<PAGE>
 
================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                              ___________________
                                   FORM 10-K
(MARK ONE)

  [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                      EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED MARCH 31, 1997.

                                      OR

  [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
            FOR THE TRANSITION PERIOD FROM __________ TO __________
                        COMMISSION FILE NUMBER 1-10538.


                            GAMMA BIOLOGICALS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         TEXAS                                           74-1668436
(STATE OF INCORPORATION)                              (I.R.S. EMPLOYER
                                                      IDENTIFICATION NO.)

           3700 MANGUM ROAD                                 77092
            HOUSTON, TEXAS                                (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

     REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE IS (713) 681-8481
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                 NAME OF EACH EXCHANGE
     TITLE OF EACH CLASS                          ON WHICH REGISTERED
     -------------------                         ---------------------

     COMMON STOCK $.10 PAR VALUE................ AMERICAN STOCK EXCHANGE
     COMMON STOCK PURCHASE RIGHTS............... AMERICAN STOCK EXCHANGE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                     NONE
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                 YES  X.    NO.

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. 
                                            [ ]

    State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days of the date of filing.

       As of June 17, 1997: Common Stock, $.10 par value -- $20,426,043

    Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as at the latest practicable date.

     As of June 17, 1997: Common Stock, $.10 par value -- 4,603,052 shares
     
                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the annual report to shareholders for the year ended March 31,
1997 are incorporated by reference into Part I and Part II.

    Portions of the proxy statement for the annual meeting to be held August 7,
1997 are incorporated by reference into Part III.
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<PAGE>
 
                                  P A R T  I

ITEM 1. BUSINESS.

     Gamma Biologicals, Inc. (which, together with its subsidiaries is herein
referred to as the "company" or "Gamma") manufactures reagents and systems used
for in-vitro diagnostic testing. The reagents are sold to hospitals, blood
centers and medical laboratories where they are used to detect the presence of
diagnostically significant substances in biological fluids, primarily human
blood. The company also develops test systems, which use certain of the
company's reagents and serve to standardize test procedures. See "New
Technology" and "Products Under Development - Gamma ReACT(TM) System".

     The company's current products are used in a number of applications,
including:

     .  grouping donor and patient bloods and performing compatibility tests
        prior to transfusion 

     .  detecting hemolytic disease of the newborn 

     .  identifying antibodies and certain inherited blood group antigens

     .  assisting in platelet antibody/antigen detection

     Gamma markets its products to over 3,500 hospitals, blood centers and
laboratories in the United States and Canada, and to dealers in approximately 50
countries. Domestic sales are made through the company's direct sales force, as
well as through distributors. Internationally, the company sells its products
and products manufactured by others through its subsidiary, Gamma Biologicals,
B.V., and independent dealers.

CURRENT PRODUCTS

     Most of the company's sales are derived from products used in tests
performed to determine the ABO and Rh groups of hospital patients and blood
donors, to detect and identify antibodies, to confirm compatibility between
blood donors and patients, and in routine prenatal care. Antibodies are serum
components produced in reaction to the introduction of foreign substances into
the body through transfusion, pregnancy or other mechanisms. The company's
reagent red cell products are used to test patients' blood specimens for
antibodies and, if antibodies are present, to determine their identity, thereby
enabling suitable donor blood to be selected. The selection of proper donor
blood is also aided by testing with the company's line of other blood grouping
reagents. Blood grouping reagents are products prepared from serum (the liquid
portion) of blood drawn from immunized human donors, from antibodies secreted by
monoclonal cell lines (hybridomas), and certain seed extracts (lectins). After
an appropriate donor blood has been selected for transfusion to a patient, a
direct test of compatibility is commonly performed using patient and donor
bloods. The company's antiglobulin reagents (commonly known as "Coombs
reagents") are used in all stages of these procedures beyond initial blood
grouping.

     BLOOD BANK PRODUCTS. This group includes blood grouping reagents, Coombs
reagents, antibody potentiators, test cell products, quality control systems and
certain specialty products.

     Blood grouping reagents are used to determine the four major blood groups
(A, B, AB and O) and six factors in the Rh blood group system, and include other
products utilized to detect blood group factors in the eight other blood group
systems.

     Coombs reagents are used in blood grouping, antibody detection and
identification procedures and in the diagnosis of hemolytic disease of the
newborn, as well as autoimmune hemolytic anemia. The company presently markets
five Coombs products in three different specificities.

                                      -2-
<PAGE>
 
     Antibody potentiators are solutions added to blood testing systems to
enhance their sensitivity. Improved sensitivity is also achieved by the use of
certain proteolytic enzymes. The company presently markets six antibody
potentiators and two enzyme reagents.

     Reagent red cell products are used in conjunction with Coombs reagents to
detect and identify antibodies during pregnancy and in patient and donor blood
serums. The company presently manufactures and sells 25 test cell products
processed from human blood.

     Reagent Quality Control (RQC(R)) Kit is a product comprising three
selected reagents, designed to enable hospital laboratories and blood banks to
test the effectiveness of reagents and to provide an organized permanent record
of the test results, as required by various regulatory agencies.

     Specialty reagents include a screening test for the detection of
significant fetal-maternal hemorrhage, a self-evaluation system that is designed
both to determine technical proficiency and to provide educational content, a
simpler system for competency testing, and six products for the resolution of
unusual blood groups or antibody detection problems.

     Platelet testing kits are manufactured by Genetic Testing Institute, Inc.
and are distributed exclusively by Gamma in the domestic market.  Distribution
in certain other countries is by mutual consent.

                           GAMMA PRODUCT GROUP TABLE

                              NUMBER OF    
     BASIC PRODUCT GROUPS     PRODUCTS           MAIN USE OF PRODUCTS
     --------------------     ---------          --------------------
                                 
BLOOD GROUPING REAGENTS

 ABO
  Monoclonal                     4       Routine testing of patients and donors 
  Lectin                         2       and in prenatal care.
                                  
 Rh                               
  Human source                   6       Rh phenotyping in selected cases; 
  Monoclonal                     6       routine testing of patients and 
                                         donors and in prenatal care.
                                  
 Rh Control                      2       Routine control of Rh grouping tests.
                                  
 Other                            
  Human source                  15       To aid in the selection of blood for
  Monoclonal                     8       patients with blood group antibodies.  
  Lectin                         1       
                                  
COOMBS REAGENTS                   
  Monoclonal                     5       With other products, in routine
                                         antibody detection (including
                                         pretransfusion compatibility testing),
                                         antibody identification and the
                                         diagnosis of certain diseases.
                                  
ANTIBODY POTENTIATORS            6       With other products, in all antibody
                                         detection and identification tests.
                                  
REAGENT RED CELL PRODUCTS         
 Serum ABO Grouping              4       With ABO blood grouping reagents, in
                                         routine ABO grouping tests.
                                  
 Antibody Detection             10       With Coombs reagents and antibody
                                         potentiators, in detection of
                                         antibodies in patients and donors, and
                                         in prenatal care.

                                             (Table continued on following page)

                                      -3-
<PAGE>
 


                              NUMBER OF    
     BASIC PRODUCT GROUPS     PRODUCTS           MAIN USE OF PRODUCTS
     --------------------     ---------          --------------------

REAGENT RED CELL PRODUCTS (continued)
 Antibody Identification         7       With Coombs reagents and antibody
                                         potentiators, in identification of
                                         antibodies detected in routine testing.

 Reagent Control                 4       Routine control of all Coombs tests and
                                         control of the test for weak D (D/u/
                                         test), mainly on donors.

RQC(R) KIT                       1       Routine quality control of blood bank
                                         reagents and procedures.
 
SPECIALTY REAGENTS
 Fetal Bleed Screen Kit          1       To detect excessive fetal-maternal
                                         hemorrhage in Rh-negative women.

 ELU-KIT(R) II                   1       To aid in identification of antibodies
                                         (especially those bound to red cells in
                                         the circulation).
 
 Blood Group Substances          2       To assist in antibody identification
                                         procedures.

 Enzymes                         2       To assist in antibody detection and
                                         identification.

 Gamma-Quin(R)                   1       To remove cell-bound antibody in some
                                         disease states to enable patient cells
                                         to be tested with blood grouping
                                         reagents.

 Lectins                         2       For the investigation of
                                         polyagglutination.

 RiSE(TM)                        1       To determine technical proficiency and
                                         provide continuing education.

 Tech-Chek(TM)                   1       To test technical staff for competency.

 Platelet Testing Kits           3       To assist in platelet antibody/antigen
                                         detection.

OTHER SPECIALTY ITEMS
 PV-Plates(TM)                   4       Extended blood grouping on selected
                                         samples, for forensic use.

 SegmentSampler(TM)              1       Disposable blood handling safety
                                         device.

 Saber(TM)                       1       Segment sampling device.
 

NEW TECHNOLOGY

     In 1989, Gamma began in-house research into a new in-vitro diagnostic
testing system utilizing electro-biosensor technology. The immunoelectrode
technique detects change in electrical charge as a positive test result in less
than five minutes. The advantages of this testing system are speed and accuracy,
while obtaining objectivity, as the results are determined by electrical
impulse.

     Gamma continues funding biosensor research at the University of Wollongong,
Australia, and progress reports appear encouraging towards the development of a
reliable test system. Although commercialization is not expected before fiscal
1999, the company is not aware of any competitive efforts to utilize this new
technology in the field of immunohematology. The company provided the University
with $207,500 for biosensor research in fiscal 1997 and has committed to provide
an additional $42,500 in fiscal 1998.

                                      -4-
<PAGE>
 
PRODUCTS UNDER DEVELOPMENT

     Gamma ReACT(TM) System. Gamma has developed and applied for a patent on a
microcolumn technology to be used for red cell affinity testing. Products based
on this technology should help Gamma compete with other microcolumn tests
marketed very successfully in Europe since 1988 and recently introduced in the
United States. The acronym ReACT has been chosen as a commercial trade name for
the product line.

     The principle of ReACT is based on the affinity adherence of red cells to
an immunologically active matrix. The matrix consists of specially treated
agarose beads. Custom designed disposables and dedicated centrifuge equipment
have been developed to provide customers with an easy-to-use and inexpensive
testing system.

     The company's first ReACT products will be used for blood grouping,
crossmatching, antibody screening and identification. Gamma applied for FDA
approval to market ReACT products in the United States in October 1996.  Sales
of test systems are currently expected to commence outside the United States in
the summer of 1997.

     Gamma-clone(R) (Monoclonal) Reagents.  The development of hybridoma
technology has led to a ready availability of monoclonal antibodies, which have
had a major impact on the design and manufacture of immunodiagnostic reagents.
The company has recognized the potential for the application of this new
technology to several of its blood bank product lines, and has pursued a program
of introducing monoclonal-based products wherever the technology proves to be
advantageous.

     The company currently markets eighteen FDA-licensed blood grouping reagents
manufactured by hybridoma technology. Its five monoclonal Coombs reagents
include the first FDA-licensed Anti-IgG. The company owns or has exclusive use
of the raw material sources (clones) for twelve of the blood grouping reagents
and all of the Coombs products; these clones are grown in-house to produce
source material for manufacturing the relevant products. A license supplement
has recently been approved for two Anti-D reagents and an Anti-E reagent based
on cell lines of which the company has exclusive use.  Consequently three more
existing products purchased from an outside source have been replaced by ones
for which the company is its own source of raw material. Raw materials for the
remaining products are currently purchased from a single supplier. Should the
supply of these materials from this source be interrupted, the company
anticipates that it could locate alternative sources of supply. The company is
committed to a program aimed at developing clones for all blood grouping
reagents.

     Gamma is currently pursuing a license application for a monoclonal Anti-c
reagent based on a cell line of which the company has exclusive use.  In
addition, the company has filed a premarket notification submission for a
product intended to assist in the testing of patients with auto-immune hemolytic
anemia (EGA-Kit).  This should be approved in the summer of 1997.

     We have entered into a contractual arrangement with Olympus America, Inc. 
to develop blood group reagents and reagent red blood cells ready to use on that
company's PK7200 immunohematology analyzers. Field testing is complete on the
initial products, and an application for the necessary license supplement is
expected to be made before the end of August 1997. Reagents for Rh phenotyping
and typing for the K antigen on the PK7200 are under development.

PRODUCTION AND QUALITY CONTROL

     The company believes that its reputation in the industry as a source of
quality products and services is largely attributable to the expertise of its
technical employees and its maintenance of rigid quality control procedures at
every step of the manufacturing process.

     Raw materials for the FDA-licensed products manufactured and sold by the
company are obtained from several sources. The sources for many of the company's
blood grouping reagent 

                                      -5-
<PAGE>
 
products are human plasma obtained from FDA-licensed establishments and
monoclonal antibodies. Test cell products are manufactured from whole blood
drawn from local donors or purchased from licensed blood banks. The company
believes that the available sources of supply for all raw materials are adequate
for its present and anticipated needs. The company is not dependent on any
single source for any of its raw materials, other than six of its current Gamma-
clone(R) products (see above), and for platelet testing, which are manufactured
by Genetic Testing Institute, Inc. and marketed exclusively in the U.S. by
Gamma.

     Once received, raw materials are subjected to a series of manufacturing and
quality control steps, which vary according to the product. FDA regulations
require samples of each finished lot of all blood grouping and Coombs reagents
to be submitted to the Center for Biologics Evaluation and Research for approval
of release prior to shipment. The FDA has granted the company exemptions from
the lot release requirements for Coombs reagents, for one of its Rh reagents,
for three of its other monoclonal blood grouping reagents, and also for two of
its monoclonal ABO reagents. The remaining blood grouping reagents remain
subject to this provision of the regulations. Test cell products, though also
licensed, do not require prior FDA approval on a lot-by-lot basis.

     The products sold by the company that are not required to be licensed by
the FDA (including antibody potentiators, diagnostic and specialty reagents)
fall into two categories: those manufactured by the company from raw materials
acquired from various sources, and those purchased from outside manufacturers
for distribution by the company. All such products are manufactured in
accordance with a Quality System as promulgated by the FDA. See "Regulation".
The company is currently pursuing ISO 9001 certification and expects to obtain
certification by the summer of 1998.

     The company maintains product liability insurance against bodily injury and
property damage in the amount of $10,000,000.

MARKETING AND SERVICES

     The company's marketing strategy is to build a broad base of customer
loyalty by providing a wide variety of quality products, marketed by a highly
qualified sales force and supported by in-house technical assistance. The
company believes that responsiveness to customer needs, both in the provision of
services and the introduction of new products, is the key to success.

     The company sells its products to hospitals, blood banks, the United States
armed forces, and university and private research institutions throughout the
world. In the United States and Canada, the company is directly represented by
21 full-time salespersons. Most members of the sales force have degrees in
medical technology or blood banking experience. Each salesperson makes direct
calls on pathologists, chief blood bank technologists and purchasing agents at
institutions in defined geographic areas. The company also markets its products
domestically through selected distributors, who sell to small hospitals,
laboratories and doctors' offices. Internationally, the company is represented
by its subsidiary, Gamma Biologicals, B.V., and independent dealers.

     Management believes that timely delivery of its products to customers is an
important element of its marketing and sales strategy. The company maintains an
inventory sufficient to allow prompt response to customer needs. The company
sells test cell products and its RQC and Tech-Chek Kits on standing orders for
shipment every two, three or four weeks. The RiSE educational product is shipped
quarterly. All contracts for company products may be terminated at any time
without penalty by either the customer or the company.

     To support its sales force and dealers, the company participates in a
number of educational programs, with management and employees serving as
speakers or faculty members in numerous domestic and international workshops and
conventions. This participation provides visibility for the company and enhances
its reputation in the scientific community. The company also conducts in-house
training programs for blood bank personnel. In addition, the company maintains a
reference laboratory, 

                                      -6-
<PAGE>
 
recognized by the American Association of Blood Banks, which employs five
persons (including three persons registered as blood bank specialists by the
American Society of Clinical Pathologists) and provides consulting services for
hospitals and blood banks with rare or difficult blood testing problems. The
reference laboratory often serves as a means of introducing the company and its
products to potential customers, generating new products in response to customer
needs and providing ongoing quality control of the company's blood bank
products. New discoveries made in the course of investigating problems referred
for consultation are regularly reported in scientific literature or at
scientific meetings.

     Sales to the company's six largest domestic customers (two of which are
regional laboratory supply dealers) represented 5.7% of the company's net sales
for fiscal 1997 and 5.8% for fiscal 1996.

     Approximately 29.8% of the company's net sales in fiscal 1997 were made to
foreign customers. In fiscal 1997 the company's export sales were to customers
in Japan ($832,000), Spain ($470,000), the Netherlands ($462,000), Brazil
($375,000),  Argentina ($332,000), and over 50 other countries worldwide.

REGULATION

     The company operates under U.S. Government Establishment License No. 435,
granted by the National Institutes of Health in 1971. The terms of the license
subject the company to stringent manufacturing and quality control standards,
and the license may be suspended or revoked by the FDA for cause at any time.
Such revocation would cause the company to cease business. The company's blood
grouping and Coombs reagents, as well as its test cell products, must be
licensed by the FDA pursuant to the Public Health Service Act and are
manufactured in accordance with defined standards.

     In addition, the Federal Food, Drug and Cosmetic Act and the Safe Medical
Devices Act, together with regulations issued or authorized thereunder, provide
for regulation by the FDA of the marketing, manufacture, labeling, packaging and
distribution of medical devices, including most of the company's non-licensed
products. Among the applicable regulations are requirements that medical device
manufacturers register with the FDA, list devices manufactured by them, and file
various reports. Regulations covering The Quality System for Medical Devices set
forth requirements for, among other things, the company's manufacturing
processes and associated record-keeping and maintenance. Certain requirements
must be met before initial marketing of medical devices, ranging from a minimum
obligation to notify the FDA before commencing marketing of a product
substantially equivalent to devices already in commerce, to a maximum obligation
to comply with the potentially expensive and time-consuming process of testing
necessary to support an application for premarket approval. The FDA also has the
authority, which it has so far exercised only to a limited degree, to issue
performance standards to be met by most of the types of non-licensed products
manufactured by the company. The company anticipates no difficulty in meeting
the performance standards for the products as promulgated by the FDA.

     None of the company's current or proposed products, except those labeled
for forensic use only, can be marketed in the United States without the licenses
or registrations required by the FDA. Unscheduled FDA inspections of the
company's facilities occur from time to time to determine compliance with
applicable FDA regulations. To date, the company believes that it has
satisfactorily complied with requirements imposed by the FDA, OSHA, EEOC and
other government agencies. The company also believes that the manufacturing and
quality control procedures it employs conform to requirements of the Quality
System regulations.

MARKETS AND COMPETITION

     Management believes that the world market for blood bank reagent products
is approximately $160 million per year, with about 40% of the market being in
the United States. There are three other companies that actively compete with
the company, one of which is Ortho Diagnostic Systems, a 

                                      -7-
<PAGE>
 
division of Johnson and Johnson, Inc., which the company believes accounts for
about 50% of all domestic sales. Other competitors include Immucor, Inc. and
BCA, a division of Biopool International.

     Competition is based on quality of product, price, the size and talent of
sales forces, ability to furnish a range of existing and new products, customer
services and continuity of product supply. During the past several years, the
industry has experienced aggressive price competition, particularly among
manufacturers that target large hospitals and institutions as key customers. In
spite of this competitive environment, the company has maintained its worldwide
sales and increased its domestic reagent market share. Management believes that
this is due to the company's emphasis on product quality, the introduction of
new products, specialty products, customer service and training.

RESEARCH AND DEVELOPMENT

     The company's strategy for growth includes internal research and
development, technology acquisition and worldwide marketing. The research and
development program is based upon the allocation of available resources among
new product development, process development, product and process improvement,
and technical services to manufacturing and marketing.

     Any new product developed by the company will require, prior to its
domestic sale, licensing or approval to market by the FDA. There can be no
assurance that any such product will be so licensed or approved, or that it will
gain acceptance in the marketplace.

     In fiscal 1997, 1996 and 1995, the company expended $1,449,000, $1,349,000
and $1,013,000, respectively, for research and development on monoclonal,
microcolumn and electro-biosensor technologies. The company engaged in no
customer-sponsored research during these periods.

PATENTS AND TRADEMARKS

     In May 1994, the company applied for United States and international
patents covering a new antigen/antibody detection procedure using an affinity
adherence technology. See "Products Under Development - Gamma ReACT System(TM)".
Two additional patent applications have been submitted covering the ReACT
technology.

     The company is funding two international patent applications, submitted by
the University of Wollongong, covering certain procedures developed in the
course of their electro-biosensor research. In return for this financial
support, the company would receive a four-year, royalty-free exclusive worldwide
license to manufacture and sell any product based on claims made in these
applications.

     The company's trademark rights to the mark "Gamma" have been federally
registered. The company holds nine different trademark registrations for various
uses of "Gamma" and claims trademark rights in respect of other brand names
utilized to identify the company's products. The company presently owns a number
of federal and state registrations and has an aggressive policy of registering
its trademark rights, where such is deemed available. There can be no assurance
that any of the company's registrations will be enforceable.

EMPLOYEES

     The company has 126 full-time employees, of whom 40 hold advanced technical
degrees or certifications in medical technology. Of the total, 43 are sales,
marketing and customer-support personnel, 53 are engaged in manufacturing and
quality control, and the remainder serve in other capacities. The company has
experienced a low turnover rate among its employees and considers its employee
relations to be excellent. None of the company's employees are represented by a
union.

                                      -8-
<PAGE>
 
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     The company operates in one industry segment and two geographic areas, the
United States and Europe.

ITEM 2. PROPERTIES.

     The principal manufacturing, research, shipping, sales and administrative
functions of the company are conducted in a 41,000 square foot building located
in northwest Houston on a three-acre tract of land owned by the company. The
land and building are subject to a first lien mortgage. Management believes that
the facility is both suitable and adequate for current production needs and has
no plans for expanding its domestic facilities in fiscal 1998.  Gamma
Biologicals, B.V. leases approximately 900 square feet of office and warehouse
space in Amsterdam, the Netherlands, which management believes is adequate for
current needs.

ITEM 3. LEGAL PROCEEDINGS.

     The company is involved in various legal actions that are in various stages
of litigation and investigation by the company and its legal counsel. After
reviewing all actions pending or threatened involving the company, management
believes that while the resolution of any matter may have an impact on the
financial results of the period in which the matter is settled, their ultimate
resolution will not have any material adverse effect upon the business or
consolidated financial position of the company. Since these matters are in
various stages of proceedings, future developments could cause management to
revise its assessment of these matters.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     During the fourth quarter of fiscal 1997, no matter was submitted to a vote
of security holders of the company.

                                      -9-
<PAGE>
 
                                  P A R T  II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS.

     The information contained under "Market for Registrant's Common Equity and
Related Shareholder Matters" on page 32 of the company's annual report to
shareholders for the year ended March 31, 1997, is incorporated herein by
reference. See also Notes 7 and 8 of Notes to Consolidated Financial Statements
on pages 26 and 27 of the company's annual report to shareholders for the year
ended March 31, 1997, which is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA.

     The information contained under "Selected Financial Data" on the inside
front cover and page 1 of the company's annual report to shareholders for the
year ended March 31, 1997, is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

     The information contained under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 13 through 18 of the
company's annual report to shareholders for the year ended March 31, 1997, is
incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The following consolidated financial statements of the company and its
subsidiaries, included on pages 19 through 30 of the company's annual report to
shareholders for the year ended March 31, 1997, are incorporated herein by
reference:

     Statements of Consolidated Income -- Years ended March 31, 1997, 
     1996 and 1995

     Consolidated Balance Sheets -- March 31, 1997 and 1996

     Statements of Changes in Shareholders' Equity -- Years ended March 31,
     1997, 1996 and 1995

     Statements of Consolidated Cash Flows -- Years ended March 31, 1997, 
     1996 and 1995
 
     Notes to Consolidated Financial Statements

     The information contained under "Quarterly Financial Data (unaudited)" on
page 32 of the company's annual report to shareholders for the year ended March
31, 1997, is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.


                                 P A R T  III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information contained under "Proposal No. 1 - Election of Directors",
"Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" on pages 3, 4, 7, 8 and 14 of the company's proxy statement dated
June 27, 1997, which has been filed with the Securities and Exchange Commission,
is incorporated herein by reference.

                                      -10-
<PAGE>
 
ITEM 11. EXECUTIVE COMPENSATION.

     The information contained under "Executive Officers", "Severance
Agreements", and "Split-Dollar Agreements" on pages 7 through 13 (except for the
Compensation/Stock Option Committee Report  and Performance Graph therein) of
the company's proxy statement dated June 27, 1997, which has been filed with the
Securities and Exchange Commission, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information contained under "Common Stock Outstanding and Principal
Holders Thereof" on pages 2 and 3 of the company's proxy statement dated 
June 27, 1997, which has been filed with the Securities and Exchange Commission,
is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information contained under "Certain Relationships and Related
Transactions" on page 14 of the company's proxy statement dated June 27, 1997,
which has been filed with the Securities and Exchange Commission, is
incorporated herein by reference.


                                  P A R T  IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

    (a)   (1) AND (2) FINANCIAL STATEMENTS AND RELATED SCHEDULES The response to
          this portion of Item 14 is submitted as a separate section of this
          report.

          (3)  EXHIBITS
          The response to this portion of Item 14 is submitted as a separate
          section of this report.

    (b)   REPORTS ON FORM 8-K
          No Report on Form 8-K was filed by the company during the quarter
          ended March 31, 1997.

    (c)   EXHIBITS
          See Item 14(a)(3), above.

    (d)   FINANCIAL STATEMENT SCHEDULES
          The response to this portion of Item 14 is submitted as a separate
          section of this report.

                                      -11-
<PAGE>
 
                                  SIGNATURES

    PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                             GAMMA BIOLOGICALS, INC.


                                             By:   DAVID E. HATCHER
                                                --------------------------------
                                                (DAVID E. HATCHER, 
                                                CHAIRMAN OF THE BOARD OF 
                                                DIRECTORS, PRESIDENT AND CHIEF 
                                                EXECUTIVE OFFICER)

Dated: June 27, 1997


    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.


         SIGNATURES                TITLE                               DATE
         ----------                -----                               ----

/s/ DAVID E. HATCHER         Chairman of the Board of Directors,   June 27, 1997
--------------------------   President and Chief Executive 
(DAVID E. HATCHER)           Officer 
          
                             
/s/ MARGARET J. O'BANNION    Vice President--Finance and           June 27, 1997
--------------------------   Chief Financial Officer (Principal
(MARGARET J. O'BANNION)      financial and accounting officer)
 

/s/ JOHN J. MOULDS           Director, Senior Vice President       June 27, 1997
--------------------------   and Chief Science Officer
(JOHN J. MOULDS)           


/s/ BETTY FRANCIS HATCHER    Director and Executive Vice           June 27, 1997
--------------------------   President
(BETTY FRANCIS HATCHER)


/s/ BRYAN J. BRIEDEN         Director                              June 27, 1997
--------------------------
(BRYAN J. BRIEDEN)


/s/ R. BRUCE LaBOON          Director                              June 27, 1997
--------------------------
(R. BRUCE LABOON)



/s/ HAYLE B. RANDOLPH        Director                              June 27, 1997
--------------------------
(HAYLE B. RANDOLPH)


/s/ RICHARD H. ASTER, M.D.   Director                              June 27, 1997
--------------------------
(RICHARD H. ASTER, M.D.)



/s/ H. H. (WILL) HARDEE      Director                              June 27, 1997
--------------------------
(H. H. (WILL) HARDEE)

                                      -12-
<PAGE>
 
                          ANNUAL REPORT ON FORM 10-K

                     ITEM 14(a) (1) and (2) and ITEM 14(d)

                     LIST OF FINANCIAL STATEMENT SCHEDULES

                         FINANCIAL STATEMENT SCHEDULES


                           Year Ended March 31, 1997


                            GAMMA BIOLOGICALS, INC.

                                HOUSTON, TEXAS
<PAGE>
 
                          ANNUAL REPORT ON FORM 10-K

                            ITEM 14(a) (1) and (2)

                   GAMMA BIOLOGICALS, INC. AND SUBSIDIARIES

                                MARCH 31, 1997


List of Financial Statements and Financial Statement Schedules

    The following consolidated financial statements of the registrant and its
subsidiaries, included on pages 19 through 30 of the  annual report of the
registrant to its shareholders for the year ended March 31, 1997, are
incorporated by reference in Item 8.

     Statements of Consolidated Income -- Years ended March 31, 1997, 
     1996 and 1995

     Consolidated Balance Sheets -- March 31, 1997 and 1996

     Statements of Changes in Shareholders' Equity -- Years ended March 31,
     1997, 1996 and 1995

     Statements of Consolidated Cash Flows -- Years ended March 31, 1997, 
     1996 and 1995

     Notes to Consolidated Financial Statements

    The following consolidated financial statement schedules of the Registrant
and its subsidiaries are included in Item 14(d):

     Schedule V  -- Property

     Schedule VI -- Accumulated depreciation and amortization of property

    All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
<PAGE>
 
                                                                      SCHEDULE V

                   GAMMA BIOLOGICALS, INC. AND SUBSIDIARIES

                                   PROPERTY
                                        
               FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>                                       
====================================================================================================================================

                                                BALANCE AT         ADDITIONS                        OTHER ADD        BALANCE AT 
                                                BEGINNING           AT COST                          (DEDUCT)          END OF    
CLASSIFICATION                                  OF PERIOD             (1)         RETIREMENTS          (2)             PERIOD    
------------------------------------------------------------------------------------------------------------------------------------

<S>                                            <C>                <C>            <C>              <C>               <C>  
Year Ended March 31, 1997:                                                                                                      
  Land.....................................    $   284,147                                                           $   284,147
  Building and improvements................      5,437,366        $   654,011                                          6,091,377
  Machinery and equipment..................      4,573,877            958,850     $   268,898       $     (2,697)      5,261,132
  Furniture and fixtures...................        567,580             32,041                               (565)        599,056
                                               -----------        -----------     -----------       ------------     -----------
     Total.................................    $10,862,970        $ 1,644,902     $   268,898       $     (3,262)    $12,235,712 
                                               ===========        ===========     ===========       ============     =========== 
Year Ended March 31, 1996
  Land.....................................    $   284,147                                                           $   284,147
  Building and improvements................      4,788,218        $   649,987     $       839                          5,437,366
  Machinery and equipment..................      3,672,215            977,616          75,954                          4,573,877
  Furniture and fixtures...................        530,289             40,542           3,251                            567,580
                                               -----------        -----------     -----------       ------------     -----------
     Total.................................    $ 9,274,869        $ 1,668,145     $    80,044            -           $10,862,970 
                                               ===========        ===========     ===========       ============     ===========  
Year Ended March 31, 1995
  Land.....................................    $   284,147                                                           $   284,147 
  Building and improvements................      4,495,903        $   446,842     $   154,527                          4,788,218
  Machinery and equipment..................      3,809,399            818,002         955,186                          3,672,215
  Furniture and fixtures...................        683,274             37,785         190,770                            530,289 
                                               -----------        -----------     -----------       ------------     -----------
     Total.................................    $ 9,272,723        $ 1,302,629     $ 1,300,483            -           $ 9,274,869 
                                               ===========        ===========     ===========       ============     ===========  
</TABLE>
___________

(1) Includes $35,175 of assets added in the acquisition of the Netherlands
    subsidiary for the year ended March 31, 1997.

(2) Other changes are due to foreign currency translation adjustments.
<PAGE>
 
                                                                     SCHEDULE VI

                   GAMMA BIOLOGICALS, INC. AND SUBSIDIARIES

             ACCUMULATED DEPRECIATION AND AMORTIZATON OF PROPERTY
                                        
               FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>

====================================================================================================================================

                                                                        ADDITIONS                                     
                                                     BALANCE AT         CHARGED TO                       BALANCE AT    
                                                     BEGINNING          COSTS AND      RETIREMENTS         END OF      
CLASSIFICATION                                       OF PERIOD          EXPENSES           (1)             PERIOD      
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>                <C>            <C>              <C>            
Year Ended March 31, 1997:                                                                                            
  Building and improvements.....................    $ 2,519,615        $   297,253     $        69       $ 2,816,799   
  Machinery and equipment.......................      2,707,862            495,985         265,764         2,938,083
  Furniture and fixtures........................        457,430             29,130             104           486,456
                                                    -----------        -----------     -----------       -----------
     Total......................................    $ 5,684,907        $   822,368     $   265,937       $ 6,241,338
                                                    ===========        ===========     ===========       ===========
Year Ended March 31, 1996
  Building and improvements.....................    $ 2,269,455        $   250,160                       $ 2,519,615
  Machinery and equipment.......................      2,380,331            374,695     $    47,164         2,707,862
  Furniture and fixtures........................        434,523             25,616           2,709           457,430
                                                    -----------        -----------     -----------       -----------
     Total......................................    $ 5,084,309        $   650,471     $    49,873       $ 5,684,907 
                                                    ===========        ===========     ===========       =========== 
Year Ended March 31, 1995
  Building and improvements.....................    $ 2,209,687        $   200,175     $   140,407       $ 2,269,455
  Machinery and equipment.......................      2,958,151            309,002         886,822         2,380,331
  Furniture and fixtures........................        582,383             20,780         168,640           434,523
                                                    -----------        -----------     -----------       -----------
     Total......................................    $ 5,750,221        $   529,957     $ 1,195,869       $ 5,084,309 
                                                    ===========        ===========     ===========       =========== 
</TABLE>
___________

(1) Includes foreign currency translation adjustments of ($399) for the year
    ended March 31, 1997.
<PAGE>
 
                          ANNUAL REPORT ON FORM 10-K

                                 ITEM 14(a)(3)

                                 EXHIBIT INDEX

                                   EXHIBITS



                           Year Ended March 31, 1997



                            GAMMA BIOLOGICALS, INC.

                                HOUSTON, TEXAS
<PAGE>
 
                          ANNUAL REPORT ON FORM 10-K
                                        
                                 ITEM 14(a)(3)

                   GAMMA BIOLOGICALS, INC. AND SUBSIDIARIES

                                MARCH 31, 1997


EXHIBIT
NUMBER
-------

 3(a)   --  Restated Articles of Incorporation of the Company dated June 20,
            1996.  Incorporated by reference to Exhibit 3(a) to the Company's
            Annual Report on Form 10-K for the year ended March 31, 1996 (the
            "1996 Form 10-K").
           
  (b)   --  Amended and Restated Bylaws of the Company dated April 13, 1990.
            Incorporated by reference to Exhibit 3(b) to the Company's Annual
            Report on Form 10-K for the year ended March 31, 1990 (the "1990
            Form 10-K") .

 4(a)   --  Specimen Common Stock certificate of the Company. Incorporated by
            reference to Exhibit 4(a) to the 1990 Form 10-K.
           
  (b)   --  Shareholder Rights Plan dated as of September 5, 1989. Incorporated
            by reference to Exhibit 4.1 to the Company's Current Report on Form
            8-K dated September 5, 1989.
          
10(a)   --  Restated and Amended Split-Dollar Agreement dated May 29, 1990
            between the Company and David E. Hatcher. Incorporated by reference
            to Exhibit 10(a) to the 1990 Form 10-K.
          
  (b)   --  Restated and Amended Split-Dollar Agreement dated May 29, 1990
            between the Company and Betty F. Hatcher. Incorporated by reference
            to Exhibit 10(b) to the 1990 Form 10-K.
          
  (c)   --  Restated and Amended Split-Dollar Agreement dated May 29, 1990
            between the Company and Bryan J. Brieden. Incorporated by reference
            to Exhibit 10(c) to the 1990 Form 10-K.
          
  (d)   --  Restated and Amended Split-Dollar Agreement dated May 29, 1990
            between the Company and Larry E. Letwin. Incorporated by reference
            to Exhibit 10(d) to the 1990 Form 10-K.
          
  (e)   --  Amendment to Restated and Amended Split-Dollar Agreement dated May
            8, 1991 between the Company and David E. Hatcher. Incorporated by
            reference to Exhibit 10(e) to the Company's Annual Report on Form 
            10-K for the year ended March 31, 1991 (the "1991 Form 10-K").
           
  (f)   --  Amendment to Restated and Amended Split-Dollar Agreement dated May
            8, 1991 between the Company and David E. Hatcher. Incorporated by
            reference to Exhibit 10(f) to the 1991 Form 10-K.
          
  (g)   --  Amendment to Restated and Amended Split-Dollar Agreement dated May
            8, 1991 between the Company and Betty F. Hatcher. Incorporated by
            reference to Exhibit 10(g) to the 1991 Form 10-K.
           
<PAGE>
 
EXHIBIT
NUMBER
-------


  (h)   --  Amendment to Restated and Amended Split-Dollar Agreement dated 
            May 8, 1991 between the Company and Betty F. Hatcher. Incorporated
            by reference to Exhibit 10(h) to the 1991 Form 10-K.
            
  (i)   --  Amendment to Restated and Amended Split-Dollar Agreement dated 
            May 8, 1991 between the Company and Bryan J. Brieden. Incorporated
            by reference to Exhibit 10(i) to the 1991 Form 10-K.
            
  (j)   --  Amendment to Restated and Amended Split-Dollar Agreement dated May
            8, 1991 between the Company and Larry E. Letwin. Incorporated by
            reference to Exhibit 10(j) to the 1991 Form 10-K.
            
  (k)   --  Split-Dollar Agreement dated March 25, 1993 between the Company and
            John J. Moulds. Incorporated by reference to Exhibit 10(k) to the
            Company's Annual Report on Form 10-K for the year ended March 31,
            1993 (the "1993 Form 10-K").
            
  (l)   --  Split-Dollar Agreement dated March 25, 1993 between the Company and
            Margaret J. O'Bannion. Incorporated by reference to Exhibit 10(l)
            to the 1993 Form 10-K.
            
  (m)   --  Split-Dollar Agreement dated March 25, 1993 between the Company and
            Jimmie L. Turner. Incorporated by reference to Exhibit 10(m) to the
            1993 Form 10-K.
            
  (n)   --  Split-Dollar Agreement dated March 25, 1993 between the Company and
            Jimmie L. Turner. Incorporated by reference to Exhibit 10(n) to the
            1993 Form 10-K.
            
  (o)   --  Split-Dollar Agreement dated May 5, 1995 between the Company and
            Gary L. Parrish. Incorporated by reference to Exhibit 10(o) to the
            1996 Form 10-K.
            
  (p)   --  Split-Dollar Agreement dated October 23, 1996 between the Company
            and Raul Alvarez.
            
  (q)   --  Split-Dollar Agreement dated October 21, 1996 between the Company
            and Susan A. Batcha.
            
  (r)   --  Split-Dollar Agreement dated October 17, 1996 between the Company
            and Thomas H. Frame.
            
  (s)   --  Split-Dollar Agreement dated October 17, 1996 between the Company
            and Marilyn K. Moulds.
            
  (t)   --  Incentive Stock Option Plan of the Company. Incorporated by
            reference to the Company's Proxy Statement dated June 25, 1987,
            Exhibit A.
<PAGE>
 
EXHIBIT
NUMBER
-------

  (u)   --  1991 Employee Stock Option Plan of the Company. Incorporated by
            reference to Exhibit 28.2 to the Company's Registration Statement on
            Form S-8 (File No. 33-44950) dated January 6, 1992.

  (v)   --  1991 Outside Director Stock Option Plan of the Company. Incorporated
            by reference to Exhibit 28.3 to the Company's Registration Statement
            on Form S-8 (File No. 33-44950) dated January 6, 1992.

  (w)   --  1995 Employee Stock Option Plan of the Company. Incorporated by
            reference to the Company's Registration Statement on Form S-8 (File
            No. 333-01147) dated February 21, 1996.

  (x)   --  401(k) Retirement Savings Plan of the Company adopted July 1, 1992.
            Incorporated by reference to Exhibit 10(r) to the 1993 Form 10-K.

  (y)   --  Patent License Agreement effective May 12, 1997 between the Company
            and Pasteur Sanofi Diagnostics.

  (z)   --  Term and Revolving Line of Credit Loan Agreement dated August 17,
            1990 between Sterling Bank and the Company. Incorporated by
            reference to Exhibit 10(v) to the 1991 Form 10-K.

 (aa)   --  Promissory Note dated November 2, 1990 payable to the order of
            Sterling Bank by the Company. Incorporated by reference to Exhibit
            10(w) to the 1991 Form 10-K.

 (bb)   --  Employment Contract dated January 29, 1976 between the Company and
            John Case. Incorporated by reference to Exhibit 10(aa) to the
            Company's Annual Report on Form 10-K for the year ended March 31,
            1986.

 (cc)   --  Amended and Restated Severance Agreement dated February 19, 1996
            between Betty F. Hatcher and the Company.  Incorporated by reference
            to Exhibit 10(y) to the 1996 Form 10-K.

 (dd)   --  Amended and Restated Severance Agreement dated February 19, 1996
            between John J. Moulds and the Company. Incorporated by reference to
            Exhibit 10(z) to the 1996 Form 10-K.

 (ee)   --  Amended and Restated Severance Agreement dated February 19, 1996
            between David E. Hatcher and the Company.  Incorporated by reference
            to Exhibit 10(aa) to the 1996 Form 10-K.

 (ff)   --  Amended and Restated Severance Agreement dated February 19, 1996
            between Margaret J. O'Bannion and the Company.  Incorporated by
            reference to Exhibit 10(bb) to the 1996 Form 10-K.
<PAGE>
 
EXHIBIT
NUMBER
-------

 (gg)   --  Amended and Restated Severance Agreement dated February 19, 1996
            between Jimmie L. Turner and the Company.  Incorporated by reference
            to Exhibit 10(cc) to the 1996 Form 10-K.

 (hh)   --  Severance Agreement dated December 19, 1995 between Gary L. Parrish
            and the Company. Incorporated by reference to Exhibit 10(dd) to the
            1996 Form 10-K.
 
 (ii)   --  Severance Agreement dated August 12, 1996 between Raul F. Alvarez
            and the Company.
 
 (jj)   --  Severance Agreement dated August 12, 1996 between Susan A. Batcha
            and the Company.
            
 (kk)   --  Severance Agreement dated August 12, 1996 between Thomas H. Frame 
            and the Company.
 
 (ll)   --  Severance Agreement dated August 12, 1996 between Marilyn K. Moulds
            and the Company.

  11    --  Statement Regarding Computation of per Share Earnings. Incorporated
            by reference to the Company's Statements of Consolidated Income for
            the years ended March 31, 1997, 1996 and 1995 on page 19 of the
            Company's Annual Report to Shareholders for the year ended March 31,
            1997 and to Note 1 of Notes to Consolidated Financial Statements on
            pages 23 and 24 of the Company's Annual Report to Shareholders for
            the year ended March 31, 1997.
 
  13    --  The Company's Annual Report to Shareholders for the year ended 
            March 31, 1997.
 
  21    --  Subsidiaries of the Company.
 
  23    --  Consent of Deloitte & Touche LLP.
 
  27    --  Financial Data Schedule.