure us that they expect
                  full Year 2000 compliance by the end of the first quarter of
                  1999.

                  The Company has employed a consultant, Mr. James Corti, who is
                  responsible for assessing the Year 2000 preparedness of those
                  third parties with which the Company has a material
                  relationship. While the responsiveness of those third parties
                  to our inquires is beyond the Company's control, we estimate
                  that Mr. Corti will conclude his Year 2000 assessment by the
                  end of April, 1999.

II.      COSTS TO ADDRESS YEAR 2000 ISSUES

         The Company has not yet encountered any actual Year 2000 problems,
         except for one computer BIOS referred to in Paragraph I A above, which
         was corrected with publicly available shareware at no cost to the
         Company. The Company therefore has not spent any money on remediation.
         All of the costs incurred to date have been related to the
         investigation of potential Year 2000 issues. All of the Year 2000
         related costs should be incurred before the end of April, 1999. We
         anticipate that these costs will not exceed $10,000.00.

III.     THE RISK OF THE COMPANY'S YEAR 2000 ISSUES

         There are two ways in which the Company would be adversely affected by
         a worst-case Year 2000 scenario.

         First, Year 2000 problems could interrupt the supply of clinical
         supplies to clinical testing sites. If clinical supplies became
         corrupted and had to be replace, or if the supplies otherwise became
         temporarily unavailable, this would cause a 3-6 month delay in the
         clinical trial. Such a delay would delay the ultimate profits to the
         Company from sales of the drug by the same amount of time.

         Second, a Year 2000 problem could result in damage to the clinical
         trial data. Because the data is originally entered on hardcopy, that
         is, actual pieces of paper, and because that hardcopy data is not
         destroyed, clinical trial data can never by completely lost due to a
         Year 2000 problem. At most, the computer data could be lost due to a
         Year 2000 problem, and the Company would incur additional expense and
         delay to have the data re-entered from the original hardcopies. The
         same is true for the study codes that reveal which trial subjects used
         placebo: if a code were lost due to a computer error, then the clinical
         trial data could be reconstructed from the hardcopies of the code kept
         at the Company.

IV.      CONTINGENCY PLANS

         A.       DRUG SUPPLY. The Company has only one supplier for the drug
                  itself, but does have a second source for the processing and
                  packaging of the drug into a usable clinical trial form. The
                  Company plans to establish a stockpile of each drug before
                  beginning clinical trials. This will provide a buffer against
                  any possible interruption of supply due to a Year 2000
                  problem. But stockpiling alone is not enough to guarantee a
                  supply of the drug during the clinical trials. In order to


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<PAGE>   10



                  afford the greatest amount of stability, clinical study
                  supplies are refrigerated. Conceivably, a Year 2000 problem
                  could cause the failure of the refrigeration system and ruin
                  the supply of the drug. Central storage of clinical supplies
                  will be temporary only, pending distribution to study sites,
                  and will be at a location with adequate backup systems,
                  meaning those with the capability to generate electrical power
                  with fossil fuel fired generators, though the individual
                  clinical trial sites may not have these precautions. In the
                  event of loss of trial supplies at one or more trial sites,
                  the Company will have the capability to replace such supplies,
                  within certain limits. Specifically, the Company orders 10%
                  more of all clinical supplies than will be required for
                  conduct of the study, assays, and other requirements. By way
                  of example, the Company's Phase 3 Sjogren's Syndrome Trial
                  will involve 50 separate trial sites. Accordingly, the Company
                  will have sufficient clinical supplies to replace lost
                  clinical supplies at five of those trial sites. If the losses
                  of clinical supplies exceeded that amount, the Company would
                  then be dependent upon its suppliers to replace such trial
                  supplies. If such suppliers had also experienced interruptions
                  in the manufacturing capability, the commencement of the
                  trials at certain sites could be delayed.

         B.       DATA INTEGRITY. Clinical trial data and the study codes used
                  in the study will be stored both in hardcopy form and on
                  diskette. While the hardcopies should provide the ultimate in
                  data safety, the diskettes should also be safe from any Year
                  2000 harm. The diskettes will provide a less expensive way of
                  restoring lost clinical trial data and study codes in the
                  event of a Year 2000 problem.


                  LIQUIDITY AND CAPITAL RESOURCES

                  At September 30, 1998, the Company had cash of $5,335,452 with
                  accounts payable of $143,192 and other funding commitments for
                  clinical studies of approximately $944,449.

                  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
                  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 12 months.

                  The Company intends to continue to focus its development
                  activities on the treatment of Sjogren's syndrome,
                  fibromyalgia, opportunistic infections in patients who are HIV
                  positive and hepatitis C, and in addition, is considering the
                  commencement of research into myeloproliferative diseases and
                  hepatitis B. Unless the Company generates significant revenues
                  during such period, the Company will need additional financing
                  to fully fund such development. Moreover, the Company's
                  estimate of the amount required to complete its 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 shareholders of the Company will
                  provide any portion of the Company's future financing
                  requirements. There can be no assurance that,


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<PAGE>   11



                  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 Company's existing cash as of
                  September 30, 1998 otherwise proves 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.




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<PAGE>   12



                           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, 1998.





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<PAGE>   13




                                   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: January 26, 1999                  By: /s/ JOSEPH M. CUMMINS
                                           -----------------------------------
                                            Joseph M. Cummins
                                            President, Chief Executive Officer
                                            and Chief Financial Officer





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