<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

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

For the quarterly period ended December 31, 1995

                                       OR

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

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 or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)


   3700 Mangum Road, Houston, Texas                           77092
--------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip code)


                                 (713) 681-8481
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


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 such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                  Yes  [X]                          No  [  ]

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


                   At February 13, 1996:   4,551,802 shares
<PAGE>
 
                         PART I. FINANCIAL INFORMATION
                            GAMMA BIOLOGICALS, INC.
                          Consolidated Balance Sheets
                                  (Unaudited)
<TABLE>
<CAPTION>
 
ASSETS                                     DECEMBER 31,      MARCH 31,     
                                               1995            1995     
                                          ---------------  -------------
                                            (UNAUDITED)
<S>                                       <C>              <C>
CURRENT ASSETS:
 Cash and cash equivalents..............      $ 2,578,505     $ 1,795,854
 Short-term investments.................        1,098,323       2,094,112
 Receivables - net of allowance for
  doubtful accounts of $183,548 and 
  $201,668, respectively................        3,442,948       3,987,349 
 Inventories............................        3,776,967       3,807,495 
 Prepaid expenses.......................          525,197         514,334 
 Deferred taxes.........................          120,000         124,400 
                                              -----------     -----------  
 Total current assets...................       11,541,940      12,323,544
                                              -----------     -----------
PROPERTY - at cost, net of accumulated
 depreciation and amortization of
 $5,532,007 and $5,084,309,                                                
 respectively...........................        4,890,981       4,190,560 
CASH VALUE OF LIFE INSURANCE............        1,664,563       1,531,998
OTHER ASSETS............................          288,756         337,806
                                              -----------     -----------
  TOTAL.................................      $18,386,240     $18,383,908
                                              ===========     ===========
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
 Current portion of long-term obligations     $   104,830     $   602,746
 Accounts payable - trade...............          485,735         565,649
 Dividends payable......................          113,749         113,528
 Accrued salaries and other expenses....          230,954         366,446
                                              -----------     -----------
   Total current liabilities............          935,268       1,648,369
                                              -----------     -----------
LONG-TERM OBLIGATIONS...................          373,252          19,263
                                              -----------     ----------- 
DEFERRED TAXES..........................          244,400         262,600
                                              -----------     ----------- 
SHAREHOLDERS' EQUITY....................       16,833,320      16,453,676
                                              -----------     ----------- 
 TOTAL..................................      $18,386,240     $18,383,908
                                              ===========     =========== 
</TABLE>
           See notes to unaudited consolidated financial statements.

                                       2
<PAGE>
 
                            GAMMA BIOLOGICALS, INC.
                       Statements of Consolidated Income
                                  (Unaudited)
<TABLE>
<CAPTION>
 
                                           THREE MONTHS ENDED              NINE MONTHS ENDED
                                    --------------------------------  ----------------------------
                                              DECEMBER 31,                    DECEMBER 31,
                                    --------------------------------  ----------------------------
                                           1995             1994          1995           1994
                                    ------------------  ------------  -------------  -------------
<S>                                 <C>                 <C>           <C>            <C>
NET SALES.........................       $4,202,417      $4,773,236    $12,622,215    $13,417,101

COST OF SALES.....................        2,005,036       2,238,716      5,842,063      6,183,120
                                         ----------      ----------    -----------    -----------
GROSS MARGIN......................        2,197,381       2,534,520      6,780,152      7,233,981
                                         ----------      ----------    -----------    -----------
OPERATING EXPENSES:                                    
  Selling.........................          878,574         890,306      2,608,270      2,655,001
  General and administrative......          621,802         573,766      1,755,267      1,683,932
  Shipping and warehouse..........          211,364         192,849        683,846        532,333
  Research and development........          347,047         297,712        976,004        770,872
                                         ----------      ----------    -----------    -----------
     Total operating expense......        2,058,787       1,954,633      6,023,387      5,642,138
                                         ----------      ----------    -----------    -----------
OPERATING INCOME..................          138,594         579,887        756,765      1,591,843
                                         ----------      ----------    -----------    -----------
OTHER INCOME (EXPENSE):                                
  Interest income.................           63,548          71,225        200,423        179,917
  Interest expense................           (3,295)        (16,400)       (35,345)       (51,274)
  Other - net.....................             (803)        (43,946)        21,476        (82,512)
                                         ----------      ----------    -----------    -----------
     Other income - net...........           59,450          10,879        186,554         46,131
                                         ----------      ----------    -----------    -----------
INCOME BEFORE INCOME TAXES........          198,044         590,766        943,319      1,637,974
INCOME TAXES......................           30,600         106,500        251,800        490,000
                                         ----------      ----------    -----------    -----------
NET INCOME........................       $  167,444      $  484,266    $   691,519    $ 1,147,974
                                         ==========      ==========    ===========    ===========
Weighted average number of common 
   and  common equivalent shares 
   outstanding....................        4,613,352       4,632,479      4,609,026      4,652,620
                                         ----------      ----------    -----------    -----------
Net income per common and common
   equivalent share...............             $.04            $.10           $.15           $.24
                                         ==========      ==========    ===========    ===========
</TABLE>

           See notes to unaudited consolidated financial statements.

                                       3
<PAGE>
 
                            GAMMA BIOLOGICALS, INC.
           Statements of Consolidated Changes in Shareholders' Equity
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED
                                    ------------------------------------------------------
                                                        DECEMBER 31,
                                    ------------------------------------------------------
                                               1995                        1994
                                    --------------------------  --------------------------
                                      SHARES        AMOUNT        SHARES        AMOUNT
                                    -----------  -------------  -----------  -------------
<S>                                 <C>          <C>            <C>          <C>
COMMON STOCK
  Balance, beginning of period....   4,700,303   $   470,030     4,700,078    $   470,008
  Exercise of stock options.......      10,937         1,094           100             10
                                     ---------   -----------     ---------    -----------
  Balance, end of period..........   4,711,240       471,124     4,700,178        470,018
                                     ---------   -----------     ---------    -----------
CAPITAL IN EXCESS OF PAR                                                       
  Balance, beginning of period....                13,482,615                   13,481,763
  Exercise of stock options.......                    29,639                          270
                                     ---------   -----------     ---------    -----------
  Balance, end of period..........                13,512,254                   13,482,033
                                     ---------   -----------     ---------    -----------
RETAINED EARNINGS                                                              
  Balance, beginning of period....                 3,619,289                    2,609,496
  Net income......................                   691,519                    1,147,974
  Dividends declared..............                  (340,958)                    (343,198)
                                     ---------   -----------     ---------    -----------
  Balance, end of period..........                 3,969,850                    3,414,272
                                     ---------   -----------     ---------    -----------
UNREALIZED INVESTMENT LOSS                                                     
  Balance, beginning of period....                                                (87,683)
  Current period unrealized loss..                                                 (6,097)
                                     ---------   -----------     ---------    -----------
  Balance, end of period..........                                                (93,780)
                                     ---------   -----------     ---------    -----------
                                                                               
TREASURY STOCK                                                                 
  Balance, beginning of period....    (159,169)   (1,118,258)      (99,952)      (853,469)
  Purchase of treasury stock......        (394)       (1,650)      (57,717)      (258,976)
                                      --------    ----------     ---------    ----------- 
  Balance, end of period..........    (159,563)   (1,119,908)     (157,669)    (1,112,445)
                                     ---------   -----------     ---------    -----------
TOTAL SHAREHOLDERS' EQUITY........   4,551,677   $16,833,320     4,542,509    $16,160,098
                                     =========   ===========     =========    ===========
 </TABLE>

           See notes to unaudited consolidated financial statements.

                                       4
<PAGE>
 
                            GAMMA BIOLOGICALS, INC.
                     Statements of Consolidated Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                 NINE MONTHS ENDED
                                          ------------------------------
                                                   DECEMBER 31,
                                          ------------------------------
                                               1995            1994
                                          --------------  --------------
                                          [INCREASE (DECREASE) IN CASH]
<S>                                       <C>             <C> 
Cash flows from operating activities:
  Cash received from customers..........   $ 13,135,395    $ 13,164,258
  Interest received.....................        103,857          96,476
  Cash paid to suppliers and employees..    (11,476,576)    (12,043,240)
  Interest paid.........................        (35,345)        (51,274)
  Income taxes paid.....................       (325,000)       (477,000)
                                           ------------    ------------ 
  Net cash provided by operating             
   activities...........................      1,402,331         689,220 
                                           ------------    ------------  
Cash flows from investing activities:
  Property additions....................     (1,185,692)       (785,875)
  Increase in cash value of life          
   insurance............................       (132,565)       (114,218) 
  Purchase of investments...............       (920,702)       (986,437) 
  Proceeds from investments.............      2,065,615          80,155  
  Proceeds from sale of equipment.......          9,245          37,085   
                                           ------------    ------------     
  Net cash used in investing activities.       (164,099)     (1,769,290)
                                           ------------    ------------
Cash flows from financing activities:
  Payments on long-term obligations.....       (143,927)       (158,559)
  Exercise of stock options.............         30,733             280
  Purchase of treasury stock............         (1,650)       (258,976)
  Dividends paid........................       (340,737)       (344,566)
                                           ------------    ------------     
  Net cash used in financing activities.       (455,581)       (761,821)
                                           ------------    ------------       
Net increase (decrease) in cash.........        782,651      (1,841,891)
Cash and cash equivalents at beginning       
 of period..............................      1,795,854       3,175,265 
                                           ------------    ------------        
Cash and cash equivalents at end of       
 period.................................    $ 2,578,505    $  1,333,374 
                                           ============    ============        
</TABLE>

                                       5
<PAGE>
 
                            GAMMA BIOLOGICALS, INC.
                     Statements of Consolidated Cash Flows
                                  (Unaudited)


Reconciliation of Net Income to
Net Cash Provided by Operating Activities

<TABLE>
<CAPTION>
                                              NINE MONTHS ENDED
                                          --------------------------
                                                 DECEMBER 31,
                                          --------------------------
                                              1995          1994
                                          ------------  ------------
<S>                                       <C>           <C>
Net Income                                 $  691,519    $1,147,974
Adjustments to reconcile net income to
  cash provided by operating activities:
     Depreciation.......................      484,628       393,650
     Amortization of goodwill...........                    110,275
     (Gain) loss on sale of fixed assets           (7)       69,539
     (Increase) decrease in accounts      
      receivable........................      557,458      (186,054)
     Gain on sale of investments........     (162,181)      (83,441)
     (Increase) decrease in inventory...       30,528      (170,283)
     Increase in prepaid expenses.......      (19,458)     (141,811)
     (Increase) decrease in other assets       49,050       (98,138)
     Decrease in accounts payable.......      (79,914)      (24,779)
     Decrease in accrued salaries and     
      other expenses....................     (149,292)     (327,712)  
                                           ----------    ---------- 
Net Cash Provided by
  Operating Activities..................   $1,402,331    $  689,220
                                           ==========    ==========  
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:

The company entered into various capital leases for new equipment, which
increased the company's property and long-term debt by $119,389 in 1994.

           See notes to unaudited consolidated financial statements.

                                       6
<PAGE>
 
                            GAMMA BIOLOGICALS, INC.
                   Notes to Consolidated Financial Statements
                                  (Unaudited)

1. Reconciliation of statutory rate with effective United States income tax
   rate:

<TABLE>
<CAPTION>
 
                                THREE MONTHS ENDED           NINE MONTHS ENDED
                                ------------------           ------------------
                                   DECEMBER 31,                 DECEMBER 31,
                                ------------------           ------------------
                                   1995      1994            1995         1994
                                 ------    ------           -----        -----
<S>                             <C>       <C>               <C>          <C> 
  Statutory rate..............     34.0%     34.0%           34.0%        34.0%
  Increase (decrease)                                              
   resulting from:              
     Exempt export earnings...      (.8)     (7.5)           (3.7)        (2.8)   
     Tax credits..............              (14.7)                        (5.3)   
     Amortization of goodwill.                2.1                          2.3    
     Reduction of taxes          
      provided in prior years.     (8.4)                     (1.8)               
     Valuation of temporary      
      differences.............    (12.4)      2.0            (3.8)          .6                                       
     Other-net................      3.1       2.1             2.0          1.1
                                 ------     -----           -----         ---- 
  Effective tax rate..........     15.5%     18.0%           26.7%        29.9%
                                 ======     =====           =====         ====  
</TABLE>

  The provision for deferred income taxes is based on the liability method
  prescribed by SFAS No. 109, "Accounting for Income Taxes", which was adopted
  by the company during the first quarter of 1994. A deferred income tax
  liability or asset is recognized for temporary differences between the tax
  basis of assets and liabilities and their reported amounts in the financial
  statements that will result in net taxable or deductible amounts in future
  years. Significant components of the company's deferred tax assets
  (liabilities) are as follows:

<TABLE>
<CAPTION>
                                             DECEMBER 31, 1995   MARCH 31, 1995
                                            ------------------   --------------
<S>                                           <C>                <C>
  Allowance for bad debts...............         $   62,400       $   68,600
  Inventory costs capitalized...........             57,600           50,800
  Other.................................                               5,000
                                                 ----------       ---------- 
     Net current deferred tax asset.....            120,000          124,400
                                                 ----------       ---------- 
 
  Difference between book and tax basis
   of property, plant and equipment.....           (218,300)        (254,000) 
  Other.................................            (26,100)          (8,600) 
                                                 ----------       ---------- 
     Net noncurrent deferred tax                                              
      liability.........................           (244,400)        (262,600) 
                                                 ----------       ----------    
  Net deferred tax liability............         $ (124,400)      $ (138,200) 
                                                 ==========       ========== 
</TABLE>

2. Net income per common and common equivalent share is computed using weighted
   average number of shares and dilutive equivalent shares outstanding during
   each period. The weighted average number of shares for the three month period
   ended December 31 was 4,613,352 in 1995 and 4,632,479 in 1994; for the nine
   month period then ended, 4,609,026 in 1995 and 4,652,620 in 1994.

                                       7
<PAGE>
 
3. Inventories are valued at the lower of cost or market value, based on the
   cost method summarized below:

<TABLE>
<CAPTION>
                                       DECEMBER 31, 1995  MARCH 31, 1995
                                       -----------------  --------------
<S>                                    <C>                <C>
  First-in, first out:
     Finished products............         $1,480,516      $1,540,278
     Products in process..........            478,652         650,443
                                           ----------      ---------- 
                                            1,959,168       2,190,721
                                           ----------      ----------  
  Specific identification:
     Raw material.................            922,340         840,289
     Finished instrument systems..              3,079           3,648
                                           ----------      ---------- 
                                              925,419         843,937
                                           ----------      ---------- 
  Average:
     Supplies.....................            892,380         772,837
                                           ----------      ---------- 
        Total.....................         $3,776,967      $3,807,495
                                           ==========      ========== 
</TABLE>

4. INVESTMENTS

   The COMPANY ADOPTED SFAS NO. 115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
   AND EQUITY SECURITIES" IN 1994.  IN ACCORDANCE WITH THIS STATEMENT, THE
   COMPANY CLASSIFIED ITS INVESTMENT IN EQUITY SECURITIES AS "AVAILABLE FOR
   SALE", WHICH WAS REPORTED AT FAIR VALUE.  UNREALIZED HOLDING GAINS AND LOSSES
   ARE REPORTED IN A SEPARATE COMPONENT OF SHAREHOLDERS' EQUITY UNTIL REALIZED.
   THESE SECURITIES WERE SOLD IN AUGUST 1995.  THE COMPANY HAS THE POSITIVE
   INTENT AND ABILITY TO HOLD ITS INVESTMENTS IN DEBT SECURITIES TO MATURITY;
   THESE INVESTMENTS ARE REPORTED AT AMORTIZED COST.  INVESTMENTS IN DEBT AND
   EQUITY SECURITIES ARE SUMMARIZED AS FOLLOWS:

<TABLE>
<CAPTION>
 
                                                                            UNREALIZED    CARRYING
                  TYPE                      CLASSIFICATION    FAIR VALUE   GAIN (LOSS)      VALUE
----------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>          <C>           <C> 
Nine months ended December 31, 1995
Debt securities:
U.S. Government:
  Treasury Notes - due 3/31/96             Held to maturity    $  999,690     $  1,367    $  998,323
 Certificates of Deposit - due 3/11/96     Held to maturity       100,000                    100,000
                                                            ----------------------------------------
  Total debt securities                                         1,099,690        1,367     1,098,323
                                                            ----------------------------------------
   Total investments                                           $1,099,690     $  1,367    $1,098,323
                                                            ========================================
 
Nine months ended December 31, 1994
Equity securities:
 Common stock                             Available for sale   $    8,528                 $    8,528
Debt securities:
 U.S. Government:
  Federal Home Loan Banks - due 3/27/95    Held to maturity     1,000,310     $ (2,772)    1,003,082
  Treasury Notes - due 3/31/96             Held to maturity       971,880      (19,734)      991,614
  Federal Farm Credit Banks - due 9/1/95   Held to maturity       992,190       (8,749)    1,000,939
 Certificates of Deposit - due 3/13/95     Held to maturity       100,000                    100,000
                                                            ----------------------------------------
  Total debt securities                                         3,064,380      (31,255)    3,095,635
                                                            ----------------------------------------
   Total investments                                           $3,072,908     $(31,255)   $3,104,163
                                                            ========================================
 
</TABLE>

                                       8
<PAGE>
 
5. In the opinion of management, the unaudited consolidated condensed financial
   statements for Gamma Biologicals, Inc. (the "company") includes all
   adjustments (consisting solely of normal recurring adjustments) necessary for
   a fair presentation of the financial position of the company as of December
   31, 1995, the results of operations of the three and nine month periods ended
   December 31, 1995 and 1994 and cash flows for the nine month periods ended
   December 31, 1995 and 1994. Although management believes the disclosures in
   these financial statements are adequate to make the information presented not
   misleading, certain information and footnote disclosures normally included in
   annual financial statements prepared in accordance with generally accepted
   accounting principles have been condensed or omitted pursuant to the rules
   and regulations of the Securities and Exchange Commission. The results of
   operations for the periods ended December 31, 1995 are not necessarily
   indicative of the results to be expected for the full year.

6. LONG-TERM OBLIGATIONS

   Long-term obligations consist of:
 
<TABLE> 
<CAPTION> 
                                                 DECEMBER 31, 1995    MARCH 31, 1995
                                                 -----------------    --------------
<S>                                                 <C>                 <C> 
  Mortgage note, due monthly through                  
   2000.................................               $450,785           $508,434              
  Other obligations.....................                 27,297            113,575
                                                       --------           -------- 
                                                        478,082            622,009
     Less current portion...............                104,830            602,746
                                                       --------           -------- 
  Total long-term obligations...........               $373,252           $ 19,263
                                                       ========           ========  
</TABLE>

   The mortgage note bears interest at the bank's base rate, but not less than
   7% nor more than 13%. At December 31, 1995, the note bore interest at 9.50%.
   The mortgage note is collaterized by a first lien on the company's land and
   building. In November 1995, the note was extended through November 2000 with
   no significant changes in terms or conditions.

7. SALES BY GEOGRAPHIC AREA

   The company operates within one dominant segment - the manufacture and sale
   of blood bank and diagnostic products - and has no customer which accounts
   for 10% or more of its total sales. The company operates in one geographic
   area, the United States, from which it sells to numerous countries.

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED            NINE MONTHS ENDED
                                        ---------------------------  ----------------------------
                                               DECEMBER 31,                  DECEMBER 31,
                                        ---------------------------  ----------------------------
                                            1995           1994          1995           1994
                                        -------------  ------------  -------------  -------------
<S>                                     <C>            <C>           <C>            <C>
Net sales to unaffiliated customers:
  United States.......................     $3,038,354    $3,634,873    $ 9,175,611    $ 9,856,917
  Europe..............................        423,014       367,453      1,194,482      1,233,925
  Pacific Region......................        323,945       323,069        931,755        955,098
  Mexico, Central and South America...        243,038       213,276        649,782        695,304
  Middle East.........................        114,701       140,977        482,887        437,539
  Other...............................         59,365        93,588        187,698        238,318
                                           ----------    ----------    -----------    -----------
   Total..............................     $4,202,417    $4,773,236    $12,622,215    $13,417,101
                                           ==========    ==========    ===========    ===========
</TABLE> 

                                       9
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED DECEMBER 31, 1995
------------------------------------

  Net sales for the three months ended December 31, 1995 fell $570,000 compared
with the same period in 1994. This decline is due wholly to non-recurring sales
of reagent red cell, serum and RQC products to another domestic reagent
manufacturer which benefitted the 1994 period.

  Gross margin as a percentage of sales held to 52% in 1995, down from 53% in
1994, in spite of the loss of more favorable pricing and above-average
production levels related to the windfall reagent red cell and RQC sales.  The
impact was minimized by the positive effect of reduced travel and personnel
expenses related to discontinued STS-M service contracts, combined with
decreased sales of lower-margin STS-M disposables and the contribution of
higher-margin SegmentSampler(Trademark) sales.

  Selling expenses remained relatively constant with the prior period.  General
and administrative expenses increased 8%, due primarily to increased insurance
coverage and to travel expense associated with the company's evaluation of
potential manufacturing sites outside the United States.  Shipping and warehouse
expenses increased 9% compared with the same period in 1994 due to increased
staffing and depreciation expense related to the first phase of the bar coding
system installed in March 1995.  The bar coding system, nearing completion, is
expected to provide significant long-term benefits to the shipping, warehousing
and manufacturing functions.

  Research and development expenses increased 17% in 1995 due to costs
associated with the ongoing electro-biosensor research and development and field
testing costs for the ReACT project.

  Net other income and expense improved in the current period over the prior
period, which bore the affect of losses on the disposal of obsolete computer
equipment in connection with the installation of a network system.

  The provision for income taxes fell in 1995 due to lower pretax earnings.

NINE MONTHS ENDED DECEMBER 31, 1995
-----------------------------------

  Net income for the nine months ended December 31, 1995 dropped 40% compared
with the same period in 1994.  This decline can be attributed to the 1994
benefit realized from the non-recurring reagent red cell, serum and RQC sales to
another domestic reagent manufacturer and the increases in operating expenses
outlined above for the three month period ended December 31, 1995.

                                       10
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------


  Net cash flows increased approximately $2,625,000 during the nine month period
ended December 31, 1995 compared with the same period in 1994. Operating cash
flows improved by $713,000 due to reduced inventory purchases, the absence of
payments of license fees that affected 1994 operating cash flows, and lower
income tax payments. A $400,000 increase in capital expenditures for
manufacturing modernization partially offset the gains in operating cash flows.
Additional cash flow gains resulted from $1,985,000 in investment maturation and
the curtailment of stock repurchases for $257,000 in 1994.  Management expects
that capital expenditures will continue to be higher than usual for the next 12
months to complete all planned improvements. Management also believes that
operating cash flows will be sufficient to meet future operating needs.

  During the current period, we took delivery of the first production lot of
ReACT microcolumn incubators and expect delivery of the centrifuges in the
fourth quarter.  These products should be available for sale internationally in
mid-1996. Field studies are proceeding to collect data for submission to the FDA
for licensure.  We continue to evaluate potential manufacturing sites outside
the United States, since FDA approval to market ReACT in the United States may
take as long as two years.  Regarding electro-biosensor research, additional
funding of $155,000 was provided to one of the research centers in the current
quarter and an additional commitment of $185,000 was made to fund the project
through fiscal 1997.

  The company's existing capital resources, consisting of $3,700,000 in cash and
short-term investments and a $1,500,000 revolving credit line, should be
sufficient to support planned product development and capital improvements
during the next 12 months.

                                       11
<PAGE>
 
                          PART II - OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K

           (a) Exhibits, Part II

               (27)  Article 5 Financial Data Schedule

           (b) Reports on Form 8-K - None

                                       12
<PAGE>
 
                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.

                              GAMMA BIOLOGICALS, INC.



February 13, 1996             By:  /s/ John J. Moulds
                                   -------------------------------
                                   John J. Moulds
                                   President
                                   (Chief Operating Officer)



February 13, 1996             By:  /s/ Margaret J. O'Bannion
                                   --------------------------
                                   Margaret J. O'Bannion
                                   Vice President - Finance
                                   (Chief Financial Officer)

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