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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

|x                                               | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE   SECURITIES EXCHANGE ACT OF 1934    
|----------------------------------------------- | ------------------------------------------------------------------------------------------
|                                                |                                                                                           
|For   the fiscal year ended December 31, 2004  
|                                               
|**or**                                         
|                                               
|o                                               | 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 - 1-10184

|ABATIX   CORP.                                                  
|----------------------------------------------------------------
|                                                                
|(Exact name of registrant as specified in its   charter)        
|                                                                
|Delaware                                                        
|                                                                
|(State or other jurisdiction of incorporation or   organization)
|                                                                
|75-1908110                                                      
|                                                                
|(I.R.S. Employer Identification Number)                         

|8201   Eastpoint Drive, Suite 500, Dallas, Texas               |  | 75227         
|-------------------------------------------------------------- |  | --------------
|                                                               |  |               
|(Address of principal executive offices)                       |  | (Zip Code)    
|                                                               |  |               
|Registrants telephone number,   including area code:          |  | (214) 381-0322
|                                                               |  |               
|Securities registered pursuant to   Section 12 (b) of the Act: |  | None          
|                                                               |  |               
|Securities registered pursuant to   Section 12 (g) of the Act: |  | Common Stock  

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
xNo
o

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 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.
o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).  Yes
o    No  
x

The aggregate market value of the registrants common stock held by non-affiliates on June 30, 2004 (based on the closing stock price on the Nasdaq Stock Market on such date) was approximately $2,875,000.

1,711,148 shares of common stock, $.001 par value, were issued and outstanding on March 21, 2005.

Documents Incorporated By Reference

Certain information contained in the definitive Proxy Statement for the Companys Annual Meeting of Stockholders to be held on May 26, 2005 is incorporated by reference into Part III hereof.

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PART I

Item 1.  Business.

(a)          Development of Business

Abatix Corp. (Abatix) markets and distributes personal protection and safety equipment and durable and nondurable supplies predominantly to the environmental industry, the industrial safety industry, the homeland security industry and, combined with tools and tool supplies, to the construction industry.  Abatix, through its wholly owned subsidiary, International Enviroguard Systems, Inc. (IESI), a Delaware corporation, imports disposable clothing sold through Abatix and other distribution companies not in direct competition with Abatix.  Abatix and IESI are collectively referred to herein as the Company.

The Company began operations in May 1983 as an industrial safety supply company located in Dallas, Texas, and was originally incorporated in Texas as T&T Supply Company, Inc. in March 1984.  To prepare for its initial public offering of its securities in March 1989, Abatix incorporated in Delaware on December 5, 1988 to effect and complete an Agreement and Plan of Merger with T&T Supply on December 9, 1988.

As opportunities to enter new markets arose over the years, the Company expanded geographically.  The basic growth philosophy has been to find the right people, and then determine if the geographic market can support a full service sales office/distribution center.  During our history, the following branches, beyond our initial Dallas location, were opened:

| |  | San Francisco  December 1988             
| | - | ------------------------------------------
| |  | Houston  February 1990                   
| |  | Los Angeles  August 1991                 
| |  | Phoenix  January 1993                    
| |  | Denver  February 1993 (closed April 1999)
| |  | Seattle  January 1994                    
| |  | Las Vegas  December 1995                 

The Company intends to expand and diversify the revenue base through hiring additional sales personnel, adding products or product lines, opening new locations and acquiring other companies, if appropriate.  Furthermore, the Company maintains an e-commerce solution, including on-line ordering, to help solidify relationships with the existing customer base and expand its geographic presence.

(b)          Financial Information About Operating Segments

Information about the Companys operating segments is included in Note 8 in the Notes to the Consolidated Financial Statements at Item 15.

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(c)          Narrative Description of Business

Based on 2004 sales, approximately 46% of the Companys products are sold to environmental contractors, 17% to construction related firms, 19% to the industrial safety market and 18% to other firms.   The Company believes a majority of its sales for the foreseeable future will continue to be made to environmental contractors and considers its relationship with its customers to be excellent.

Environmental Industry

Asbestos Abatement Industry

Between 1900 and the early 1970s, asbestos was extensively used for insulation and fireproofing in industrial, commercial and governmental facilities as well as private residences in the United States and in other industrialized countries.  In the mid-1980s it was estimated that in the United States, approximately 20% of all buildings, excluding residences and schools, contained friable asbestos-containing materials that were brittle and were susceptible to the release of asbestos dust.  Various diseases, such as asbestosis, lung cancer and mesothelioma, have been linked to the exposure to airborne asbestos.  Through medical studies, the public has become aware of the diseases associated with asbestos.

Maintenance, repair, renovation or other activities can disturb asbestos-containing material and, if disturbed or damaged, asbestos fibers become airborne and pose a hazard to building occupants and the environment.  In October 1986, Congress passed the Asbestos Hazard Emergency Response Act, which mandates inspections for asbestos, the adoption of asbestos abatement plans and the removal of asbestos from schools and facilities scheduled for renovation or demolition. In addition, state and local governments have also adopted asbestos-related regulations.  Even with these federal, state and local regulations, budgetary constraints continue to limit the number and scope of asbestos abatement projects.

Lead Abatement Industry

The hazards of lead-based paint have been known for many years; however, the federal and state regulations requiring identification, disclosure and cleanup have been minimal.  In early 1996, the Environmental Protection Agency (EPA) and the Department of Housing and Urban Development unveiled rules regarding lead-based paint in the residential markets.  These rules give homebuyers the right to test for lead-based paint before signing a contract.  In addition, although a landlord or home seller is not required to test for lead-based paint, the rules do require disclosure of such, if known.

Many asbestos abatement contractors added lead abatement to their range of services in an attempt to enter a market considered being in its infancy.  The asbestos abatement contractors bring equipment, a trained labor force and experience working in a regulatory environment to the lead abatement industry; however, budgetary constraints also limit the number of these projects.

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Mold Remediation Industry

Although mold remediation has been around for years, litigation over the past several years surrounding the health hazards of human exposure to mold has created public awareness and is forcing property owners and the construction industry to deal with the problem.  To grow, mold requires moisture, a carbon source (wood, plasterboard, natural fibers, or any organic matter), lack of air movement and little to no light.  The energy crisis in the 1970s inspired many energy efficiency programs, including the building of structures that promoted less air movement which increased the likelihood of a mold problem.

Although there are approximately 100,000 species of fungi, about 100 are considered to be pathogenic to humans.  Currently, there are few regulations concerning mold levels or mold remediation.  However, in 2003, the Institute of Inspection, Cleaning and Restoration Certification adopted S520, Mold Remediation Standard and Reference Guide.  The S520 Standard describes the procedures to be followed and the precautions to be taken when performing mold remediation.

Many asbestos and lead abatement contractors added mold remediation to their range of services.  In addition, fire, water, and smoke restoration contractors added mold remediation to their range of services.  The Company had very few sales to restoration contractors before the heightened awareness of mold.  In late 2000, the Company began to see high levels of activity from this industry, primarily in Texas.  The growth in this industry continued into the early part of the fourth quarter of 2002, but slowed significantly in the first half of 2003 and has remained level for the past eighteen months.  The decline in 2003 occurred primarily because insurance laws in Texas changed to eliminate or limit the insurance companies exposure to mold liabilities, resulting in fewer projects being undertaken.  While there has been some increased legal activity in states other than Texas, the limited liability on insurance policies has
inhibited the growth of this industry.

Homeland Security

Seeing an opportunity to leverage our current product lines with some additional lines, including consulting and training, the Company entered the Homeland Security market in August 2002.  A 2003 industry report published by U.S. Bancorp Piper Jaffray (Piper Jaffray) indicated the Security industry generates over $120 billion in annual revenue on a global basis and is expected to grow at 8.5% through 2006.  The United States accounts for approximately $43 billion of the global revenue and is projected to grow at approximately 7% reaching $60 billion in 2006.  The Piper Jaffray report breaks down the industry into segments, and estimates the Personal Safety Products segment generates $4 billion in annual domestic revenue.  In addition, this report depicts that funding for the Department of Homeland Security is approximately 50% of the total domestic revenue generated.  While state and local governments account for
some of the difference, the private sector is also considered to be a participant in this industry.

Much of the Companys activity in this industry to date has been with the public sector attempting to outfit the first responders.  Because these activities are broad in scope and tend to be large dollar orders, the purchasing departments for these governmental entities solicit bids and generally select the lowest product price.  Unlike our current business model, the sales cycle tends to be long and can sometimes be unsuccessful.  To meet these challenges, we changed some of our processes to lower our costs related to these types of orders.

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We are also working with the private sector businesses, which traditionally focus on the value Abatix provides, and less on the price of the product.  Albeit small, we have been successful in selling to the private sector.  As the economy continues to strengthen, we expect companies to invest more dollars in our products and services so their facilities and personnel are prepared.   However, unless there are regulations mandating security products or another attack similar to September 11th, the private sector may not be willing to invest significant dollars.

Construction Tools Supply Industry

Besides the normal hand and power tools, and associated consumable parts, supplied to the construction industry, the EPA and Occupational Safety and Health Administration (OSHA) have also established certain rules and regulations governing the protection of the environment and the protection of workers in this industry.

Currently, the Company supplies the construction tools industry in its Las Vegas, Los Angeles, and Phoenix facilities and on a limited basis from its other facilities.  This industry is directly tied to the local economies and more specifically, the real estate conditions within those markets.  The real estate industry initially declined after the events of September 11, 2001, stabilized in 2003 and has shown signs of improvement since early 2004.  The Company anticipates this industry to improve in 2005 as the economy continues to improve.

Industrial Safety Industry

The EPA and OSHA have established numerous rules and regulations governing environmental protection and worker safety and health.  The demand for supplies and equipment by U.S. businesses and governments to meet these rules and regulations has resulted in the creation of a multi-billion dollar industry.

As research identifies the degree of environmental or health risk associated with various substances and working conditions, new rules and regulations can be expected.  These actions inevitably will require more expenditure for supplies and equipment for handling, remediation and disposal of hazardous substances and the creation of safe living and working conditions.  However, potentially offsetting these gains are manufacturing automation and productivity improvements which potentially result in fewer people to protect, and movement of labor intensive operations offshore where there is less regulation.

Geographic Distribution of Business

The Company distributes over 20,000 industrial, construction tool, personal protection, safety and hazardous waste remediation products to approximately 4,100 active customers primarily located in the Southwest, Midwest, Pacific Coast, Alaska and Hawaii.

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The Company maintains sales, distribution and warehouse centers in Los Angeles and San Francisco, California, Dallas and Houston, Texas, Phoenix, Arizona, Las Vegas, Nevada, and Seattle, Washington.

In August 2004, the Company opened a temporary office in Tampa, Florida to help contractors respond to the devastation from the hurricanes.  This office was closed in February 2005.

Equipment and Supplies

An estimated 35% of the Companys current year sales were environmental products and 29% were safety products, while construction tools and supplies accounted for 13%.  The remaining 23% of sales were miscellaneous products used by environmental contractors, construction contractors and industrial manufacturing facilities.

The Company buys products from manufacturers based on orders received from its customers as well as anticipated needs based on prior buying patterns and customer inquiries.  The Company maintains an inventory of disposable products and commodities as well as low cost equipment items.  Approximately 80% of the Companys sales are of disposable items and commodity products, which are sold to customers at unit prices ranging from under $1.00 to $50.00.  The balance of sales is attributable to items consisting of lower priced equipment beginning at $20.00 to construction related tools that can retail in excess of $10,000.  The Company currently does not manufacture or lease any products.  On a very limited scale, the Company provides warranty repair on certain equipment.  The Company distributes, on a limited basis, disposable items under its own private label.

Except with regard to certain specialty equipment associated with environmental remediation activities such as filtration, vacuum and pressure differential systems, many of the Companys products can be used interchangeably within many of the industries it supplies. Equipment distributed by the Company includes manufacturers product descriptions and instructions pertaining to use.

Marketing

The Companys marketing program is conducted by its sales representatives, as well as by senior management and the leaders at each of its operating facilities.  The sales representatives are compensated by a combination of salary and/or commission, which is based upon negotiated sales standards.

The Company maintains 24-hours-a-day/7-days-a-week telephone service for its customers and typically delivers supplies and equipment within two days of the receipt of an order.  The Company is prepared to provide products on an expedited basis in response to requests from customers who require immediate deliveries because their work is performed during non-business hours, involves substantial costs because of the specialized labor crews involved or may arise on short notice as a result of exigent conditions.

The Company also has a web site, www.abatix.com, which allows customers to place orders on-line.  Currently the web site contains approximately 6,000 products.  In addition to on-line ordering, the web site has current industry and Company information, including historical press releases and the Companys filings with the Security and Exchange Commission (SEC).

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Backlog

Substantially all the Companys products are shipped to customers within 48 hours following receipt of the order; therefore backlog is not material to the Companys operations.  During severe weather conditions, such as the hurricanes in Florida in 2004, the Company can experience severe backlog situations because products in the quantities needed are unavailable from the manufacturers.  Since the customers need for products is immediate in these situations, the customers will purchase from whichever supplier can get them the product.

Inflation

The inflation rate for the U.S. economy has been relatively low over the past several years, with the 2004 inflation rate around 3%.  The 2005 inflation rate is expected to be in this same range.  Therefore, the Company believes inflation will not have a material impact on the Companys operations or profitability in the near term.

The Company experienced cost increases in several of its major product lines during 2004 and decreases in certain other product lines.  The majority of the price increases were passed along to customers in the form of higher selling prices, thereby having little effect on product margins.  We expect further price increases in certain product lines in 2005 and we believe these price increases will be able to be passed on to customers.  If we are unable to pass on these price increases, our gross margins and profitability would be negatively impacted.

Environmental Impact

The Company distributes a variety of products in the environmental industry which requires the Company to maintain Material Safety Data Sheets (MSDS) on file.  These MSDS inform purchasers and users of any potential hazards which could occur if the products spill or leak.  Although the Company provides no assurance, it reviews all products that could have a potential for environmental hazards and tries to ensure the products are safe for on site storage and distribution.  The Company currently distributes no products it believes would create an environmental hazard if leaked or spilled and has safety procedures in place to minimize any impact if such an event occurred.

Seasonality

In the past, the environmental supply business has been seasonal as a result of the substantial amount of work performed in educational facilities during the summer months when the weather is generally more conducive to construction or during other vacation periods.  The Company believes seasonality is not a major characteristic in the non-educational or private sector, which includes the industrial, commercial and residential markets.  In addition to the private sector environmental business, the Companys expansion in the construction and industrial safety supply markets has mitigated most seasonal impacts of government environmental projects on the Companys sales.

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The Companys profitability historically increases in the second and third quarters, relative to the first and fourth quarters.  This increase in profitability is attributable to the usual small increase in revenues during the second and third quarters without the corresponding increase in costs, as fixed costs represent a majority of total general and administrative costs.

Government Regulation

As a supplier of products manufactured by others to the environmental supply, construction tool, homeland security and industrial safety industries, the Companys internal operations are not substantially affected by federal laws and regulations including those promulgated by the EPA and OSHA.  Most of the contractors and other purchasers of the Companys equipment and supplies are subject to various government regulations.  Developments in legislation and regulations affecting manufacturers and purchasers of the Companys products could have a substantial effect on the Company.

Competition

The environmental supply, industrial safety, homeland security and construction tools supply businesses are highly competitive.  These markets are served by a limited number of large national firms as well as many regional and local firms, none of which can be characterized as controlling the market.  The Company competes on the basis of product availability, variety and quality.  In addition, the Company competes on delivery, credit arrangements and price.  Substantial regulatory or economic barriers to entry do not characterize the Companys business.  Therefore, additional companies could enter any of these industries and may have greater financial, marketing and technical resources than the Company.

Employees

As of February 28, 2005, the Company employed a total of 103 full time, non-union employees including 3 executive officers, 18 managers, 55 administrative and marketing personnel and 27 clerical and warehouse personnel.  The Company believes relations with its employees are excellent.

Certain Factors That May Affect Future Results

Certain matters discussed in this Form 10-K, or documents, a portion of which are incorporated by reference, concerning, among other things, the business outlook, including growth, cost savings, anticipated financial and operating results, strategies and contingencies, constitute forward-looking statements and are based upon managements expectations and beliefs concerning future events impacting the Company.  There can be no assurance that these events will occur or that the Companys results will be as estimated.

The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases.  In addition, many factors outside the control of the Company, including the prices and availability of the Companys products, potential competitive pressures on selling prices and fuel prices, as well as general economic conditions in the markets in which the Company operates, also could impact the realization of such estimates.

8

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The following factors, as well as factors described elsewhere in the Form 10-K, or in other SEC filings, among others, could cause the Companys future results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.

These factors are described in accordance with the provisions of the Private Securities Litigation Reform Act of 1995, which encourages companies to disclose such factors.

Competition.  The Company experiences intense competition for sales of its principal products.  The Company has several major competitors in its markets, some of which are larger and have more resources than the Company.  The principal methods and elements of the competition include product quality, product breadth, product availability, price, credit terms and delivery services.  Inherent risks in the Companys competitive strategy include uncertainties concerning the effects of consolidation of suppliers and distribution channels, the lack of barriers to entry and competitive reaction.  Increased competition with respect to pricing would reduce revenue and could have an adverse impact on the Companys financial results.

Personnel.  A key component of our strategy is to provide value to our customers by building relationships and establishing a trusting working environment between our customers and our staff.  The Company provides competitive compensation, benefits and other factors that have attracted our current staff.  In addition, hiring and training of additional staff is a key component to our growth plans.  However, there can be no assurance that our staff will remain employed by the Company, or that the Company will be able to hire and train replacement or additional staff.  Loss of staff could have an adverse impact on the Companys financial results.

Cost Savings Strategy.  The Companys anticipated cost savings are expected to result from better purchasing and inventory control strategies, productivity gains and efforts to reduce general and administrative costs without sacrificing service.  The Companys strategic investments in its information systems should also allow further cost savings through the streamlining of its back office operations.  However, there can be no assurance that such cost savings will be achieved.

Products.  A number of the Companys products, such as plastic sheeting and bags, contain certain materials which are principally derived from petroleum.  These products are subject to price fluctuations based on changes in petroleum prices, availability and other factors.  Significant increases in prices for these products, as we experienced in 2004, could adversely affect earnings if the Company does not or is unable to increase its selling price to customers or if adjustment to our selling price to customers significantly trails the increases in the cost of the products to us.

Although the Company believes that the suppliers of products needed to meet our demand are adequate, global economic and political conditions, especially in China, supplier capacity constraints, severe weather conditions and other factors could materially affect the availability of or prices for certain products.

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Fuel Costs.  We depend heavily on third party delivery services as well as our own fleet of delivery vehicles.  Fuel costs are a component of the total cost of product deliveries.  Significant increases in oil prices could adversely affect earnings if the Company does not or is unable to pass along these increases to customers.

Contingencies.  Any costs and other effects of pending litigation against the Company cannot be determined with certainty.  Although management believes that no such proceedings will have a material adverse effect on the Company, there can be no assurance that the outcome of such proceedings will be as expected.  See Item 3. Legal Proceedings.

Item 2.  Properties.

As of December 31, 2004, the Company leases and occupies approximately 174,000 square feet of industrial space.  Included is approximately 8,100 square feet of office space for the Companys headquarters which expires in February 2006.  Also included is 5,000 square feet of space in Florida which expired in February 2005.  Excluding the space in Florida, the Abatix branch facilities range in size from 9,090 square feet to 30,820 and have leases expiring between July 2005 and July 2010.  IESI leases approximately 21,000 square feet of warehouse space.

Item 3.  Legal Proceedings.

The Company has been named in several class action lawsuits as detailed below.  These complaints generally allege that defendants violated the Securities and Exchange Act of 1934 by allegedly making a series of materially false and purportedly misleading statements concerning Abatixs business agreement with the Goodwin Group LLC and, as a result, the price of the Abatix stock was allegedly artificially inflated causing plaintiff and other members of the class to allegedly suffer damages.  The Company intends to vigorously defend itself against these allegations.

| |  | On April 26, 2004, the Company and certain of its   officers and directors were named as defendants in a lawsuit filed in the   United States District Court for the Northern District of Texas styled Family   Medicine Specialists and Howard Kalnitsky, and on Behalf of All Others   Similarly Situated, Plaintiffs v. Abatix Corp., Terry Shaver, Frank Cinatl,   IV and Gary Cox, Defendants (304CV-872 D).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On April 30, 2004, the Company and certain of its   officers and directors were named as defendants in a lawsuit filed in the   United States District Court for the Northern District of Texas styled David   Maione, Individually And On Behalf of All Others Similarly Situated,   Plaintiff vs. Abatix Corp and Terry Shaver, Defendants (304 CV0926-P).                                                     
| |  | On May 5, 2004, the Company and certain of its   officers and directors were named as defendants in a lawsuit filed in the   United States District Court for the Northern District of Texas styled Eve   Gelman, individually and on behalf of all others similarly situated,   Plaintiff v. Abatix Corporation, Terry Shaver and Frank Cinatl (4-04CV-341-A).                                                  
| |  | On May 11, 2004, the Company and certain of its   officers and directors were named as defendants in a lawsuit filed in the   United States District Court for the Northern District of Texas styled Vincent   Teal, individually and on behalf of all others similarly situated, Plaintiff   v. Abatix Corp., Terry Shaver, Frank Cinatl, IV and Gary Cox, Defendants   (3-04CV-1002P).                         
| |  | On May 21, 2004, the Company and an officer and   director were named as defendants in a lawsuit filed in the United States   District Court for the Eastern District of Texas styled John S. Rankin, On   Behalf of Himself and All Others Similarly Situated, Plaintiff, v. Abatix   Corp., and Terry Shaver Defendants (504CV 116).                                                                           

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All of these lawsuits have been transferred to one Federal District Court in the Northern District of Texas, Dallas Division and have been consolidated into a single case under Cause No. 3-04CV-872-D; Family Medicine Specialists, et al v. Abatix, et al.

On May 27, 2004, the officers and directors of Abatix Corp. were named as defendants in a lawsuit filed in the District Court of Dallas County, Texas, 162nd Judicial District styled Daniel M. Johnson Plaintiff v. Terry Shaver; Frank Cinatl IV; Gary L Cox; Donald N. Black; Eric A. Young; and A. David Cook; Defendants v. Abatix Corp. Nominal Defendant (Cause No. 2004-04-4841), although Plaintiff has dismissed A. David Cook from this case since Mr. Cook was not a director of the Company at the time of the alleged actions.  This suit is a shareholder derivative action that alleges that all of the defendants breached certain fiduciary duties and abused their control of Abatix.  In that regard, the plaintiff seeks contribution and indemnification.  In addition, this petition alleges that Donald Black, an outside board of director of Abatix, breached his fiduciary duties by selling securities based on allegedly material, non-public information and
by allegedly misappropriation of information.  Plaintiff has agreed to abate this case; however, Plaintiff has the right to lift the abatement and pursue these claims with 15 days notice.

Other than the applicable policy deductible and the fees and expenses incurred prior to provision of notice to the insurance carrier, the insurance company has paid for the defense costs related to the SEC inquiry and the class action and derivative lawsuits.  At this time, it is not possible to predict whether the Company will have any additional liability or to estimate additional costs that may be incurred with such actions that may not be covered by any applicable insurance policy.

Item 4.  Submission of Matters to a Vote of Security Holders.

None

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PART II

|Item   5. | Market   for the Registrants Common Stock, Related Stockholder Matters and Issuer   Purchases of Equity Securities.
|--------- | --------------------------------------------------------------------------------------------------------------------

(a)          The Companys common stock trades on The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol ABIX.  The following table sets forth the high and low bid prices for the common stock for the periods indicated.  These quotations reflect prices between dealers, do not include retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

|               |  | Common   Stock   Bid Price |      
|-------------- |  | -------------------------- | -----
|               |  |                            |      
|               |  | High                       |      
|               |  |                            |      
|2003           |  |                            |      
|First Quarter  |  | $                          | 8.50 
|Second Quarter |  |                            | 6.24 
|Third Quarter  |  |                            | 5.29 
|Fourth Quarter |  |                            | 4.32 
|2004           |  |                            |      
|First Quarter  |  | $                          | 6.74 
|Second Quarter |  |                            | 16.75
|Third Quarter  |  |                            | 4.53 
|Fourth Quarter |  |                            | 14.75

On March 21, 2005, the closing price for the common stock was $7.24.

(b)          As of March 21, 2005, the approximate number of holders of record of the Companys common stock was estimated to be 200.

(c)          The Company has never paid cash dividends on its common stock.  Future dividend policy will depend on the Companys earnings, capital requirements, expansion plans, financial conditions, tax laws and other relevant factors.  The Company currently does not anticipate paying cash dividends for the foreseeable future.

(d)          The Company does not currently have any equity compensation plans.

(e)          The Company does not currently have an active share repurchase program and has not repurchased any of its common stock since 1999.

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Item 6.  Selected Financial Data.

The tables below set forth, in summary form, selected financial data of the Company.  This data, which is not covered by the report of the independent registered public accounting firm, should be read in conjunction with the consolidated financial statements and notes thereto which are included elsewhere herein (amounts in thousands except per share amounts).

|                                                                      |  | Year Ended   December 31, |       
|--------------------------------------------------------------------- |  | ------------------------- | ------
|                                                                      |  |                           |       
|                                                                      |  | 2004a                     |       
|                                                                      |  |                           |       
|Selected Operating Results:                                           |  |                           |       
|Net sales                                                             |  | $                         | 52,892
|                                                                      |  |                           |       
|Gross profit                                                          |  | $                         | 14,370
|                                                                      |  |                           |       
|Earnings before   cumulative effect of change in accounting principle |  | $                         | 214   
|Cumulative effect of   change in accounting principle d               |  |                           |      
|                                                                      |  |                           |       
|Net earnings                                                          |  | $                         | 214   
|                                                                      |  |                           |       
|Basic and diluted net earnings per common share:                      |  |                           |       
|Earnings before   cumulative effect of change in accounting principle |  | $                         | .13   
|Cumulative effect of   change in accounting principle d               |  |                           |      
|                                                                      |  |                           |       
|Net earnings                                                          |  | $                         | .13   
|                                                                      |  |                           |       
|Basic and diluted weighted average shares   outstanding               |  |                           | 1,711 
|                                                                      |  |                           |       

|                             |  | As of   December 31, |       
|---------------------------- |  | -------------------- | ------
|                             |  |                      |       
|                             |  | 2004                 |       
|                             |  |                      |       
|Selected Balance Sheet Data: |  |                      |       
|Current assets               |  | $                    | 17,837
|Current liabilities          |  |                      | 10,306
|Total assets                 |  |                      | 19,272
|Total liabilities            |  |                      | 10,306
|Retained earnings            |  |                      | 8,646 
|Stockholders equity         |  |                      | 8,966 

| 
|-
|a
| 
|b
| 
|c
| 
|d

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|Item   7. | Managements   Discussion and Analysis of Financial Condition and Results of Operations.
|--------- | ----------------------------------------------------------------------------------------

Introduction

The Company is a supplier of mainly safety related products and tools to workers involved in the construction, manufacturing and homeland security markets.  From seven fully-stocked distribution facilities/sales offices in the western and southwestern part of the United States the Company primarily distributes commodity products to the local geographic areas surrounding its facilities.

IESI, the Companys wholly-owned subsidiary, imports disposable clothing from China.  IESI sells their product throughout the United States through the Abatix distribution channels, as well as through other distributors.

The Companys management believes that hiring additional sales staff, controlling costs, geographic expansion, diversification of customer base and responding effectively to competitive challenges are important to the long-term success of the Company.

| | Sales Staff  We sell our   products based on relationships, among other things.  Our ability to hire, train and retain   staff, especially in the sales and customer service area is critical to our   long-term success.  Our current   competitive compensation and benefits, including updating these items when   necessary, as well as a good work-life balance are critical to this area.                                                                                                                                                                                                                                                                         
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Controlling Costs  To   maintain our competitive position by providing competitively priced products   while also maintaining our profitability, we must control our costs and   effectively utilize our assets.    During 2004 we reviewed, and will continue to review in 2005, our   general and administrative costs making adjustments where appropriate.  Our ability to control costs can be   affected by outside factors, such as the price of oil or increases in   interest rates.  In addition, the cost   to comply with Section 404 of Sarbanes-Oxley is expected to approximate   $500,000 which would negate most of our cost reduction efforts to date.
| | Geographic Expansion  The   Company needs to leverage our infrastructure and knowledge over a larger   revenue base.  While the Company   intends to focus on growing revenues in its existing locations, the Company   will also explore geographic expansion.                                                                                                                                                                                                                                                                                                                                                                                                         
| | Customer Base  While no   customer represents 10% or more of the Companys revenues, there are several   large customers, especially at IESI.    The loss of one or more of those customers would have an impact on our   revenue and profitability.  The   Company intends to pursue additional customers and cultivate current   customers in an attempt to lessen the impact of any one customer.                                                                                                                                                                                                                                                                    
| | Competitive Environment    Past results and future prospects are significantly affected by the   competitive environment in which we operate.    We experience intense competition for sales of our products in all of   our markets.  Our competition ranges   from small owner-operator distributors to large national retail chains   selling to the construction industry and large national companies selling to   the construction and industrial industries.    Typically, the smaller companies are built around very strong   relationships which make it hard to penetrate, while the larger companies   have a distinct geographic and price advantage.      

14

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Other than historical and factual statements, the matters and items discussed herein are forward-looking statements that involve risks and uncertainties.  Actual results of the Company may differ materially from the results discussed herein.  Certain, but not all, factors that could contribute to such differences are discussed throughout this report.  We do not undertake any obligation to publicly update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law or regulation.

Overview of 2004 Results

| | Net sales increased 8%   when compared to 2003.                               
|- | ------------------------------------------------------------------------------
| | Gross profit increased 2%   when compared to 2003.                            
| | Selling, general and   administrative costs were essentially the same as 2003.
| | Net income of $214,000   increased $153,000 when compared to 2003.            

This discussion and analysis of our results of operations and financial condition is intended to provide investors with an understanding of the Companys recent performance, its financial condition and its prospects.  We will discuss and provide our analysis of the following:

| | Results of Operations and   Related Information    
|- | ---------------------------------------------------
| | Liquidity and Capital   Resources                  
| | Critical Accounting   Policies                     
| | New Accounting Standards                           
| | Business Outlook                                   
| | Information Concerning   Forward-Looking Statements

Results of Operations and Related Information

2004 Compared With 2003

Net Sales

Consolidated net sales increased 8% to $52,892,000 from 2003.  The Abatix operating segment net sales increased 7% to $50,106,000, while the IESI operating segment net sales increased 42% to $2,786,000.

| | The increase in sales at   the Abatix operating segment resulted from:                                                                                                                            
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | o                                                                                                                                                                                                 
|  | o                                                                                                                                                                                                 
|  | o                                                                                                                                                                                                 
| | The increase in sales at   the IESI operating segment resulted from market penetration at a few key   customers and those customers ability to capture market share from   competitors products.

15

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Gross Profit

Consolidated gross profit of $14,370,000 increased 2% from 2003.  Expressed as a percentage of sales, gross profit was 27% and 29% in 2004 and 2003, respectively.

| | The increase in gross   profit dollars is a result of higher sales volume to the restoration and   homeland security markets.
|- | -----------------------------------------------------------------------------------------------------------------------------
| | The decrease in the gross   profit rate is a result of:                                                                      
|  | o                                                                                                                            
|  | o                                                                                                                            

Selling, General and Administrative Expenses

|Selling, general and administrative expenses of $13,720,000 increased slightly over 2003.  The significant changes are:
|-----------------------------------------------------------------------------------------------------------------------
|                                                                                                                      
|                                                                                                                      

Expressed as a percentage of sales, S,G&A expenses were 26% and 28% for 2004 and 2003, respectively.

Additional Statement of Operations Commentary

| | Operating profit of 1.2%   of sales for 2004 improved from 0.7% of sales in 2003.  The Abatix segment operating profit of   0.3% of sales for 2004 improved from an operating loss of (0.1%) of sales in   2003.  The IESI segment operating   profit of 18.3% of sales in 2004 declined from 19.8% in 2003.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | o                                                                                                                                                                                                                                                                                                           
|  | o                                                                                                                                                                                                                                                                                                           
| | Interest expense of   $243,000 increased approximately $64,000 from 2003 primarily due to higher   line of credit balances and higher interest rates.                                                                                                                                                       
| | Our effective tax rate was   48% in 2004, which compared with 60% in 2003.  Although the effective rate in 2004 is lower than 2003, it is   higher than normal as a result of the following.                                                                                                                
|  | o                                                                                                                                                                                                                                                                                                           
|  | o                                                                                                                                                                                                                                                                                                           
| | Net earnings of $214,000   or $.13 per share increased $153,000 from net earnings of $61,000 or $.04 per   share in 2003.  The increase in net   earnings is primarily due to the higher sales volume, partially offset by   lower margins.                                                                 

16

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2003 Compared With 2002

Net Sales

|Consolidated net sales decreased 18% to $48,893,000 from 2002.  The Abatix operating segment net sales decreased 19% to $46,933,000, while the IESI operating segment net sales decreased 3% to $1,961,000.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                          
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                          

Gross Profit

|Consolidated gross profit of $14,050,000 decreased 19% from 2002.  Expressed as a percentage of sales, gross profit was 29% in both 2003 and 2002.
|--------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                 

Selling, General and Administrative Expenses

|Selling, general and administrative expenses of $13,719,000 decreased 9% from 2002.  The significant changes in these costs are as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                          

|Expressed as a percentage of sales, S,G&A expenses were 28% and 25% for 2003 and 2002, respectively.
|----------------------------------------------------------------------------------------------------
|                                                                                                   

17

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Additional Statement of Operations Commentary

| | Operating profit of 0.7%   of sales for 2003 declined from 4.1% of sales in 2002.  The Abatix segment operating loss of   (0.1%) of sales for 2003 declined from an operating profit of 3.5% of sales   in 2002.  The IESI segment operating   profit of 19.8% of sales in 2003 increased from 18.7% in 2002.                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Interest expense of   $179,000 decreased approximately $52,000 from 2002 primarily due to lower interest   rates and lower borrowings.                                                                                                                                                                                                                                                                                                                                                                 
| | Our effective tax rate was   60% in 2003, which compared with 39% in 2002.  This higher rate is a result of the following.                                                                                                                                                                                                                                                                                                                                                                             
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In the first quarter of 2002, the Company   implemented Financial Accounting Standards Board (FASB) Statement of   Financial Accounting Standards (Statement) No. 142.  As required by Statement No. 142, the   Company, upon adoption, ceased amortizing goodwill and performed an   impairment review of its goodwill balance.    Based on the review performed, the Company recorded a goodwill impairment   charge for the full amount of $819,841, net of an income tax benefit of   $327,900.
| | Net earnings of $61,000 or   $.04 per share decreased $792,000 from net earnings of $853,000 or $.50 per   share in 2002.  The decrease in net   earnings is primarily due to the lower sales volume in 2003 without a   corresponding decrease in selling, general and administrative expenses.                                                                                                                                                                                                       

Liquidity and Capital Resources

|Cash used in operations during 2004 of $691,000 compared to cash provided by operations during 2003 of $1,247,000.
|------------------------------------------------------------------------------------------------------------------
|                                                                                                                 
|                                                                                                                 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                 

Cash requirements for investing activities during 2004 of $163,000 decreased by $466,000 when compared to 2003.  These requirements were primarily the purchase of computer hardware and software and leasehold improvements.  Purchases of property and equipment in 2004 were lower than normal primarily because of the significant expense in 2003 related to the Companys new computer system.  Purchases in 2005 are estimated to be less than $400,000 and will primarily include replacement of vehicles and computers, and potentially some additional productivity software.

18

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|The Company has an $8,000,000 working capital line of credit and a $500,000 capital equipment credit facility.
|--------------------------------------------------------------------------------------------------------------
|                                                                                                             
|                                                                                                             
|                                                                                                             
|                                                                                                             

Contractual Obligations

The following table presents the Companys total contractual obligations as of December 31, 2004 for which cash flows are fixed or determinable (in thousands).

|                                 |  | 2005 |       | 2006 |   | 2007  |  | 2008 |     | 2009 |   | 2010 |  | Total |    
|-------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | --- | ---- | - | ---- |  | ----- | ---
|                                 |  |      |       |      |   |       |  |      |     |      |   |      |  |       |    
|Contractual obligations:         |  |      |       |      |   |       |  |      |     |      |   |      |  |       |    
|Operating leases                 |  | $    | 1,135 |      | $ | 659   |  | $    | 365 |      | $ | 132  |  | $     | 118
|Working capital line of   credit |  |      | 5,496 |      |   |      |  |      |    |      |   |     |  |       |   
|Equipment notes                  |  |      | 35    |      |   | 10    |  |      |    |      |   |     |  |       |   
|Employment contracts             |  |      | 584   |      |   | 584   |  |      |    |      |   |     |  |       |   
|Open purchase orders             |  |      | 1,556 |      |   |      |  |      |    |      |   |     |  |       |   
|Office equipment leases          |  |      | 22    |      |   | 15    |  |      | 7   |      |   | 7    |  |       | 4  
|                                 |  |      |       |      |   |       |  |      |     |      |   |      |  |       |    
|Total contractual obligations    |  | $    | 8,828 |      | $ | 1,268 |  | $    | 372 |      | $ | 139  |  | $     | 122
|                                 |  |      |       |      |   |       |  |      |     |      |   |      |  |       |    

|Commentary:
|-----------
|          
|          
|          
|          

19

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Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period.  Actual results could differ from these estimates, and changes in these estimates are recorded when known.  The critical accounting policies used by management in the preparation of the Companys consolidated financial statements are those that are important both to the presentation of the Companys financial condition and results of operations and require significant judgments by management with regard to estimates used.  The critical judgments by management relate to excess and obsolete inventory, allowance for doubtful accounts, depreciation, amortization and impairment testing for property and equipment,
and deferred tax assets and potential income tax assessments.  The Companys critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.

Excess and Obsolete Inventory

The Company evaluates whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory.  The assumptions used in this evaluation are based on current market conditions and the Company believes inventory is stated at the lower of cost or market in the financial statements.

Allowance for Doubtful Accounts

The Company has estimated the net realizable value of accounts receivable by evaluating the current pool of accounts receivable in light of past experience and current knowledge of its customer base.  The Company believes the reserves recorded in the financial statements are adequate for potential credit losses.  It is possible the accuracy of the estimation process could be materially impacted as the composition of this pool of accounts receivable changes over time or if the health of the economy, its customers or the markets served by the Company deteriorates.

Depreciation, Amortization and Impairment Testing for Property and Equipment

Estimating the useful lives of property, plant and equipment requires the exercise of management judgment, and actual lives may differ from these estimates.  Changes to these initial useful life estimates would be made if and when appropriate.  Property, plant and equipment are tested for impairment in accordance with Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,whenever events or changes in circumstances indicate that the carrying amounts of such long-lived assets may not be recoverable from future net pretax cash flows.  Impairment testing requires significant management judgment including estimating the future success of product lines and facilities, future sales volumes, growth rates for selling prices and costs, alternative uses for the assets and estimated proceeds from disposal of the assets.  The Company makes estimates regarding future undiscounted cash flows from the use of long-lived
assets in assessing potential impairment whenever events or

20

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changes in circumstances indicate the carrying value of a long-lived asset may not be recoverable.  Since there were no events or changes in circumstances to indicate the carrying value of long-lived assets were impaired, the Company recorded no adjustment to the carrying value of these assets.  The Company does not expect events or circumstances to significantly change, thereby affecting the carrying value of long-lived assets.

Deferred Tax Assets and Potential Income Tax Assessments

As of December 31, 2004, the Company has recorded a net deferred tax asset. In determining the valuation allowances to establish against these deferred tax assets, if any, the Company considers many factors, including the specific taxing jurisdiction, income tax strategies and forecasted earnings. A valuation allowance is recognized if, based on the weight of available evidence, the Company concludes that it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company records liabilities in current income taxes for potential assessments resulting from tax audits.  Any accruals relate to uncertain tax positions in, potentially, a variety of taxing jurisdictions and are based on what management believes will be the ultimate resolution of these positions. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations. The Companys U.S. federal income tax returns have been audited through 2001 and all federal assessments of additional taxes, interest and penalties have been paid through 2001.

New Accounting Standards

In November 2004, FASB issued Statement No. 151, Inventory Costs  an amendment of ARB No. 43, Chapter 4.  Statement No. 151 requires that abnormal amounts of costs, including idle facility expense, freight, handling costs and spoilage, should be recognized as current period charges.  The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005.  The Company does not expect the adoption of this Statement to have a material impact on its financial statements.

In December 2004, FASB issued Statement No. 153, Exchanges of Nonmonetary Assets  an amendment of Accounting Principles Board (APB) Opinion No. 29.  Statement No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have a commercial substance.  A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  The provisions of this Statement are effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005.  The Company does not expect the adoption of this Statement to have a material impact on its financial statements.

In December 2004, FASB issued Statement No. 123R, Share-Based Payment.  Statement No. 123R revises Statement No. 123, supersedes APB Opinion No. 25 and amends Statement No. 95.  Statement No. 123R requires the cost of employee services received in exchange for an award of equity instruments be recognized over the period during which an employee is required to provide service in exchange for the award.  The provisions of this Statement are effective for public entities that do not file as small business issuers as of the beginning of the first interim period or annual reporting period that begins after June 15, 2005.  The Company does not expect the adoption of this Statement to have a material impact on its financial statements.

21

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Business Outlook

|Our goal for 2005 is to produce revenue growth, exclusive of the non-recurring revenues in Florida in 2004, as it is vital to our long-term success.
|----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                    
|Overall margins for 2005 are anticipated to remain   at their current levels.                                                                       
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                    
|The Company will need to further reduce costs to   stay competitive and improve on its profitability.                                               
|                                                                                                                                                   

22

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|                                                                                                                                                                                                                                                                                                                                                     | Unless revenues improve significantly and are   sustainable, S,G&A expenses are estimated to remain in their current   range for 2005.                                                                                                                                                                                                                                                                                            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                     | The Companys credit facilities are variable rate   notes tied to the lending institutions prime rate.  Increases in the prime rate could negatively affect the   Companys earnings.                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Depending on many factors, including the timing of   sales, cash flow from operations for the entire year of 2005 is expected to   be positive as the Company collects the receivables from the sales increase   in the last half of 2004, improvements are made to inventory and purchasing   and there is further refinement in our cost structure.
|                                                                                                                                                                                                                                                                                                                                                     | Unless the Company employs a more aggressive growth   strategy, management believes the Companys current credit facilities,   together with cash provided by operations, will be sufficient for its capital   and liquidity requirements for the next twelve months.                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                     | The Companys accounts receivable collection days   have leveled off over the past twelve months after increasing slightly in the   eighteen months prior.  The increase   was primarily a result of the sharp decrease in sales to restoration   contractors.  The Company took steps   to protect our interests in certain receivables and believes its allowance   for bad debts is sufficient to cover any anticipated losses.
|                                                                                                                                                                                                                                                                                                                                                     | The Companys inventory turns have also leveled off   over the past twelve months after declining the eighteen months prior.  The decline was primarily a result of the   sharp decrease in sales to restoration contractors and the increase in   inventory to support a customer.    Sales to this customer have improved, but have been slow to reach the   projected levels.                                                  
|                                                                                                                                                                                                                                                                                                                                                     | A new location would require approximately $100,000   in fixed asset purchases, comprised of computers, office furniture, warehouse   racking and potentially a delivery vehicle.    In addition, cash will also be required to stock this location with   product and to finance the customers purchases.  Cash flow from operations and borrowings on our lines of credit   will be used to finance any new location.          
|                                                                                                                                                                                                                                                                                                                                                     | Unless the Companys stock could be used as   currency, any acquisitions would most likely require the raising of capital   as the borrowing capacity on the lines of credit and the cash flow from   operations would most likely not be sufficient to support an acquisition of   reasonable size.                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                     | The Company currently estimates that it will incur   approximately $500,000 in additional costs related to the implementation of   Section 404 of the Sarbanes-Oxley Act of 2002.  These costs will be incurred over 2005 and 2006.                                                                                                                                                                                               

Information Concerning Forward-Looking Statements

Certain statements contained herein, among other things, are of a forward-looking nature relating to future events or the future business performance of Abatix.  Such statements involve a number of risks and uncertainties including, without limitation, global, national and local economic and political conditions; changes in laws and regulations relating to the Companys products and the import of such products; the outcome of litigation; market acceptance of new products, existence or development of competitive products the Company represents as a distributor that outperform current product lines or are priced more competitively; inability to hire and train quality people or retain current employees; changes in interest rates; the financial status of key customers and vendors; efforts to control and/or reduce costs; adverse weather conditions; significant changes in oil prices; or the Companys success in the process of managements assessment
and auditor

23

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attestation of internal controls, as required by the Sarbanes-Oxley Act of 2002.  We do not undertake any obligation to publicly update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law or regulation.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Since the Companys working capital and equipment lines of credit are variable rate notes, the Company is exposed to interest rate risk.  Based on the Companys debt at December 31, 2004 and 2003, an increase of 100 basis points in the United States prime rate would have negatively impacted the Companys net earnings for the years then ended by $27,000 and $18,000, respectively.

Item 8.  Consolidated Financial Statements and Supplementary Data.

The consolidated financial statements and supplementary data are included under Item 15(a)(l) and (2) of this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9A.  Controls and Procedures.

As of December 31, 2004, the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures.  Based upon that evaluation, the Companys management, including the Chief Executive Officer and Chief Financial Officer, concluded the Companys disclosure controls and procedures were effective as of December 31, 2004.  There have been no significant changes during the period covered by this report in the Companys internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

Item 9B.  Other Information.

None.

24

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PART III

Item 10.  Directors and Executive Officers of the Registrant.

This Item 10 is incorporated herein by reference from the Companys definitive Proxy Statement to be filed with the SEC not later than one hundred twenty (120) days after December 31, 2004.

Item 11.  Executive Compensation.

This Item 11 is incorporated herein by reference from the Companys definitive Proxy Statement to be filed with the SEC not later than one hundred twenty (120) days after December 31, 2004.

|Item   12. | Security   Ownership of Certain Beneficial Owners and Management and Related Stockholder   Matters.
|---------- | ---------------------------------------------------------------------------------------------------

This Item 12 is incorporated herein by reference from the Companys definitive Proxy Statement to be filed with the SEC not later than one hundred twenty (120) days after December 31, 2004.

Item 13.  Certain Relationships and Related Transactions.

This Item 13 is incorporated herein by reference from the Companys definitive Proxy Statement to be filed with the SEC not later than one hundred twenty (120) days after December 31, 2004.

Item 14.  Principal Accounting Fees and Services.

This Item 14 is incorporated herein by reference from the Companys definitive Proxy Statement to be filed with the SEC not later than one hundred twenty (120) days after December 31, 2004.

25

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PART IV

Item 15.  Exhibits and Financial Statement Schedules.

(a)  Documents filed as part of this report.

1 and 2. Consolidated Financial Statements and Financial Statement Schedule

The consolidated financial statements and financial statement schedule listed on the index to consolidated financial statements on page F-l are filed as part of this Form l0-K.

3.  Exhibits

|(2)(a)    | Agreement of Merger filed as Exhibit (2) to the   Registration Statement on Form S-18, filed January 11, 1989, and herein   incorporated by reference.                                                                                                                                                                                          
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                 
|(2)(b)    | Asset Purchase Agreement filed as Exhibit (2)(b) to   the Report on Form 8-K, filed October 19, 1992, and herein incorporated by   reference.                                                                                                                                                                                                   
|          |                                                                                                                                                                                                                                                                                                                                                 
|(2)(c)    | Asset Purchase Agreement for Keliher Hardware   Company filed as exhibit (2)(c) to the Report on Form 10-K for the year ended   December 31, 1998, and herein incorporated by reference.                                                                                                                                                        
|          |                                                                                                                                                                                                                                                                                                                                                 
|(2)(d)    | Asset Purchase Agreement for North State Supply Co.   of Phoenix filed with Report on Form 8-K on June 15, 1999, and herein   incorporated by reference.                                                                                                                                                                                        
|          |                                                                                                                                                                                                                                                                                                                                                 
|(3)(a)(1) | Certificate of Incorporation filed as Exhibit   (3)(a)(1) to the Registration Statement on Form S-18, filed January 11, 1989;   filed electronically as Exhibit 3(i)(a) to the Form 10-Q for the quarter   ended December 31, 1995, filed on November 9, 1995, and herein incorporated   by reference.                                          
|          |                                                                                                                                                                                                                                                                                                                                                 
|(3)(a)(2) | Certificate of Amendment of Certificate of   Incorporation filed as Exhibit (3)(a)(2) to the Registration Statement on   Form S-18, filed January 11, 1989; filed electronically as Exhibit 3(i)(b) to   the Form 10-Q for the quarter ended December 31, 1995, filed on November 9,   1995, and herein incorporated by reference.              
|          |                                                                                                                                                                                                                                                                                                                                                 
|(3)(a)(3) | Certificate of Amendment of Certificate of   Incorporation filed as Exhibit (3)(i)(c) to the Form 10-Q for the quarter   ended December 31, 1995, filed November 9, 1995; filed electronically as   Exhibit 3(i)(c) to the Form 10-Q for the quarter ended December 31, 1995,   filed on November 9, 1995, and herein incorporated by reference.

26

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|(3)(b)       | Bylaws filed as Exhibit (3)(b) to the Registration   Statement on Form S-18, filed January 11, 1989; filed electronically as   Exhibit 3(ii) to the Form 10-Q for the quarter ended December 31, 1995, filed   on November 9, 1995, and herein incorporated by reference.
|------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |                                                                                                                                                                                                                                                                          
|(4)(a)       | Specimen Certificate of Common Stock filed as   Exhibit (4)(a) to the Registration Statement on Form S-18, filed January 8,   1989, and herein incorporated by reference.                                                                                                
|             |                                                                                                                                                                                                                                                                          
|(4)(b)       | Specimen of Redeemable Common Stock Purchase Warrant   filed as Exhibit (4)(b) to the Registration Statement on Form S-18, filed   February 9, 1989, and herein incorporated by reference.                                                                               
|(10)(a)(v)   | Employment Agreement with Terry W. Shaver effective   January 1, 2005.*                                                                                                                                                                                                  
|             |                                                                                                                                                                                                                                                                          
|(10)(b)(v)   | Employment Agreement with Gary L. Cox effective   January 1, 2005.*                                                                                                                                                                                                      
|             |                                                                                                                                                                                                                                                                          
|(10)(c)(i)   | Employment Agreement with Frank J. Cinatl, IV   effective January 1, 2005.*                                                                                                                                                                                              
|             |                                                                                                                                                                                                                                                                          
|(10)(e)(iii) | Demand Credit Facility with Comerica Bank-Texas   extension, renewal and increase dated September 22, 1994 filed as Exhibit   (10)(e)(iii) to the Report on Form 10-K for the year ended December 31, 1994,   and herein incorporated by reference.                      
|             |                                                                                                                                                                                                                                                                          
|(14)         | Code of Business Conduct and Ethics for Directors,   Officers and Employees.*                                                                                                                                                                                            
|             |                                                                                                                                                                                                                                                                          
|(22)         | Information Statement dated September 1, 1995 filed   as Exhibit (22) to the Report on Form 10-K for the year ended December 31,   1995, and herein incorporated by reference.                                                                                           
|             |                                                                                                                                                                                                                                                                          
|(31)(a)      | Certification of Chief Executive Officer required by   Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as   amended (the Exchange Act).*                                                                                                      
|             |                                                                                                                                                                                                                                                                          
|(31)(b)      | Certification of Chief Financial Officer required by   Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.*                                                                                                                                                            
|             |                                                                                                                                                                                                                                                                          
|(32)(a)      | Certification of Chief Executive Officer required by   Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of   Chapter 63 of Title 18 of the United States Code.*                                                                                     
|             |                                                                                                                                                                                                                                                                          
|(32)(b)      | Certification of Chief Financial Officer required by   Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of   Chapter 63 of Title 18 of the United States Code.*                                                                                     
|             |                                                                                                                                                                                                                                                                          
|            
|*            | Filed herewith as part of the Companys electronic   filing.                                                                                                                                                                                                             

27

---



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, on the 24th day of March, 2005.

| | ABATIX CORP.
| | ------------
| |             
| | By:         
| |             
| |             
| |             

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/ TERRY W. SHAVER |  | President, Chief Executive Officer           |  | March 24, 2005
|                    |  | and Director (Principal Executive Officer)   |  |               
|Terry W. Shaver     |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ GARY L. COX     |  | Executive Vice President,                    |  | March 24, 2005
|                    |  | Chief Operating Officer and Director         |  |               
|Gary L. Cox         |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ FRANK J. CINATL |  | Vice President and Chief Financial Officer   |  | March 24, 2005
|                    |  | (Principal Financial and Accounting Officer) |  |               
|Frank J. Cinatl, IV |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ DONALD N. BLACK |  | Director                                     |  | March 24, 2005
|                    |  |                                              |  |               
|Donald N. Black     |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ ERIC A. YOUNG   |  | Director                                     |  | March 24, 2005
|                    |  |                                              |  |               
|Eric A. Young       |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ A. DAVID COOK   |  | Director                                     |  | March 24, 2005
|                    |  |                                              |  |               
|A. David Cook       |  |                                              |  |               

28

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ABATIX CORP. AND SUBSIDIARY

Index to Consolidated Financial Statements

|                                                                                                         |  | Page
|-------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                         |  |     
|Report of Independent Registered   Public Accounting Firm                                                |  | F-2 
|                                                                                                         |  |     
|Financial Statements:                                                                                    |  |     
|Consolidated   Balance Sheets as of December 31, 2004 and 2003                                           |  | F-3 
|                                                                                                         |  |     
|Consolidated   Statements of Operations for the years ended December 31, 2004, 2003 and 2002             |  | F-4 
|                                                                                                         |  |     
|Consolidated   Statements of Stockholders Equity for the years ended December 31, 2004,   2003 and 2002 |  | F-5 
|                                                                                                         |  |     
|Consolidated   Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002             |  | F-6 
|                                                                                                         |  |     
|Notes   to Consolidated Financial Statements                                                             |  | F-7 
|                                                                                                         |  |     
|Financial Statement Schedule:                                                                            |  |     
|II -   Valuation and Qualifying Accounts for the years ended December 31, 2004, 2003   and 2002          |  | S-1 

All other schedules have been omitted as the required information is inapplicable.

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders Abatix Corp.:

We have audited the accompanying consolidated balance sheets of Abatix Corp. and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2004.  In connection with our audits of the consolidated financial statements we also have audited the financial statement schedule as listed in the accompanying index.  These consolidated financial statements and financial statement schedule are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and related schedules.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Abatix Corp. and subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

|               | KPMG LLP
|-------------- | --------
|               |         
|Dallas, Texas  |         
|March 14, 2005 |         

F-2

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Balance Sheets December 31, 2004 and 2003

|                                                                                                               |  | 2004 |            | 2003 |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                                                                               |  |      |            |      |  
|Assets                                                                                                         |  |      |            |      |  
|Current assets:                                                                                                |  |      |            |      |  
|Cash                                                                                                           |  | $    | 338,443    |      | $
|Trade accounts   receivable, net of allowance for doubtful accounts of $368,874 in 2004 and   $277,830 in 2003 |  |      | 9,303,140  |      |  
|Inventories                                                                                                    |  |      | 7,199,841  |      |  
|Prepaid expenses and   other assets                                                                            |  |      | 680,745    |      |  
|Refundable income taxes                                                                                        |  |      |           |      |  
|Deferred income taxes   (note 4)                                                                               |  |      | 309,841    |      |  
|Receivables from   employees                                                                                   |  |      | 5,427      |      |  
|                                                                                                               |  |      |            |      |  
|Total current assets                                                                                           |  |      | 17,837,437 |      |  
|Property and equipment, net (note 2)                                                                           |  |      | 987,694    |      |  
|Deferred income taxes (note 4)                                                                                 |  |      | 364,343    |      |  
|Other assets                                                                                                   |  |      | 82,450     |      |  
|                                                                                                               |  |      |            |      |  
|                                                                                                               |  | $    | 19,271,924 |      | $
|                                                                                                               |  |      |            |      |  
|Liabilities and   Stockholders Equity                                                                         |  |      |            |      |  
|Current liabilities:                                                                                           |  |      |            |      |  
|Notes payable (note 3)                                                                                         |  | $    | 5,539,736  |      | $
|Accounts payable                                                                                               |  |      | 3,618,564  |      |  
|Accrued compensation                                                                                           |  |      | 131,935    |      |  
|Other accrued expenses                                                                                         |  |      | 1,015,473  |      |  
|                                                                                                               |  |      |            |      |  
|Total current   liabilities                                                                                    |  |      | 10,305,708 |      |  
|                                                                                                               |  |      |            |      |  
|Stockholders equity (note 5):                                                                                 |  |      |            |      |  
|Preferred stock - $1   par value, 500,000 shares authorized; none issued                                       |  |      |           |      |  
|Common stock - $.001   par value, 5,000,000 shares authorized; issued 2,437,314 shares in 2004 and   2003      |  |      | 2,437      |      |  
|Additional paid-in   capital                                                                                   |  |      | 2,574,560  |      |  
|Retained earnings                                                                                              |  |      | 8,646,561  |      |  
|Treasury stock at cost,   726,166 common shares in 2004 and 2003                                               |  |      | (2,257,342 | )    |  
|                                                                                                               |  |      |            |      |  
|Total stockholders   equity                                                                                   |  |      | 8,966,216  |      |  
|Commitments and contingencies  (note 9)                                                                        |  |      |            |      |  
|                                                                                                               |  |      |            |      |  
|                                                                                                               |  | $    | 19,271,924 |      | $
|                                                                                                               |  |      |            |      |  

See accompanying notes to consolidated financial statements.

F-3

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Statements of Operations Years ended December 31, 2004, 2003 and 2002

|                                                                                       |  | 2004 |             | 2003 |   | 2002        |  
|-------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                       |  |      |             |      |   |             |  
|Net sales                                                                              |  | $    | 52,892,213  |      | $ | 48,893,420  |  
|Cost of sales                                                                          |  |      | 38,521,908  |      |   | 34,843,222  |  
|                                                                                       |  |      |             |      |   |             |  
|Gross profit                                                                           |  |      | 14,370,305  |      |   | 14,050,198  |  
|Selling, general and administrative expenses                                           |  |      | (13,719,943 | )    |   | (13,718,525 | )
|                                                                                       |  |      |             |      |   |             |  
|Operating profit                                                                       |  |      | 650,362     |      |   | 331,673     |  
|Other income (expense):                                                                |  |      |             |      |   |             |  
|Interest expense                                                                       |  |      | (242,643    | )    |   | (178,857    | )
|Other, net                                                                             |  |      | 1,763       |      |   | 773         |  
|                                                                                       |  |      |             |      |   |             |  
|Earnings before income   taxes                                                         |  |      | 409,482     |      |   | 153,589     |  
|Income tax expense (note 4)                                                            |  |      | (195,317    | )    |   | (92,398     | )
|                                                                                       |  |      |             |      |   |             |  
|Earnings before   cumulative effect of change in accounting principle                  |  |      | 214,165     |      |   | 61,191      |  
|Cumulative effect of change in accounting principle,   net of tax of $327,900 (note 1) |  |      |            |      |   |            |  
|                                                                                       |  |      |             |      |   |             |  
|Net earnings                                                                           |  | $    | 214,165     |      | $ | 61,191      |  
|                                                                                       |  |      |             |      |   |             |  
|Basic and diluted earnings per common share:                                           |  |      |             |      |   |             |  
|Earnings before   cumulative effect of change in accounting principle                  |  | $    | .13         |      | $ | .04         |  
|Cumulative effect of   change in accounting principle, net of tax (note 1)             |  |      |            |      |   |            |  
|                                                                                       |  |      |             |      |   |             |  
|Net earnings                                                                           |  | $    | .13         |      | $ | .04         |  
|                                                                                       |  |      |             |      |   |             |  
|Basic and diluted weighted average shares   outstanding                                |  |      | 1,711,148   |      |   | 1,711,148   |  
|                                                                                       |  |      |             |      |   |             |  

See accompanying notes to consolidated financial statements.

F-4

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Statements of Stockholders Equity Years ended December 31, 2004, 2003 and 2002

|                             |  | Common   Stock |           | Additional   Paid-in   Capital |                     |       |  |        | Treasury   Stock |        |   |           | 
|---------------------------- |  | -------------- | --------- | ------------------------------ | ------------------- | ----- |  | ------ | ---------------- | ------ | - | --------- | 
|                             |  |                |           |                                | Retained   Earnings |       |  |        | Total   Equity   |       
|                             |  | Shares         |           | Amount                         |                     |       |  | Shares |                  | Amount |   |          
|                             |  |                |           |                                |                     |       |  |        |                  |        |   |           | 
|Balance at December 31, 2001 |  |                | 2,437,314 |                                | $                   | 2,437 |  | $      | 2,574,560        |        | $ | 7,518,024 | 
|Net earnings                 |  |                |          |                                |                     |      |  |        |                 |        |   | 853,181   | 
|                             |  |                |           |                                |                     |       |  |        |                  |        |   |           | 
|Balance at December 31, 2002 |  |                | 2,437,314 |                                |                     | 2,437 |  |        | 2,574,560        |        |   | 8,371,205 | 
|Net earnings                 |  |                |          |                                |                     |      |  |        |                 |        |   | 61,191    | 
|                             |  |                |           |                                |                     |       |  |        |                  |        |   |           | 
|Balance at December 31, 2003 |  |                | 2,437,314 |                                |                     | 2,437 |  |        | 2,574,560        |        |   | 8,432,396 | 
|Net earnings                 |  |                |          |                                |                     |      |  |        |                 |        |   | 214,165   | 
|                             |  |                |           |                                |                     |       |  |        |                  |        |   |           | 
|Balance at December 31, 2004 |  |                | 2,437,314 |                                | $                   | 2,437 |  | $      | 2,574,560        |        | $ | 8,646,561 | 
|                             |  |                |           |                                |                     |       |  |        |                  |        |   |           | 

See accompanying notes to consolidated financial statements.

F-5

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Statements of Cash Flows Years ended December 31, 2004, 2003 and 2002

|                                                                                                  |  | 2004 |             | 2003 |   | 2002        |  
|------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                                  |  |      |             |      |   |             |  
|Cash flows from operating activities:                                                             |  |      |             |      |   |             |  
|Net earnings                                                                                      |  | $    | 214,165     |      | $ | 61,191      |  
|Adjustments to   reconcile net earnings to net cash (used in) provided by operating   activities: |  |      |             |      |   |             |  
|Cumulative effect of   change in accounting principle                                             |  |      |            |      |   |            |  
|Depreciation and   amortization                                                                   |  |      | 462,437     |      |   | 426,318     |  
|Deferred income taxes                                                                             |  |      | (71,914     | )    |   | (5,556      | )
|Provision for losses on   receivables                                                             |  |      | 416,026     |      |   | 265,289     |  
|Provision for   obsolescence of inventory                                                         |  |      | 151,720     |      |   | 141,280     |  
|Loss on disposal of   assets                                                                      |  |      | 1,261       |      |   | 2,354       |  
|Changes in operating   assets and liabilities:                                                    |  |      |             |      |   |             |  
|Receivables                                                                                       |  |      | (2,531,603  | )    |   | 939,448     |  
|Inventories                                                                                       |  |      | (1,397,147  | )    |   | 69,431      |  
|Prepaid expenses and   other assets                                                               |  |      | 161,753     |      |   | (56,308     | )
|Refundable income taxes                                                                           |  |      | 204,894     |      |   | (182,481    | )
|Other assets, primarily   deposits                                                                |  |      | (2,000      | )    |   | (3,708      | )
|Accounts payable                                                                                  |  |      | 1,108,245   |      |   | (27,528     | )
|Accrued expenses                                                                                  |  |      | 591,293     |      |   | (382,954    | )
|                                                                                                  |  |      |             |      |   |             |  
|Net cash (used in) provided by operating activities                                               |  |      | (690,870    | )    |   | 1,246,776   |  
|                                                                                                  |  |      |             |      |   |             |  
|Cash flows from investing activities:                                                             |  |      |             |      |   |             |  
|Purchase of property   and equipment                                                              |  |      | (157,784    | )    |   | (630,365    | )
|Advances to employees                                                                             |  |      | (8,997      | )    |   | (4,671      | )
|Collection of advances   to employees                                                             |  |      | 3,570       |      |   | 5,946       |  
|                                                                                                  |  |      |             |      |   |             |  
|Net cash used in investing activities                                                             |  |      | (163,211    | )    |   | (629,090    | )
|                                                                                                  |  |      |             |      |   |             |  
|Cash flows from financing activities:                                                             |  |      |             |      |   |             |  
|Borrowings on notes   payable                                                                     |  |      | 16,248,866  |      |   | 14,347,800  |  
|Repayments on notes   payable                                                                     |  |      | (15,232,420 | )    |   | (14,809,050 | )
|                                                                                                  |  |      |             |      |   |             |  
|Net cash provided by (used in) financing activities                                               |  |      | 1,016,446   |      |   | (461,250    | )
|                                                                                                  |  |      |             |      |   |             |  
|Net increase in cash                                                                              |  |      | 162,365     |      |   | 156,436     |  
|Cash at beginning of year                                                                         |  |      | 176,078     |      |   | 19,642      |  
|                                                                                                  |  |      |             |      |   |             |  
|Cash at end of year                                                                               |  | $    | 338,443     |      | $ | 176,078     |  
|                                                                                                  |  |      |             |      |   |             |  

See accompanying notes to consolidated financial statements.

F-6

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------
|    |                                           
|    | (a)                                       
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|    | (b)                                       
|    |                                           
|    |                                           
|    |                                           
|    | (c)                                       
|    |                                           
|    |                                           

F-7

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | (d) | Impairment of Long-Lived Assets and Long-Lived   Assets to Be Disposed Of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In accordance with Statement of Financial Accounting   Standards (Statement) No. 144, the Company reviews long-lived assets   for impairment whenever events or changes in circumstances indicate the   carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a   comparison of the carrying amount of an asset to future net cash flows   expected to be generated by the asset.    If such assets are considered to be impaired, the impairment to be   recognized is measured by the amount by which the carrying value of the   assets exceeds the fair value of the assets.    Assets to be disposed of are reported at the lower of the carrying   amount or fair value less costs to sell.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (e) | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Revenue is recognized when the goods are shipped.   Shipping fees billed to customers are included in net sales.  The costs related to these shipping fees, which   are included in selling, general and administrative expense, were $1,262,000,   $1,160,000 and $1,254,000 for the years ended December 31, 2004,   2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (f) | Earnings per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Basic earnings per share is calculated using the   weighted average number of common shares outstanding during each year, while   diluted earnings per share includes the effects of all dilutive potential   common shares.  As of December 31,   2004, 2003 and 2002, there were no dilutive securities outstanding.  Basic earnings per share and diluted   earnings per share amounts were equal for the years ended   December 31, 2004, 2003, and 2002.                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (g) | Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | For purposes of the Statements of Cash Flows, the   Company considers all short-term investments with original maturities of   three months or less to be cash equivalents.    The Company held no cash equivalents at December 31, 2004 or 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Company paid interest of $233,259, $181,214 and   $235,235 in 2004, 2003, and 2002, respectively, and income taxes of $32,139,   $294,812 and $1,029,199 in 2004, 2003, and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-8

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | (h) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Company accounts for income taxes using the   asset and liability method.  Under   this method the Company records deferred income taxes for the temporary   differences between the financial reporting basis and the tax basis of assets   and liabilities at enacted tax rates expected to be in effect when such   amounts are realized or settled. The resulting deferred tax liabilities and   assets are adjusted to reflect changes in tax laws or rates in the period   that includes the enactment date.                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (i) | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Goodwill represents the excess of purchase price   over the fair value of net assets acquired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | In the first quarter of 2002, the Company adopted   Financial Accounting Standards Board (FASB) Statement No. 142 Goodwill and   Other Intangible Assets.  Statement   No. 142 requires, among other things, the discontinuance of goodwill   amortization.  In addition, the   Statement includes provisions for annual impairment testing of existing   goodwill and other intangibles.  Upon   adoption of Statement No. 142, the Company ceased amortizing goodwill and   performed an impairment review of its goodwill balance.  Based on the review performed, the Company   recorded an impairment charge for the full goodwill amount of $819,841, net   of an income tax benefit of $327,900.    The following pro forma disclosure presents earnings and earnings   per share as if the goodwill requirements of Statement No. 142 had been   adopted as of January 1, 2001.

|                                                                  |  | Year Ended   December 31, |        
|----------------------------------------------------------------- |  | ------------------------- | -------
|                                                                  |  |                           |        
|                                                                  |  | 2004                      |        
|                                                                  |  |                           |        
|Reported net earnings                                             |  | $                         | 214,165
|Cumulative effect of change in accounting principle,   net of tax |  |                           |       
|                                                                  |  |                           |        
|Adjusted net earnings                                             |  | $                         | 214,165
|                                                                  |  |                           |        
|Basic and diluted earnings per common share:                      |  |                           |        
|Reported net earnings                                             |  | $                         | .13    
|Cumulative effect of change in accounting principle,   net of tax |  |                           |       
|                                                                  |  |                           |        
|Adjusted net earnings                                             |  | $                         | .13    
|                                                                  |  |                           |        

F-9

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|    | (j)                                                                               | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                   | In November 2004, FASB issued Statement No. 151,   Inventory Costs  an amendment of ARB No. 43, Chapter 4.  Statement No. 151 requires that abnormal   amounts of costs, including idle facility expense, freight, handling costs   and spoilage, should be recognized as current period charges.  The provisions of this Statement are   effective for inventory costs incurred during fiscal years beginning after   June 15, 2005.  The Company does not   expect the adoption of this Statement to have a material impact on its   financial statements.                                                                                                                                                                                                                                                                                        
|    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                   | In December 2004, FASB issued Statement No. 153,   Exchanges of Nonmonetary Assets  an amendment of Accounting Principles   Board (APB) Opinion No. 29.    Statement No. 153 amends APB Opinion No. 29 to eliminate the exception   for nonmonetary exchanges of similar productive assets and replaces it with a   general exception for exchanges of nonmonetary assets that do not have a   commercial substance.  A nonmonetary   exchange has commercial substance if the future cash flows of the entity are   expected to change significantly as a result of the exchange.  The provisions of this Statement are   effective for nonmonetary exchanges occurring in fiscal periods beginning   after June 15, 2005.  The Company does   not expect the adoption of this Statement to have a material impact on its   financial statements.
|    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                   | In December 2004, FASB issued Statement No. 123R,   Share-Based Payment.  Statement No.   123R supersedes APB Opinion No. 25 and requires the cost of employee services   received in exchange for an award of equity instruments be recognized over   the period during which an employee is required to provide service in   exchange for the award.  The   provisions of this Statement are effective for public entities that do not   file as small business issuers as of the beginning of the first interim   period or annual reporting period that begins after June 15, 2005.  The Company does not expect the adoption   of this Statement to have a material impact on its financial statements.                                                                                                                                         
|    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Property and Equipment                                                           
|    |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Property and equipment consists of the following at   December 31, 2004 and 2003:

|                                               |  | Estimated    Useful Life |             | 2004 |   |            | 2003 |  
|---------------------------------------------- |  | ------------------------ | ----------- | ---- | - | ---------- | ---- | -
|                                               |  |                          |             |      |   |            |      |  
|Furniture and equipment                        |  |                          | 3 - 8 years |      | $ | 2,689,517  |      | $
|Transportation equipment                       |  |                          | 3 - 5 years |      |   | 433,811    |      |  
|Leasehold improvements                         |  |                          | 3 - 5 years |      |   | 456,751    |      |  
|                                               |  |                          |             |      |   |            |      |  
|                                               |  |                          |             |      |   | 3,580,079  |      |  
|Less accumulated depreciation and amortization |  |                          |             |      |   | (2,592,385 | )    |  
|                                               |  |                          |             |      |   |            |      |  
|Net property and equipment                     |  |                          |             |      | $ | 987,694    |      | $
|                                               |  |                          |             |      |   |            |      |  

F-10

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(3) | Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | At December 31, 2004, the Company had two lines of   credit with a bank.  The working   capital facility allows the Company to borrow up to 80% of the book value of   eligible trade receivables plus the lesser of 40% of eligible inventory or   $2,000,000, up to a maximum of $8,000,000.    Under this formula, the Company had the ability to borrow $8,000,000   at December 31, 2004, of which approximately $5,496,000 was used.  A capital equipment facility provides for   individual borrowings, aggregating up to $500,000, at 80% of the purchased   equipments cost.  At December 31,   2004, the Company had borrowed approximately $44,000 on this facility.  Each borrowing under the capital equipment   line is due on the earlier of demand or in terms ranging from thirty-six to   sixty monthly installments of principal and interest.  Both credit facilities are payable on   demand and bear a variable rate of interest based on the prime
rate.  As of December 31, 2004 and 2003, the Companys   rate of interest on these agreements was 5.00% and 3.75%, respectively.  These credit facilities are secured by   accounts receivable, inventories and equipment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company has a note payable to Ford Motor Credit   Corporation secured by one of the Companys vehicles.  The note is for 36 months, maturing in   January 2005, and carries a 0% interest rate.  At December 31, 2004, the balance owed was approximately $900.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(4) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Income tax expense (benefit) for the years ended   December 31, 2004, 2003 and 2002 consists of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                         |  | 2004 |         | 2003 |   | 2002   |  
|------------------------ |  | ---- | ------- | ---- | - | ------ | -
|                         |  |      |         |      |   |        |  
|Current:                 |  |      |         |      |   |        |  
|Federal                  |  | $    | 215,012 |      | $ | 68,324 |  
|State                    |  |      | 52,219  |      |   | 29,630 |  
|Deferred:                |  |      |         |      |   |        |  
|Federal                  |  |      | (61,127 | )    |   | (4,722 | )
|State                    |  |      | (10,787 | )    |   | (834   | )
|                         |  |      |         |      |   |        |  
|Total income tax expense |  | $    | 195,317 |      | $ | 92,398 |  
|                         |  |      |         |      |   |        |  

F-11

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | A reconciliation of expected federal income tax   expense (based on the U.S. corporate income tax rate of 34%) to actual income   tax expense for the years ended December 31, 2004, 2003 and 2002   follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                         |  | 2004 |         | 2003 |   | 2002   | 
|-------------------------------------------------------- |  | ---- | ------- | ---- | - | ------ | 
|                                                         |  |      |         |      |   |        | 
|Expected income tax expense                              |  | $    | 139,224 |      | $ | 52,220 | 
|State income taxes, net of related federal tax   benefit |  |      | 27,345  |      |   | 19,006 | 
|Nondeductible meals, entertainment expense               |  |      | 7,160   |      |   | 16,780 | 
|Other                                                    |  |      | 21,588  |      |   | 4,392  | 
|                                                         |  |      |         |      |   |        | 
|Actual income tax expense                                |  | $    | 195,317 |      | $ | 92,398 | 
|                                                         |  |      |         |      |   |        | 

| | The state income taxes in 2004 and 2003 are higher   than expected because Texas is not a unitary state and excludes certain   deductions in calculating the Texas franchise tax.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                  
| | The tax effects of temporary differences that give   rise to significant portions of the deferred tax assets and liabilities at   December 31, 2004 and 2003 follow:             

|                                                                         |  | 2004 |          | 2003 |  
|------------------------------------------------------------------------ |  | ---- | -------- | ---- | -
|                                                                         |  |      |          |      |  
|Deferred tax assets:                                                     |  |      |          |      |  
|Allowance for doubtful   accounts                                        |  | $    | 147,144  |      | $
|Inventory                                                                |  |      | 303,159  |      |  
|Goodwill, due to   differences in amortization periods                   |  |      | 306,618  |      |  
|Property and equipment,   principally due to differences in depreciation |  |      | 57,725   |      |  
|                                                                         |  |      |          |      |  
|Total gross deferred   tax assets                                        |  |      | 814,646  |      |  
|Deferred tax liabilities  prepaid expenses                              |  |      | (140,462 | )    |  
|                                                                         |  |      |          |      |  
|Net deferred tax assets                                                  |  | $    | 674,184  |      | $
|                                                                         |  |      |          |      |  

|    | Management has determined, based on the Companys   history of prior operating earnings and its expectations for the future, that   operating earnings will more likely than not be sufficient to realize the   benefit of the deferred tax assets.    Accordingly, the Company has not provided a valuation allowance for   deferred tax assets in any period presented.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                          
|(5) | Stockholders Equity                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                          
|    | The Board of Directors authorized the acquisition of   up to 726,500 shares of the Companys common stock.  The Company has acquired 726,166 shares that are held as   treasury shares.                                                                                                                                                                                  

F-12

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(6) | Benefit Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company has a 401(k) profit sharing plan, under   which eligible employees may request the Company deduct and contribute a   portion of their compensation to the plan.    The Company, at its discretion, matches a portion of employee   contributions to the plan.  Contributions   by the Company to the 401(k) plan aggregated $77,823, $115,262 and $115,617   during 2004, 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(7) | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The reported amounts of financial instruments such   as cash, accounts receivable, accounts payable and accrued expenses   approximate fair value because of their short maturity.  The carrying value of notes payable to   bank approximates fair value because these instruments bear interest at current   market rates.  Although the note payable   to Ford Motor Credit Corporation bears zero interest, the current balance of   the note approximates fair value because of its short term.                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(8) | Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Identification of operating segments is based   principally upon differences in the types and distribution channel of   products.  The Companys reportable   segments consist of Abatix and IESI.    The Abatix operating segment includes seven aggregated branches, principally   engaged in distributing environmental, safety, homeland security and construction   equipment and supplies to contractors and industrial manufacturing facilities   in the western half of the United States and the Companys corporate   operations.  The IESI operating   segment, which consists of the Companys wholly-owned subsidiary,   International Enviroguard Systems, Inc., is engaged in the wholesale   distribution of disposable protective clothing to companies similar to, and   including, Abatix.  The IESI operating   segment distributes products throughout the United States.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The accounting policies are consistent in each   operating segment as described in Note 1 of the Notes to Consolidated   Financial Statements.  The Company   evaluates the performance of its operating segments based on operating profit   after a charge for the carrying value of inventory and accounts   receivable.  Intersegment sales are at   agreed upon pricing and intersegment profits are eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-13

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | Summarized financial information concerning the   Companys reportable segments is shown in the following table.  There are no other significant noncash   items.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              |  | Abatix |            | IESI |   | Totals    | 
|----------------------------- |  | ------ | ---------- | ---- | - | --------- | 
|                              |  |        |            |      |   |           | 
|2004                          |  |        |            |      |   |           | 
|Sales from external customers |  | $      | 50,105,619 |      | $ | 2,786,594 | 
|Intersegment sales            |  |        |           |      |   | 567,399   | 
|Interest expense              |  |        | 242,643    |      |   |          | 
|Depreciation and amortization |  |        | 456,597    |      |   | 5,840     | 
|Segment profit                |  |        | 148,990    |      |   | 509,778   | 
|Segment assets                |  |        | 17,679,153 |      |   | 1,757,079 | 
|Capital expenditures          |  |        | 157,784    |      |   |          | 
|2003                          |  |        |            |      |   |           | 
|Sales from external customers |  | $      | 46,932,862 |      | $ | 1,960,558 | 
|Intersegment sales            |  |        |           |      |   | 565,157   | 
|Interest expense              |  |        | 178,857    |      |   |          | 
|Depreciation and amortization |  |        | 424,915    |      |   | 1,403     | 
|Segment profit (loss)         |  |        | (38,545    | )    |   | 388,443   | 
|Segment assets                |  |        | 14,900,767 |      |   | 1,519,044 | 
|Capital expenditures          |  |        | 612,415    |      |   | 17,950    | 
|2002                          |  |        |            |      |   |           | 
|Sales from external customers |  | $      | 57,773,848 |      | $ | 2,027,327 | 
|Intersegment sales            |  |        |           |      |   | 429,930   | 
|Interest expense              |  |        | 230,605    |      |   |          | 
|Depreciation and amortization |  |        | 466,109    |      |   | 3,016     | 
|Segment profit                |  |        | 2,046,304  |      |   | 378,760   | 
|Segment assets                |  |        | 16,662,281 |      |   | 548,037   | 
|Capital expenditures          |  |        | 658,335    |      |   | 2,070     | 

F-14

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ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | Below is a reconciliation of (i) total segment   profit to operating profit on the Consolidated Statements of Operations, and   (ii) total segment assets to total assets on the Consolidated Balance Sheets   for all periods presented.  The sales   from external customers represent the net sales on the Consolidated Statements   of Operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     |  | 2004 |            | 2003 |   | 2002       |  
|------------------------------------ |  | ---- | ---------- | ---- | - | ---------- | -
|                                     |  |      |            |      |   |            |  
|Profit for reportable segments       |  | $    | 658,768    |      | $ | 349,898    |  
|Elimination of intersegment profits  |  |      | (8,406     | )    |   | (18,225    | )
|                                     |  |      |            |      |   |            |  
|Operating profit                     |  | $    | 650,362    |      | $ | 331,673    |  
|                                     |  |      |            |      |   |            |  
|Total assets for reportable segments |  | $    | 19,436,232 |      | $ | 16,419,811 |  
|Elimination of intersegment assets   |  |      | (164,308   | )    |   | (78,036    | )
|                                     |  |      |            |      |   |            |  
|Total assets                         |  | $    | 19,271,924 |      | $ | 16,341,775 |  
|                                     |  |      |            |      |   |            |  

| | The Companys sales, substantially all of which are   on an unsecured credit basis, are to various customers from its distribution   centers in Texas, California, Arizona, Washington and Nevada.  The Company evaluates credit risks on an   individual basis before extending credit to its customers and it believes the   allowance for doubtful accounts adequately provides for loss on uncollectible   accounts.  During 2004, 2003 and 2002,   no single customer accounted for more than 10% of net sales, although sales   to environmental contractors were approximately 46%, 47% and 55% of   consolidated net sales in 2004, 2003 and 2002, respectively.  A reduction in spending on environmental   projects could significantly impact sales.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Although no vendor accounted for more than 10% of   purchases, two product classes accounted for greater than 10% of sales.  One product class accounted for   approximately 16%, 9% and 11% of net sales in 2004, 2003 and 2002, respectively.  A major component of these products is   petroleum.  Increases in oil prices or   shortages in supply could significantly impact sales and the Companys   ability to supply its customers with certain products at a reasonable price.  The second product class accounted for   12%, 13% and 12% of net sales in 2004, 2003 and 2002, respectively.  This product class is comprised of many   vendors, none of which control the market.                                                                   

F-15

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ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(9) | Commitments and Contingencies                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                              
|    | The Company leases warehouse and office facilities   and certain office equipment under long-term noncancelable operating leases   expiring at various dates through July 2010.    The following is a schedule of future minimum lease payments under   these leases as of December 31, 2004:

|2005       |  | $ | 1,155,787 | 
|---------- |  | - | --------- | 
|2006       |  |   | 674,508   | 
|2007       |  |   | 372,115   | 
|2008       |  |   | 139,412   | 
|2009       |  |   | 121,263   | 
|Thereafter |  |   | 117,732   | 
|           |  |   |           | 
|           |  | $ | 2,580,817 | 
|           |  |   |           | 

| | Rental expense under operating leases for the years   ended December 31, 2004, 2003 and 2002 was $1,261,156, $1,181,499 and   $1,199,089, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company has employment agreements with three   officers that were effective on January 1, 2005 and expire at the   end of 2006.  The agreements provide   for minimum aggregate cash compensation of $583,500 in both 2005 and 2006.                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company has been named in several class action   lawsuits as detailed below.  These   complaints generally allege that defendants violated the Securities and   Exchange Act of 1934 by allegedly making a series of materially false and   purportedly misleading statements concerning Abatixs business agreement with   the Goodwin Group LLC and, as a result, the price of the Abatix stock was   allegedly artificially inflated causing plaintiff and other members of the   class to allegedly suffer damages.    The Company intends to vigorously defend itself against these   allegations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On   April 26, 2004, the Company and certain of its officers and directors were   named as defendants in a lawsuit filed in the United States District Court   for the Northern District of Texas styled Family Medicine Specialists and   Howard Kalnitsky, and on Behalf of All Others Similarly Situated, Plaintiffs   v. Abatix Corp., Terry Shaver, Frank Cinatl, IV and Gary Cox, Defendants   (304CV-872 D).                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On   April 30, 2004, the Company and certain of its officers and directors were   named as defendants in a lawsuit filed in the United States District Court   for the Northern District of Texas styled David Maione, Individually And   On Behalf of All Others Similarly Situated, Plaintiff vs. Abatix Corp and   Terry Shaver, Defendants (304 CV0926-P).                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | On   May 5, 2004, the Company and certain of its officers and directors were named   as defendants in a lawsuit filed in the United States District Court for the   Northern District of Texas styled Eve Gelman, individually and on behalf   of all others similarly situated, Plaintiff v. Abatix Corporation, Terry   Shaver and Frank Cinatl (4-04CV-341-A).                                                                                                                                                                                                                                         

F-16

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | On   May 11, 2004, the Company and certain of its officers and directors were   named as defendants in a lawsuit filed in the United States District Court   for the Northern District of Texas styled Vincent Teal, individually and   on behalf of all others similarly situated, Plaintiff v. Abatix Corp., Terry   Shaver, Frank Cinatl, IV and Gary Cox, Defendants (3-04CV-1002P).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | On   May 21, 2004, the Company and an officer and director were named as   defendants in a lawsuit filed in the United States District Court for the   Eastern District of Texas styled John S. Rankin, On Behalf of Himself and   All Others Similarly Situated, Plaintiff, v. Abatix Corp., and Terry Shaver   Defendants (504CV 116).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | All of these lawsuits have been transferred to one   Federal District Court in the Northern District of Texas, Dallas Division and   have been consolidated into a single case under Cause No. 3-04CV-872-D;   Family Medicine Specialists, et al v. Abatix, et al.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | On May 27, 2004, the officers and directors of   Abatix Corp. were named as defendants in a lawsuit filed in the District   Court of Dallas County, Texas, 162nd Judicial District styled Daniel M.   Johnson Plaintiff v. Terry Shaver; Frank Cinatl IV; Gary L Cox; Donald N.   Black; Eric A. Young; and A. David Cook; Defendants v. Abatix Corp. Nominal   Defendant (Cause No. 2004-04-4841), although Plaintiff has dismissed A.   David Cook from this case since Mr. Cook was not a director of the Company at   the time of the alleged actions.  This   suit is a shareholder derivative action that alleges that all of the   defendants breached certain fiduciary duties and abused their control of   Abatix.  In that regard, the plaintiff   seeks contribution and indemnification.    In addition, this petition alleges that Donald Black, an outside board   of director of Abatix, breached his fiduciary duties by selling securities   based on allegedly material,
non-public information and by allegedly   misappropriation of information.    Plaintiff has agreed to abate this case; however, Plaintiff has the   right to lift the abatement and pursue these claims with 15 days notice.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Other than the applicable policy deductible and the   fees and expenses incurred prior to provision of notice to the insurance   carrier, the insurance company has paid for the defense costs related to the   Securities and Exchange Commission inquiry and the class action and   derivative lawsuits.  At this time, it   is not possible to predict whether the Company will have any additional   liability or to estimate additional costs that may be incurred with such   actions that may not be covered by any applicable insurance policy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-17

---



ABATIX CORP. AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(10) | Selected Quarterly Data (unaudited)
|---- | -----------------------------------

|                                                   |  | Quarter |           
|-------------------------------------------------- |  | ------- | ----------
|                                                   |  |         |           
|                                                   |  | First   |           
|                                                   |  |         |           
|2004                                               |  |         |           
|Net sales                                          |  | $       | 11,972,318
|Gross profit                                       |  |         | 3,210,102 
|Operating (loss) profit                            |  |         | (97,334   
|Net (loss) earnings                                |  |         | (120,054  
|Basic and diluted (loss) earnings per common share |  |         | (.07      
|2003b                                              |  |         |           
|Net sales                                          |  | $       | 12,850,036
|Gross profit                                       |  |         | 3,783,352 
|Operating profit (loss)                            |  |         | 254,788   
|Net earnings (loss)                                |  |         | 115,977   
|Basic and diluted earnings (loss) per common share |  |         | .07       

|                                                                                                                                                                                                                                                                            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|aThe   growth in revenues and profitability in the third and fourth quarters of 2004   is primarily a result of the clean up following the three hurricanes in   Florida.                                                                                                   
|                                                                                                                                                                                                                                                                            
|bThe   generally declining amounts from quarter to quarter in 2003 resulted from the   decline in mold business during the first half of 2003.  This decline in mold business was not   offset by a corresponding decline in costs as much of our cost structure is   fixed.

F-18

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Schedule II

ABATIX CORP. AND SUBSIDIARY

Valuation and Qualifying Accounts Years ended December 31, 2004, 2003 and 2002

|                                   |  | Balance at      beginning    of year |         | Additions    charged to    costs and    expenses |  | Other   |  | Deductions |   |  |  | Balance at      end of    year | 
|---------------------------------- |  | ------------------------------------ | ------- | ------------------------------------------------ |  | ------- |  | ---------- | - |  |  | ------------------------------ | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|Year ended December 31:            |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|Allowance for Doubtful   Accounts: |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2004                               |  | $                                    | 277,830 |                                                  |  | 416,026 |  |            |  |  |  | 325,782                        | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2003                               |  | $                                    | 390,910 |                                                  |  | 265,289 |  |            |  |  |  | 378,369                        | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2002                               |  | $                                    | 447,037 |                                                  |  | 134,911 |  |            |  |  |  | 191,038                        | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|Inventory Reserve:                 |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2004                               |  | $                                    | 454,699 |                                                  |  | 151,720 |  |            |  |  |  | 129,995                        | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2003                               |  | $                                    | 398,528 |                                                  |  | 141,280 |  |            |  |  |  | 85,109                         | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 
|2002                               |  | $                                    | 391,925 |                                                  |  | 147,941 |  |            |  |  |  | 141,338                        | 
|                                   |  |                                      |         |                                                  |  |         |  |            |   |  |  |                                | 

| 
|-
|A
|B

S-1

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