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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, 2005  
|                                               
|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 if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.    
Yes
oNo
x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    
Yes
oNo
x

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 a   large accelerated filer, an accelerated filer or a non-accelerated   filer.  See definition of accelerated   filer and large accelerated filer in Rule 12b-2 of the Act.  (Check one):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Large accelerated filer
o                                                                                                                                                                                                                   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes
oNo
x

The aggregate market value of the registrants common stock held by non-affiliates on June 30, 2005 (based on the closing stock price on the Nasdaq Stock Market on such date) was approximately $5,954,000.

1,711,148 shares of common stock, $.001 par value, were issued and outstanding on March 20, 2006.

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 23, 2006 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                                                                                                                                                                                                          
| | Seattle  January 1994                                                                                                                                                                                                          
| | Las Vegas  December 1995                                                                                                                                                                                                       
| | Tampa  August 2004  The Company opened a temporary   facility in response to the hurricanes that damaged property in that state.  This facility was closed in February 2005.                                                  
| | Ponchatoula, Louisiana  August 2005  The Company   opened a temporary facility in Louisiana in response to hurricanes Katrina   and Rita and the ensuing floods that devastated parts of Louisiana,   Mississippi and Alabama.

|(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 2005 sales, approximately 53% of the Companys products are sold to environmental contractors, 14% to construction related firms, 20% to the industrial safety market and 13% 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 is 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, public and private 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 the mid- to late-1990s in an attempt to diversify their revenue stream.  The asbestos abatement contractors bring equipment, a trained labor force and experience working in a hazardous environment to the lead abatement industry; however, public and private budgetary constraints have also limited the number of these projects.

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Restoration Industry

This industry is comprised of contractors that handle primarily fire, smoke and water damage.  In recent years, the damage caused by wildfires in the west and southwest, heavy rains in the west and the hurricanes in Florida and Louisiana have increased the visibility of this industry to the residential consumer as well as the commercial consumer.

A component of the restoration industry, mold remediation, has been around for years although litigation in the late 1990s and early 2000s surrounding the health hazards of human exposure to mold created public awareness and forced 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 still very few regulations concerning tolerable mold levels or approved processes to remove mold.  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.  This standard is now widely accepted in the industry.

Many asbestos and lead abatement contractors added restoration, including mold remediation, to their range of services, while traditional restoration contractors added mold remediation to their range of services.  Prior to 2000, the Company had very few sales to restoration contractors.  In late 2000, the Company began to see high levels of activity from this industry, primarily in Texas.  The growth in this portion of the restoration industry continued into the early part of the fourth quarter of 2002, but slowed significantly in the first half of 2003 primarily because insurance laws in Texas changed to eliminate or limit the insurance companies exposure to mold liabilities, resulting in fewer projects for contractors.  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 portion of the restoration industry.

Recently, the effects of the hurricanes that hit Florida in 2004 and the hurricanes that hit Louisiana and other parts of the Gulf Coast in 2005 have created a significant opportunity for the Company.  Although this revenue is not considered recurring, it does provide an opportunity to improve our revenues and profitability and in limited circumstances it provides us the ability to gain new customers.

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.

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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.  Since our business model was not cost effective in this environment, we restructured our costs in this market in 2004 and are now able to be a cost effective supplier.

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.  As the economy continues to strengthen, companies may invest more dollars in our products and services so their facilities and personnel are protected.   However, unless there are regulations mandating security products or another attack similar to September 11th, the private sector may not be willing or will be slow 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 primarily from 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 improved in both 2004 and 2005.  The Company anticipates this industry to improve in 2006 as the economy remains stable or 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 would be expected, although there have been no regulations in the past few years that have resulted in significant opportunities for the Company.  In addition, potentially offsetting these gains from new regulations 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 22,000 industrial, construction tool, personal protection, safety and hazardous waste remediation products to approximately 4,000 active customers primarily located in the Southwest, Midwest, Pacific Coast, Alaska and Hawaii.

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Equipment and Supplies

An estimated 43% of the Companys current year sales were environmental products and 27% were safety products, while construction tools and supplies accounted for 17%.  The remaining 13% 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 75% 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 $100.00.  The balance of sales is attributable to items consisting of lower priced equipment beginning at $20.00 to construction related tools or environmental equipment that can retail in excess of $10,000.  The Company currently does not manufacture any products, nor does it rent or lease any products to customers.  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, instructions pertaining to use and, when appropriate, Material Safety Data Sheets (MSDS).

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 ships 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 6,500 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).  Through enhancements to our system in 2006, customers will also be able to review their purchasing history and check the status of their account, including having the ability to print copies of invoices.

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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 the United States in 2004 and 2005, 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 has the product available.

Inflation

The inflation rate for the United States economy has been relatively low over the past several years, with the 2005 inflation rate just above 3%.  With the 2006 inflation rate expected to be in this same range, the Company believes inflation will not have a material impact on the Companys operations or profitability in the near term; however, there are inflationary factors affecting our business.

The Company experienced cost increases in several of its major product lines during 2005.  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 2006 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.

The cost of fuel for the delivery vehicles (both inbound and outbound deliveries) has risen and impacts our profitability.  Also affecting profitability is the increased cost for utilities.  These increases were not as apparent in 2005 because of the 34% growth in revenue; however, they could become a more significant factor if the revenue growth slows.

Environmental Impact

The Company distributes a variety of products in the environmental industry which requires the Company to maintain MSDS on file.  These MSDS, which are provided to the Company by the manufacturers, inform purchasers and users of any potential hazards which could occur if the products spill or leak and other hazards.  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, sales to the environmental supply business has been seasonal as a result of (1) 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 and (2) the severe weather (e.g. hurricanes, wildfires, flooding) that generally impacts the United States from August through November.

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Absent the severe weather, which can be considered non-recurring revenue, 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 helps mitigate the seasonal impacts of government environmental projects on the Companys sales.

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 historically 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.  However, legislation and regulations affecting manufacturers and purchasers of the Companys products could have a substantial effect on the Company.

Competition

The Company competes on the basis of delivery, credit arrangements and price, as well as product availability, variety and quality.

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.  Many of these existing firms have greater financial, marketing and technical resources than the Company.

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, 2006, the Company employed a total of 105 full time, non-union employees including 3 executive officers, 19 managers, 58 administrative and marketing personnel and 25 clerical and warehouse personnel.  The Company believes relations with its employees are excellent.

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|Item   1A. | Risk   Factors
|---------- | --------------

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.

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.

Economy.  The Companys business follows the U.S. economy and, in particular, the health of the real estate sector.  Although the U.S. economy has grown over the past two years, there is no assurance this growth or this level of output will continue.  In addition, further interest rate hikes could stifle the economy and the real estate sector such that there would be no growth or even a decline which would negatively impact our business.

Competition.  The Company experiences intense competition for sales of its principal products.  The Company has several major competitors in each of 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 profitability and could have an adverse impact on the Companys financial position.

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 plan.  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.

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Non-recurring Revenue and Collection of Accounts Receivable.  Over the past two years the Company has benefited from several disasters.  For example, the Company benefited from the hurricanes that damaged Florida in 2004 and the hurricanes that damaged Louisiana, Mississippi and Alabama in 2005.  There are numerous factors in determining if a disaster will result in business for the Company.  Some of these factors are (1) the strength and size of the disaster, (2) the density of structures/population of the affected area and (3) our customers must be part of the team of contractors that are responding to the disaster.  There are no assurances that there will be another disaster that benefits the Company.

Much of the work performed during these disasters is ultimately paid by the Federal government or by insurance companies.  There is risk in the timeliness of collection of the monies owed to our customers from these entities, which can result in a slow down of payments made the Company.  This slowdown could stress the financial resources of the Company significantly.

Cost Controls.  The Company has made strategic investments in its information systems and has other plans to improve our cost structure.  There is 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 2005, 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.

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.

Many customers in the industries we serve are brand conscious.  If the relationships with certain vendors were to be discontinued, there would be a negative impact on the financial results of the Company.

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 shipments inbound from our vendors and shipments outbound to our customers.  Significant increases in fuel prices could adversely affect earnings if the Company does not or is unable to pass along increases to customers.

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Internal Controls over Financial Reporting.  We expect to expend significant resources in developing the necessary documentation and testing procedures and the testing required by Section 404 of the Sarbanes-Oxley Act of 2002 (SOX 404).  The amount of resources is currently estimated to be $575,000; however, the amount of resources needed to comply could change significantly.  In addition, if management or our auditors identify any significant deficiency or material weakness, they may be unable to attest to our internal controls and investors and others may lose confidence in the reliability of our financial statements and our ability to obtain equity or debt financing may be negatively impacted.

Low Float and Volatility of Stock Price.  The low number of outstanding shares and resulting low amount of shares available for trade in the open market place can result in extreme volatility in the Companys stock price.  Not only can the volatility of the stock price be concerning to long-term investors, but it could increase the difficulty in utilizing the stock to obtain capital for growth.

|Item   2. | Properties.
|--------- | -----------

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 September 2005, the Company opened a temporary office in Ponchatoula, Louisiana to help contractors respond to the devastation in Louisiana, Mississippi and Alabama from the hurricanes.

As of December 31, 2005, the Company leases and occupies approximately 266,000 square feet of industrial space.  Included is approximately 8,100 square feet of office space for the Companys headquarters which expires in July 2006.  Also included is 85,000 square feet of space for our temporary facility in Louisiana which expires in September 2006.  Excluding the space in Louisiana, the Abatix branch facilities range in size from 13,200 square feet to 30,820 and have leases expiring between July 2006 and January 2011.  IESI leases approximately 17,000 square feet of warehouse space.

|Item   3. | Legal   Proceedings.
|--------- | --------------------

None

|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 Capital 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                     |      
|                 |  |                          |      
|2004             |  |                          |      
|First   Quarter  |  | $                        | 6.74 
|Second   Quarter |  |                          | 16.75
|Third   Quarter  |  |                          | 4.53 
|Fourth   Quarter |  |                          | 14.75
|2005             |  |                          |      
|First   Quarter  |  | $                        | 10.46
|Second   Quarter |  |                          | 8.30 
|Third   Quarter  |  |                          | 16.50
|Fourth   Quarter |  |                          | 18.50

On March 17, 2006, the closing price for the common stock was $10.70.

(b)          As of March 17, 2006, the approximate number of holders of record of the Companys common stock was estimated to be 200, although we estimate that there are approximately 1,000 stockholders.

(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, |       
|--------------------------------------------------------------------- |  | ------------------------- | ------
|                                                                      |  |                           |       
|                                                                      |  | 2005a                     |       
|                                                                      |  |                           |       
|Selected Operating Results:                                           |  |                           |       
|Net   sales                                                           |  | $                         | 70,626
|                                                                      |  |                           |       
|Gross   profit                                                        |  | $                         | 19,961
|                                                                      |  |                           |       
|Earnings   before cumulative effect of change in accounting principle |  | $                         | 2,084 
|Cumulative   effect of change in accounting principle d               |  |                           | -     
|                                                                      |  |                           |       
|Net   earnings                                                        |  | $                         | 2,084 
|                                                                      |  |                           |       
|Basic and diluted net   earnings per common share:                    |  |                           |       
|Earnings   before cumulative effect of change in accounting principle |  | $                         | 1.22  
|Cumulative   effect of change in accounting principle d               |  |                           | -     
|                                                                      |  |                           |       
|Net   earnings                                                        |  | $                         | 1.22  
|                                                                      |  |                           |       
|Basic and diluted weighted   average shares outstanding               |  |                           | 1,711 
|                                                                      |  |                           |       

|                               |  | As of   December 31, |       
|------------------------------ |  | -------------------- | ------
|                               |  |                      |       
|                               |  | 2005                 |       
|                               |  |                      |       
|Selected Balance Sheet   Data: |  |                      |       
|Current   assets               |  | $                    | 24,966
|Current   liabilities          |  |                      | 15,323
|Total   assets                 |  |                      | 26,431
|Total   liabilities            |  |                      | 15,381
|Retained   earnings            |  |                      | 10,730
|Stockholders   equity         |  |                      | 11,050

| 
|-
|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, and one temporary facility in Louisiana to serve our customers helping with the aftermath of the hurricanes affecting the Gulf Coast region, the Company primarily distributes equipment and  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 and the Caribbean 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.  Competitive   compensation and benefits 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.  We   continuously review 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   other raw materials or increases in interest rates.  In addition, the cost to initially comply with Section 404 of   SOX 404 is expected to total approximately $575,000 by December 31,   2007.  This cost will negate much 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.    This expansion could come in the form of opening a new location in a   new geographic market or acquiring an existing company in a market where we   currently do not operate.  These   possibilities require significant planning time and financial resources which   could limit our ability to implement.                                                                                                               
| | 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 in an attempt to lessen the   impact of any one customer and improve on existing customer   relationships.  While we intend to   market our customer service in an attempt to obtain higher margins, obtaining   market share generally has a negative effect on product margins.                                                                                                   

14

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| | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the above mentioned critical success factors, the Company needs to improve how it responds to catastrophic events like the hurricanes of 2004 and 2005.  Significant, short-term boosts of revenue, while positively impacting the sales and net income lines of the income statement are very difficult for the Company to handle for the following reasons:

| | Non-recurring revenues
|- | ----------------------
|  | o                     
|  | o                     
| | Accounts receivable   
|  | o                     
|  | o                     
| | Inventory             
|  | o                     
|  | o                     
|  | o                     
|  | o                     
| | Cash                  
|  | o                     
|  | o                     
|  | o                     

15

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| | Human Resources
|- | ---------------
|  | o              
|  | o              
|  | o              
|  | o              
|  | o              

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 2005 Results

| | Net sales increased 34%   when compared to 2004.                                
|- | --------------------------------------------------------------------------------
| | Gross profit increased 39%   when compared to 2004.                             
| | Selling, general and   administrative costs increased 18% when compared to 2004.
| | Net income of $2,084,000   increased $1,870,000 when compared to 2004.          

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

16

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Results of Operations and Related Information

2005 Compared With 2004

Net Sales

|Consolidated net sales   increased 34% to $70,626,000 from 2004.    The Abatix operating segment net sales increased 34% to $67,058,000,   while the IESI operating segment net sales to external customers increased   28% to $3,568,000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                         

Gross Profit

|Consolidated gross profit   of $19,961,000 increased 39% from 2004.    Expressed as a percentage of sales, gross profit was 28.3% and 27.2%   in 2005 and 2004, respectively
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                           
|                                                                                                                                                                           

17

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Selling, General and Administrative Expenses

|Selling, general and   administrative expenses of $16,236,000 increased 18% from 2004.  The significant changes are:
|--------------------------------------------------------------------------------------------------------------------
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   
|                                                                                                                   

Expressed as a percentage of sales, S,G&A expenses were 23.0% and 25.9% for 2005 and 2004, respectively.

Additional Statement of Operations Commentary

| | Operating profit of 5.3%   of sales for 2005 improved from 1.2% of sales in 2004.  The Abatix segment operating profit of   4.3% of sales for 2005 improved from 0.3% of sales in 2004.  The IESI segment operating profit of 19.8%   of sales in 2005 improved from 15.2% in 2004.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | o                                                                                                                                                                                                                                                                                  
|  | o                                                                                                                                                                                                                                                                                  
| | Interest expense of   $371,000 increased approximately $128,000 from 2004 primarily due to higher   interest rates and higher line of credit balances.                                                                                                                             
| | Our effective tax rate was   38.0% in 2005, which compared with 47.7% in 2004.  The effective rate in 2005 is lower than 2004 as a result of   the following.                                                                                                                      
|  | o                                                                                                                                                                                                                                                                                  
|  | o                                                                                                                                                                                                                                                                                  
| | Net earnings of $2,084,000   or $1.22 per share increased $1,870,000 from net earnings of $214,000 or $.13   per share in 2004.  The increase in   net earnings is primarily due to the higher sales volume.                                                                       

18

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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 to external customers increased   42% to $2,786,000.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                       

Gross Profit

|Consolidated gross profit of $14,370,000 increased 2% from 2003.  Expressed as a percentage of sales, gross profit was 27.2% and 28.7% in 2004 and 2003, respectively.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                     
|                                                                                                                                                                     
|                                                                                                                                                                      
|                                                                                                                                                                      

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 25.9% and 28.1% for 2004 and 2003, respectively.

19

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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 15.2% of sales in 2004 declined from 15.4% 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   47.7% in 2004, which compared with 60.2% 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.                                                                 

Liquidity and Capital Resources

|Cash used in operations during 2005 of $3,482,000 compared to cash used in operations during 2004 of $691,000.
|--------------------------------------------------------------------------------------------------------------
|                                                                                                             
|                                                                                                              
|                                                                                                              
|                                                                                                             
|                                                                                                              
|                                                                                                              

20

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| | These uses of cash were mostly offset by the:
|- | ---------------------------------------------
|  | o                                            
|  | o                                            
|  | o                                            

Cash requirements for investing activities during 2005 of $477,000 increased by $314,000 when compared to 2004.  These requirements were primarily the purchase of corporate and delivery vehicles, computer hardware and software, new furniture and warehouse equipment related to the move of a branch into a new facility and necessary items to make our temporary facility in Louisiana operational.  Purchases in 2006 are estimated to be approximately $600,000 and will primarily include replacement of vehicles and computers, and potentially some additional productivity software.

|The Company has a $12,000,000 working capital line   of credit with its financial institution and a $500,000 capital equipment   credit facility.
|-------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                
|                                                                                                                                                

21

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Contractual Obligations

The following table presents the Companys total contractual obligations as of December 31, 2005 for which cash flows are fixed or determinable (in thousands).

|                                 |  | 2006 |        | 2007 |   | 2008 |  | 2009 |     | 2010 |   | 2011 |  | Total |    
|-------------------------------- |  | ---- | ------ | ---- | - | ---- |  | ---- | --- | ---- | - | ---- |  | ----- | ---
|                                 |  |      |        |      |   |      |  |      |     |      |   |      |  |       |    
|Contractual obligations:         |  |      |        |      |   |      |  |      |     |      |   |      |  |       |    
|Operating   leases               |  | $    | 1,056  |      | $ | 475  |  | $    | 295 |      | $ | 263  |  | $     | 158
|Working   capital line of credit |  |      | 9,843  |      |   |     |  |      |    |      |   |     |  |       |   
|Equipment   notes                |  |      | 49     |      |   | 36   |  |      | 13  |      |   | 9    |  |       | 1  
|Employment   contracts           |  |      | 584    |      |   |     |  |      |    |      |   |     |  |       |   
|Open   purchase orders           |  |      | 838    |      |   |     |  |      |    |      |   |     |  |       |   
|Office   equipment leases        |  |      | 19     |      |   | 19   |  |      | 19  |      |   | 9    |  |       |   
|                                 |  |      |        |      |   |      |  |      |     |      |   |      |  |       |    
|Total contractual   obligations  |  | $    | 12,389 |      | $ | 530  |  | $    | 327 |      | $ | 281  |  | $     | 159
|                                 |  |      |        |      |   |      |  |      |     |      |   |      |  |       |    

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

Critical Accounting Policies and Use of Estimates

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 allowance for doubtful accounts; excess and obsolete inventory; depreciation, amortization and impairment testing for property and
equipment; deferred tax assets and potential income tax assessments; and retained insurance risks.  The Companys critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.

22

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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.

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.

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 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, 2005, 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.

23

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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.

Retained Insurable Risks

The Company has elected to self insure for health care related costs, but does have catastrophic coverage.  The accrued liabilities for incurred but not reported events are based upon historical loss patterns and managements judgment.

New Accounting Standards

On December 19, 2005, the Financial Accounting Standards Board (FASB) posted the final FASB Staff Position (FSP) No. SOP 94-6-1, Terms of Loan Products That May Give Rise to a Concentration of Credit Risk.  This FSP defines loan products that may give rise to concentrations of credit risk as being loan products whose contractual features may increase the exposure of the originator, holder, investor, guarantor, or service to risk of nonpayment or realization.  The Company does not expect any impact to its financial statements from this FSP.

On January 25, 2006, the FASB issued an Exposure Draft, The Fair Value Option for Financial Assets and Liabilities.  This Exposure Draft would provide companies with the option to report selected financial assets and liabilities at fair value with the changes in fair value included in earnings.  This proposed standard seeks to reduce both complexity in accounting and volatility in earnings caused by differences in the existing accounting rules.  The Company does not expect any impact to its financial statements from this Exposure Draft, if adopted in its current state.

On February 3, 2006, the FASB posted the final FSP No. FAS 123R-4, Classification of Options and Similar Instruments Issued as Employee Compensation that Allow for Cash Settlement upon the Occurrence of a Contingent Event.  This FSP amends paragraphs 32 and A229 of FASB Statement No. 123R.  This FSP is to be applied on the initial adoption of FASB Statement No. 123R.  The Company does not expect any impact to its financial statements from this FSP.

On February 16, 2006, the FASB issued Statement No. 155, Accounting for Certain Hybrid Financial Instruments.  This Statement, which amends Statement No. 133 and No. 140, (1) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement No. 133, (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (5) amends Statement No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to
a beneficial interest other than another derivative financial instrument.  This Statement is effective for all financial instruments acquired or issued after the beginning of the entitys first fiscal year that begins after September 15, 2006.  The Company does not expect any impact to its financial statements from this Statement.

24

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Business Outlook

|Our goal for 2006 is to produce revenue growth,   exclusive of the non-recurring revenues in Louisiana in 2005, as it is vital   to our long-term success.
|----------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                          
|Overall margins for 2006 are anticipated to be in   the 27  28% range.                                                                                   
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         
|                                                                                                                                                         

25

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|The Company will need to further reduce costs to   stay competitive and improve on its profitability.
|-----------------------------------------------------------------------------------------------------
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    

|Depending on many factors, including the timing of   sales, cash flow from operations for the entire year of 2006 is expected to   be positive as the Company collects the receivables from the sales increase   in the last half of 2005, improvements are made to inventory and purchasing   and there is further refinement in our cost structure.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                    

26

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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, the occurrence, timing and property devastation of disasters; 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; market acceptance of new products; existence or development of competitive products the Company represents 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 and relationships with key customers and vendors; efforts to control and/or reduce costs; fluctuations in oil prices; or the Companys success in the process of managements
assessment and auditor attestation of internal controls, as required by the SOX 404.  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, 2005 and 2004, 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 $61,000 and $27,000, 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.
|---------- | --------------------------

27

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Evaluation of Disclosure Controls and Procedures

As of December 31, 2005, the Company evaluated, 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 pursuant to Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the Exchange Act).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer conclude that the Companys disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys Exchange Act filings.

Internal Control over Financial Reporting

The Company is currently undergoing a comprehensive effort to ensure compliance with the regulations under SOX 404 that take effect for the Companys fiscal year ending December 31, 2007.  This effort includes internal control documentation and review under the direction of senior management.  In the course of its ongoing evaluation, management has identified certain areas requiring improvement, which the Company is addressing.  Management routinely reviews potential internal control issues with the Companys Audit Committee.

Changes in Internal Control

There have been no significant changes in the Companys internal controls over financial reporting or in other factors, which could significantly affect internal controls over financial reporting subsequent to the date the Company carried out its evaluation.

Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

28

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The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

|Item   9B. | Other   Information.
|---------- | --------------------

None.

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, 2005.

|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, 2005.

|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, 2005.

|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, 2005.

|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, 2005.

29

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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.
|             |                                                                                                                                                                                                                                                                                                                                                 
|(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.                                                                       

30

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|(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 filed as Exhibit (10)(a)(v) to the Form 10-K for the year   ended December 31, 2004, and herein incorporated by reference.                                   
|.           |                                                                                                                                                                                                                                    
|(10)(b)(v)  | Employment Agreement with Gary L. Cox effective   January 1, filed as Exhibit (10)(b)(v) to the Form 10-K for the year ended   December 31, 2004, and herein incorporated by reference..                                           
|            |                                                                                                                                                                                                                                    
|(10)(c)(i)  | Employment Agreement with Frank J. Cinatl, IV   effective January 1, filed as Exhibit (10)(c)(v) to the Form 10-K for the   year ended December 31, 2004, and herein incorporated by reference..                                   
|            |                                                                                                                                                                                                                                    
|(10)(e)(iv) | Credit Facility, Master Revolving Note and Advance   Formula Agreement with Comerica Bank-Texas dated October 14, 2005 filed as   Exhibit 99 to the Report on Form 8-K on October 19, 2005, and herein   incorporated by reference.
|            |                                                                                                                                                                                                                                    
|(14)        | Code of Business Conduct and Ethics for Directors,   Officers and Employees filed as Exhibit 99 to the Report on Form 8-K on   May 10, 2004, and herein incorporated by reference.                                                 
|            |                                                                                                                                                                                                                                    
|(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.                                                     
|            |                                                                                                                                                                                                                                    
|(31.1)      | 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).*                                                                
|            |                                                                                                                                                                                                                                    
|(31.2)      | Certification of Chief Financial Officer required by   Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.*                                                                                                                      
|            |                                                                                                                                                                                                                                    
|(32.1)      | 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.*                                               
|            |                                                                                                                                                                                                                                    
|(32.2)      | 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.*                                               

31

---



|(99.1) | Audit Committee Charter filed as Exhibit 99.1 to the   Report on Form 8-K on June 7, 2005, and herein incorporated by   reference.                              
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                 
|(99.2) | Compensation Committee Charter filed as Exhibit 99.2   to the Report on Form 8-K on June 7, 2005, and herein incorporated   by reference.                       
|       |                                                                                                                                                                 
|(99.3) | Nominating and Corporate Governance Committee   Charter filed as Exhibit 99.3 to the Report on Form 8-K on   June 7, 2005, and herein incorporated by reference.

| 
|-
|*

32

---



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 21st day of March, 2006.

| | 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 21, 2006
|                    |  | and Director (Principal Executive Officer)   |  |               
|Terry W. Shaver     |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ Gary L. Cox     |  | Executive Vice President,                    |  | March 21, 2006
|                    |  | Chief Operating Officer and Director         |  |               
|Gary L. Cox         |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ Frank J. Cinatl |  | Vice President and Chief Financial Officer   |  | March 21, 2006
|                    |  | (Principal Financial and Accounting Officer) |  |               
|Frank J. Cinatl, IV |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ Donald N. Black |  | Director                                     |  | March 21, 2006
|                    |  |                                              |  |               
|Donald N. Black     |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ Eric A. Young   |  | Director                                     |  | March 21, 2006
|                    |  |                                              |  |               
|Eric A. Young       |  |                                              |  |               
|                    |  |                                              |  |               
|/s/ A. David Cook   |  | Director                                     |  | March 21, 2006
|                    |  |                                              |  |               
|A. David Cook       |  |                                              |  |               

33

---



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, 2005 and 2004                                           | F-3 
|                                                                                                         |     
|Consolidated   Statements of Operations for the years ended December   31, 2005, 2004 and 2003           | F-4 
|                                                                                                         |     
|Consolidated   Statements of Stockholders Equity for the years ended December 31, 2005,   2004 and 2003 | F-5 
|                                                                                                         |     
|Consolidated   Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003             | F-6 
|                                                                                                         |     
|Notes   to Consolidated Financial Statements                                                             | F-7 
|                                                                                                         |     
|Financial Statement Schedule:                                                                            |     
|II -   Valuation and Qualifying Accounts for the years ended December 31, 2005, 2004   and 2003          | S-1 

All other schedules have been omitted as the required information is not applicable.

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, 2005 and 2004, 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, 2005.  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, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, 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 10, 2006

F-2

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Balance Sheets December 31, 2005 and 2004

|                                                                                                               |  | 2005 |            | 2004 |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                                                                               |  |      |            |      |  
|Assets                                                                                                         |  |      |            |      |  
|Current assets:                                                                                                |  |      |            |      |  
|Cash                                                                                                           |  | $    | 790,097    |      | $
|Trade   accounts receivable, net of allowance for doubtful accounts of $663,300 in   2005 and $368,874 in 2004 |  |      | 12,029,054 |      |  
|Inventories                                                                                                    |  |      | 10,842,852 |      |  
|Prepaid   expenses and other assets                                                                            |  |      | 861,480    |      |  
|Deferred   income taxes (note 4)                                                                               |  |      | 440,646    |      |  
|Receivables   from employees                                                                                   |  |      | 1,630      |      |  
|                                                                                                               |  |      |            |      |  
|Total   current assets                                                                                         |  |      | 24,965,759 |      |  
|Property and equipment, net   (note 2)                                                                         |  |      | 1,034,248  |      |  
|Deferred income taxes (note   4)                                                                               |  |      | 328,067    |      |  
|Other assets                                                                                                   |  |      | 103,649    |      |  
|                                                                                                               |  |      |            |      |  
|                                                                                                               |  | $    | 26,431,723 |      | $
|                                                                                                               |  |      |            |      |  
|Liabilities   and Stockholders Equity                                                                         |  |      |            |      |  
|Current liabilities:                                                                                           |  |      |            |      |  
|Notes   payable and current maturities of long term debt (note 3)                                              |  | $    | 9,892,501  |      | $
|Accounts   payable                                                                                             |  |      | 3,419,561  |      |  
|Accrued   compensation                                                                                         |  |      | 413,506    |      |  
|Other   accrued expenses                                                                                       |  |      | 1,597,145  |      |  
|                                                                                                               |  |      |            |      |  
|Total   current liabilities                                                                                    |  |      | 15,322,713 |      |  
|Long term debt                                                                                                 |  |      | 58,534     |      |  
|                                                                                                               |  |      |            |      |  
|Total   liabilities                                                                                            |  |      | 15,381,247 |      |  
|                                                                                                               |  |      |            |      |  
|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 2005 and 2004      |  |      | 2,437      |      |  
|Additional   paid-in capital                                                                                   |  |      | 2,574,560  |      |  
|Retained   earnings                                                                                            |  |      | 10,730,821 |      |  
|Treasury   stock at cost, 726,166 common shares in 2005 and 2004                                               |  |      | (2,257,342 | )    |  
|                                                                                                               |  |      |            |      |  
|Total   stockholders equity                                                                                   |  |      | 11,050,476 |      |  
|Commitments and   contingencies  (note 9)                                                                      |  |      |            |      |  
|                                                                                                               |  |      |            |      |  
|                                                                                                               |  | $    | 26,431,723 |      | $
|                                                                                                               |  |      |            |      |  

See accompanying notes to consolidated financial statements.

F-3

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Statements of Operations Years ended December 31, 2005, 2004 and 2003

|                                                        |  | 2005 |             | 2004 |   | 2003        |  
|------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                        |  |      |             |      |   |             |  
|Net sales                                               |  | $    | 70,626,403  |      | $ | 52,892,213  |  
|Cost of sales                                           |  |      | (50,665,826 | )    |   | (38,521,908 | )
|                                                        |  |      |             |      |   |             |  
|Gross   profit                                          |  |      | 19,960,577  |      |   | 14,370,305  |  
|Selling, general and   administrative expenses          |  |      | (16,236,361 | )    |   | (13,719,943 | )
|                                                        |  |      |             |      |   |             |  
|Operating   profit                                      |  |      | 3,724,216   |      |   | 650,362     |  
|Other income (expense):                                 |  |      |             |      |   |             |  
|Interest   expense                                      |  |      | (370,655    | )    |   | (242,643    | )
|Other,   net                                            |  |      | 5,507       |      |   | 1,763       |  
|                                                        |  |      |             |      |   |             |  
|Earnings   before income taxes                          |  |      | 3,359,068   |      |   | 409,482     |  
|Income tax expense (note 4)                             |  |      | (1,274,808  | )    |   | (195,317    | )
|                                                        |  |      |             |      |   |             |  
|Net   earnings                                          |  | $    | 2,084,260   |      | $ | 214,165     |  
|                                                        |  |      |             |      |   |             |  
|Basic and diluted earnings   per common share:          |  |      |             |      |   |             |  
|Net   earnings                                          |  | $    | 1.22        |      | $ | .13         |  
|                                                        |  |      |             |      |   |             |  
|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, 2005, 2004 and 2003

|                               |  | Common   Stock  |           | Additional   Paid-in   Capital |   |       |                     |   |                |  |   |            | 
|------------------------------ |  | --------------- | --------- | ------------------------------ | - | ----- | ------------------- | - | -------------- |  | - | ---------- | 
|                               |  |                 |           |                                |   |       | Treasury   Stock    |   | Total   Equity | 
|                               |  | Shares   Issued |           |                                |   |       | Retained   Earnings |   |                |  |  
|                               |  |                 | Amount    |                                |   |       | Shares              |   | Amount         |  |  
|                               |  |                 |           |                                |   |       |                     |   |                |  |   |            | 
|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  | 
|Net   earnings                 |  |                 |          |                                |   |      |                     |   |               |  |   | 2,084,260  | 
|                               |  |                 |           |                                |   |       |                     |   |                |  |   |            | 
|Balance at December 31,   2005 |  |                 | 2,437,314 |                                | $ | 2,437 |                     | $ | 2,574,560      |  | $ | 10,730,821 | 
|                               |  |                 |           |                                |   |       |                     |   |                |  |   |            | 

See accompanying notes to consolidated financial statements.

F-5

---



ABATIX CORP. AND SUBSIDIARY

Consolidated Statements of Cash Flows Years ended December 31, 2005, 2004 and 2003

|                                                                                                |  | 2005 |             | 2004 |   | 2003        |  
|----------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                                |  |      |             |      |   |             |  
|Cash flows from operating   activities:                                                         |  |      |             |      |   |             |  
|Net   earnings                                                                                  |  | $    | 2,084,260   |      | $ | 214,165     |  
|Adjustments   to reconcile net earnings to net cash (used in) provided by operating activities: |  |      |             |      |   |             |  
|Depreciation   and amortization                                                                 |  |      | 423,472     |      |   | 462,437     |  
|Deferred   income taxes                                                                         |  |      | (94,529     | )    |   | (71,914     | )
|Provision   for losses on receivables                                                           |  |      | 672,463     |      |   | 416,026     |  
|Provision   for obsolescence of inventory                                                       |  |      | 252,824     |      |   | 151,720     |  
|Loss   on disposal of assets                                                                    |  |      | 11,078      |      |   | 1,261       |  
|Changes   in operating assets and liabilities:                                                  |  |      |             |      |   |             |  
|Receivables                                                                                     |  |      | (3,398,377  | )    |   | (2,531,603  | )
|Inventories                                                                                     |  |      | (3,895,835  | )    |   | (1,397,147  | )
|Prepaid   expenses and other assets                                                             |  |      | (180,735    | )    |   | 161,753     |  
|Refundable   income taxes                                                                       |  |      |            |      |   | 204,894     |  
|Other   assets, primarily deposits                                                              |  |      | (21,199     | )    |   | (2,000      | )
|Accounts   payable                                                                              |  |      | (199,003    | )    |   | 1,108,245   |  
|Accrued   expenses                                                                              |  |      | 863,243     |      |   | 591,293     |  
|                                                                                                |  |      |             |      |   |             |  
|Net cash (used in) provided   by operating activities                                           |  |      | (3,482,338  | )    |   | (690,870    | )
|                                                                                                |  |      |             |      |   |             |  
|Cash flows from investing   activities:                                                         |  |      |             |      |   |             |  
|Purchase   of property and equipment                                                            |  |      | (481,804    | )    |   | (157,784    | )
|Proceeds   from the disposal of fixed assets                                                    |  |      | 700         |      |   |            |  
|Advances   to employees                                                                         |  |      | (1,063      | )    |   | (8,997      | )
|Collection   of advances to employees                                                           |  |      | 4,860       |      |   | 3,570       |  
|                                                                                                |  |      |             |      |   |             |  
|Net cash used in investing   activities                                                         |  |      | (477,307    | )    |   | (163,211    | )
|                                                                                                |  |      |             |      |   |             |  
|Cash flows from financing   activities:                                                         |  |      |             |      |   |             |  
|Borrowings   on notes payable                                                                   |  |      | 25,184,279  |      |   | 16,248,866  |  
|Repayments   on notes payable                                                                   |  |      | (20,772,980 | )    |   | (15,232,420 | )
|                                                                                                |  |      |             |      |   |             |  
|Net cash provided by (used   in) financing activities                                           |  |      | 4,411,299   |      |   | 1,016,446   |  
|                                                                                                |  |      |             |      |   |             |  
|Net increase in cash                                                                            |  |      | 451,654     |      |   | 162,365     |  
|Cash at beginning of year                                                                       |  |      | 338,443     |      |   | 176,078     |  
|                                                                                                |  |      |             |      |   |             |  
|Cash   at end of year                                                                           |  | $    | 790,097     |      | $ | 338,443     |  
|                                                                                                |  |      |             |      |   |             |  

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | 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   $1,641,000, $1,262,000 and $1,160,000 for the years ended   December 31, 2005, 2004 and 2003, 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,   2005, 2004 and 2003, there were no dilutive securities outstanding.  Basic earnings per share and diluted   earnings per share amounts were equal for the years ended   December 31, 2005, 2004, and 2003.                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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, 2005 or 2004.                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The Company paid interest of $381,116, $233,259 and   $181,214 in 2005, 2004, and 2003, respectively, and income taxes of $989,749,   $32,139 and $294,812 in 2005, 2004, and 2003, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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.                                                                                                                                                  

F-8

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | (i) | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On December 19, 2005, the Financial Accounting   Standards Board (FASB) posted the final FASB Staff Position (FSP)   No. SOP 94-6-1, Terms of Loan Products That May Give Rise to a   Concentration of Credit Risk.  This   FSP defines loan products that may give rise to concentrations of credit risk   as being loan products whose contractual features may increase the exposure   of the originator, holder, investor, guarantor, or service to risk of   nonpayment or realization.  The   Company does not expect any impact to its financial statements from this FSP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On January 25, 2006, the FASB issued an Exposure   Draft, The Fair Value Option for Financial Assets and Liabilities.  This Exposure Draft would provide   companies with the option to report selected financial assets and liabilities   at fair value with the changes in fair value included in earnings.  This proposed standard seeks to reduce   both complexity in accounting and volatility in earnings caused by   differences in the existing accounting rules.  The Company does not expect any impact to its financial   statements from this Exposure Draft, if adopted in its current state.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On February 3, 2006, the FASB posted the final FSP   No. FAS 123R-4, Classification of Options and Similar Instruments   Issued as Employee Compensation that Allow for Cash Settlement upon the   Occurrence of a Contingent Event.    This FSP amends paragraphs 32 and A229 of FASB Statement No.   123R.  This FSP is to be applied on   the initial adoption of FASB Statement No. 123R.  The Company does not expect any impact to its financial   statements from this FSP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On February 16, 2006, the FASB issued Statement No.   155, Accounting for Certain Hybrid Financial Instruments.  This Statement, which amends Statement No.   133 and No. 140, (1) permits fair value remeasurement for any hybrid   financial instrument that contains an embedded derivative that otherwise   would require bifurcation, (2) clarifies which interest-only strips and   principal-only strips are not subject to the requirements of Statement No.   133, (3) establishes a requirement to evaluate interests in securitized   financial assets to identify interests that are freestanding derivatives or   that are hybrid financial instruments that contain an embedded derivative   requiring bifurcation, (4) clarifies that concentrations of credit risk in   the form of subordination are not embedded derivatives, and (5) amends   Statement No. 140 to eliminate the prohibition on a qualifying   special-purpose entity from holding a derivative financial
instrument that   pertains to a beneficial interest other than another derivative financial   instrument.  This Statement is   effective for all financial instruments acquired or issued after the   beginning of the entitys first fiscal year that begins after September 15,   2006.  The Company does not expect any   impact to its financial statements from this Statement.

F-9

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(2) | Property and Equipment                                                           
|--- | ---------------------------------------------------------------------------------
|    |                                                                                  
|    | Property and equipment consists of the following at   December 31, 2005 and 2004:

|                                                 |  |  | Estimated   Useful Life |  | 2005 |            | 2004 |  
|------------------------------------------------ |  |  | ----------------------- |  | ---- | ---------- | ---- | -
|                                                 |  |  |                         |  |      |            |      |  
|Furniture and equipment                          |  |  | 3   - 5 years           |  | $    | 3,013,540  |      | $
|Transportation equipment                         |  |  | 3   - 5 years           |  |      | 473,770    |      |  
|Leasehold improvements                           |  |  | 3   - 5 years           |  |      | 507,977    |      |  
|                                                 |  |  |                         |  |      |            |      |  
|                                                 |  |  |                         |  |      | 3,995,287  |      |  
|Less accumulated   depreciation and amortization |  |  |                         |  |      | (2,961,039 | )    |  
|                                                 |  |  |                         |  |      |            |      |  
|Net property and equipment                       |  |  |                         |  | $    | 1,034,248  |      | $
|                                                 |  |  |                         |  |      |            |      |  

|(3) | Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | At December 31, 2005, the Company has a $12,000,000   working capital line of credit and a $500,000 capital equipment facility with   its financial institution.  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 $3,000,000, up to a maximum of $12,000,000.  The capital equipment facility provides   for individual borrowings at 80% of the purchased equipments cost.  These credit facilities are secured by   accounts receivable, inventories and equipment.

| |  | Based on the borrowing formula calculated as of   December 31, 2005, the Company had the capacity to borrow up to the maximum   of $11,500,000 on its working capital line.                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As of December 31, 2005, there are advances of   $9,843,000 outstanding on the working capital credit facility.                                                                                                                                 
| |  | As of December 31, 2005 there are advances of   $54,000 outstanding on the capital equipment credit facility.                                                                                                                                   
| |  | As of December 31, 2005 and 2004, the Companys rate   of interest on these agreements was 6.75% and 5.00%, respectively.                                                                                                                       
| |  | Both credit facilities expire in October 2007.                                                                                                                                                                                                  
| |  | Since there is no defined payment schedule for the   working capital line of credit, it is classified as a current liability on   the Consolidated Balance Sheets.                                                                              
| |  | Although the terms of the equipment facility range   from twenty-four to sixty monthly installments of principal and interest,   this facility is payable on demand.                                                                            
| |  | Both credit facilities bear a variable rate of   interest tied to the prime rate.  The   working capital line of credit also gives the Company the ability, at its   option, to convert a portion of its prime based loan to a Libor based loan.
| |  | The Companys credit facilities are currently at one   financial institution.  Although the   Company has relationships with two financial institutions, none of its credit   facilities are at the second institution.                         

F-10

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

|    | The Company has two notes payable to Ford Motor   Credit Corporation secured by two of the Companys vehicles.  The first note is for 36 months, maturing   in February 2008, and carries a 0% interest rate.  At December 31, 2005, the balance owed was approximately   $33,000.  The second note is for 60   months, maturing in February 2010, and carries a 0% interest rate.  At December 31, 2005, the balance owed was   approximately $21,000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Income tax expense (benefit) for the years ended   December 31, 2005, 2004 and 2003 consists of:                                                                                                                                                                                                                                                                                                                                                       

|                         |  | 2005 |           | 2004 |   | 2003    |  
|------------------------ |  | ---- | --------- | ---- | - | ------- | -
|                         |  |      |           |      |   |         |  
|Current:                 |  |      |           |      |   |         |  
|Federal                  |  | $    | 1,159,855 |      | $ | 215,012 |  
|State                    |  |      | 209,482   |      |   | 52,219  |  
|Deferred:                |  |      |           |      |   |         |  
|Federal                  |  |      | (80,350   | )    |   | (61,127 | )
|State                    |  |      | (14,179   | )    |   | (10,787 | )
|                         |  |      |           |      |   |         |  
|Total income tax expense |  | $    | 1,274,808 |      | $ | 195,317 |  
|                         |  |      |           |      |   |         |  

| | 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, 2005, 2004 and 2003   follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                         |  | 2005 |           | 2004 |   | 2003    | 
|-------------------------------------------------------- |  | ---- | --------- | ---- | - | ------- | 
|                                                         |  |      |           |      |   |         | 
|Expected income tax expense                              |  | $    | 1,142,083 |      | $ | 139,224 | 
|State income taxes, net of   related federal tax benefit |  |      | 128,900   |      |   | 27,345  | 
|Nondeductible meals,   entertainment expense             |  |      | 18,742    |      |   | 7,160   | 
|Other                                                    |  |      | (14,917   | )    |   | 21,588  | 
|                                                         |  |      |           |      |   |         | 
|Actual income tax expense                                |  | $    | 1,274,808 |      | $ | 195,317 | 
|                                                         |  |      |           |      |   |         | 

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-11

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | The tax effects of temporary differences that give   rise to significant portions of the deferred tax assets and liabilities at   December 31, 2005 and 2004 follow:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                         |  | 2005 |          | 2004 |  
|------------------------------------------------------------------------ |  | ---- | -------- | ---- | -
|                                                                         |  |      |          |      |  
|Deferred tax assets:                                                     |  |      |          |      |  
|Allowance   for doubtful accounts                                        |  | $    | 265,321  |      | $
|Inventory                                                                |  |      | 291,930  |      |  
|Goodwill                                                                 |  |      | 273,907  |      |  
|Property   and equipment, principally due to differences in depreciation |  |      | 54,160   |      |  
|                                                                         |  |      |          |      |  
|Total   gross deferred tax assets                                        |  |      | 885,318  |      |  
|Deferred tax liabilities    prepaid expenses                            |  |      | (116,605 | )    |  
|                                                                         |  |      |          |      |  
|Net   deferred tax assets                                                |  | $    | 768,713  |      | $
|                                                                         |  |      |          |      |  

|    | 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 had previously authorized the   acquisition of up to 726,500 shares of the Companys common stock.  To date, the Company has acquired 726,166   shares (the last purchase was in 1999) that are held as treasury shares.  In May 2005, the Board of Directors   officially closed this repurchase plan.                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|(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 $92,432,   $77,823 and $115,262 during 2005, 2004 and 2003, respectively.

F-12

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

|(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   notes payable to Ford Motor Credit Corporation bear zero interest, the current   balance of the notes approximates fair value because of their short term,   small balance and the fact that current market interest rates are low.                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(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 the Companys corporate   operations, seven aggregated branches and the temporary facility, which are   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.  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 and Caribbean.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | 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    | 
|------------------------------- |  | ------ | ---------- | ---- | - | --------- | 
|                                |  |        |            |      |   |           | 
|2005                            |  |        |            |      |   |           | 
|Sales from external   customers |  | $      | 67,058,222 |      | $ | 3,568,181 | 
|Intersegment sales              |  |        |           |      |   | 849,205   | 
|Interest expense                |  |        | 370,655    |      |   |          | 
|Depreciation and   amortization |  |        | 416,067    |      |   | 7,405     | 
|Segment profit                  |  |        | 2,857,589  |      |   | 874,573   | 
|Segment assets                  |  |        | 25,158,984 |      |   | 1,355,270 | 
|Capital expenditures            |  |        | 477,787    |      |   | 4,017     | 
|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 (loss) profit           |  |        | (38,545    | )    |   | 388,443   | 
|Segment assets                  |  |        | 14,900,767 |      |   | 1,519,044 | 
|Capital expenditures            |  |        | 612,415    |      |   | 17,950    | 

F-14

---



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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       |  | 2005 |            | 2004 |   | 2003       |  
|-------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                       |  |      |            |      |   |            |  
|Profit for reportable   segments       |  | $    | 3,732,162  |      | $ | 658,768    |  
|Elimination of intersegment   profits  |  |      | (7,946     | )    |   | (8,406     | )
|                                       |  |      |            |      |   |            |  
|Operating profit                       |  | $    | 3,724,216  |      | $ | 650,362    |  
|                                       |  |      |            |      |   |            |  
|Total assets for reportable   segments |  | $    | 26,514,254 |      | $ | 19,436,232 |  
|Elimination of   intersegment  assets  |  |      | (82,531    | )    |   | (164,308   | )
|                                       |  |      |            |      |   |            |  
|Total assets                           |  | $    | 26,431,723 |      | $ | 19,271,924 |  
|                                       |  |      |            |      |   |            |  

| | The Companys sales, substantially all of which are   on an unsecured credit basis, are to various customers from its permanent   distribution centers in Texas, California, Arizona, Washington and Nevada and   its temporary facility in Louisiana.    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 2005, 2004 and 2003, no single   customer accounted for more than 10% of net sales, although sales to   environmental contractors, which include sales to contractors responding to   the effects of hurricanes in both 2005 and 2004, were approximately 53%, 46%   and 47% of consolidated net sales in 2005, 2004 and 2003, respectively.  A reduction in spending on environmental   projects could significantly impact sales.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Because of the substantial increase in sales,   primarily as a result of the 2005 hurricanes affecting the Gulf Coast region,   several customers of Abatix purchased substantial amounts of product late in   the third quarter and in the fourth quarter.    These large purchases resulted in significant receivable balances from   these customers.  The top ten   companies owing money to the Company make up approximately 41% of the total   receivable balance, with the largest customer accounting for approximately   23%.  No other customer accounted for   more than 6% of our receivables balance.    All of these accounts have been customers of the Company for more than   three years, with several being customers of the Company for more than ten   years.  Non-payment by any one of   these accounts would have a significant negative impact on the cash flows of   the Company.            

F-15

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ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

|    | Although no vendors products accounted for more   than 10% of the Companys sales, three product classes (groupings of similar   products) accounted for greater than 10% of sales in 2005.                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                               
|(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 January 2011.  The following is a schedule of future minimum lease payments   under these leases as of December 31, 2005:

|2006       |  | $ | 1,074,989 | 
|---------- |  | - | --------- | 
|2007       |  |   | 494,081   | 
|2008       |  |   | 313,852   | 
|2009       |  |   | 271,616   | 
|2010       |  |   | 157,574   | 
|Thereafter |  |   | 12,061    | 
|           |  |   |           | 
|           |  | $ | 2,324,173 | 
|           |  |   |           | 

| | Rental expense under operating leases for the years   ended December 31, 2005, 2004 and 2003 was $1,258,912, $1,261,156 and   $1,181,499, 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 2006.                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company was named in several class action   lawsuits in April and May 2004.  These   complaints generally alleged 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.

F-16

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

| | All of the lawsuits were transferred to one Federal   District Court in the Northern District of Texas, Dallas Division (Federal   Court) and were consolidated into a single case under Cause   No. 3-04CV-872-D; Family Medicine Specialists, et al v. Abatix, et al.   (Class Action).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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 (State District   Court, and when combined with the Federal Court as Courts) 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) (Derivative Suit), although   Plaintiff  dismissed A. David Cook   from this case.  This suit is a   stockholder derivative action that alleged that all of the defendants   breached certain fiduciary duties and abused their control of Abatix.  Further, the plaintiff sought contribution   and indemnification.  In addition,   this petition alleged 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | On May 6, 2005, the Company executed a Stipulation   and Agreement of Settlement to settle the Class Action (Class   Stipulation).  On May 9, 2005, the   Company executed a Stipulation of Compromise and Settlement to settle the   Derivative Suit (with the Class Stipulation, Stipulations).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | It is the Companys understanding that one class   member opted out of the proposed settlement in the Class Action and that no   members of the Class Action or the Derivative Suit objected to the proposed   settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | On August 11, 2005, the District Court of Dallas   County, Texas, 162nd Judicial District heard Plaintiffs Unopposed Motion for   Approval of Settlement and Award of Attorney Fees, requesting entry of the   Order and Final Judgment Approving Settlement in the Derivative Suit   previously disclosed.  The Court   determined the proposed settlement of the Derivative Suit was fair,   reasonable and in the best interest of the nominal defendant, the Company,   and its stockholders, and signed the Order and Final Judgment Approving   Settlement.  As a result, final   approval of the Settlement of the Derivative Suit was granted.                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Also on August 11, 2005, the Federal District Court   in the Northern District of Texas, Dallas Division heard Lead Plaintiffs   Motion for Final Approval of Class Action Settlement and Plan of Allocation   filed in the Class Action litigation previously disclosed.  The Court determined the Settlement was   fair, reasonable and in the best interest of the Class and all parties, and   signed the Order and Final Judgment.    As a result, final approval of the Settlement of the Class Action was   granted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-17

---



ABATIX CORP AND SUBSIDIARY

Notes to Consolidated Financial Statements

|     | While the Company was prepared to vigorously defend   itself and the officers and directors against the allegations, the Company   agreed to settle the Class Action for $900,000 in cash and will adhere to   certain corporate governance provisions to settle the Derivative Suit, so   that management and its employees can concentrate their full attention on   growing the business by eliminating the distraction of protracted litigation.  In addition, the Company agreed to the   Stipulations in order to eliminate the litigation risk and expense.  The settlement funds were covered by the   Companys insurance policy.    Accordingly, there have been no charges against the Companys earnings   in connection with payment of the settlement amount.  These settlements expressly provide that   the Company and its officers or directors do not admit or concede any   violation of law or wrongdoing of any kind.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(10) | Selected Quarterly Data (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                     |  | Quarter |           
|---------------------------------------------------- |  | ------- | ----------
|                                                     |  |         |           
|                                                     |  | First   |           
|                                                     |  |         |           
|2005                                                 |  |         |           
|Net sales                                            |  | $       | 14,726,765
|Gross profit                                         |  |         | 4,141,745 
|Operating profit                                     |  |         | 389,032   
|Net earnings                                         |  |         | 198,315   
|Basic and diluted earnings   per common share        |  |         | .12       
|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      

|                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|aThe   growth in revenues and profitability in the third and fourth quarters of 2005   and 2004 is primarily a result of the clean up following the hurricanes that   hit the Gulf Coast in 2005 and the hurricanes in Florida in 2004.

F-18

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Schedule II

ABATIX CORP. AND SUBSIDIARY

Valuation and Qualifying Accounts Years ended December 31, 2005, 2004 and 2003

|                                   |  | 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: |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2005                               |  | $                                | 368,074 |                                               |  | 672,463 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2004                               |  | $                                | 277,830 |                                               |  | 416,026 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2003                               |  | $                                | 390,910 |                                               |  | 265,289 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 
|Inventory   Reserve:               |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2005                               |  | $                                | 476,424 |                                               |  | 252,824 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2004                               |  | $                                | 454,699 |                                               |  | 151,720 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 
|2003                               |  | $                                | 398,528 |                                               |  | 141,280 |  |            |  |                          | 
|                                   |  |                                  |         |                                               |  |         |  |            |   |                          | 

| 
|-
|A
|B

S-1

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