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

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999     Commission File Number - 1-10184

                                  ABATIX CORP.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                                   75-1908110
---------------------------------------------       ----------------------------
(State or other jurisdiction of incorporation             (I.R.S. Employer
            or organization)                           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) 381-1146
                                                    ----------------------------

Securities registered pursuant to Section 12 (b) of the Act:        NONE
                                                              ------------------

Securities registered pursuant to Section 12 (g) of the Act:     COMMON STOCK
                                                              ------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during  the  preceding  twelve  months  (or for  such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing for the past 90 days.
Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of 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. [ ]

1,711,148 shares of common stock,  $.001 par value,  were issued and outstanding
on March 20, 2000.

The  aggregate   market  value  of  the   Registrant's   common  stock  held  by
nonaffiliates  of the  Registrant  as of the close of business on March 20, 2000
(an aggregate of 748,914 shares out of a total of 1,711,148  shares  outstanding
at that time) was  $1,451,021  computed by reference to the closing bid price of
$1 15/16 on March 20, 2000.

Portions of the  Registrant's  proxy  statement  for its 2000 annual  meeting of
stockholders are incorporated into Part III, herein, by this reference thereto.


<PAGE>


                                     PART I

ITEM 1. BUSINESS

(a)      DEVELOPMENT OF BUSINESS

Abatix Corp. (the "Company")  markets and  distributes  personal  protection and
safety  equipment and durable and  nondurable  supplies  predominantly  based on
revenues,  to the asbestos abatement  industry.  The Company also supplies these
products  to the  industrial  safety and  hazardous  materials  industries  and,
combined with tools and tool supplies, to the construction industry.

The Company began  operations in May 1983 as a supply company located in Dallas,
Texas, and was originally  incorporated in Texas as T&T Supply Company,  Inc. in
March 1984.  Abatix was  incorporated  in Delaware on December 5, 1988 to effect
and complete an Agreement and Plan of Merger with T&T on December 9, 1988.

In March  1989,  the  Company  completed  its  initial  public  offering  of its
securities  with the sale of 300,000  units,  each  consisting  of two shares of
common stock and one  redeemable  common stock purchase  warrant,  at a price of
$5.00 per unit.  Net proceeds of  $1,135,251  were  realized  from the offering.
Pursuant to provisions of the initial public  offering,  the Company issued,  on
March 2, 1990, a notice of redemption to the warrantholders  with respect to all
of its  outstanding  redeemable  common  stock  purchase  warrants,  which  were
exercisable  at $3.00 per share.  An aggregate  of 231,983 of such  warrants was
exercised  pursuant to the notice.  In total,  290,983  warrants were exercised,
8,917 were  redeemed  and 100 were not  presented,  resulting in net proceeds of
$805,616.  Proceeds  from the  exercise of the  warrants  enabled the Company to
increase its capital base and expand its operations.

On October 5, 1992, the Company  entered into and  consummated an Asset Purchase
Agreement  with  International   Enviroguard  Systems,  Inc.  ("IES"),  a  Texas
corporation, pursuant to which the Company assumed the operation of this company
and issued  250,000 shares of the Company's  $.001 par value common stock.  IES,
based in Corpus Christi,  Texas,  was a manufacturer of sorbents,  primarily for
the hazardous materials  industry.  The Company transferred the assets purchased
and liabilities assumed to International  Enviroguard Systems,  Inc. ("IESI"), a
Delaware corporation wholly owned by the Company.

During 1994, because of increased  purchasing power, the Company,  through IESI,
began  to  import   certain   products  sold  through  not  only  the  Company's
distribution  channels,  but also  other  distribution  companies  not in direct
competition  with Abatix.  In December 1994,  because of the  significant use of
cash,  the negative  impact on earnings and the limited  potential  for progress
towards  profitability,  the Company  announced plans to discontinue the sorbent
manufacturing  business of IESI.  This process was  completed  during the second
quarter of 1995; however, IESI continues the importation of products.

In December 1995, the Company opened its eighth facility in Las Vegas.  Although
the Las Vegas  operation  handles the entire  product line, its primary focus is
the construction tool industry.

                                       2
<PAGE>

Effective January 1, 1999, the Company  consummated an Asset Purchase  Agreement
with Keliher Hardware Company, a California  corporation,  pursuant to which the
Company  assumed the  operations  of  Keliher.  Keliher,  based in Los  Angeles,
California, is an industrial supply distributor,  primarily for the construction
and  industrial  markets.  The estimated  fair value of the assets  acquired was
approximately  $975,000.  The  aggregate  purchase  price was  settled  with the
assumption  of certain  liabilities  (approximately  $900,000),  the issuance of
23,500 shares of the Company's $.001 par value common stock at a value of $3.375
per share and the remainder in cash.  This  acquisition  has been  accounted for
using the purchase method.

On April 6, 1999, the Company closed its Denver  facility.  The Denver  facility
had sales of approximately  $353,000,  $1,449,000,  and $1,076,000 for the years
ended December 31, 1999, 1998, and 1997, respectively. The Company did not incur
any significant charges related to the shutdown.

Effective June 1, 1999, the Company consummated an Asset Purchase Agreement with
North State Supply Co. of Phoenix, an Arizona corporation, pursuant to which the
Company   assumed  the  operations  of  North  State,   a  construction   supply
distributor.  The estimated fair value of the  identifiable  assets acquired was
approximately  $1,800,000.  The  aggregate  purchase  price was settled with the
assumption of certain  liabilities  (approximately  $785,000) and  approximately
$2,100,000 in cash.  This  acquisition has been accounted for using the purchase
method.

The  Company  intends to expand and  diversify  the  revenue  base  through  the
expansion  of  product  lines,  hiring  additional  personnel,   and  additional
acquisitions.  In addition,  the Company is developing an e-commerce solution to
help  solidify  relationships  with the  existing  customer  base and expand its
geographic presence.

(b)      FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS

Information about the Company's  operating  segments is included in the Notes to
the Consolidated Financial Statements at Item 14.

(c)      NARRATIVE DESCRIPTION OF BUSINESS

ASBESTOS ABATEMENT INDUSTRY BACKGROUND

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 percent of all  buildings,  excluding  residences and schools,
contain friable asbestos-containing  materials that are brittle, readily crumble
and are  susceptible to the release of asbestos dust.  Various  diseases such as
asbestosis,  lung cancer and  mesothelioma,  linked to the  exposure to airborne
asbestos,  and the presence of asbestos in insulation,  service applications and
finishing  materials  have given rise to the concern about exposure to asbestos.
Public  awareness of the health  hazards  posed by asbestos has increased as the
results of continuing  medical  studies have become  widely known.  Business and
other  publications  and  studies  have  listed  asbestos  abatement  as  one of
America's critical problems,  and legislation  previously introduced to the U.S.

                                       3
<PAGE>

Congress  refers to asbestos as "one of the most dangerous  substances  known to
science."  A study  performed  in the 1980's  predicted  that as many as 225,000
Americans will die of asbestos  related  ailments  before the year 2000 and that
there are approximately  50,000 to 75,000 known cases of asbestosis.  Litigation
involving  claimants  exposed to asbestos has forced  several  firms to seek the
protection  of the  bankruptcy  courts,  and the  volume of  pending  claims has
inundated state and Federal courts  throughout the country,  thus prompting many
commentators to propose legislative solutions.

The United States Environmental Protection Agency ("EPA") estimated, in a survey
conducted  in 1984,  that  asbestos  was  present in 30 percent of the  nation's
110,000  schools and in 20 percent of the  nation's 3.6 million  government  and
commercial buildings.  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.

Prompted by such concerns,  Congress,  in 1984, authorized the EPA to spend $800
million for asbestos  abatement  in schools  under the  Asbestos  School  Hazard
Abatement Act. In October 1986,  Congress passed the Asbestos  Hazard  Emergency
Response Act ("AHERA") which mandates inspections for asbestos,  the adoption of
asbestos abatement plans and the removal of asbestos from schools and facilities
scheduled for demolition.  In addition,  state and local  governments  have also
adopted asbestos-related regulations.

Notwithstanding  such  legislative  impetus and  continued  awareness  of health
related hazards associated with asbestos, the budgetary constraints and the lack
of improvement in the industrial  sectors continue to limit the number and scope
of asbestos abatement projects.  However, if the U.S. economy remains strong and
commercial  real  estate  demand  increases,  the Company  believes  the overall
industry will improve on a limited basis.

LEAD ABATEMENT INDUSTRY BACKGROUND

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 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 any contracts are signed. In addition, although a landlord or home seller
is not required to test for lead-based paint, the rules do require disclosure of
a known lead hazard.

Many  asbestos  abatement  contractors  added lead  abatement  to their range of
services in an attempt to enter a market  considered  to be in its infancy.  The
asbestos  abatement  contractors  bring  equipment,  a trained labor force,  and
experience working in a regulatory  environment to the lead abatement  industry.
To  date,  the  Company  has not  experienced  a  significant  increase  in lead
abatement  projects,  although  these  rules and their  opportunities  encourage
management.  Such rules could create a long-term  positive impact on the Company
through  expenditures  for  equipment and supplies to ensure the safe and proper
removal and disposal of lead paint.

                                       4
<PAGE>

SAFETY AND HAZARDOUS MATERIALS INDUSTRIES BACKGROUND

The EPA and the Occupational Safety and Health Administration ("OSHA"), together
over  time,  have   established   numerous  rules  and   regulations   governing
environmental  protection and worker safety and health.  The demand for supplies
and  equipment  by U.S.  businesses  and  governments  to meet  these  rules and
regulations has resulted in the creation of a multi-billion dollar industry.

As research  identifies the degree of  environmental  or health risk  associated
with various substances and working conditions, new rules and regulations can be
expected.  These actions  inevitably will require more expenditures for supplies
and equipment for handling, remediation and disposal of hazardous substances and
the creation of safe living and working conditions.

CONSTRUCTION TOOLS SUPPLY INDUSTRY BACKGROUND

Besides  the normal  hand and power  tools,  and  associated  consumable  parts,
supplied to the  construction  industry,  the EPA and OSHA have also established
certain rules and  regulations  governing the protection of the  environment and
the protection of workers in this industry.

Currently,  the Company  supplies  the  construction  tools  industry in its Las
Vegas, Los Angeles,  and Phoenix  facilities.  This industry is directly tied to
the local economies and more  specifically,  the real estate  conditions  within
those  markets.  The real  estate  market in the Las Vegas  area is strong  with
vacancy  rates  for  commercial   properties  low  and  rental  rates  high  and
construction  of hotels and casinos  strong.  The  condition  of the real estate
industry in the Los Angeles and Phoenix areas remains stable.

GEOGRAPHIC DISTRIBUTION OF BUSINESS

With the acquisition of Keliher and North State,  the Company  distributes  over
40,000 industrial,  construction tool, personal protection, safety and hazardous
waste remediation products to approximately 6,500 customers primarily located in
the  Southwest,  Midwest  and  Pacific  Coast.  An  estimated  36 percent of the
Company's  sales  include  safety  products,  30 percent  include  environmental
products,  while  construction  tools and supplies account for 20 percent of its
sales. The remaining 14 percent of sales include miscellaneous  products used by
asbestos and lead abatement contractors, construction contractors and industrial
manufacturing facilities.

Approximately 40 percent of the Company's products are sold to asbestos and lead
abatement contractors, 23 percent to the industrial safety market, 20 percent to
construction  related firms and 17 percent to other firms,  including  hazardous
material contractors and other distributors.  The Company believes a majority of
its sales for the  foreseeable  future will  continue to be made to asbestos and
lead abatement  contractors,  project organizers and managers.  At present,  the
Company  estimates  its  share of the  asbestos  abatement  supply  market to be
approximately 15 to 20 percent in the geographic  markets served by the Company.
The Company considers its relationship with its customers to be excellent.

                                       5
<PAGE>

The Company  maintains  24-hours-a-day/7-days-a-week  telephone  service for its
customers and typically delivers supplies and equipment within two or three days
of 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  maintains sales,  distribution and warehouse centers in Los Angeles
and San Leandro,  California, in Dallas and Houston, Texas, in Phoenix, Arizona,
in Las Vegas, Nevada, and in Kent, Washington.

EQUIPMENT AND SUPPLIES

The Company buys products from  manufacturers  based on orders received from its
customers as well as anticipated needs based on prior buying patterns,  customer
inquiries  and  industry  experiences.  The Company  maintains  an  inventory of
disposable  products  and  commodities  as well  as low  cost  equipment  items.
Approximately  82  percent  of the  Company's  sales  for  1999  and 1998 are of
disposable  items and  commodity  products,  which are sold to customers at unit
prices ranging from under $1.00 to $50.00.  The balance of sales is attributable
to items  consisting  of lower  priced  equipment  beginning  at $20.00 to major
product   assemblies   such  as   decontamination   trailers  which  retail  for
approximately  $15,000.  The Company currently does not manufacture or lease any
products and does not perform any repairs thereon. The Company distributes, on a
limited basis, disposable items under its own private label.

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

MARKETING

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

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.

INFLATION

The inflation  rate for the U.S.  economy has averaged  approximately  3 percent
annually  over the past  several  years,  with the 1999  inflation  rate below 3
percent. The 2000 inflation rate is projected to be in the 2 to 3 percent range.

                                       6
<PAGE>

The  Company  believes  inflation  has not been a  substantial  concern nor will
inflation have a material impact to the Company's operations or profitability in
the near term, if it remains stable.  In the event of increased  inflation,  the
Company anticipates it would be able to pass along increases in product costs to
its customers in the form of higher selling prices, thereby having little effect
on product margins.

ENVIRONMENTAL IMPACT

The Company distributes a variety of products in the asbestos abatement industry
all of which require the Company to maintain on file Material Safety Data Sheets
("MSDS") that inform all  purchasers  and users of any  potential  hazards which
could occur if the products spilled or leaked.  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.  The  Company has safety
procedures in place to minimize any impact if a product were to leak or spill.

SEASONALITY

Historically,  the  asbestos  abatement  services  and supply  business has been
seasonal as a result of the substantial number of abatement  contracts performed
in  educational  facilities  during the summer  months or during other  vacation
periods.  The Company  believes the  non-educational  or private  sector,  which
includes the  industrial,  commercial  and  residential  markets,  is an area of
potential  growth,  and that seasonality is not a major  characteristic of these
markets.  In addition to the private  sector  asbestos  business,  the Company's
expansion  of  the  construction,   industrial  safety  and  hazardous  material
remediation  supply  markets have  mitigated any seasonal  impacts of government
asbestos 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  is
attributable  to the small  increase  in  revenues  during  the second and third
quarters  without a corresponding  increase in costs, as fixed costs represent a
majority of total selling, general and administrative costs.

GOVERNMENT REGULATION

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

                                       7
<PAGE>

COMPETITION

The asbestos and lead  abatement,  industrial  safety,  hazardous  materials and
construction tools supply businesses are highly  competitive.  These markets are
served by a limited  number of large national firms as well as many local firms,
none of who can be characterized as controlling the market. The Company competes
on the basis of price,  delivery,  credit  arrangements  and product variety and
quality.   Substantial   regulatory  or  economic   barriers  to  entry  do  not
characterize  the  Company's  business.   Furthermore,   additional   companies,
including  e-commerce based  companies,  could enter any of these industries and
may have greater financial, marketing and technical resources than the Company.

EMPLOYEES

As of February 29, 2000, the Company employed a total of 119 full time employees
including 4 executive  officers,  9 managers,  59  administrative  and marketing
personnel  and  47  clerical  and  warehouse  personnel.  The  Company  believes
relations with its employees are excellent.

ITEM 2.  DESCRIPTION OF PROPERTIES

The Company's headquarters are located in Dallas, Texas and occupy approximately
6,400 square feet of leased general office space. This lease expires in February
2005. As of December 31, 1999, the seven  distribution  facilities lease a total
of 172,571 square feet of general office and warehouse  space.  These facilities
range in size from 3,300  square  feet to 33,600 with  leases  expiring  between
February 2000 and February 2005.

ITEM 3. LEGAL PROCEEDINGS

In December 1998, the Company was named as a defendant in a lawsuit filed in the
District Court of Harris County,  Texas  (Asbestos  Handlers,  Inc.  ("AHI") vs.
Abatix  Environmental  Corp.,  et al). The lawsuit alleges the Company and other
defendants together  participated in the conversion and unauthorized sale of AHI
inventory  with a resell value of  approximately  $28,000.  The plaintiff  seeks
actual damages,  exemplary  damages,  interest and attorney's  fees. The Company
purchased  the  inventory in good faith and  believed  that the manager of AHI's
Houston  facility  was  representing  AHI's  interests.  In late March  2000,  a
settlement  agreement  was signed by all parties  which  required the Company to
replace the inventory in question.

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

None
                                       8
<PAGE>
                                     PART II

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

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

                                           Common Stock
                                             Bid Price
                                   -----------------------------
          1998                         High              Low
--------------------------         ------------      -----------
      First Quarter                $  3 7/8          $  2 5/8
     Second Quarter                   4 1/2             3 3/8
      Third Quarter                   4 1/4             2 3/4
     Fourth Quarter                   3 15/16           2 3/4

          1999
--------------------------
      First Quarter                $ 3 5/8           $  2 1/2
     Second Quarter                  3 11/16            2 13/16
      Third Quarter                  3 3/16             2 1/4
     Fourth Quarter                  2 9/16             1 5/8

On March 20, 2000, the closing bid price for the common stock was $1 15/16.

(b) As of March 20,  2000,  the  approximate  number of holders of record of the
Company's common stock was 700.

(c) The Company has never paid cash  dividends on its common stock.  The Company
presently  intends to retain any future earnings to finance the expansion of its
business or repay borrowings on its lines of credit and does not anticipate that
any cash  dividends  will be paid in the  foreseeable  future.  Future  dividend
policy will depend on the Company's earnings,  capital  requirements,  expansion
plans, financial conditions, and other relevant factors.

(d) At various times since November 1984, the Board of Directors  authorized the
acquisition of the Company's common stock totaling  726,500 shares.  As of March
20, 2000, the Company has acquired 726,166 shares and does not intend to acquire
any additional shares for the foreseeable future.  Included in these shares is a
block of  102,600  shares  purchased  in March  1999,  a block of 51,000  shares
purchased in October 1999,  and 22,766  shares  received in January 1999 from an
officer  of  the   Company  as  payment  for  monies  owed  to  the  Company  of
approximately $80,000. All of these shares are held as treasury shares.

                                       9
<PAGE>

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 independent  auditors'  report,
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).
<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                             ------------------------------------------------------------------------
                                                1999            1998           1997            1996            1995
                                             ----------      ----------     ----------     -----------     ----------
<S>                                          <C>             <C>            <C>            <C>             <C>
Selected Operating Results:
   Net sales                                 $   44,230     $    37,328    $    34,955     $   33,067     $    27,632
   Gross profit                              $   11,871     $    10,481    $     9,651     $    9,202     $     7,977

   Earnings from continuing operations
                                             $      461     $     1,167    $       841     $      734     $       813
   Earnings from discontinued
     operations, net of income taxes                  -               -              -             22               -
                                             ----------     -----------    -----------     ----------     -----------
   Net earnings                              $      461     $     1,167    $       841     $      756     $       813
                                             ==========     ===========    ===========     ==========     ===========

Basic earnings per common share:
   Earnings from continuing operations       $      .26     $       .60    $       .43     $      .35     $       .37
   Earnings from discontinued operations              -               -              -            .01               -
                                             ----------     -----------    -----------     ----------     -----------
   Net earnings                              $      .26     $       .60    $       .43     $      .36     $       .37
                                             ==========     ===========    ===========     ==========     ===========

Diluted earnings per common share:
   Earnings from continuing operations       $      .26     $       .60    $       .43     $      .35     $       .36
   Earnings from discontinued operations              -               -              -            .01               -
                                             ----------     -----------    -----------     ----------     -----------
   Net earnings                              $      .26     $       .60    $       .43     $      .36     $       .36
                                             ==========     ===========    ===========     ==========     ===========

Weighted average shares outstanding:
     Basic                                        1,779           1,934          1,934          2,076           2,207
                                             ==========     ===========    ===========     ==========     ===========
     Diluted                                      1,779           1,934          1,934          2,111           2,238
                                             ==========     ===========    ===========     ==========     ===========
</TABLE>
<TABLE>
<CAPTION>

                                                                       As of December 31,
                                             ------------------------------------------------------------------------
                                                1999           1998           1997           1996            1995
                                             ----------     ----------     ----------     ----------      ----------
<S>                                          <C>            <C>            <C>            <C>             <C>
Selected Balance Sheet Data:
   Current assets                            $   13,220     $    9,918     $    9,003     $    9,722      $    8,230
   Current liabilities                            9,171          4,408          4,676          6,219           4,659
   Total assets                                  15,204         10,596          9,854         10,678           8,977
   Total liabilities                              9,171          4,408          4,676          6,219           4,659
   Retained earnings                              5,714          5,252          4,085          3,244           2,488
   Stockholders' equity                           6,033          6,187          5,178          4,459           4,318
</TABLE>

                                       10
<PAGE>

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

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Consolidated  net sales for the year ended December 31, 1999 improved 18 percent
to $44,230,000 from $37,328,000 in 1998. The Abatix operating  segment net sales
grew 20 percent to $41,841,000 in 1999, and the IESI operating segment net sales
of  $2,388,000 in 1999  remained  constant with the prior year.  The increase in
consolidated  net sales was  primarily  the result of the  acquisition  of North
State in June 1999 and the January 1999 acquisition of Keliher.  The increase in
sales  resulting from these  acquisitions  was partially  offset by a decline in
sales derived from customers in oil related industries. In addition, on April 6,
1999, the Company closed its Denver  facility.  The Denver facility had sales of
approximately  $353,000 and $1,449,000 for the years ended December 31, 1999 and
1998, respectively.  The Company will serve the Denver market primarily from its
Phoenix location.

Industry-wide  sales of  asbestos  abatement  products  are  expected  to remain
relatively  flat for the foreseeable  future.  However,  the asbestos  abatement
industry will likely diminish over time as asbestos containing  materials,  last
used  in  construction  during  1977-1980,  are  removed  from  schools,  office
buildings, homes and factories.

Sales to the hazardous materials remediation, industrial safety and construction
tools supply markets are increasing both in absolute amounts and as a percentage
of revenues to the Company.  The acquisitions of Keliher and North State,  other
potential  acquisitions,  additional  salespeople  and internal  growth in these
markets  should  decrease  the  dependency  of the  Company on any one  product,
geographic market or on sales to the asbestos abatement  industry.  In addition,
the Company is developing an e-commerce solution to help solidify  relationships
with the existing customer base and expand its geographic presence.

Gross profit for 1999 of $11,871,000 increased 13 percent from 1998 gross profit
of $10,481,000  due to an increase in sales volume.  As seen in previous  years,
gross  profit  margins  varied  by  location  as a result of sales mix and local
market conditions. Reported as a percentage of sales, the Company's gross profit
margins were 27 percent and 28 percent for 1999 and 1998, respectively.  The one
percent  decline in gross profit margin was  attributable to a change in the mix
of products being sold primarily as a result of the  acquisitions of Keliher and
North State.  Overall  margins are expected to remain at their current levels in
2000. However, competitive pressures could negatively impact any and all efforts
by the Company to maintain or improve product margins.

Selling, general and administrative expenses increased 28 percent to $10,737,000
over 1998 expenses of $8,373,000. The increase was due to the inclusion of North
State  and  Keliher  costs,  as well as costs  incurred,  including  facilities,
payroll,  travel,  and marketing costs, in preparation for expected  growth.  In
order to accommodate  growth,  the Company relocated several of its distribution
centers to larger facilities,  which also included higher per square foot rental
rates.  This increase in rent expense,  coupled with the costs  associated  with
efforts to further enhance customer  service  contributed to the higher selling,
general and administrative expenses in 1999.

                                       11
<PAGE>

As a percent of sales,  selling,  general and  administrative  expenses  were 24
percent  for 1999 as  compared  to 22 percent  for 1998.  As a percent of sales,
these expenses are higher in 1999 due to the higher  operating cost structure of
Keliher,  expenses related to the integration of North State's  operations,  and
the costs  associated with marketing  initiatives to improve our internal growth
rate. As a result of higher rent expense,  increased health care costs, costs to
integrate acquisitions, and costs related to the marketing initiatives, selling,
general and  administrative  expenses are expected to be in the 23 percent to 24
percent  range for the year  2000.  The  Company  did not incur any  significant
charges related to the closing of its Denver facility.

Other  expense,  net,  of $374,000  increased  70 percent  from 1998  expense of
$220,000 primarily due to a 62 percent increase in interest expense. In addition
to a higher  prime rate,  borrowings  used to finance the  acquisition  of North
State  resulted in the higher  interest  expense.  Since the Company's  lines of
credit  are tied to the  prime  rate,  any  increases  in the prime  rate  would
negatively affect the Company's earnings.  The prime rate has increased 50 basis
points since December 31, 1999.

Net earnings of $461,000 or $.26 per share in 1999 declined 60 percent from 1998
net earnings of $1,167,000  or $.60 per share.  The decrease in net earnings was
due to a one percent  decline in profit  margins  combined with higher  selling,
general and administrative costs and increased interest expense.

The Company's credit policies remain stringent,  and accounts receivable written
off are consistent with historical experience.  Monthly average days of sales in
net  accounts  receivable  remained  consistent  from 1998 to 1999.  The Company
believes the reserve for doubtful accounts is adequate.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Consolidated  net sales for the year ended December 31, 1998 increased 7 percent
to $37,328,000 from $34,955,000 in 1997. The Abatix operating  segment net sales
grew 4 percent to $34,928,000  in 1998 and the IESI operating  segment net sales
increased 70 percent to $2,400,000  in 1998.  The increase in  consolidated  net
sales  resulted from efforts to further  expand and diversify the customer base.
The  increase  was  also a  result  of the  stable  economic  conditions  in the
geographic regions serviced by the Company's facilities.

Gross  profit in 1998 of  $10,481,000  increased 9 percent  from gross profit in
1997 of $9,651,000 due to increased  sales volume.  As expected,  margins varied
from  location to location  due to sales mix and local  market  conditions.  The
Company's  gross  profit  margins,  expressed  as a  percentage  of sales,  were
approximately 28 percent for 1998 and 1997.

Selling,  general and administrative expenses for 1998 of $8,373,000 increased 5
percent  over  1997  expenses  of  $7,953,000.  The  increase  was  attributable
primarily to higher  employment  costs as a result of  additional  marketing and
support personnel.  Selling, general and administrative expenses were 22 percent
of sales for 1998 and 23 percent of sales for 1997.

                                       12
<PAGE>

Other  expense,  net, of $220,000 in 1998 decreased 40 percent from 1997 expense
of $365,000. This decrease was primarily due to lower interest expense resulting
from lower borrowings on the Company's  working capital line of credit and lower
interest  rates.  The lower  borrowings  were due to  improved  receivables  and
inventory management.

Net earnings in 1998 of $1,167,000 or $.60 per share increased $326,000 from net
earnings of $841,000 or $.43 per share in 1997.  The 39 percent  increase in net
earnings was primarily due to increased sales volume and lower interest expense,
partially offset by higher general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital  requirements  historically result from the growth
of its  accounts  receivable  and  inventories,  partially  offset by  increased
accounts payable and accrued expenses, associated with increases in sales volume
and/or the addition of new  locations.  Net cash provided by  operations  during
1999 of $559,000 resulted principally from the increase in accounts payable, the
net earnings and the  adjustment for  depreciation  and  amortization  partially
offset by an increase in inventories and  receivables.  The increase in accounts
payable,  inventories and  receivables was primarily  related to the increase in
revenue related to the acquisitions of Keliher and North State.

Cash  requirements for non-operating  activities during 1999 resulted  primarily
from the  acquisition  of North State,  the purchases of property and equipment,
primarily delivery vehicles and computer and communications equipment, amounting
to $445,000, and the repurchase of the Company's common stock totaling $612,000.
These  cash  requirements  were  partially  offset  by  borrowings,  net  of the
repayments,  on the working capital line of credit. The Company  repurchased its
common stock because of the Board of Directors'  belief that it was  undervalued
in the marketplace.  All of the cash  requirements  were funded by borrowings on
the Company's lines of credit.

Cash  flow  from  operations  for the  entire  year of  2000 is  expected  to be
positive,  although at any given point,  it may be negative.  The development of
the  Company's  e-commerce  solution,  which is  expected to be  operational  in
mid-2000, will require a significant capital outlay. This solution,  which could
cost a total of  $250,000  to  implement,  market and  maintain,  is expected to
provide  customers a more  efficient  method of doing  business  with Abatix and
could  provide some cost  savings in the future,  as well as expand the customer
base.

The  Company  maintains  a  $6,500,000  working  capital  line  of  credit  at a
commercial  lending  institution  that  allows  the  Company  to borrow up to 80
percent of the book value of eligible  trade  receivables  plus the lesser of 40
percent of eligible  inventory or  $2,000,000.  As of March 20, 2000,  there are
advances  outstanding  under this credit  facility of  $5,726,000.  Based on the
borrowing formula, the Company had the capacity to borrow an additional $774,000
as of March 20, 2000.  The Company also maintains a $550,000  capital  equipment
credit facility providing for borrowings at 80 percent of cost on purchases. The
advances  outstanding  under  this  credit  facility  as of March 20,  2000 were
$198,000.  Both credit facilities are payable on demand and bear a variable rate
of interest computed at the prime rate.

                                       13
<PAGE>

Management believes the Company's current credit facilities,  together with cash
provided  by  operations,  will be  sufficient  for its  capital  and  liquidity
requirements  for the next  twelve  months.  In the  event the  Company  pursues
additional  acquisitions  and is unable to use its common stock as payment,  the
Company would need to negotiate with a lender to secure additional borrowings to
be used to acquire another company's assets.

NEW ACCOUNTING STANDARDS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments and Hedging Activities." This statement, as amended by SFAS No. 137,
is effective for fiscal  quarters of all fiscal years  beginning  after June 15,
2000  and  establishes   accounting  and  reporting   standards  for  derivative
instruments.  Management of the Company does not expect the adoption of SFAS No.
133 to have a material impact on the Company's financial condition or results of
operations.

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, 1999 and 1998,  an  increase  of 100 basis  points in the
United States prime rate would  negatively  impact the Company's net earnings by
$36,000 and $18,000, respectively.


Except for the historical information contained herein, the matters set forth in
this  Form  10-K  are  forward  looking  and  involve  a  number  of  risks  and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially are the following: federal funding of environmental related projects,
general  economic and  commercial  real estate  conditions in the local markets,
changes in interest  rates,  inability to pass on price  increases to customers,
unavailability  of products,  strong  competition and loss of key personnel.  In
addition,  further  increases  in oil prices or  shortages  in oil supply  could
significantly  impact the Company's  petroleum based products and its ability to
supply those products at a reasonable price. Furthermore,  lack of acceptance of
our proposed  e-commerce  solution or the impairment of goodwill  resulting from
the 1999 acquisitions could also cause actual results to differ materially.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated  financial statements and supplementary data are included under
Item 14(a)(l) and (2) of this Report.

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

None
                                       14
<PAGE>

                                    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  Securities  and Exchange  Commission  not
later than one hundred twenty (120) days after December 31, 1999.

ITEM 11.  EXECUTIVE COMPENSATION

This Item 11 is incorporated  herein by reference from the Company's  definitive
Proxy  Statement to be filed with the  Securities  and Exchange  Commission  not
later than one hundred twenty (120) days after December 31, 1999.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This Item 12 is incorporated  herein by reference from the Company's  definitive
Proxy  Statement to be filed with the  Securities  and Exchange  Commission  not
later than one hundred twenty (120) days after December 31, 1999.

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  Securities  and Exchange  Commission  not
later than one hundred twenty (120) days after December 31, 1999.

                                     PART IV

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

(a)  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.

(b)  REPORTS ON FORM 8-K

(i)     Item 2. Acquisition of North State Supply Co. of Phoenix filed on
                June 15, 1999.
(ii)    Item 5. Change the name of the corporation to Abatix Corp. filed on
                June 15, 1999.
(iii)   Item 6. Resignations of Registrant's Directors, filed February 2, 2000.

(c)  EXHIBITS

(1)(a)          Form of Underwriting Agreement (filed as Exhibit (1)(a) to the
                Registration Statement on Form S-18, filed February 9, 1989).

                                       15
<PAGE>

(1)(b)          Form of Selected Dealer Agreement (filed as Exhibit (1)(b) to
                the Registration Statement on Form S-18, filed
                January 11, 1989).

(1)(c           Warrant Solicitation Agent and Exercise Fee Agreement
                (filed as Exhibit (l)(c) to the Report on Form 10-K for the
                year ended December 31, 1989).

(2)(a)          Agreement of Merger (filed as Exhibit (2) to the Registration
                Statement on Form S-18, filed January 11, 1989).

(2)(b)          Asset Purchase Agreement (filed as Exhibit (2)(b) to the Report
                on Form 8-K, filed October 19, 1992).

(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).

(2)(d)          Asset Purchase Agreement for North State Supply Co.of Phoenix
                (filed with Report on Form 8-K on June 15, 1999).

(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 September 30, 1995, filed on November 9, 1995).

(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 September 30, 1995, filed
                on November 9, 1995).

(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
                September 30, 1995, filed November 9, 1995; filed electronically
                as  Exhibit  3(i)(c)  to the  Form  10-Q for the  quarter  ended
                September 30, 1995, filed on November 9, 1995).

(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
                September 30, 1995, filed on November 9, 1995).

(4)(a)          Specimen Certificate of Common Stock (filed as Exhibit (4)(a) to
                the Registration Statement on Form S-18, filed January 8, 1989).

(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).

(4)(c)          Form of Warrant to be sold to Culverwell & Co., Inc. (filed as
                Exhibit (4)(c) to the  Registration Statement on Form S-18,
                filed February 9, 1989).

                                       16
<PAGE>

 (4)(d)         Warrant  Agency  Agreement  between  the  Registrant  and  North
                American  Transfer  Company  (filed  as  Exhibit  (4)(d)  to the
                Registration Statement on Form S-18, filed February 9, 1989).

(9)(a)(ii)      Form of  Escrow  Agreement  with  State  Street  Bank and  Trust
                Company  (filed  as  Exhibit   (9)(a)(ii)  to  the  Registration
                Statement on Form S-18, filed January 11, 1989).

(10)(a)         Employment Agreement with Terry W. Shaver (filed as Exhibit
                (10)(a) to the Registration Statement on Form S-18,
                filed January 11, 1989).

(10)(a)(i)      Employment  Agreement with Terry W. Shaver effective  January 2,
                1991 (filed as Exhibit (10)(a)(i) to the Report on Form 10-K for
                the year ended December 31, 1990).

(10)(a)(ii)     Employment  Agreement with Terry W. Shaver effective  January 4,
                1993  (filed as Exhibit  (10)(a)(ii)  to the Report on Form 10-K
                for the year ended December 31, 1992).

(10)(a)(iii)    Employment  Agreement with Terry W. Shaver effective  January 1,
                1995 (filed as Exhibit  (10)(a)(iii)  to the Report on Form 10-K
                for the year ended December 31, 1994).

(10)(a)(iv)     Employment  Agreement with Terry W. Shaver effective  January 1,
                1997  (filed as Exhibit  (10)(a)(iv)  to the Report on Form 10-K
                for the year ended December 31, 1996).

(10)(a)(v)      Employment  Agreement with Terry W. Shaver effective  January 1,
                1999 (filed as Exhibit (10)(a)(v) to the Report on Form 10-K for
                the year ended December 31, 1998).

(10)(b)         Employment Agreement with Gary L. Cox (filed as Exhibit (10)(b)
                to the Registration Statement on Form S-18,
                filed January 11, 1989).

(10)(b)(i)      Employment Agreement with Gary L. Cox effective  January 2, 1991
                (filed as Exhibit (10)(b)(i) to the Report on Form 10-K for the
                year ended December 31, 1990).

(10)(b)(ii)     Employment Agreement with Gary L. Cox effective  January 4, 1993
                (filed as Exhibit (10)(b)(ii) to the Report on Form 10-K for the
                year ended December 31, 1992).

(10)(b)(iii)    Employment  Agreement with Gary L. Cox effective January 1, 1995
                (filed as Exhibit (10)(b)(iii) to the Report on Form 10-K for
                the year ended December 31, 1994).

(10)(b)(iv)     Employment  Agreement with Gary L. Cox effective January 1, 1997
                (filed as Exhibit (10)(b)(iv) to the Report on Form 10-K for the
                year ended December 31, 1996).

                                       17
<PAGE>

(10)(b)(v)      Employment Agreement with Gary L. Cox effective  January 1, 1999
                (filed as Exhibit  (10(b)(iv) to the Report on Form 10-K for the
                year ended December 31, 1998).

(10)(c)         Revolving Credit Agreement with Texas American Bank/Duncanville,
                N.A. (filed as Exhibit (10)(c) to the Registration Statement on
                Form S-18, filed January 11, 1989).

(10)(d)         Demand Credit Facility with Comerica  Bank-Texas  dated February
                15,  1989  (filed as Exhibit  (10)(d) to the Report on Form 10-Q
                for the Quarter ended March 31, 1989, filed May 15,1989).

(10)(e)         Demand Credit Facility with Comerica  Bank-Texas  dated June 15,
                1989  (filed as  Exhibit  (10)(e) to the Report on Form 10-Q for
                the Quarter ended June 30, 1989, filed August 11, 1989).

(10)(e)(i)      Demand Credit Facility with Comerica  Bank-Texas  dated March 1,
                1993 (filed as Exhibit (10)(e)(i) to the Report on Form 10-K for
                the year ended December 31, 1992).

(10)(e)(ii)     Demand  Credit  Facility  with  Comerica  Bank-Texas  extension,
                renewal  and  increase  dated  June 1, 1993  (filed  as  Exhibit
                (10)(e)(ii)  to the  Report  on Form  10-K  for the  year  ended
                December 31, 1993).

(10)(e)(iii)    Demand  Credit  Facility  with  Comerica  Bank-Texas  extension,
                renewal and increase dated  September 22, 1994 (filed as Exhibit
                (10)(e)(iii)  to the  Report  on Form  10-K for the  year  ended
                December 31, 1994).

(10)(f)         Employment Agreement with S. Stanley French effective
                October 1, 1992 (filed as Exhibit (10)(f) to the Report on Form
                8-K, filed October 19, 1992).

(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).

(23)            Consent of Independent Auditors.*

(27)            Financial Data Schedule for the twelve months ended
                December 31, 1999.*

* Filed herewith as part of the Company's electronic filing.

                                       18
<PAGE>

                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned;  thereunto duly authorized, on the 27th day of March,
2000.


                                      ABATIX CORP.



                                      By: /S/ TERRY W. SHAVER
                                      Terry W. Shaver

                                      President, Chief Executive Officer
                                      and Director (Principal Executive Officer)

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 date indicated.

SIGNATURES                 TITLE                                  DATE


/S/ TERRY W. SHAVER        President, Chief Executive Officer     March 27, 2000
-------------------        and Director
Terry W. Shaver            (Principal Executive Officer)


/S/ GARY L. COX            Executive Vice President,              March 27, 2000
---------------            Chief Operating Officer and Director
Gary L. Cox


/S/ DANIEL M. BIRNLEY      Director                               March 27, 2000
---------------------
Daniel M. Birnley


/S/ DONALD N. BLACK        Director                               March 27, 2000
-------------------
Donald N. Black


/S/ FRANK J. CINATL        Vice President,                        March 27, 2000
-------------------        Chief Financial Officer
Frank J. Cinatl, IV        and Director
                           (Principal Accounting Officer)

                                       19
<PAGE>


                           ABATIX CORP. AND SUBSIDIARY

                   Index to Consolidated Financial Statements

                                                                            PAGE
Independent Auditors' Report                                                F-2

Financial Statements:
  Consolidated Balance Sheets as of December 31, 1999 and 1998              F-3

  Consolidated Statements of Operations for the years ended
    December 31, 1999, 1998 and 1997                                        F-4

  Consolidated Statements of Stockholders' Equity for the years
    ended December 31, 1999, 1998 and 1997                                  F-5

  Consolidated Statements of Cash Flows for the years ended
    December 31, 1999, 1998 and 1997                                        F-6

  Notes to Consolidated Financial Statements                                F-7


Financial Statement Schedule:
  II - Valuation and Qualifying Accounts for the years ended
        December 31, 1999, 1998 and 1997                                    S-1

All  other   schedules  have  been  omitted  as  the  required   information  is
inapplicable  or the  information  required  is  presented  in the  consolidated
financial statements or the notes thereto.

                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Abatix Corp.:


We have  audited the  consolidated  financial  statements  of Abatix  Corp.  and
subsidiary as listed in the accompanying index. 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 financial statement schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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.  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, 1999 and 1998, and the results of their operations
and  their  cash  flows  for each of the years in the  three-year  period  ended
December 31, 1999 in conformity with 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
February 29, 2000

                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                           ABATIX CORP. AND SUBSIDIARY

                           Consolidated Balance Sheets
                           December 31, 1999 and 1998

                                  ASSETS                                               1999               1998
                                                                                  --------------     --------------
 <S>                                                                              <C>                <C>
 Current assets:
   Cash                                                                           $      106,793     $      223,997
   Trade accounts receivable, net of allowance for doubtful accounts of
     $616,678 in 1999 and $514,696 in 1998 (note 4)                                    7,028,271          5,701,314
   Inventories (note 4)                                                                5,393,355          3,424,914
   Prepaid expenses and other assets                                                     368,583            424,865
   Refundable income taxes                                                                87,986                  -
   Deferred income taxes (note 5)                                                        235,505            143,299
                                                                                  --------------     --------------
       Total current assets                                                           13,220,493          9,918,389

Receivables from officers and employees                                                    7,750             79,505
Property and equipment, net (notes 3 and 4)                                              629,796            450,991
Deferred income taxes (note 5)                                                           144,916            120,324
Goodwill, net of accumulated amortization of $91,751                                   1,134,880                  -
Other assets                                                                              66,973             26,296
                                                                                  --------------     --------------
                                                                                  $   15,204,808     $   10,595,505
                                                                                  ==============     ==============

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable to bank (note 4)                                                 $    5,825,721     $    2,854,206
   Accounts payable                                                                    2,604,587            958,656
   Accrued compensation                                                                  198,127            181,071
   Other accrued expenses                                                                542,959            414,416
                                                                                  --------------     --------------
         Total current liabilities                                                     9,171,394          4,408,349
                                                                                  --------------     --------------

Stockholders' equity (note 6):
   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 1999 and 2,413,814 shares in 1998                                 2,437              2,414
   Additional paid-in capital                                                          2,574,560          2,498,508
   Retained earnings                                                                   5,713,759          5,252,301
   Treasury stock at cost, 726,166 common shares in 1999 and 517,700
     common shares in 1998                                                            (2,257,342)        (1,566,067)
                                                                                  --------------     --------------
       Total stockholders' equity                                                      6,033,414          6,187,156

Commitments (note 10)
                                                                                  ---------------    ---------------
                                                                                  $    15,204,808    $    10,595,505
                                                                                  ===============    ===============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                           ABATIX CORP. AND SUBSIDIARY

                      Consolidated Statements of Operations
                  Years ended December 31, 1999, 1998 and 1997

                                                                    1999                  1998                 1997
                                                             ----------------      ----------------     ----------------
<S>                                                          <C>                   <C>                  <C>
Net sales                                                    $     44,229,758      $     37,327,629     $     34,955,477
Cost of sales                                                      32,358,985            26,846,279           25,304,902
                                                             ----------------      ----------------     ----------------
       Gross profit                                                11,870,773            10,481,350            9,650,575

Selling, general and administrative expenses                      (10,737,007)           (8,373,030)          (7,953,179)
                                                             ----------------      ----------------     ----------------
       Operating profit                                             1,133,766             2,108,320            1,697,396

Other income (expense):
   Interest income                                                        573                15,824               36,187
   Interest expense                                                  (386,856)             (238,706)            (381,655)
   Other, net                                                          12,436                 2,400              (19,215)
                                                             ----------------      ----------------     ----------------
       Earnings before income taxes                                   759,919             1,887,838            1,332,713

Income tax expense (note 5)                                          (298,461)             (720,429)            (491,607)
                                                             ----------------      ----------------     ----------------
       Net earnings                                          $        461,458      $      1,167,409     $        841,106
                                                             ================      ================     ================

Basic and diluted earnings per common share                  $            .26      $            .60     $            .43
                                                             ================      ================     ================

Basic and diluted weighted average shares outstanding
    (note 1(f))                                                     1,779,029             1,933,769            1,933,896
                                                             ================      ================     ================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>

                           ABATIX CORP. AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 1999, 1998 and 1997


                                          Common Stock          Additional                       Treasury Stock
                                     ----------------------      Paid-in        Retained    -------------------------     Total
                                       Shares       Amount       Capital        Earnings      Shares        Amount        Equity
                                     ----------    --------    ------------    -----------  ----------  -------------   -----------
<S>                                  <C>           <C>         <C>             <C>           <C>        <C>             <C>
Balance at December 31, 1996          2,381,314    $  2,381    $  2,407,603    $ 3,243,786     392,750  $  (1,195,247)  $ 4,458,523


  Purchase of treasury stock                  -           -               -              -      83,500       (212,890)     (212,890)

  Exercise of stock options              32,500          33          90,905              -           -              -        90,938

  Net earnings                                -           -               -        841,106           -              -       841,106
                                     ----------    --------     -----------    -----------  ----------  -------------   -----------
Balance at December 31, 1997          2,413,814       2,414       2,498,508      4,084,892     476,250     (1,408,137)    5,177,677

  Purchase of treasury stock                 -            -               -              -      41,450       (157,930)     (157,930)

  Net earnings                               -            -               -      1,167,409           -              -     1,167,409
                                     ----------    --------     -----------    -----------  ----------  -------------   -----------
 Balance at December 31, 1998         2,413,814       2,414       2,498,508      5,252,301     517,700     (1,566,067)    6,187,156

   Stock issued  for  the
   Purchase   of Keliher
   Hardware (note 2)                     23,500          23          76,052              -           -              -        76,075

   Purchase of treasury
    stock                                     -           -               -              -     185,700       (611,594)     (611,594)

    Stock received to repay
    debt from officer                         -           -               -              -      22,766        (79,681)      (79,681)

   Net earnings                               -           -               -        461,458           -              -       461,458
                                     ----------    --------     -----------    -----------  ----------  --------------   -----------
Balance at December 31, 1999          2,437,314    $  2,437     $ 2,574,560    $ 5,713,759     726,166  $   (2,257,342)  $6,033,414
                                     ==========    ========     ===========    ===========  ==========  ==============   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                           ABATIX CORP. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
                  Years ended December 31, 1999, 1998 and 1997

                                                                       1999                1998                1997
                                                                -----------------   -----------------   -----------------
<S>                                                             <C>                 <C>                 <C>
Cash flows from operating activities:
   Net earnings                                                 $         461,458   $       1,167,409   $         841,106
   Adjustments to reconcile net earnings to net cash
     provided by operating activities:
     Depreciation and amortization                                        469,032             367,789             378,076
     Deferred income taxes                                               (116,798)             (5,626)            (74,106)
     Loss (gain) on disposal of assets                                    (19,609)             (3,310)              2,681
     Changes in assets and liabilities, net of
     business acquisitions:
       Receivables                                                       (287,808)           (933,035)            527,570
       Inventories                                                       (384,281)            113,441             (97,798)
       Refundable income taxes                                            (87,986)                  -             285,784
       Prepaid expenses and other assets                                   64,968            (175,439)             36,365
       Accounts payable                                                   556,542            (271,451)            163,680
       Accrued expenses                                                   (96,221)            159,755              69,645
                                                                -----------------   -----------------   -----------------
Net cash provided by operating activities                                 559,297             419,533           2,133,003
                                                                -----------------   -----------------   -----------------
Cash flows from investing activities:
   Purchase of property and equipment                                    (444,642)           (191,850)           (285,900)
   Proceeds from sale of property and equipment                            35,750               8,500              36,666
   Business acquisitions, net of cash acquired (note 2)                (2,160,574)                  -                   -
   Advances to officers and employees                                     (63,897)            (40,609)            (25,647)
   Collection of advances to officers and employees                        60,170              34,833              28,265
   Other assets, primarily deposits                                       (30,515)              3,100               6,426
                                                                -----------------   -----------------   -----------------
Net cash used in investing activities                                  (2,603,708)           (186,026)           (240,190)
                                                                -----------------   -----------------   -----------------

Cash flows from financing activities:
   Exercise of stock options                                                    -                   -              90,938
   Purchase of treasury stock                                            (611,594)           (157,930)           (212,890)
   Borrowings on notes payable to bank                                 19,927,926          36,258,601          34,600,365
   Repayments on notes payable to bank                                (17,389,125)        (36,415,128)        (36,376,567)
                                                                -----------------   -----------------   -----------------
Net cash provided by (used in) financing activities                     1,927,207            (314,457)         (1,898,154)
                                                                -----------------   -----------------   -----------------

Net decrease in cash                                                     (117,204)            (80,950)             (5,341)
Cash at beginning of year                                                 223,997             304,947             310,288
                                                                -----------------   -----------------   -----------------
       Cash at end of year                                      $         106,793   $         223,997   $         304,947
                                                                =================   =================   =================

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)  GENERAL

              Abatix  Corp.   ("Abatix")  and  subsidiary   (collectively,   the
              "Company")  market and distribute  personal  protection and safety
              equipment and durable and nondurable supplies predominantly, based
              on revenues, to the asbestos abatement industry.  The Company also
              supplies  these  products to the  industrial  safety and hazardous
              materials  industries and,  combined with tools and tool supplies,
              to the  construction  industry.  At December 31, 1999, the Company
              operated seven distribution  centers in five states. The Company's
              wholly-owned subsidiary,  International  Enviroguard Systems, Inc.
              ("IESI"), a Delaware corporation, imports disposable products sold
              through the  Company's  distribution  channels  and through  other
              distributors.

              The  preparation  of  financial   statements  in  conformity  with
              generally accepted  accounting  principles  requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and  liabilities  and  disclosure of contingent  assets and
              liabilities  at the  date  of the  financial  statements  and  the
              reported  amounts of revenues  and expenses  during the  reporting
              period. Actual results could differ from those estimates.

              The accompanying  consolidated  financial  statements  include the
              accounts of Abatix and IESI. All significant intercompany accounts
              and transactions  have been eliminated in  consolidation.  Certain
              prior year  amounts  have been  reclassified  for  consistency  in
              presentation.

         (b)  INVENTORIES

              Inventories  consist of materials and equipment for resale and are
              stated  at  the  lower  of  cost,  determined  by  a  method  that
              approximates the first-in, first-out method, or market.

         (c)  PROPERTY AND EQUIPMENT

              Property  and  equipment  are  stated  at cost.  Depreciation  for
              financial  statement  purposes is  provided  by the  straight-line
              method  over  the  estimated   useful  lives  of  the  depreciable
              properties.

         (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

                                   F-7
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

              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  amount  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.

         (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, 1999, 1998 and 1997,
              there were no dilutive securities outstanding.  Basic earnings per
              share and diluted  earnings  per share  amounts were equal for the
              years ended December 31, 1999, 1998, and 1997. Options to purchase
              67,500 shares of common stock at various  prices were  outstanding
              during 1997,  but were not included in the  computation of diluted
              earnings per share because the options' exercise price was greater
              than the average  market price of the common stock.  These options
              either were exercised or expired on December 31, 1997.

          (g) STATEMENTS OF CASH FLOWS

              For  purposes  of  the  Statements  of  Cash  Flows,  the  Company
              considers  all  highly  liquid  debt   instruments  with  original
              maturities  of three  months or less to be cash  equivalents.  The
              Company held no cash equivalents at December 31, 1999 or 1998.

              The Company paid interest of $362,249, $247,298, $383,735 in 1999,
              1998,  and  1997,  respectively,  and  income  taxes of  $637,957,
              $667,963, $524,635 in 1999, 1998, and 1997, respectively. In 1999,
              the Company issued stock for a business  acquisition at a value of
              $76,075  and  received  stock from an officer to repay debt in the
              amount of $79,681.

         (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
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

         (i)  GOODWILL

               Goodwill  represents  the excess of purchase  price over the fair
               value of net assets acquired.  Amortization is provided using the
               straight-line method over estimated useful lives of three and ten
               years.

               The  Company   assesses   the   recoverability   of  goodwill  by
               determining  whether the  amortization  of the asset balance over
               its remaining life can be recovered through  undiscounted  future
               operating  cash flows of the  acquired  operation.  The amount of
               impairment,  if any, is measured  based on  projected  discounted
               future  operating  cash flows using a discount rate  commensurate
               with that attainable by the Company for secured borrowings.

(2)      ACQUISITION AND DISPOSITION OF ASSETS

Effective January 1, 1999, the Company  consummated an asset purchase  agreement
with Keliher Hardware Company, a California  corporation,  pursuant to which the
Company  assumed the  operations  of  Keliher.  Keliher,  based in Los  Angeles,
California, is an industrial supply distributor,  primarily for the construction
and  industrial  markets.  The estimated  fair value of the assets  acquired was
approximately  $975,000.  The  aggregate  purchase  price was  settled  with the
assumption  of certain  liabilities  (approximately  $900,000),  the issuance of
23,500 shares of the Company's $.001 par value common stock at a value of $3.375
per share and $35,000 in cash. This acquisition has been accounted for using the
purchase method of accounting and, accordingly,  results of Keliher's operations
are  included  in the  Company's  consolidated  financial  statements  since the
acquisition  date.  The excess of the purchase  price over the fair value of net
assets acquired is being amortized on a straight-line basis over three years.

On April 6, 1999, the Company closed its Denver  distribution  and sales center.
The Denver  facility had sales of $353,000,  $1,449,000,  and $1,076,000 for the
years ended December 31, 1999, 1998, and 1997, respectively. Expenses related to
the closing of this location were not material.

Effective June 1, 1999, the Company consummated an asset purchase agreement with
North State Supply Co. of Phoenix, an Arizona corporation, pursuant to which the
Company   assumed  the  operations  of  North  State,   a  construction   supply
distributor.  The estimated fair value of the assets acquired was  approximately
$1,800,000.  The  aggregate  purchase  price was settled with the  assumption of
certain  liabilities  (approximately  $785,000) and approximately  $2,100,000 in
cash.  This  acquisition  has been  accounted  for using the purchase  method of
accounting  and,  accordingly,  the  results  of North  State's  operations  are
included  in  the  Company's   consolidated   financial   statements  since  the
acquisition  date.  The excess of the purchase  price over the fair value of net
assets acquired is being amortized on a straight-line basis over ten years.

                                      F-9
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

Unaudited pro forma results,  as if the Keliher and North State acquisitions had
occurred at the beginning of 1998, are as follows:

                                                   For the years ended
                                                       December 31,
                                         ---------------------------------------
                                                1999                   1998
                                         ------------------     ----------------

Net sales                                $       46,741,163     $     46,675,077
                                         ==================     ================

Net income                               $          484,561     $      1,039,893
                                         ==================     ================

Basic and diluted earnings per share     $              .27     $            .53
                                         ==================     ================

(3)      PROPERTY AND EQUIPMENT

         A summary of  property  and  equipment  at  December  31, 1999 and 1998
follows:

                                 Estimated
                                Useful Life          1999              1998
                              ---------------   --------------    --------------

Furniture and equipment          3 - 10 years   $    2,183,305    $    1,767,738
Transportation equipment          3 - 5 years          489,917           423,890
Leasehold improvements            3 - 5 years           85,141            71,715
                                                --------------    --------------
                                                     2,758,363         2,263,343
Less accumulated depreciation and
   amortization                                      2,128,567         1,812,352
                                                --------------    --------------
Net property and equipment                      $      629,796    $      450,991
                                                ==============    ==============

(4)      NOTES PAYABLE TO BANK

         At December 31,  1999,  the Company had two lines of credit with a bank
         that are due on demand.  A working capital  facility allows the Company
         to  borrow  up to 80  percent  of the  book  value  of  eligible  trade
         receivables  plus the  lesser of 40 percent of  eligible  inventory  or
         $2,000,000,  up to a maximum of  $6,500,000.  Under this  formula,  the
         Company had the ability to borrow  $6,500,000  at December 31, 1999, of
         which  approximately  $5,595,000 was used. A capital equipment facility
         provides for individual  borrowings,  aggregating up to $550,000, at 80
         percent of the purchased  equipment's  cost. At December 31, 1999,  the
         Company had  borrowed  approximately  $230,000 on this  facility.  Each
         borrowing  under the  capital  equipment  line is due on the earlier of
         demand  or  in  terms   ranging  from   thirty-six   to  sixty  monthly
         installments of principal and interest.

                                      F-10
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

         During  1998,  the  Company  negotiated  a  one-quarter  of one percent
         reduction  in its rate,  thereby  reducing  the rate of interest on its
         agreements  to prime.  As of December 31, 1999 and 1998,  the Company's
         rate of interest on these  agreements was 8.5 percent and 7.75 percent,
         respectively.   These  credit   facilities   are  secured  by  accounts
         receivable, inventories, and equipment.

 (5)     INCOME TAXES

         Income tax expense (benefit) for the years ended December 31, 1999,
         1998 and 1997 consists of:

                               1999               1998               1997
                          ---------------    ---------------    ---------------
  Current:
     Federal              $       342,903    $       605,621    $       483,323
     State                         72,355            120,433             82,390
  Deferred:
     Federal                      (88,946)            (5,766)           (63,253)
     State                        (27,851)               141            (10,853)
                          ---------------    ---------------    ---------------
 Total income tax expense $       298,461    $       720,429    $       491,607
                          ===============    ===============    ===============

         A  reconciliation  of expected federal income tax expense (based on the
         U.S.  corporate  income tax rate of 34  percent)  to actual  income tax
         expense for the years ended December 31, 1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                                        1999                1998               1997
                                                   --------------     --------------     --------------

  <S>                                              <C>                 <C>                <C>
  Expected income tax expense                      $      258,372     $      641,865     $      453,122
  State income taxes, net of related federal
     tax benefit                                           29,373             79,579             47,215
  Nondeductible meals and entertainment
     expense                                               10,667              6,479             11,119
  Other                                                        49             (7,494)           (19,849)
                                                   --------------     --------------     --------------
  Actual income tax expense                        $      298,461     $      720,429     $      491,607
                                                   ==============     ==============     ==============
</TABLE>

                                    F-11
<PAGE>
                           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,
         1999 and 1998 follow:

                                                  1999               1998
                                             ---------------    ---------------
Deferred tax assets:
     Allowance for doubtful accounts         $       238,801    $       196,283
     Inventory reserve                                36,637             25,921
     Goodwill, due to differences in
         amortization periods                         16,982                  -
     Property and equipment, principally due
         to differences in depreciation              127,933            120,324
     Other                                             7,466                  -
                                             ---------------    ---------------
         Total gross deferred tax assets             427,819            342,528

Deferred tax liabilities - prepaid expenses          (47,398)           (78,905)
                                             ---------------    ---------------

         Net deferred tax assets             $       380,421    $       263,623
                                             ===============    ===============

         Management  has  determined,  based on the  Company's  history of prior
         operating  earnings  and its  expectations  for the  future,  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.

(6)      STOCKHOLDERS' EQUITY

         In 1994, the Company adopted a stock option plan (the "Plan")  pursuant
         to which the Company's  Board of Directors could grant stock options to
         officers and key employees. The Plan authorized grants of up to 140,000
         shares of  authorized  but unissued  common  stock.  Stock options were
         granted  with an exercise  price  equal to or greater  than the stock's
         fair market value at the date of grant. All options vested on the grant
         date.  At December  31,  1999,  1998,  and 1997,  there were no options
         outstanding or shares available for grant under the Plan.

         The  Company  applies  Opinion No. 25 in  accounting  for its Plan and,
         accordingly,  no  compensation  cost has been  recognized for its stock
         options  in  the  financial  statements.  Had  the  Company  recognized
         compensation  cost  based on the fair  value at the grant  date for its
         stock  options  under  Statement  123,  there would be no effect on the
         Company's net earnings and earnings per share in 1999, 1998 and 1997.

         The Board of Directors has authorized the  acquisition of up to 726,500
         shares of the  Company's  common  stock.  As of February 29, 2000,  the
         Company has acquired  726,166 shares and does not intend to acquire any
         additional shares for the foreseeable future.  Included in these shares
         is a block of 102,600 shares purchased in March 1999, a block of 51,000

                                      F-12
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

         shares  purchased in October 1999,  and 22,766 shares  received from an
         officer of the  Company in January  1999 as payment  for monies owed to
         the Company of approximately  $80,000.  All of these shares are held as
         treasury shares.

(7)      BENEFIT PLANS

         The Company has a 401(k)  profit  sharing  plan,  under which  eligible
         employees may request the Company to deduct and contribute a portion of
         their  salary to the plan.  The  Company may also,  at its  discretion,
         match a portion of employee contributions to the plan. Contributions by
         the Company to the 401(k) plan aggregated $42,366, $38,154, and $59,195
         during 1999, 1998, and 1997, respectively.

(8)      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.

(9)      SEGMENT INFORMATION

         Identification   of  operating   segments  is  based  principally  upon
         differences  in the types and  distribution  channel of  products.  The
         Company's  reportable  segments  consist of Abatix and IESI. The Abatix
         operating  segment  includes  seven  aggregated  branches,  principally
         engaged in distributing environmental, safety and construction supplies
         to contractors and industrial  manufacturing  facilities in the western
         half of the United States and the Company's corporate  operations.  The
         IESI operating  segment,  which consists of the Company's  wholly-owned
         subsidiary,  International Enviroguard Systems, Inc., is engaged in the
         wholesale  distribution of disposable clothing to companies similar to,
         and including,  Abatix. The IESI operating segment distributes products
         throughout the United States.

         The accounting policies of the operating segments are the same as those
         described in Note 1 of the Notes to Consolidated  Financial Statements.
         The Company  evaluates the performance of its operating  segments based
         on income  before  income taxes and  accounting  changes,  and after an
         allocation of corporate expenses. Intersegment sales are at agreed upon
         pricing and intersegment profits are eliminated in consolidation.

                                      F-13
<PAGE>
                           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.
<TABLE>
<CAPTION>

                                                   Abatix            IESI            Totals
                                                -------------    -------------    -------------
                    1999
----------------------------------------------
<S>                                             <C>              <C>              <C>
Sales from external customers                   $  41,841,367    $   2,388,391    $  44,229,758
Intersegment sales                                          -          876,734          876,734
Interest income                                           573                -              573
Interest expense                                      386,856                -          386,856
Depreciation and amortization                         461,924            7,108          469,032
Segment profit                                        478,441          292,862          771,303
Segment assets                                     15,141,406          712,996       15,854,402
Capital expenditures                                  439,941            4,701          444,642

                    1998
----------------------------------------------
Sales from external customers                   $  34,928,236    $   2,399,393    $  37,327,629
Intersegment sales                                          -          872,332          872,332
Interest income                                        15,767               57           15,824
Interest expense                                      238,706                -          238,706
Depreciation and amortization                         363,089            4,700          367,789
Segment profit                                      1,585,546          305,333        1,890,879
Segment assets                                     10,706,982          993,048       11,700,030
Capital expenditures                                  177,670           14,180          191,850

                    1997
----------------------------------------------
Sales from external customers                   $  33,543,501    $   1,411,976    $  34,955,477
Intersegment sales                                          -          822,721          822,721
Interest income                                        36,001              186           36,187
Interest expense                                      381,655                -          381,655
Depreciation and amortization                         374,940            3,136          378,076
Segment profit                                      1,155,745          182,471        1,338,216
Segment assets                                     10,011,038          997,816       11,008,854
Capital expenditures                                  285,029              871          285,900

</TABLE>

                                 F-14
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

         Below is a  reconciliation  of (i) total  segment  profit  to  earnings
         before income taxes 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.
<TABLE>
<CAPTION>

                                                       1999                 1998                 1997
                                                -----------------    -----------------    -----------------
    <S>                                         <C>                  <C>                  <C>
    Profit for reportable segments              $         771,303    $       1,890,879    $       1,338,216
      Elimination of intersegment profits                 (11,384)              (3,041)              (5,503)
                                                -----------------    -----------------    -----------------
    Earnings before income taxes                $         759,919    $       1,887,838    $       1,332,713
                                                =================    =================    =================

    Total assets for reportable segments        $      15,854,402    $      11,700,030    $      11,008,854
      Elimination of intersegment assets                 (649,594)          (1,104,525)          (1,154,605)
                                                -----------------    -----------------    -----------------
    Total assets                                $      15,204,808    $      10,595,505    $      $9,854,249
                                                =================    =================    =================
</TABLE>

         The  Company's  sales,  substantially  all of which are on an unsecured
         credit basis, are to various customers from its distribution centers in
         Texas,  California,   Arizona,   Washington  and  Nevada.  The  Company
         evaluates  credit risks on an individual  basis before extending credit
         to its customers  and it believes the  allowance for doubtful  accounts
         adequately  provides for loss on uncollectible  accounts.  During 1999,
         1998 and 1997, no single customer accounted for more than 10 percent of
         net sales,  although sales to asbestos and lead  abatement  contractors
         were  approximately  40  percent,   48  percent,   and  48  percent  of
         consolidated  net  sales in  1999,  1998,  and  1997,  respectively.  A
         reduction  in spending on asbestos  or lead  abatement  projects  could
         significantly impact sales.

         Although no vendor accounted for more than 8 percent of purchases,  one
         product class accounted for approximately 16 percent,  19 percent,  and
         18 percent of net sales in 1999, 1998, and 1997, respectively.  A major
         component  of these  products is  petroleum.  Further  increases in oil
         prices or shortages in supply could significantly  impact sales and the
         Company's  ability to supply its customers  with certain  products at a
         reasonable price.

                                      F-15
<PAGE>
                           ABATIX CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

(10)     COMMITMENTS

         The Company  leases  warehouse and office  facilities  under  long-term
         noncancelable  operating  leases  expiring  at  various  dates  through
         February  2005.  The  following is a schedule of future  minimum  lease
         payments under these leases as of December 31, 1999:

                         2000         $      959,963
                         2001                766,389
                         2002                666,756
                         2003                544,192
                         2004                443,538
                         Thereafter           19,367
                                      --------------
                                      $    3,400,205
                                      ==============

         Rental expense under operating  leases for the years ended December 31,
         1999, 1998 and 1997 was $776,435, $589,658, and $549,612, respectively.

         The Company has employment  agreements  with seven key  employees.  The
         agreements provide for minimum aggregate cash compensation as follows:

                         2000         $      782,634
                         2001                284,700
                         2002                 78,300
                                      --------------
                                      $    1,145,634
                                      ==============

                                      F-16
<PAGE>
<TABLE>
<CAPTION>

                                                                     SCHEDULE II
                           ABATIX CORP. AND SUBSIDIARY

                        Valuation and Qualifying Accounts
                  Years ended December 31, 1999, 1998 and 1997

                                                               Additions
                                            Balance at          charged
                                           beginning of      to costs and                                          Balance at
                                               year            expenses            Other         Deductions        end of year
                                          --------------    ---------------    -------------    -------------      ------------
<S>                                       <C>               <C>                <C>              <C>                <C>
Year ended December 31:
   Allowance for Doubtful Accounts:
       1999                               $      514,696            125,370               -            23,388 A   $    616,678
                                          ==============    ===============    ============     =============     ============

       1998                               $      495,092            114,515               -            94,911 A   $    514,696
                                          ==============    ===============    ============     =============     ============

       1997                               $      376,117            215,396               -            96,421 A   $    495,092
                                          ==============    ===============    ============     =============     ============

   Inventory Reserve:
       1999                               $       69,321             89,823         109,993 B          63,915     $    205,222
                                          ==============    ===============    ============     =============     ============

       1998                               $            -             69,321               -                 -     $     69,321
                                          ==============    ===============    ============     =============     ============
<FN>

A  Represents the write-off of uncollectible accounts.
B  Represents the reserve required to state inventory acquired from Keliher at
   fair value.
</FN>
</TABLE>

                                      S-1