<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  Form 10-Q


            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

                         COMMISSION FILE NUMBER 0-13251

                         MEDICAL ACTION INDUSTRIES INC.
             (Exact name of registrant as specified in its charter)


           DELAWARE                                         11-2421849
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

150 Motor Parkway, Hauppauge, New York 11788
(Address of Principal executive offices)

Registrant's telephone number, including area code:

(516)231-4600

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.

                                    Yes   X                   No
                                        ------                   ------

         Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date.  8,335,164 shares of
common stock as of January 31, 1998.


<PAGE>

                                  Form 10-Q
                                  ---------

                                   CONTENTS
                                   --------

PART I -          FINANCIAL INFORMATION
                  ---------------------

Item 1.           Financial Statements

                  Balance Sheets at December 31, 1997 (Unaudited) and March 31,
                  1997

                  Statements of Income for the Three and Nine Months ended
                  December 31, 1997 and December 31, 1996 (Unaudited)

                  Statements of Cash Flows for the Nine Months ended December
                  31, 1997 and December 31, 1996 (Unaudited)

                  Notes to Consolidated Financial Statements (Unaudited)

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


PART II -         OTHER INFORMATION
                  -----------------

                                       2

<PAGE>

                         MEDICAL ACTION INDUSTRIES INC.
                         ------------------------------
                                 Balance Sheets
                                 --------------
                             (dollars in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                             December 31,          March 31,
                                                1997                 1997
                                             -----------           ---------   
                                             (Unaudited)
CURRENT ASSETS
<S>                                          <C>                   <C>
Cash and cash equivalents                     $  1,104              $   275
Accounts receivable, less allowance for
doubtful accounts of $133 at December 31,
1997 and $112 at March 31, 1997                  6,754                6,065

Inventories                                     10,504               11,035
Prepaid expenses                                   483                  237
Other current assets                               167                  247
                                               -------              -------

         TOTAL CURRENT ASSETS                   19,012               17,859

Property and equipment at cost, less
accumulated depreciation of $3,738
at December 31, 1997 and $4,297 at
March 31, 1997                                   7,783                4,024

Investment in Joint Ventures                       431                  495
Due from Officers                                  247                  195
Excess of cost over net assets
 acquired, less accumulated
 amortization of $458 at December 31,
 1997 and $355 at March 31, 1997                 2,251                2,315
Other assets                                       137                  106
                                              --------              -------
         TOTAL ASSETS                          $29,861              $24,994
                                              ========              =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                        3


<PAGE>
                         MEDICAL ACTION INDUSTRIES INC.
                         ------------------------------
                                 Balance Sheets
                                 --------------
                             (dollars in thousands)

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

<TABLE>
<CAPTION>
                                             December 31,          March 31,
                                                1997                 1997
                                             -----------           ---------
                                             (Unaudited)
CURRENT LIABILITIES:
<S>                                          <C>                   <C>
Accounts payable                             $ 1,493               $ 1,723
Accrued expenses, payroll and payroll taxes    1,167                   482
Accrued income taxes                             126                    14
Current portion of capital lease obligations     128                   131
Notes payable to bank                          5,630                 3,954
Current portion of long-term debt                240                 1,327
                                             -------               -------
         TOTAL CURRENT LIABILITIES             8,784                 7,631

Deferred Income Taxes                            386                   386
Capital lease obligation, less
 current portion                                 434                   524
Long-term debt, less current
 portion                                       5,398                 3,035
                                             -------               -------
         TOTAL LIABILITIES                   $15,002               $11,576


SHAREHOLDERS' EQUITY:

Common stock 15,000,000 shares authorized, 
 $.001 par value; issued and outstanding 
 8,330,164 shares at December 31, 1997
 and 8,230,289 shares at March 31, 1997            8                     8
Additional paid-in capital, net of
 deferred compensation of $227 at
 December 31, 1997 and $296
 at March 31, 1997                             8,409                 8,179
Retained earnings                              6,442                 5,231
                                             -------               -------
         TOTAL SHAREHOLDERS' EQUITY           14,859                13,418
                                             -------               -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $29,861               $24,994
                                             =======               =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       4

<PAGE>

                         MEDICAL ACTION INDUSTRIES INC.
                         ------------------------------
                              Statements of Income
                              --------------------
                  (dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                                  December 31,
                                                                        1997                         1996
                                                                     (Unaudited)                 (Unaudited)
                                                                     -----------                ------------
<S>                                                                  <C>                         <C>    
Net Sales                                                              $14,024                     $11,212

Cost of Sales                                                           10,853                       8,866
                                                                       --------                    -------

Gross Profit                                                             3,171                       2,346

Selling, general and administrative
 expenses                                                                2,294                       1,806
Interest expense, net                                                      143                         175
                                                                       -------                     -------

Income before income taxes                                                 734                         365
Income tax expense                                                         301                         150
                                                                       -------                     -------

Net income                                                             $   433                     $   215
                                                                       =======                     =======

Net Income per share basic
 and diluted                                                           $   .05                     $   .03
                                                                       ========                    =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       5


<PAGE>

                         MEDICAL ACTION INDUSTRIES INC.
                         ------------------------------
                              Statements of Income
                              --------------------
                  (dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                                                  December 31,
                                                                          1997                      1996
                                                                       ----------                -----------
                                                                       (Unaudited)               (Unaudited)
<S>                                                                    <C>                       <C>    
Net Sales                                                               $40,777                    $33,580

Cost of Sales                                                            31,565                     26,553
                                                                       ---------                  --------

Gross Profit                                                              9,212                      7,027

Selling, general and administrative
 expenses                                                                 6,419                      5,453
Interest expense, net                                                       466                        463
Restructuring charge                                                        273                         --
                                                                         ------                    -------

Income before income taxes                                                2,054                      1,111
Income tax expense                                                          843                        463
                                                                         ------                    -------

Net Income                                                               $1,211                    $   648
                                                                         ======                    =======

Net Income per share basic                                               $  .15                    $   .08
                                                                         ======                    =======

Net Income per share diluted                                             $  .14                    $   .08
                                                                         ======                    =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       6


<PAGE>

                MEDICAL ACTION INDUSTRIES INC. AND SUBSIDIARY
                           Statement of Cash Flows
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                    Nine Months Ended
                                                        December 31,
                                                1997                  1996 
                                             -----------           -----------
                                             (Unaudited)           (Unaudited)
<S>                                          <C>                   <C>
OPERATING ACTIVITIES
 Net Income                                  $  1,211              $   648
Adjustments to reconcile net income
 to net cash provided by
 operating activities:
   Loss from sale of property
   and equipment                                   61                   --
  Depreciation and amortization                   570                  512
  Provision for doubtful accounts                  21                  (14)
  Deferred compensation                            91                  109
  Changes in operating assets and liabilities
   net of acquisition:
   Accounts Receivable                           (407)                 758
   Inventories                                    753               (1,554)
   Prepaid expenses and other current assets     (159)                  95
   Other assets                                   (26)                  (9)
   Accounts payable                              (416)                 (60)
   Accrued income taxes                           112                 (112)
   Accrued expenses, payroll and
    payroll taxes                                 667                 (169)
                                               ------                ------

NET CASH PROVIDED BY OPERATING ACTIVITIES      $2,478                $ 204

INVESTING ACTIVITIES
  Purchase price and related acquisition
   costs                                          (40)                (163)
 Purchase of property, plant and equipment     (5,540)                  --
 Proceeds from sale of property
  and equipment                                 1,336                   --
 Loan to officers                                 (52)                (147)
                                               ------                ------
NET CASH USED IN INVESTING ACTIVITIES          (4,296)                (310)
FINANCING ACTIVITIES
Proceeds from revolving line of
  credit and long-term borrowings               8,484                2,442
Principal payments on revolving line of
 credit, long-term debt, and capital
 lease obligations                             (5,977)              (2,444)
Proceeds from exercise of employee

 stock options                                    140                    3
                                               ------              -------

NET CASH PROVIDED BY FINANCING ACTIVITIES       2,647                    1
                                               ------              -------

INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                      829                 (105)
Cash at beginning of period                       275                  504
                                               ------              -------
Cash and cash equivalents at end of period    $ 1,104               $  399
                                               ======              =======
</TABLE>

 The accompanying notes are an integral part of these financial statements.

                                       7


<PAGE>

                  MEDICAL ACTION INDUSTRIES INC. AND SUBSIDIARY
                  ---------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (Unaudited)

Note 1.           BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q for quarterly
reports under section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended December 31, 1997
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report for the year ended March 31, 1997.

Note 2.           INVENTORIES

Inventories, which are stated at the lower of cost (first-in, first-out) or
market, consist of the following:

<TABLE>
<CAPTION>
                                              December 31         March 31, 
                                                 1997               1997
                                             ------------        ----------
                                                       (Unaudited)
<S>                                           <C>                <C>    
Finished Goods                                $ 4,105              $ 4,491
Work in Process                                   125                    0
Raw Materials                                   6,274                6,544
                                              -------              -------
         Total                                $10,504              $11,035
                                              =======              =======
</TABLE>


<PAGE>

Note 3.           SIGNIFICANT EVENTS

On July 9, 1997 the Company acquired approximately 32 acres of land located in
Arden, North Carolina and an existing 205,000 square foot building located
thereon (the "Arden Facility"). The purchase price for the Arden Facility was
$2,900,000, which was paid at closing. The acquisition of the Arden Facility was
financed with the proceeds from the issuance and sale by The Buncombe County

Industrial Facilities and Pollution Control Financing Authority of its
$5,500,000 Industrial Development Revenue Bonds (Medical Action Industries Inc.
Project), Series 1997 (the "Bonds"). Interest on the Bonds is payable on the
first business day of each January, April, July and October commencing October,
1997 and ending July, 2013. The Bonds bear interest at a variable rate,
determined weekly. The interest rate on the Bonds at December 31, 1997 was 4.3%
per annum. In connection with the issuance of the Bonds, the Company entered
into a Letter of Credit and Reimbursement Agreement dated as of July 1, 1997
with a bank for approximately $5,800,000 (the "Reimbursement Agreement") to
support principal and interest payments of the Bonds and requires payment of an
annual fee of .85%. The Company also entered into a Remarketing Agreement,
pursuant to which the Remarketing Agent will use its best efforts to arrange for
a sale in the secondary market of such Bonds. The Remarketing Agreement provides
for the payment of an annual fee of .125%.

As of December 31, 1997 the Company has used $5,268,000 of the $5,500,000
proceeds from the Bonds for the purchase and rehabilitation of the Arden
Facility and for the acquisition of machinery and equipment. The remaining
$232,000 will be used for additional rehabilitation of the Arden Facility and
for the acquisition of additional machinery and equipment, which is expected to
be completed by January 31, 1998. The remaining proceeds have been invested in
U.S. Treasury strips which yield interest at the rate of 5.2% per annum as of
December 31, 1997.

On December 11, 1997, the Company sold its manufacturing facility in Asheville,
North Carolina. The net selling price after closing costs was $1,332,000. The
proceeds were used to pay the remaining mortgage on the facility of $746,000 and
then to pay down other debt balances. The net loss on the sale of the building
was $61,000 and is included as part of the restructuring charge as discussed in
Note 4.

                                       9

<PAGE>

On October 30, 1997 the Company acquired certain assets of the specialty medical
packaging and collection systems for the containment and transport of
biohazardous waste business of Dayhill Corporation ("Dayhill"). The purchase
price for the acquired assets consisted of the assumption of approximately
$595,000 of Dayhill's liabilities. The acquisition has been accounted for as a
purchase and the operations of Dayhill have been included in the Company's
Statement of Operations since the acquisition date. The excess of the purchase
price and related expenses over the net assets acquired amounted to $39,723 and
is being amortized over ten (10) years.

On November 6, 1997, the Company signed an Amended and Restated Revolving Credit
Agreement (the "Agreement") with its existing bank. The Agreement expires on
September 30, 2000 and bears interst at prime rate. The Agreement provides for
total borrowings of up to $12,000,000 with a $7,000,000 sublimit for bankers
acceptances, which bear interest at 1-1/4% over the prevailing bankers
acceptance rate, and a $3,000,000 sublimit for letters of credit. Borrowings
under the Agreement are collateralized by all the assets of the Company and
advances to the Company are made in accordance with the borrowing base formula.


Note 4.           RESTRUCTURING CHARGE

As a result of the Company's consolidation of its existing manufacturing
facilities and two leased warehouse facilities into the new Arden Facility,
which is expected to be completed in the fourth quarter of fiscal 1998, the
Company has recorded $273,000 of pre-tax restructuring charges in the quarter
ended September 30, 1997. The restructuring charges include lease termination
fees, net loss on the sale of the manufacturing facility in Asheville, North
Carolina, and costs incurred for moving inventory and equipment to the recently
acquired Arden Facility. It is anticipated that the consolidation will be
completed by January 31, 1998. As of December 31, 1997, the accruals pertaining
to the above mentioned charges totalled $61,000.

Note 5.           NET INCOME PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with the basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.

                                       10

<PAGE>

The following table sets forth the computation of basic and diluted earnings per
share for the three and nine months ended December 31, 1996 and for the three
and nine months ended December 31, 1997.


<TABLE>
<CAPTION>
                                                          Three Months Ended                          Nine Months Ended
                                                             December 31,                               December 31,
                                                          ------------------                          -------------------
                                                     1997                       1996             1997                  1996
                                                     ----                       ----             ----                  ----
                                                                            Dollars in thousands except
                                                                                   per share data
Numerator:
----------
<S>                                            <C>                        <C>                <C>               <C>
Net income for
basic and dilutive
earnings per share                                   $433                       $215             $1,211                $648
                                                     ====                       ====             ======                ====
Denominator:
-----------

Denominator for basic

earnings per share -
weighted average shares                         8,216,836                  8,103,581          8,179,779           8,078,958

Effect of dilutive
securities:

Employee stock options                            720,620                    111,996            633,090             175,525
Non-vested restricted
 stock                                             88,750                    108,708             90,465             130,248
Warrants                                           33,839                          0             28,197                   0
                                                ---------                  ---------          ---------           ---------

Dilutive potential
common shares                                     843,209                    220,704            751,752             305,773

Earnings per share-
adjusted weighted
average shares                                  9,060,045                  8,324,285          8,930,531           8,384,731
                                                =========                  =========          =========           =========

Basic earnings
 per share                                           $.05                       $.03               $.15                $.08
                                                     ====                       ====               ====                ====

Diluted earnings
 per share                                           $.05                       $.03               $.15                $.08
                                                     ====                       =====              ====                ====
</TABLE>

                                       11

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     ---------------------------------------
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                  ---------------------------------------------

Forward-Looking Statement
-------------------------

This report on Form 10-Q contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include plans and objectives of management for future operations, including
plans and objectives relating to the future economic performance and financial
results of the Company. The forward-looking statements relate to (i) the
expansion of the Company's market share, (ii) the Company's growth into new
markets, (iii) the development of new products and product lines to appeal to
the needs of the Company's customers, (iv) the procurement of export visas for
raw materials for operating room towels from China, which may impact the
availability and pricing of operating room towels, and (v) the retention of the
Company's earnings for use in the operation and expansion of the Company's
business.


Important factors and risks that could cause actual results to differ materially
form those referred to in the forward-looking statements include, but are not
limited to, the effect of economic and market conditions, the impact of the
consolidation throughout the healthcare supply chain, the impact of healthcare
reform, opportunities for acquisitions and the Company's ability to effectively
integrate acquired companies, the ability of the Company to maintain its gross
profit margins, the ability to obtain additional financing to expand the
Company's business, the failure of the Company to successfully compete with the
Company's competitors that have greater financial resources, the loss of key
management personnel or the inability of the Company to attract and retain
qualified personnel, the availability and possible increases in raw material
prices for operating room towels, the impact of current or pending legislation
and regulation, as well as the risks described from time to time in the
Company's filings with the Securities and Exchange Commission, which include
this report on Form 10-Q and the Company's annual report on Form 10-K for the
year ended March 31, 1997.

The forward-looking statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
results, performance and/or achievements of the Company to differ materially
from any future results, performance or achievements, express or implied, by the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, and that in light of the significant
uncertainties inherent in forward-lookin statements, the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved.

                                       12

<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    ---------------------------------------
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
                 ---------------------------------------------

RESULTS OF OPERATIONS

Nine months ended December 31, 1997 compared to nine months ended December 31,
------------------------------------------------------------------------------
1996.
-----

Net sales for the nine months ended December 31, 1997 increased 21% to
$40,777,000 from $33,580,000 for the nine months ended December 31, 1996. The
increase in net sales was primarily attributable to an increase of $4,545,000,
or 49%, in net sales of operating room towels, $745,000, or 26%, in net sales of
the QuanTech product line and a $852,000, or 6%, increase in net sales of
laparotomy sponges. Management believes that the increase in net sales of
operating room towels, the QuanTech product line and laparotomy sponges was
primarily due to greater domestic market penetration.

The Company presently obtains substantially all of its raw materials for
operating room towels from China. These operating room towels are designated as

a textile, for which an export visa is required. These export visas could
adversely impact the availability and pricing of operating room towels. In the
event that these quota restrictions reduce the availability of operating room
towels, the Company will accelerate its procurement of operating room towels
from China and, to a lesser extent, secure operating room towels from sources
outside of China. Management presently anticipates that it will be able to meet
the Company's requirements of operating room towels through fiscal 1999, however
higher pricing for such raw materials which the Company will begin incurring in
the fourth quarter of fiscal 1998, due to the availability of export visas,
could adversely effect the Company.

Gross profit for the nine months ended December 31, 1997 increased 31% to
$9,213,000 from $7,027,000 for the nine months ended December 31, 1996. Gross
profit as a percentage of net sales for the nine months ended December 31, 1997
increased to 23% of net sales from 21% of net sales for the nine months ended
December 31, 1996. The increase in gross profit dollars and gross profit
percentage was primarily attributable to the increase in net sales, increased
manufacturing efficiencies and a decrease in the cost of certain raw materials.

Selling, general and administrative expenses for the nine months ended December
31, 1997 increased 18% to $6,419,000 from $5,453,000 for the nine months ended
December 31, 1996. As a percentage of net sales, selling, general and
administrative expenses decreased to 15.7% for the nine months ended December
31, 1997 from 16.2% for the nine months ended December 31, 1996. The increase in
selling, general and administrative expense dollars was primarily attributable
to increased commissions and distributor fees associated with increased sales
volume. The decrease in selling, general and administrative expense dollars as a
percentage of sales was primarily attributable to increased operating
efficiencies. 

                                       13

<PAGE>

Restructuring charges of $273,000 were incurred for the nine months ended
December 31, 1997 as a result of the Company's consolidation of its existing
manufacturing facilities and two leased warehouse facilities into the new Arden
facility. It is anticipated that the consolidation will be completed by January
31, 1998.

Interest expense for the nine months ended December 31, 1997 increased 1% to
$466,000 from $463,000 for the nine months ended December 31, 1996.

Net income for the nine months ended December 31, 1997 increased to $1,211,000
from $648,000 for the nine months ended December 31, 1996. The increase in net
income is attributable to the aforementioned increase in net sales and gross
profits, which were partially offset by an increase in selling, general and
administrative expenses, restructuring charges and interest expense.

Three months ended December 31, 1997 compared to three months ended December 31,
--------------------------------------------------------------------------------
1996.
-----


Net sales for the three months ended December 31, 1997 increased 25% to
$14,024,000 from $11,212,000 for the three months ended December 31, 1996. The
increase in net sales was primarily attributable to an increase of $1,592,000,
or 53%, in net sales of operating room towels, $321,000, or 62%, increase in net
sales of gauze sponges and $268,000, or 18%, increase in net sales of the SBW
product line as a result of the recent acquisition of Dayhill Corporation.
Management believes that the increase in net sales of operating room towels,
laparotomy sponges and gauze sponges was primarily due to greater domestic
market penetration.

Gross profit for the three months ended December 31, 1997 increased 35% to
$3,171,000 from $2,346,000 for the three months ended December 31, 1996. Gross
profit as a percentage of net sales for the period ended December 31, 1997
increased to 23% of net sales from 21% of net sales for the three months ended
December 31, 1996. The increase in gross profit dollars and gross profit
percentage was primarily attributable to the increase in net sales, increased
manufacturing efficiencies and a decrease in the cost of certain raw materials.

Selling, general and administrative expenses for the three months ended December
31, 1997 increased 27% to $2,294,000 from $1,806,000 for the three months ended
December 31, 1996. As a percentage of net sales, selling, general and
administrative expenses increased to 16.4% for the three months ended December
31, 1997 from 16.1% for the three months ended December 31, 1996. The increase
in selling, general and administrative expense dollars and as a percentage of
sales was primarily attributable to increased commissions and distributor fees
associated with increased sales volume.

                                       14

<PAGE>

Interest expense for the three months ended December 31, 1997 decreased 18% to
$143,000 from $175,000 for the three months ended December 31, 1996.

Net income for the three months ended December 31, 1997 increased to $433,000
from $215,000 for the three months ended December 31, 1996. The increase in net
income is attributable to the aforementioned increase in net sales and gross
profits and a decrease in interst expense, which were partially offset by an
increase in selling, general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company had working capital of $10,228,000 with a current ratio of 2.2 at
December 31, 1997 as compared to working capital of $10,228,000 with a current
ratio of 2.34 on March 31, 1997. Total bank borrowings outstanding, including
Industrial Revenue Bonds of $5,500,000, were $11,268,000 with a debt to equity
ratio of .76 at December 31, 1997 as compared to $8,316,000 with a debt to
equity ratio of .62 at March 31, 1997. The increase in total borrowings
outstanding at December 31, 1997 was primarily attributable to the acquisition
of the Arden facility, which was financed with the proceeds from Industrial
Development Revenue Bonds issued by The Buncombe County Industrial Facilities
and Pollution Control Financing Authority.


The Company believes that the anticipated future cash flow from operations,
coupled with its cash on hand and available funds under its revolving credit
agreements, will be sufficient to meet working capital requirements.

                                       15

<PAGE>

                 MEDICAL ACTION INDUSTRIES INC. AND SUBSIDIARY

                          PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

                  There are no material legal proceedings against the Company or
                  in which any of its property is subject.

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

                           None

                  (b)      Reports on Form 8-K

                  (i)      Current Report on Form 8-K dated October 28, 1997 re:
                           Item 5 - Other Events and Item 7 - Financial
                           Statements, Pro Forma Financial Information and
                           Exhibits.

                  (ii)     Current Report on Form 8-K dated November 6, 1997 re:
                           Item 2 - Acquisition or Disposition of Assets and
                           Item 7 - Financial Statements, Pro Forma Financial
                           Information and Exhibits.


                                       16

<PAGE>

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 thereunto duly authorized.



                                       MEDICAL ACTION INDUSTRIES INC.



Date: February 10, 1998                By: s/Richard G. Satin
      -----------------                    ------------------
                                           Richard G. Satin, Vice President
                                           (Principal Accounting Officer)