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, 2002

Commission
File Number - 1-10184ABATIX CORP.(Exact name of registrant as
specified in its charter)Delaware
(State or other jurisdiction of incorporation or organization)75-1908110
(I.R.S. Employer Identification Number)8201 Eastpoint Drive, Suite 500, Dallas, Texas
(Address of principal executive offices)75227
(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.
[X]

1,711,148 shares of common
stock, $.001 par value, were issued and outstanding on March 13,
2003.

The aggregate market value
of the Registrant's common stock held by nonaffiliates of the
Registrant as of the close of business on March 13, 2003 (an aggregate of
841,048 shares out of a total of 1,711,148 shares outstanding at that time) was
$5,517,275 computed by reference to the closing bid price of $6.56 on March 13,
2003.

Portions of the
Registrant's proxy statement for its 2003 Annual Meeting of
Stockholders are incorporated into Part III, herein, by this reference
thereto.

---

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 to the environmental industry, the
industrial  safety industry and,  combined with tools and tool supplies,  to the
construction  industry.  The  Company,  through  its  wholly  owned  subsidiary,
International Enviroguard Systems, Inc.  (IESI),  imports disposable
clothing sold through not only the  Companys  distribution  channels,  but
also other distribution companies not
in direct competition with Abatix.

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  Supply on December 9, 1988.  In
March 1989, the Company completed its initial public offering of its
securities.

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,  was 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 $3.45 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 and $1,449,000 for the years ended December 31, 1999 and
1998, 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 continued  diversification  of
the  customer  base,  hiring  additional  personnel,  adding  product  lines and
additional acquisitions,  if appropriate.  Furthermore, the Company maintains an
e-commerce solution,  including on-line ordering, to help solidify relationships
with the existing customer base and expand its geographic
presence.

(b)  
Financial Information About Operating Segments

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

(c)  
Narrative Description of Business

Based  on 2002  sales,
approximately  55 percent of the  Company's  products are sold to  environmental
contractors,  17  percent  to  construction  related  firms,  15  percent to the
industrial  safety market and 13 percent to other firms.  The Company believes a
majority of its sales for the  foreseeable  future  will  continue to be made to
environmental contractors and considers its relationship with its customers to
be excellent.

Environmental Industry

Asbestos Abatement Industry

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

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

Notwithstanding 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.

Lead Abatement Industry

The hazards of lead-based
paint have been known for many years; however, the federal and state regulations
requiring  identification,  disclosure  and cleanup have been minimal.  In early
1996, the Environmental  Protection Agency  (EPA) and the Department
of Housing and Urban  Development  unveiled rules regarding  lead-based paint in
the  residential  markets.  These  rules give  homebuyers  the right to test for
lead-based  paint  before 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  being  in  its  infancy.  The  asbestos  abatement
contractors bring equipment, a trained labor force and experience working in a
regulatory environment to the lead abatement industry.

---

Despite legislative impetus
and continued awareness of health related hazards associated with lead-based
paint, the budgetary constraints and the lack of improvement in the industrial
sectors continue to limit the number of these projects.

Mold Remediation Industry

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

Although there are
approximately 100,000 species of fungi, about 100 are considered to be
pathogenic to humans. Currently, the regulations concerning mold levels or
remediation are few. Although there has been some discussion at the EPA and
state government levels about defining the level of mold spores considered to be
hazardous, no rules have been adopted.

Many asbestos and lead
abatement contractors added mold remediation to their range of services. In
addition, restoration contractors added mold remediation to their range of
services. The Company had very few sales to restoration contractors before the
heightened awareness of mold. In late 2000, the Company began to see high levels
of activity from this industry. The growth in this industry continued into the
early part of the fourth quarter of 2002, but has since slowed significantly.
This slowdown has occurred primarily because insurance laws changed to eliminate
or limit the insurance companies exposure to mold liabilities, resulting
in fewer jobs available. The Company expects a decline in year over year sales
for 2003 to this industry.

Construction Tools
Supply
Industry

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

Currently, the Company
supplies the construction tools industry in its Las Vegas, Los Angeles, and
Phoenix facilities and on a limited basis from its other facilities. This
industry is directly tied to the local economies and more specifically, the real
estate conditions within those markets. The real estate industry has declined
since the events of September 11, 2001, but has stabilized over the past year.
The Company anticipates this industry to remain stable for the foreseeable
future.

---

Industrial Safety
Industry

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

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

Geographic Distribution
of Business

The Company distributes
over 24,000 industrial, construction tool, personal protection, safety and
hazardous waste remediation products to over 5,000 customers primarily located
in the Southwest, Midwest and Pacific Coast.

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

Equipment and Supplies

An estimated 37 percent of
the Companys current year sales were environmental products and
33 percent were safety products, while construction tools and supplies
accounted for 19 percent. The remaining 11 percent of sales were miscellaneous
products used by environmental contractors, construction contractors and
industrial manufacturing facilities.

The Company buys products
from manufacturers based on orders received from its customers as well as
anticipated needs based on prior buying patterns, customer inquiries and
industry experiences. The Company maintains an inventory of disposable products
and commodities as well as low cost equipment items. Approximately 72 percent
and 75 percent of the Companys sales for 2002 and 2001, respectively, 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. On a very limited scale, the Company provides warranty repair on
certain equipment. The Company distributes, on a limited basis, disposable items
under its own private label.

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

---

Marketing

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

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

The Company also has a web
site, www.abatix.com, which allows customers to place orders on-line. Currently
the web site has approximately 5,000 products. In addition to on-line ordering,
the web site has current industry and Company information.

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 been relatively low over the past several years, with the 2002
inflation rate being 1.9 percent. The 2003 inflation rate is projected to be in
the 2 to 3 percent range. 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.

Over the past several
years, the Company has battled deflation in the cost of many of its products,
resulting in the sale of more units to generate an equivalent dollar sales
volume. Deflation in some of our products is expected in 2003. However, there
have been price increases in our plastic products in early 2003. The Company
anticipates it will 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 environmental industry which require the Company to
maintain Material Safety Data Sheets (MSDS) on file. These MSDS
inform purchasers and users of any potential hazards which could occur if the
products 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 and has safety procedures in place to
minimize any impact if such an event occurred.

---

Seasonality

Historically, the
environmental supply business has been seasonal as a result of the substantial
amount of work performed in educational facilities during the summer months or
during other vacation periods when the weather is generally more conducive to
construction. The Company believes seasonality is not a major characteristic in
the non-educational or private sector, which includes the industrial, commercial
and residential markets. In addition to the private sector environmental
business, the Companys expansion of the construction and industrial safety
supply markets has mitigated most seasonal impacts of government environmental
projects on the Companys sales. Historically, the Company generates 23
percent, 27 percent, 27 percent and 23 percent of its sales in the first,
second, third and fourth quarters, respectively.

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
general and administrative costs.

Government Regulation

As a supplier of products
manufactured by others to the environmental supply, construction tool and
industrial safety 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.

Competition

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

Employees

As of February 28, 2003,
the Company employed a total of 130 full time, non-union employees including 3
executive officers, 23 managers, 64 administrative and marketing personnel and
40 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 8,100 square
feet of leased general office space. This lease expires in February 2005. As of
December 31, 2002, the seven distribution facilities lease a total of
172,766 square feet of general office and warehouse space. These facilities
range in size from 9,090 square feet to 31,675 with leases expiring between
August 2004 and April 2007.

Item 3.  Legal
 Proceedings

None

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

None

---

PART II

Item 5.  
Market for the
Registrant's Common Stock and Related Stockholder Matters

1. 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   
| |  | 2001            |  |             
| |  | First Quarter   |  | $           
| |  | Second
Quarter  |  |             
| |  | Third Quarter   |  |             
| |  | Fourth Quarter  |  |             
| | 
| |  | 2002           
| |  | First Quarter   |  | $           
| |  | Second
Quarter  |  |             
| |  | Third Quarter   |  |             
| |  | Fourth
 Quarter |  |             

On March 13, 2003, the
closing bid price for the common stock was $6.56.

1. As of March
13, 2003, the  approximate  number of holders of record of the Company's  common
stock was 500.

1. The Company
has never paid cash dividends on its common stock.  Future  dividend policy will
depend  on  the  Company's  earnings,  capital  requirements,  expansion  plans,
financial conditions, tax laws and other relevant factors.

---

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).

|                                                                    |   | Year Ended December 31,
|------------------------------------------------------------------- | - | -----------------------
|                                                                    |   | 2002                   
|Selected
Operating Results:                                        
|Net sales                                                           | $ | 59,801                 
|Gross profit                                                        | $ | 17,437                 
|Earnings before cumulative effect                                  
|of change in accounting principle                                   | $ | 1,345                  
|Cumulative effect of change in accounting principle a               |   | (492)                  
|Net earnings bc                                                     | $ | 853                    
|Basic and
diluted net earnings per common share:                   
|Earnings before cumulative effect of change in accounting principle | $ | .79                    
|Cumulative effect of change in accounting principlea                |   | (.29)                  
|Net earningsbc                                                      | $ | .50                    
|Basic and
diluted weighted average shares outstanding               |   | 1,711                  
|                                                                   
|                                                                    |   | 2002                   
|Selected Balance Sheet Data:                                       
|Current assets                                                      | $ | 15,579                 
|Current liabilities                                                 |   | 8,439                  
|Total assets                                                        |   | 17,130                 
|Total liabilities                                                   |   | 8,439                  
|Retained earnings                                                   |   | 8,371                  
|Stockholders' equity                                                |   | 8,691                  

a The cumulative
 effect of
change in accounting principle resulted from the adoption of Financial
Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (Statement) No. 142 Goodwill and Other Intangible
Assets. See Item 7 for further details.

b The 2001 and
 2002 results
include the increase in sales related to the affects of Tropical Storm Allison
in Texas. In addition, the Company, primarily in the Texas markets, experienced
a significant growth in sales related to the increased awareness of toxic molds
in homes and buildings.

c  The 1999
results include
the closure of the Companys Denver facility which occurred in April 1999.
In addition, the 1999 results include the acquisitions of Keliher Hardware in
January 1999 and North State Supply Co. of Phoenix in June 1999. See Item 1 for
further details.

---

Item 7. Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations

# Year Ended December 31,
2002 Compared to Year Ended December 31, 2001

Consolidated net sales for
the year ended December 31, 2002, increased 9 percent to $59,801,000 from
$54,726,000 in 2001. The Abatix operating segment net sales grew 10 percent to
$57,774,000 in 2002 and the IESI operating segment net sales decreased 10
percent to $2,027,000 in 2002. The increase in revenue at Abatix is primarily
attributable to the expanding awareness of toxic molds in homes and buildings
throughout the U.S., partially offset by a decline in revenues to the
construction and industrial manufacturing industries. The decrease in IESI
revenue is due to the exit from a distribution channel during the second quarter
of 2001.

The growth in sales to the
restoration industry, including mold remediation, continued into the early part
of the fourth quarter of 2002, but has since slowed significantly. This slowdown
has occurred primarily because insurance laws changed to eliminate or limit the
insurance companies exposure to mold liabilities, resulting in fewer jobs
available. The Company expects a decline in year over year sales for 2003 to
this industry.

Gross profit for 2002 of
$17,437,000 increased 13 percent from gross profit in 2001 of $15,384,000 due to
increased sales volume. The Companys gross profit margins, expressed as a
percentage of sales, were approximately 29 percent for 2002 and 28 percent for
2001. Although overall margins are expected to remain at their current levels in
2003, competitive pressures could negatively impact any and all efforts by the
Company to maintain or improve product margins.

Selling, general and
administrative expenses for 2002 of $15,000,000 increased 15 percent over 2001
expenses of $12,991,000. The increase in selling, general and administrative
expenses is due primarily to increased labor costs in anticipation of continued
growth. These expenses were 25 percent and 24 percent of sales for 2002 and
2001, respectively. Selling, general and administrative expenses are expected to
be in the 24 to 25 percent range for 2003.

Interest expense of
$231,000 decreased $149,000 from 2001 interest expense of $380,000 primarily due
to lower interest rates. The Companys credit facilities are variable rate
notes tied to the Companys lending institutions prime rate.
Increases in the prime rate could negatively affect the Companys earnings.

In the first quarter of
2002, the Company implemented FASB Statement No. 142. Statement No. 142
requires, among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for annual impairment testing of
existing goodwill and other intangibles. Upon adoption of Statement No. 142, the
Company ceased amortizing goodwill and performed an impairment review of its
goodwill balance. Based on the review performed, the Company recorded an
impairment charge for the full amount of $819,841, net of an income tax benefit
of $327,900.

---

Net earnings for the year
ended December 31, 2002, of $853,000 or $.50 per share decreased $353,000 from
net earnings of $1,206,000 or $.70 per share in 2001. The decrease in net
earnings is primarily due to the implementation of FASB Statement No. 142.

# Year Ended December 31,
2001 Compared to Year Ended December 31, 2000

Consolidated net sales for
the year ended December 31, 2001, increased 14 percent to $54,726,000 from
$47,987,000 in 2000. The Abatix operating segment net sales grew 19 percent to
$52,461,000 in 2001 and the IESI operating segment net sales decreased 41
percent to $2,265,000 in 2001. Sales were significantly impacted by the
increasing awareness of toxic molds in homes and buildings and by the cleanup
from the effects of Tropical Storm Allison on the Houston area. The decrease in
IESI sales was due to the exit from a distribution channel during the second
quarter of 2001.

Gross profit for 2001 of
$15,384,000 increased 19 percent from gross profit in 2000 of $12,982,000 due to
increased sales volume. The Companys gross profit margins, expressed as a
percentage of sales, were approximately 28 percent for 2001 and 27 percent for
2000.

Selling, general and
administrative expenses for 2001 of $12,991,000 increased 14 percent over 2000
expenses of $11,395,000. These expenses were 24 percent of sales for 2001 and
2000.

Interest expense of
$380,000 decreased $182,000 from 2000 interest expense of $562,000 primarily due
to lower interest rates.

Net earnings for the year
ended December 31, 2001, of $1,206,000 or $.70 per share increased $608,000 from
net earnings of $598,000 or $.35 per share in 2000. The increase in net earnings
was primarily due to the higher sales volume and lower interest expense,
partially offset by the higher general and administrative costs.

# 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. Net cash provided
by operations during 2002 of $1,055,000 resulted from net earnings adjusted for
non-cash charges and an increase in accounts payable, partially offset by an
increase in accounts receivable. Cash flow from operations for the entire year
of 2003 is expected to be positive, although at any given point, it may be
negative.

Cash requirements for
non-operating activities during 2002 resulted primarily from the purchases of
property and equipment. In addition, net working capital line of credit
borrowings occurred primarily as a result of the higher levels of accounts
receivable and inventory and purchases of fixed assets. The equipment purchases
in 2002 consisted of autos and computers and, primarily for the Los Angeles
facility, furniture and leasehold improvements.

---

The Company has an
$8,000,000 working capital line of credit at a commercial lending institution.
The working capital line of credit agreement 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 13, 2003, there are
advances outstanding under this credit facility of $4,206,000. Based on the
borrowing formula, the Company had the capacity to borrow an additional
$3,794,000 as of March 13, 2003. 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 13,
2003, were $104,000. Both credit facilities are payable on demand and bear a
variable rate of interest tied to the prime rate.

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 might need to
negotiate with a lender to secure additional borrowings to be used to acquire
another companys assets.

# New Accounting
Standards

In April 2002, the FASB
issued Statement No. 145 Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. This
Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement
No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers. This Statement
amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The provisions of this standard relating to the recession of
Statement No. 4 applies to periods beginning after May 15, 2002. All other
provisions are effective for all transactions entered into after May 15, 2002.
The adoption of this Statement has had no impact on the Company.

In June 2002, the FASB
issued Statement No. 146 Accounting for Costs Associated with Exit or
Disposal Activities. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The principal
difference between this Statement and Issue 94-3 relates to its requirements for
recognition of a liability for a cost associated with an exit or disposal
activity. This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized
at the date of an entitys commitment to an exit plan. A fundamental
conclusion reached by the Board in this Statement is that an entitys
commitment to a plan, by itself, does not create a present obligation to others
that meets the definition of a liability. Therefore, this Statement eliminates
the definition and requirements for recognition of exit costs in Issue 94-3.
This Statement also establishes that fair value is the objective for initial
measurement of the liability. The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The adoption of this Statement currently has had
no impact on the Company.

---

In December 2002, the FASB
issued Statement No. 148 Accounting for Stock-Based Compensation 
Transition and Disclosure, an amendment of FASB Statement No. 123". This
Statement amends Statement No. 123 and provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. Statement No. 148 also requires prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based compensation and the effect of the method used on
reported results. Statement No. 148 permits two additional transition methods
for entities that adopt the fair value based method. These methods allow
Companies to avoid the ramp-up effect arising from prospective application of
the fair value based method. This Statement is effective for financial
statements for fiscal years ending after December 15, 2002. The adoption of this
Statement has had no impact on the Company.

# Critical Accounting
 Policies

The Company follows certain
significant accounting policies when preparing its consolidated financial
statements. A summary of these policies is included in Note 1 of the Notes to
the Consolidated Financial Statements.

Certain policies require
the Company to make significant and subjective estimates and assumptions which
are sensitive to deviations from actual results. In particular, the Company
makes estimates regarding future undiscounted cash flows from the use of
long-lived assets in assessing potential impairment whenever events or changes
in circumstances indicate the carrying value of a long-lived asset may not be
recoverable. Since there were no events or changes in circumstances to indicate
the carrying value of long-lived assets were impaired, the Company recorded no
adjustment to the carrying value of these assets. The Company does not expect
events or circumstances to significantly change, thereby affecting the carrying
value of long-lived assets.

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

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

---

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, 2002 and 2001, an increase of 100 basis points in the United States
prime rate would have negatively impacted the Companys net earnings for
the years then ended by $30,000 and $33,000, 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:
the continued long-term impact of the September 11, 2001, tragic events on the
markets we serve, public and private spending on domestic preparedness, the
long-term impact of insurance coverage on mold remediation jobs, adverse weather
conditions, inability to hire and train quality people or retain current
personnel, changes in interest rates and strong competition. In addition,
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.

Item 7B.  Controls and
Procedures

1. Within the 90-day period
prior to the date of this report,  the Company carried out an evaluation,  under
the supervision and with the participation of the
Company's management,  including the Company's Chief Executive Officer and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of the
Company's  disclosure  controls  and  procedures  pursuant to Rule 13a-14 of the
Securities   Exchange  Act  of  1934  (the  "Exchange  Act").  Based  upon  that
evaluation, the Chief Executive Officer and Chief Financial Officer conclude the
Company's  disclosure  controls and procedures are effective in timely  alerting
them to material information relating to the Company (including its consolidated
subsidiaries) which would be required to be included in the Company's Exchange
Act filings.

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

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

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, 2002.

---

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, 2002.

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, 2002.

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, 2002.

PART IV

Item  14.  Exhibits,
Financial 2Statement 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                                                                                                                                                                               
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | None                                                                                                                                                                                              
|      
|(c)    | Exhibits                                                                                                                                                                                          
|      
|(2)(a) | Agreement of Merger filed
as Exhibit (2) to the  Registration  Statement on Form S-18, filed January 11,
1989, and herein incorporated by reference.                                              
|      
|(2)(b) | Asset Purchase  Agreement
  filed as Exhibit  (2)(b) to the  Report on Form 8-K,  filed
October 19, 1992, and herein incorporated by reference.                                                   
|      
|(2)(c) | Asset
Purchase  Agreement for Keliher  Hardware Company filed as exhibit (2)(c) to the
Report  on  Form  10-K  for  the  year  ended  December  31,  1998,  and  herein
incorporated by reference.
|      
|(2)(d) | Asset
Purchase  Agreement  for North State Supply Co. of Phoenix  filed with Report on
Form 8-K on June 15, 1999, and herein incorporated by reference.                                           

---

|(3)
(a)(1)   | Certificate  of
  Incorporation  filed as Exhibit  (3)(a)(1) to the  Registration
Statement on Form S-18, filed January 11, 1989; filed  electronically as Exhibit
3(i)(a) to the Form 10-Q for the  quarter  ended  December  31,  1995,  filed on
November 9, 1995, and herein incorporated by reference.                                         
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            
|(3)(a)(2)    | Certificate  of  Amendment
  of  Certificate  of  Incorporation  filed as Exhibit
(3)(a)(2) to the  Registration  Statement on Form S-18,  filed January 11, 1989;
filed  electronically  as Exhibit 3(i)(b) to the Form 10-Q for the quarter ended
December  31,  1995,  filed on  November  9, 1995,  and herein  incorporated  by
reference.     
|            
|(3)(a)(3)    | Certificate  of Amendment
 of Certificate  of  Incorporation  filed as
Exhibit  (3)(i)(c)  to the Form 10-Q for the quarter  ended  December  31, 1995,
filed November 9, 1995; filed electronically as Exhibit 3(i)(c) to the Form 10-Q
for the quarter ended  December 31, 1995,  filed on November 9, 1995, and herein
incorporated by reference.
|            
|(3)(b)       | Bylaws
filed as  Exhibit  (3)(b) to the  Registration  Statement  on Form  S-18,  filed
January 11, 1989; filed electronically as Exhibit 3(ii) to the Form 10-Q for the
quarter  ended  December  31,  1995,  filed on  November  9,  1995,  and  herein
incorporated by reference.                                                                
|            
|(4)(a)       | Specimen
Certificate  of  Common  Stock  filed  as  Exhibit  (4)(a)  to the  Registration
Statement  on Form  S-18,  filed  January 8, 1989,  and herein  incorporated  by
reference.                                                                                                                                                               
|            
|(4)(b)       | Specimen
of  Redeemable  Common Stock  Purchase  Warrant  filed as Exhibit  (4)(b) to the
Registration  Statement  on Form  S-18,  filed  February  9,  1989,  and  herein
incorporated by reference.                                                                                                                                               
|            
|(10)(a)(v)   | Employment Agreement with
 Terry W. Shaver effective January 1, 2003.*                                                                                                                                                                                                                                                                              
|            
|(10)(b)(v)   | Employment Agreement with
 Gary L. Cox effective January 1, 2003.*                                                                                                                                                                                                                                                                                  
|            
|(10)(e)(iii) | Demand Credit Facility
with Comerica Bank-Texas extension,  renewal and increase
dated  September  22, 1994 filed as Exhibit  (10)(e)(iii)  to the Report on Form
10-K  for  the  year  ended  December  31,  1994,  and  herein  incorporated  by
reference.                                                                                       
|            
|(22)         | Information  Statement
 dated  September  1, 1995 filed as  Exhibit  (22) to the
Report  on  Form  10-K  for  the  year  ended  December  31,  1995,  and  herein
incorporated by reference.                                                                                                                                                        
|            
|(23)         | Consent of
Independent Auditors.*                                                                                                                                                                                                                                                                                                                   
|            
|(99)(a)      | Certification of Chief
Financial Officer.*                                                                                                                                                                                                                                                                                                          
|            
|(99)(b)      | Certification of Chief
Executive Officer.*                                                                                                                                                                                                                                                                                                          

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

---

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 20th day of March, 2003.

|ABATIX CORP.
        (Registrant)         
|------------------------------------------
|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 20, 2003
|Terry W. Shaver       | and Director
(Principal Executive Officer)  |               
|                      |                                             |               
|/s/ Gary L.
 Cox      | Executive Vice
President,                   | March 20, 2003
|Gary L. Cox           | Chief Operating
 Officer and Director       |               
|                      |                                             |               
|/s/ Daniel
M. Birnley | Director                                    | March 20, 2003
|Daniel M.
 Birnley   
|                      |                                             |               
|/s/ Donald N. Black   | Director                                    | March 20, 2003
|Donald N. Black      
|                      |                                             |               
|/s/ Eric A.
 Young    | Director                                    | March 20, 2003
|Eric A. Young        
|                      |                                             |               
|/s/ Frank J.
 Cinatl  | Vice President,
 Chief Financial Officer    | March 20, 2003
|Frank J. Cinatl,
 IV  | and Director
(Principal Accounting Officer) |               

---

CERTIFICATION OF CHIEF
 EXECUTIVE OFFICER

I, Frank J. Cinatl, IV,
certify that:

1. I have reviewed this annual report on Form 10-K of Abatix
Corp.;
2. Based on my  knowledge,  this annual  report does not
contain  any untrue  statement  of a material  fact or omit to state a
material fact necessary to make the statements  made, in light of the
circumstances  under which such statements were made,
not misleading with respect to the period covered by this annual report;
3. Based on my knowledge,  the financial  statements,
and other financial  information included in this annual report,  fairly
present in all material  respects the financial  condition,  results of
operations  and cash flows of the  registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying  officers and I
are responsible for establishing and maintaining  disclosure  controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:

| | a) | designed  such
disclosure  controls and  procedures to ensure that material  information
 relating to the  registrant,
including its consolidated subsidiaries, is made known to us by others within
 those
entities, particularly during the period in which this annual report is being
prepared;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the
effectiveness of the registrant's  disclosure  controls and procedures as of a
date within 90 days prior
                to the filing date of this annual report (the "Evaluation Date")
; and                                                                                      
| | c) | presented in this annual
report our  conclusions  about the  effectiveness  of the  disclosure  controls
 and procedures
                based on our evaluation as of the Evaluation Date;                                                                                                        

1. The registrant's other certifying  officers and I have
disclosed,  based on our most recent evaluation,  to the registrant's
           auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

| | a) | all  significant
 deficiencies  in the design or  operation  of  internal  controls  which could
  adversely  affect the
registrants ability to record, process, summarize and report financial
data and have identified for the registrants auditors any material
weaknesses in
internal controls; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud,  whether or
 not material,  that involves  management or other  employees who have a
significant  role in the
                registrant's internal controls; and                                                                                                                             

1. The  registrant's  other  certifying  officers  and I have
  indicated  in this  annual  report  whether  or not  there  were
           significant  changes in internal controls or in other factors that
 could  significantly  affect internal controls subsequent
           to the date of our most recent  evaluation,  including any corrective
  actions with regard to significant  deficiencies  and
           material weaknesses.

|Date: March 20,
 2003                            
|-------------------------------------------------
|By:  
/s/ Frank J. Cinatl, IV                    
|Name: Frank J.
Cinatl, IV                        
|Title: Vice
President and Chief Financial Officer

---

CERTIFICATION OF CHIEF
FINANCIAL OFFICER

I, Terry W. Shaver,
certify that:

1. I have reviewed this annual report on Form 10-K of
Abatix Corp.;
2. Based on my  knowledge,  this annual  report does not
 contain  any untrue  statement  of a material  fact or omit to state a
           material fact necessary to make the statements  made, in light of the
  circumstances  under which such statements were made,
           not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge,  the financial  statements,
and other financial  information included in this annual report,  fairly
           present in all material  respects the financial  condition,  results
 of operations  and cash flows of the  registrant as of,
           and for, the periods presented in this annual report;
4. The registrant's other certifying  officers and I are
 responsible for establishing and maintaining  disclosure  controls and
           procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
 the registrant and we have:

| | a) | designed  such  disclosure
  controls and  procedures to ensure that material  information  relating to the
  registrant,
including its consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this annual report is being
prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the
effectiveness of the registrant's  disclosure  controls and procedures as of a
 date within 90 days prior
                to the filing date of this annual report (the "Evaluation Date")
; and                                                                                       
| | c) | presented in this annual
report our  conclusions  about the  effectiveness  of the  disclosure  controls
 and procedures
                based on our evaluation as of the Evaluation Date;                                                                                                          

1. The registrant's other certifying  officers and I have
disclosed,  based on our most recent evaluation,  to the registrant's
           auditors and the audit committee of registrant's board of directors
 (or persons performing the equivalent function):

| | a) | all  significant
deficiencies  in the design or  operation  of  internal  controls  which could
 adversely  affect the
registrants ability to record, process, summarize and report financial
data and have identified for the registrants auditors any material
weaknesses in
internal controls; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud,  whether or not
 material,  that involves  management or other  employees who have a significant
  role in the
                registrant's internal controls; and                                                                                                                          

1. The  registrant's  other  certifying  officers  and I have
indicated  in this  annual  report  whether  or not  there  were
           significant  changes in internal controls or in other factors that
could  significantly  affect internal controls subsequent
           to the date of our most recent  evaluation,  including any corrective
  actions with regard to significant  deficiencies  and
           material weaknesses.

|Date: March 20,
2003                        
|--------------------------------------------
|/s/ Terry W.
Shaver                         
|Name: Terry W.
Shaver                       
|Title: President
and Chief Executive Officer

---

ABATIX CORP.
 AND SUBSIDIARY

Index to Consolidated Financial Statements

|                                                                                                                                    | Page
|----------------------------------------------------------------------------------------------------------------------------------- | ----
|Independent
Auditors' Report                                                                                                        | F-2 
|Financial
Statements:                                                                                                              
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                                        | F-3 
|Consolidated Statements of Operations for the years ended
    December 31, 2002, 2001 and 2000                                      | F-4 
|Consolidated Statements of Stockholders' Equity for the years
    ended December 31, 2002, 2001 and 2000                            | F-5 
|Consolidated Statements of Cash Flows for the years ended
    December 31, 2002, 2001 and 2000                                      | F-6 
|Notes to Consolidated Financial Statements                                                                                          | F-7 
|Financial
Statement Schedule:
  II - Valuation and Qualifying Accounts for the years ended
        December 31, 2002, 2001 and 2000 | S-1 

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

F-1

---

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 the financial statement schedule based on our audits.

We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. 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, 2002 and 2001, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. 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.

As discussed in Note 1(i),
the Company adopted Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets in 2002.

KPMG LLP

Dallas, Texas
March 4, 2003

F-2

---

# ABATIX CORP
 AND SUBSIDIARY

Consolidated
 Balance Sheets
 Years ended December 31, 2002, 2001

|Assets                                               | 2002 | 2001       |  
|---------------------------------------------------- | ---- | ---------- | -
|Current assets:                                     
|Cash                                                 | $    | 19,642     | $
|Trade accounts receivable, net of allowance for     
|doubtful accounts of $390,910 in 2002               
|and $447,037 in 2001 (note 3)                        |      | 8,392,300  |  
|Inventories (note 3)                                 |      | 6,165,125  |  
|Prepaid expenses and other current assets            |      | 786,190    |  
|Deferred income taxes (note 4)                       |      | 216,170    |  
|Total current assets                                 |      | 15,579,427 |  
|                                                    
|Receivables from officers and employees              |      | 1,275      |  
|Property and equipment, net (notes 2 and 3)          |      | 1,091,915  |  
|Deferred income taxes (note 4)                       |      | 380,544    |  
|Goodwill, net of accumulated amortization           
|of $406,795 in 2001 (note 1)                         |      | -          |  
|Other assets                                         |      | 76,742     |  
|                                                     | $    | 17,129,903 | $
|                                                    
|Liabilities and Stockholders' Equity                
|                                                    
|Current liabilities:                                
|Notes payable to bank (note 3)                       | $    | 4,963,203  | $
|Accounts payable                                     |      | 2,537,847  |  
|Accrued compensation                                 |      | 322,518    |  
|Other accrued expenses                               |      | 615,475    |  
|Total current liabilities                            |      | 8,439,043  |  
|                                                    
|Stockholders' equity: (note 5)                      
|Preferred stock - $1 par value, 500,000
 shares     
|authorized; none issued                              |      | -          |  
|Common stock - $ .001 par value,
5,000,000 shares   
|authorized; 2,437,314
shares issued in 2002 and 2001 |      | 2,437      |  
|Additional paid-in capital                           |      | 2,574,560  |  
|Retained earnings                                    |      | 8,371,205  |  
|Treasury stock at cost, 726,166 common
shares       
|in 2002 and 2001                                     |      | (2,257,342 | )
|Total stockholders'
 equity                          |      | 8,690,860  |  
|Committments and
contingencies (note 9)             
|                                                     | $    | 17,129,903 | $

See accompanying notes to
consolidated financial statements.

F-3

---

# ABATIX CORP
 AND SUBSIDIARY

Consolidated
 Statements of Operations
 Years ended December 31, 2002, 2001 and 2000

|                                               |             | 2002       |             | 2001       |             | 2000      
|---------------------------------------------- | ----------- | ---------- | ----------- | ---------- | ----------- | ----------
|Net sales                                      | $           | 59,801,175 | $           | 54,726,290 | $           | 47,986,591
|Cost of sales                                  | 42,364,236  | 39,342,062 |             | 35,004,764
|Gross profit                                   | 17,436,939  | 15,384,228 |             | 12,981,827
|                                              
|Selling, general and administrative expenses   | (14,999,741 | )          | (12,990,978 | )          | (11,394,760 | )         
|Operating profit                               | 2,437,198   | 2,393,250  |             | 1,587,067 
|Other
 income (expense):                      
|Interest expense                               |             | (230,605   | )           | (380,139   | )           | (561,826  
|Other, net                                     | 2,212       |            | (27,349     | )          | 2,372      
|Earnings before
 income taxes                  | 2,208,805   | 1,985,762  |             | 1,027,613 
|                                              
|Income tax expense (note 4)                    | (863,683    | )          | (779,411    | )          | (429,699    | )         
|Earnings before
 cumulative effect of change  
|in
accounting principle                        | 1,345,122   |            | 1,206,351   |            | 597,914    
|Cumulative effect of change in accounting     
|principle, net of tax of $327,900 (note 1)     |             | (491,941   | )           | -          |             | -         
|Net earnings                                   | $           | 853,181    | $           | 1,206,351  | $           | 597,914   
|                                              
|Basic and diluted earnings per common share:  
|Earnings before cumulative
effect of change in
|accounting
principle                           | $           | .79        | $           | .70        | $           | .35       
|Cumulative effect of change in
 accounting    
|principle, net of tax  (note 1)                |             | (.29       | )           | -          |             | -         
|Net earnings                                   | $           | .50        | $           | .70        | $           | .35       
|                                              
|Basic and diluted weighted average shares     
|outstanding (note 1)                           |             | 1,711,148  |             | 1,711,148  |             | 1,711,148 

See accompanying notes
to consolidated
financial statements.

F-4

---

# ABATIX CORP
 AND SUBSIDIARY

Consolidated
 Statements of Stockholders' Equity
 Years ended December 31, 2002, 2001 and 2000

|                              |  |              |         |          | Additional    
|----------------------------- |  | ------------ | ------- | -------- | --------------
|                              |  | Common Stock | Paid-in | Retained | Treasury Stock
|                              |  | Shares       | Amount  | Capital  | Earnings      
|Balance at December 31, 1999  |  | 2,437,314    | $       | 2,437    | $             
|Net earnings                  |  | -            |         | -        |               
|Balance at December 31,
 2000 |  | 2,437,314    |         | 2,437    |               
|Net earnings                  |  | -            |         | -        |               
|Balance at December 31,
 2001 |  | 2,437,314    |         | 2,437    |               
|Net earnings                  |  | -            |         | -        |               
|Balance at December 31,
 2002 |  | 2,437,314    | $       | 2,437    | $             

See accompanying notes to
consolidated financial statements.

F-5

---

Consolidated
 Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000

|2002                                                 | 2001 | 2000       
|---------------------------------------------------- | ---- | -----------
|Cash flows
from operating activities:               
|Net earnings                                         | $    | 853,181    
|Adjustments to reconcile net earnings to net        
|cash (used in) provided by operating
activities:    
|Cumulative effect of change in accounting
 principle |      | 819,841    
|Depreciation and amortization                        |      | 469,125    
|Deferred income taxes                                |      | (306,195   
|Provision for losses on receivables                  |      | 134,911    
|Provision for obsolescence of inventory              |      | 147,941    
|Loss/(gain) on disposal of assets                    |      | 3,040      
|Changes in operating assets and liabilities, net of 
|business acquisitions:                              
|Receivables                                          |      | (1,074,228 
|Inventories                                          |      | (142,256   
|Refundable income taxes
 and other current assets    |      | -          
|Prepaid expenses
and other assets                    |      | (69,216    
|Other assets,
 primarily deposits                    |      | (11,892    
|Accounts payable                                     |      | 374,468    
|Accrued
 expenses                                    |      | (143,607   
|Net cash provided by (used in) operating activities  |      | 1,055,113  
|                                                    
|Cash flows
 from investing activities:              
|Purchase of property and equipment                   |      | (660,405   
|Proceeds from sale of property and equipment         |      | -          
|Advances to officers and employees                   |      | (6,207     
|Collection of advances to officers and
employees     |      | 12,608     
|Net cash used in investing activities                |      | (654,004   
|                                                    
|Cash flows
from financing activities:               
|Borrowings on notes payable to bank                  |      | 16,577,330 
|Repayments on notes payable to bank                  |      | (16,972,640
|Net cash (used in) provided by financing activities  |      | (395,310   
|                                                    
|Net increase
(decrease) in cash                      |      | 5,799      
|Cash at beginning of year                            |      | 13,843     
|Cash at end of
year                                  | $    | 19,642     

See accompanying notes to
 consolidated
financial statements.

F-6

---

ABATIX CORP
 AND SUBSIDIARY

Notes to Consolidated Financial Statements

(1)   
     Summary of Significant Accounting Policies

1. GeneralAbatix Corp.
(Abatix) and subsidiary (collectively, the Company)
market and distribute personal protection and safety equipment and durable and
nondurable supplies to the environmental industry, the industrial safety
industry and, combined with tools and tool supplies, the construction industry.
At December 31, 2002, the Company operated seven sales and distribution centers
in five states. Abatixs wholly-owned subsidiary, International Enviroguard
Systems, Inc. (IESI) imports disposable protective clothing products
sold through the Companys distribution channels and through other
distributors.

The preparation of
financial statements in conformity with generally accepted accounting principles
in the United States of America 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.

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

1. Property and EquipmentProperty and equipment are
stated at cost. Depreciation is provided by the straight-line method over the
estimated useful lives of the assets.

F-7

---

1. Impairment of Long-Lived Assets and Long-Lived Assets to
 Be Disposed Of The Company reviews
long-lived assets for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying 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.

1. Revenue RecognitionRevenue is recognized when
the goods are shipped. Shipping fees billed to customers are included in net
sales. The costs related to these shipping fees, which are included in selling,
general and administrative expense, were $1,254,000, $1,026,400 and $965,019 for
the years December 31, 2002, 2001 and 2000.

1. Earnings per ShareBasic 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, 2002, 2001 and 2000, there were no
dilutive securities outstanding. Basic earnings per share and diluted earnings
per share amounts were equal for the years ended December 31, 2002, 2001, and
2000.

1. Statements of Cash
 FlowsFor 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, 2002 or 2001.

The Company paid interest
of $235,235, $393,602 and $565,933 in 2002, 2001, and 2000, respectively, and
income taxes of $1,029,199, $524,176 and $352,562 in 2002, 2001, and 2000,
respectively.

1. Income TaxesThe 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.

1. Goodwill
Goodwill represents the
excess of purchase price over the fair value of net assets acquired.
Amortization was provided in 2001 and 2000 using the straight-line method over
estimated useful lives of three and ten years. In the first quarter of 2002, the
Company implemented Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (Statement) No. 142
Goodwill and Other Intangible Assets. Statement No. 142 requires,
among other things, the discontinuance of goodwill amortization. In addition,
the Statement includes provisions for annual impairment testing of existing
goodwill and other intangibles. Upon adoption of Statement No. 142, the Company
ceased amortizing goodwill and performed an impairment review of its goodwill
balance. Based on the review performed, the Company recorded an impairment
charge for the full amount of $819,841, net of an income tax benefit of
$327,900. The following table shows the Companys net earnings excluding
the goodwill impairment in 2002 and goodwill amortization in 2001 and 2000,
respectively.

|Year Ended
December 31,                      
|---------------------------------------------
|                                             
|Reported net earnings                        
|Goodwill
amortization, net of tax            
|Cumulative
effect of change of accounting    
|principle, net of tax                        
|Adjusted net earnings                        
|Basic and
 diluted earnings per common share:
|Reported net earnings                        
|Goodwill
amortization, net of tax            
|Cumulative
 effect of change in
accounting   
|principle, net of
tax                        
|Adjusted net earnings                        

F-8

---

1. New Accounting
StandardsIn April 2002, the FASB issued
 Statement No. 145 Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This Statement rescinds FASB Statement No. 4, Reporting
Gains and Losses from Extinguishment of Debt, and an amendment of that
Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. This Statement also rescinds FASB Statement No.
44, Accounting for Intangible Assets of Motor Carriers. This
Statement amends FASB Statement No. 13, Accounting for Leases, to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The provisions of this standard relating to the
recession of Statement No. 4 applies to periods beginning after May 15, 2002.
All other provisions are effective for all transactions entered into after May
15, 2002. The adoption of this Statement has had no impact on the Company.
In June 2002, the FASB issued
 Statement No. 146 Accounting for Costs
Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this Statement and Issue
94-3 relates to its requirements for recognition of a liability for a cost
associated with an exit or disposal activity. This Statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under Issue 94-3, a liability for an exit cost
as defined in Issue 94-3 was recognized at the date of an entitys
commitment to an exit plan. A fundamental conclusion reached by the Board in
this Statement is that an entitys commitment to a plan, by itself, does
not create a present obligation to others that meets the definition of a
liability. Therefore, this Statement eliminates the definition and requirements
for recognition of exit costs in Issue 94-3. This Statement also establishes
that fair value is the objective for initial measurement of the liability. The
provisions of this Statement are effective for exit or disposal activities that
are initiated after December 31, 2002, with early application encouraged. The
adoption of this Statement currently has had no impact on the Company.
In December 2002, the FASB
issued Statement No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure, an amendment of FASB
Statement No. 123". This Statement amends Statement No. 123 and provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. Statement No. 148
also requires prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based compensation and the
effect of the method used on reported results. Statement No. 148 permits two
additional transition methods for entities that adopt the fair value based
method. These methods allow Companies to avoid the ramp-up effect arising from
prospective application of the fair value based method. This Statement is
effective for financial statements for fiscal years ending after December 15,
2002. The adoption of this Statement has had no impact on the Company.

F-9

---

(2)    
  Property and Equipment

Property and equipment
consists of the following at December 31, 2002 and 2001:

|                                               | Estimated   |      |           |   |          
|---------------------------------------------- | ----------- | ---- | --------- | - | ---------
|                                               | Useful Life | 2002 | 2001     
|Furniture and equipment                        | 3 - 8 years | $    | 2,206,535 | $ | 2,439,216
|Transportation
equipment                       | 3 - 5 years |      | 468,166   |   | 462,807  
|Leasehold
 improvements                        | 3 - 5 years |      | 436,300   |   | 164,476  
|                                               |             |      | 3,111,001 |   | 3,066,499
|Less
accumulated depreciation and amortization |             |      | 2,019,086 |   | 2,162,824
|Net property
 and equipment                    |             | $    | 1,091,915 | $ | 903,675  

(3)   
   Notes Payable to Bank

At December 31, 2002, the
Company had two lines of credit with a bank. The 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 $8,000,000. Under this formula, the
Company had the ability to borrow $8,000,000 at December 31, 2002, of which
approximately $4,848,000 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, 2002, the Company had borrowed
approximately $116,000 on this facility. Each borrowing under the capital
equipment line is due on the earlier of demand or in terms ranging from
thirty-six to sixty monthly installments of principal and interest. Both credit
facilities are payable on demand and bear a variable rate of interest based on
the prime rate. As of December 31, 2002 and 2001, the Companys rate of
interest on these agreements was 4.00 percent and 4.75 percent, respectively.
These credit facilities are secured by accounts receivable, inventories and
equipment.

F-10

---

(4)   
   Income Taxes

Income tax expense
 (benefit) for the years ended December 31, 2002, 2001
 and 2000 consists of:

|                         |   | 2002     |   |   | 2001    |  |   | 2000   
|------------------------ | - | -------- | - | - | ------- |  | - | -------
|Current:                
|Federal                  | $ | 703,221  |   | $ | 494,613 |  | $ | 424,224
|State                    |   | 138,757  |   |   | 100,967 |  |   | 99,404 
|Deferred:               
|Federal                  |   | (260,266 | ) |   | 156,256 |  |   | (77,366
|State                    |   | (45,929  | ) |   | 27,575  |  |   | (16,563
|Total income tax expense | $ | 535,783  |   | $ | 779,411 |  | $ | 429,699

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, 2002, 2001 and 2000 follows:

|                                              |   | 2002    |  |   | 2001    |   |   | 2000   
|--------------------------------------------- | - | ------- |  | - | ------- | - | - | -------
|Expected income tax expense                   | $ | 472,248 |  | $ | 675,159 |   | $ | 349,388
|State income
 tax, net of related tax benefit |   | 45,651  |  |   | 94,214  |   |   | 65,536 
|Nondeductible
 meals, entertainment expense   |   | 14,892  |  |   | 15,609  |   |   | 15,402 
|Other                                         |   | 2,992   |  |   | (5,571  | ) |   | (627   
|Actual income
tax expense                     | $ | 535,783 |  | $ | 779,411 |   | $ | 429,699

F-11

---

The tax effects of
temporary  differences  that give rise to  significant  portions of the
 deferred  tax
         assets and liabilities at December 31, 2002 and 2001 follow:

|                                                                       |   | 2002    |   | 2001    
|---------------------------------------------------------------------- | - | ------- | - | --------
|Deferred
tax assets:                                                  
|Allowance for doubtful accounts                                        | $ | 156,364 | $ | 178,815 
|Inventory reserve                                                      |   | 159,411 |   | 136,993 
|Goodwill, due
to differences in amortization periods                   |   | 372,038 |   | 38,970  
|Property and equipment, principally due to
differences in depreciation |   | 8,506   |   | 76,811  
|Total gross deferred tax assets                                        |   | 696,319 |   | 431,589 
|Deferred tax
 liabilities - prepaid expenses                           |   | (99,605 | ) | (141,070
|Net deferred
tax assets                                                | $ | 596,714 | $ | 290,519 

Management  has
determined,  based  on  the  Company's  history  of  prior  operating
earnings  and  its
         expectations  for the future,  that operating  earnings will more
likely than not be sufficient to realize
         the benefit of the deferred tax assets.  Accordingly,  the Company
has not provided a valuation  allowance
         for deferred tax assets in any period presented.

(5)   
   Stockholders' Equity


         The Board of Directors has  authorized the  acquisition  of up to
726,500  shares of the Company's  common
         stock.  As of February 28, 2003,  the Company has acquired  726,166
  shares and does not intend to acquire
         any additional shares for the foreseeable future.  All of these shares
 are held as treasury shares.

(6)   
   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  compensation  to the plan.
  The  Company,  at its  discretion,
         matches a portion  of  employee  contributions  to the plan.
Contributions  by the  Company to the 401(k)
         plan aggregated $115,617, $50,046 and $46,346 during 2002, 2001 and
2000, respectively.

F-12

---

(7)   
   Fair Value of Financial Instruments


         The reported amounts of financial  instruments  such as cash,
accounts  receivable,  accounts payable and
         accrued  expenses  approximate  fair value because of their short
  maturity.  The carrying  value of notes
         payable to bank approximates fair value because these instruments
bear interest at current market rates.

(8)   
   Segment Information


         Identification  of operating  segments is based principally upon
differences in the types and distribution
         channel  of  products.  The  Company's  reportable  segments  consist
  of  Abatix  and  IESI.  The  Abatix
         operating segment includes seven aggregated branches,  principally
engaged in distributing  environmental,
         safety 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  protective  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  operating  profit after a charge for the carrying  value of
 inventory  and accounts  receivable.
         Intersegment sales are at agreed upon pricing and intersegment profits
 are eliminated in consolidation.



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

|Abatix                        | IESI | Totals    
|----------------------------- | ---- | ----------
|                             
|Sales from external customers | $    | 57,773,848
|Intersegment
sales            |      | -         
|Interest expense              |      | 230,605   
|Depreciation and amortization |      | 466,109   
|Segment profit                |      | 2,046,304 
|Segment assets                |      | 16,754,838
|Capital expenditures          |      | 658,335   
|                             

|2001                         
|-----------------------------
|Sales from external customers
|Intersegment
 sales          
|Interest
expense             
|Depreciation and amortization
|Segment profit               
|Segment assets               
|Capital expenditures         
|                             

|2000                         
|-----------------------------
|Sales from external customers
|Intersegment sales           
|Interest income              
|Interest expense             
|Depreciation and amortization
|Segment profit               
|Segment assets               
|Capital expenditures         
|                             

F-13

---

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.

|                                     |   | 2002       |   | 2001       |   | 2000      
|------------------------------------ | - | ---------- | - | ---------- | - | ----------
|Profit for reportable segments       | $ | 2,425,064  | $ | 2,414,721  | $ | 1,582,744 
|Elimination of intersegment profits  |   | 12,134     |   | (21,471    | ) | 4,323     
|Earnings before income taxes         | $ | 2,437,198  | $ | 2,393,250  | $ | 1,587,067 
|                                     |  
|Total assets for reportable segments | $ | 17,589,546 | $ | 16,806,176 | $ | 14,145,424
|Elimination of intersegment  assets  |   | (459,643   | ) | (365,005   | ) | (102,987  
|Total assets                         | $ | 17,129,903 | $ | 16,441,171 | $ | 14,042,437

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 2002, 2001 and 2000, no single customer accounted
for more than 10 percent of net sales, although sales to environmental
contractors were approximately 55 percent, 49 percent and 37 percent of
consolidated net sales in 2002, 2001 and 2000, respectively. A reduction in
spending on environmental projects could significantly impact sales.

Although
no vendor accounted for more than 10 percent of purchases, two product classes
accounted for greater than 10 percent of sales. One product class accounted for
approximately 11 percent, 14 percent and 13 percent of net sales in 2002, 2001
and 2000, respectively. A major component of these products is petroleum.
Increases in oil prices or shortages in supply could significantly impact sales
and the Companys ability to supply its customers with certain products at
a reasonable price. The second product class accounted for 12 percent, 9 percent
and 2 percent of net sales in 2002, 2001 and 2000, respectively. This product
class is comprised of many vendors, none of which control the market.

F-14

---

(9)   
   
Commitments and Contingencies


The
Company leases warehouse and office facilities under long-term noncancelable
operating leases expiring at various dates through April 2007. The following is
a schedule of future minimum lease payments under these leases as of
December 31, 2002:

| | 2003 |  | $ | 1,185,792
| | ---- |  | - | ---------
| | 2004 |  |   | 1,138,083
| | 2005 |  |   | 614,282  
| | 2006 |  |   | 328,156  
| | 2007 |  |   | 71,904   
| |      |  | $ | 3,338,217

Rental  expense
 under  operating  leases  for the  years  ended  December  31,  2002,  2001
 and 2000 was
         $1,199,089, $1,016,209 and $950,199, respectively.

The Company has
  employment  agreements  with two officers,  both of which expire in 2004.
The agreements
         provide for minimum aggregate cash compensation of $432,000 in both
2003 and 2004.

(10)   
   Selected Quarterly Data (unaudited)

|Quarter                                             
|----------------------------------------------------
|                                                    
|Net sales                                           
|Gross profit                                        
|Operating profit                                    
|Net
 (loss)/earnings                                
|Basic and diluted
 (loss)/earnings per common sharea

|2001                                              
|--------------------------------------------------
|Net sales                                         
|Gross profit                                      
|Operating profit                                  
|Net (loss)/earnings                               
|Basic and diluted (loss)/earnings per common share

aThe loss for
the first
quarter of 2002 relates to required implementation of FASB Statement
No. 142. See Note 1 for further details.

F-15

---

Schedule
II

ABATIX CORP.
 AND SUBSIDIARY

 Valuation and Qualifying Accounts
 Years ended December 31, 2002, 2001 and 2000

|                                 |  |   |            |  | Additions  |  |       |  |            |     |        
|-------------------------------- |  | - | ---------- |  | ---------- |  | ----- |  | ---------- | --- | -------
|                                 |  |   | Balance at |  | charged to |  |       |  |            |     | Balance
|                                 |  |   | beginning  |  | costs and  |  |       |  |            |     | at end 
|                                 |  |   | of year    |  | expenses   |  | Other |  | Deductions |     | of year
|Year ended December 31:         
|Allowance for Doubtful Accounts:
|2002                             |  | $ | 447,037    |  | 134,911    |  | -     |  | 191,038    | A $ | 390,910
|2001                             |  | $ | 559,963    |  | 79,536     |  | -     |  | 192,462    | A $ | 447,037
|2000                             |  | $ | 616,678    |  | 85,247     |  | -     |  | 141,962    | A $ | 559,963
|                                
|Inventory
 Reserve:             
|2002                             |  | $ | 391,925    |  | 147,941    |  | -     |  | 141,338    | B $ | 398,528
|2001                             |  | $ | 288,409    |  | 168,878    |  | -     |  | 65,362     | B $ | 391,925
|2000                             |  | $ | 205,222    |  | 95,823     |  | -     |  | 12,636     | B $ | 288,409

A   
Represents the write-off of uncollectible accounts.
B    Represents the disposal of obsolete inventory.

S-1