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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 and 15(d) of the
Securities Exchange Act of 1934

For the quarter ended September 30, 2002

Commission file number 1-10184

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

Delaware
(State or other jurisdiction of incorporation or organization)

75-1908110
(I.R.S. Employer Identification number)

8201 Eastpoint Drive, Suite 500 Dallas, Texas 75227
(Address of principal executive offices)

Registrant's telephone number, including area code:(214) 381-1146

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 requirements for the past 90 days.
                                                                                                                                 Yes X   No    

Common stock outstanding at November 8, 2002 was 1,711,148.

ABATIX CORP. AND SUBSIDIARY
Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

ABATIX CORP. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)

See accompanying notes to consolidated financial statements.

ABATIX CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)

See accompanying notes to consolidated financial statements.

ABATIX CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)

(1)    Basis of Presentation, General and Business

Abatix 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, to the construction industry. At September 30, 2002, the Company operated seven sales and distribution centers in five states. The Company’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 accompanying consolidated financial statements are prepared in accordance with the instructions to Form 10-Q. As such, they are unaudited and do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2001. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year.

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 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. The following table shows the Company’s net earnings excluding the goodwill impairment in 2002 and goodwill amortization in 2001.

(2)   Earnings per Share

Basic earnings per share is calculated using the weighted average number of common shares outstanding during each period, while diluted earnings per share includes the effects of all dilutive potential common shares. For the three-month and nine-month periods ended September 30, 2002 and 2001, there were no potentially dilutive securities outstanding.

(3)   Supplemental Information for Statements of Cash Flows

The Company paid interest of $172,838 and $301,739 in the nine months ended September 30, 2002 and 2001, respectively, and income taxes of $823,199 and $399,803 in the nine months ended September 30, 2002 and 2001, respectively.

(4)   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 included in the Company’s Form 10-K for the year ended December 31, 2001. 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.

Below is a reconciliation of (i) total segment profit to operating profits 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.

The Company’s sales, substantially all of which are on an unsecured credit basis, are to various customers from its distribution centers in Texas, California, Arizona, Washington and Nevada. The Company evaluates credit risks on an individual basis before extending credit to its customers and it believes the allowance for doubtful accounts adequately provides for loss on uncollectible accounts. During the nine months ended September 30, 2002 and 2001, no single customer accounted for more than 10 percent of net sales, although sales to environmental contractors were approximately 56 percent and 48 percent of consolidated net sales in those periods, respectively. A reduction in spending on environmental projects, including mold remediation projects, could significantly impact sales.

Although no vendor accounted for more than 10 percent of purchases, two product classes accounted for more than 10 percent of sales. One product class accounted for approximately 14 percent of net sales during the nine months ended September 30, 2002 and 2001. 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. Another product class accounted for approximately 11 percent of net sales during the nine months ended September 30, 2002 and 2001. These products are purchased from Asia, however there are several non-Asian sources for the product line.

ABATIX CORP. AND SUBSIDIARY

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Three Month Period Ended September 30, 2002 Compared to Three Month Period Ended September 30, 2001.

Consolidated net sales for the three months ended September 30, 2002, increased 12 percent to $16,302,000 from $14,569,000 in 2001. The Abatix operating segment net sales grew 13 percent to $15,737,000 in 2002 and the IESI operating segment net sales decreased 15 percent to $566,000 in 2002. The increase in revenue 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.

Gross profit in the third quarter of 2002 of $4,776,000 increased 16 percent from gross profit in 2001 of $4,103,000 due to increased sales volume and increased gross margin rates due to changes in the sales mix. The Company’s gross profit margins, expressed as a percentage of sales, were approximately 29 percent and 28 percent for 2002 and 2001, respectively.

Selling, general and administrative expenses for the third quarter of 2002 of $3,900,000 increased 16 percent over 2001 expenses of $3,372,000. The increase in selling, general and administrative expenses is due primarily to increased labor costs in anticipation of continued growth. These expenses were 24 percent and 23 percent of sales for 2002 and 2001 respectively.

Interest expense of $64,000 decreased approximately $53,000 from 2001 interest expense of $117,000. Lower interest rates in 2002 contributed to reduced interest expense in the current period. 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.

Net earnings for the three months ended September 30, 2002, of $492,000, or $.29 per share, increased $109,000 from net earnings of $383,000, or $.22 per share, for the same period in 2001. The increase in net earnings is primarily due to increased sales volume and lower interest expense, partially offset by higher general and administrative expenses.

Nine Month Period Ended September 30, 2002 Compared to Nine Month Period Ended September 30, 2001.

Consolidated net sales for the nine months ended September 30, 2002, increased 11 percent to $46,197,000 from $41,485,000 in 2001. The Abatix operating segment net sales grew 12 percent to $44,620,000 in 2002 and the IESI operating segment net sales decreased 10 percent to $1,577,000 in 2002. The increase in revenue 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.

Gross profit in the first nine months of 2002 of $13,442,000 increased 17 percent from gross profit in 2001 of $11,510,000 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 in the 28 to 29 percent range in 2002, competitive pressures or substantial changes in product mix could negatively impact any and all efforts by the Company to maintain or improve product margins.

Selling, general and administrative expenses for the first nine months of 2002 of $11,468,000 increased 19 percent over 2001 expenses of $9,601,000. 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 of sales for 2002 and 23 percent of sales for 2001. Selling, general and administrative expenses are expected to be approximately 25 percent of sales for the year ended December 31, 2002.

Interest expense of $174,000 decreased $130,000 from 2001 interest expense of $304,000. Lower interest rates in 2002 contributed to reduced interest expense in the current year. 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.

Net earnings for the nine months ended September 30, 2002, of $612,000 or $.36 per share, decreased $335,000 from net earnings of $947,000, or $.55 per share, for the same period in 2001. The decrease in net earnings is primarily due to the implementation of FASB Statement No. 142.

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 the first nine months of 2002 of $61,000 resulted from the increase in net earnings adjusted for non-cash charges, and accounts payable, partially offset by an increase in accounts receivable. Cash flow from operations for the entire year of 2002 is expected to be positive, although at any given point, it may be negative.

Cash used in non-operating activities during the first six months of 2002 resulted primarily from payments of notes payable to the bank. In addition, the Company purchased $615,000 of fixed assets consisting of autos and computers and, primarily for the Los Angeles facility, furniture and leasehold improvements.

The Company maintains 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 November 1, 2002, there are advances outstanding under this credit facility of $5,526,000. Based on the borrowing formula, the Company had the capacity to borrow an additional $2,474,000 as of November 1, 2002. 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 November 1, 2002, were $120,000. Both credit facilities are payable on demand and bear a variable rate of interest computed at the prime rate less 25 basis points.

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 acquisitions and is unable to use its common stock as payment or opens additional locations, the Company might need to negotiate with a lender to secure additional borrowings to finance such activities.

Except for the historical information contained herein, the matters set forth in this Form 10-Q 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 commercial construction, industrial manufacture and domestic preparedness markets, 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 3.    Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes from the information previously reported under Item 7A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

Item 4.    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 the Company's managment, 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 that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's Exchange Act filings.
   
2. 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.

ABATIX CORP. AND SUBSIDIARY
PART II
Other Information

Item 1. Legal Proceedings- None

Item 2. Changes in Securities - None

Item 3. Defaults upon Senior Securities - None

Item 4. Submission of Matters to a Vote of Security Holders - None

Item 5. Other Information - None

Item 6. Exhibits and Reports on Form 8-K

             (a) Exhibits - (99)(1) - Certification of Chief Financial Officer
                                  (99)(2) - Certification of Chief Executive Officer

             (b) Reports on Form 8-K - None

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned as both a duly authorized officer and as the principal financial and accounting officer by the Registrant.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

1. I have reviewed this quarterly report on Form 10-Q of Abatix Corp.;
   
2. Based on my knowledge, this quarterly 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 quarterly report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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:
   
   1. 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 quarterly report is being prepared;
   2. 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 quarterly report (the "Evaluation Date"); and
   3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. 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):
   
   1. all significant deficiencies in the design or operation of internal controls which could adversely affect the ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
   2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly 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.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Terry W. Shaver, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Abatix Corp.;
   
2. Based on my knowledge, this quarterly 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 quarterly report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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:
   
   1. 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 quarterly report is being prepared;
   2. 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 quarterly report (the "Evaluation Date"); and
   3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. 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):
   
   1. all significant deficiencies in the design or operation of internal controls which could adversely affect the ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
   2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly 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.

Exhibit 99(1)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 (18 U.S.C. 1350), the undersigned, Frank J. Cinatl, IV, Chief Financial Officer of Abatix Corp. (the “Company”) has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the “Report”).

The undersigned certifies that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 8th day of November, 2002.

Exhibit 99(2)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 (18 U.S.C. 1350), the undersigned, Terry W. Shaver, Chief Executive Officer of Abatix Corp. (the “Company”) has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (the “Report”).

The undersigned certifies that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 8th day of November, 2002.