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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE
ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2004



COMMISSION FILE NUMBER 0-13251



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MEDICAL ACTION INDUSTRIES INC.

(Exact name of Registrant as specified in its
charter)



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



800 Prime Place,
Hauppauge, New York 11788

(Address of Principal Executive Offices)



Registrants telephone number, including area code:

(631) 231-4600



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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 by check mark whether the registrant is an accelerated filer (as defined in Rule 126-b of the Exchange
Act).    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. 10,255,536 shares of common stock as of October 29, 2004.



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##### Table of Contents

Form 10-Q



CONTENTS



|          |  |                                                                                           |  |        
|--------- |  | ----------------------------------------------------------------------------------------- |  | -------
|          |  |                                                                                           |  | PageNo.
|          |  |                                                                                          
|PART I-   |  | FINANCIAL INFORMATION                                                                     |  |        
|          |  |                                                                                          
|Item 1.   |  | Condensed Financial Statements                                                            |  |        
|          |  |                                                                                          
|          |  | Balance Sheets at September 30, 2004 (Unaudited) and March 31, 2004                       |  | 3-4    
|          |  |                                                                                          
|          |  | Statements of Earnings for the Three Months ended September 30, 2004 and 2003 (Unaudited) |  | 5      
|          |  |                                                                                          
|          |  | Statements of Earnings for the Six Months ended September 30, 2004 and 2003 (Unaudited)   |  | 6      
|          |  |                                                                                          
|          |  | Statements of Cash Flows for the Six Months ended September 30, 2004 and 2003 (Unaudited) |  | 7      
|          |  |                                                                                          
|          |  | Notes to Financial Statements (Unaudited)                                                 |  | 8-12   
|          |  |                                                                                          
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations     |  | 13-21  
|          |  |                                                                                          
|Item 3.   |  | Quantitative and Qualitative Disclosures about Market Risk                                |  | 21     
|          |  |                                                                                          
|Item 4.   |  | Procedures and Controls                                                                   |  | 22     
|          |  |                                                                                          
|PART II - |  | OTHER INFORMATION                                                                         |  |        



2



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##### Table of Contents

Item 1.



MEDICAL ACTION INDUSTRIES INC.

Balance Sheets

(dollars in thousands)



ASSETS



|                                                                                                                   |  |                   |        |               |   |       
|------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------ | ------------- | - | ------
|                                                                                                                   |  | September 30,2004 |        | March 31,2004
|                                                                                                                   |  | (Unaudited)       |        |              
|CURRENT ASSETS:                                                                                                    |  |                   |        |               |   |       
|                                                                                                                   |  |                  
|Cash                                                                                                               |  | $                 | 545    |               | $ | 545   
|Accounts receivable, less allowance for doubtful accounts of $343 at September 30, 2004 and $295 at March 31, 2004 |  |                   | 10,910 |               |   | 10,670
|Inventories, net                                                                                                   |  |                   | 18,179 |               |   | 18,616
|Prepaid expenses                                                                                                   |  |                   | 728    |               |   | 551   
|Deferred income taxes                                                                                              |  |                   | 308    |               |   | 308   
|Prepaid income taxes                                                                                               |  |                   |       |               |   | 234   
|Other current assets                                                                                               |  |                   | 104    |               |   | 142   
|                                                                                                                   |  |                   |        |               |   |       
|TOTAL CURRENT ASSETS:                                                                                              |  |                   | 30,774 |               |   | 31,066
|                                                                                                                   |  |                  
|Property, plant and equipment, net                                                                                 |  |                   | 13,015 |               |   | 13,654
|Due from officers                                                                                                  |  |                   |       |               |   | 92    
|Goodwill                                                                                                           |  |                   | 37,085 |               |   | 37,085
|Trademarks                                                                                                         |  |                   | 666    |               |   | 666   
|Other intangible assets, net                                                                                       |  |                   | 2,079  |               |   | 2,213 
|Other assets                                                                                                       |  |                   | 414    |               |   | 521   
|                                                                                                                   |  |                   |        |               |   |       
|TOTAL ASSETS:                                                                                                      |  | $                 | 84,033 |               | $ | 85,297
|                                                                                                                   |  |                   |        |               |   |       



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



3



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##### Table of Contents

Item 1.



MEDICAL ACTION INDUSTRIES INC.

Balance Sheets

(dollars in thousands)



LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                                                                                                   |  |                   |        |               |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------ | ------------- | - | ------
|                                                                                                                                                                   |  | September 30,2004 |        | March 31,2004
|                                                                                                                                                                   |  | (Unaudited)       |        |              
|CURRENT LIABILITIES:                                                                                                                                               |  |                   |        |               |   |       
|                                                                                                                                                                   |  |                  
|Accounts payable                                                                                                                                                   |  | $                 | 4,871  |               | $ | 5,828 
|Accrued expenses, payroll and payroll taxes                                                                                                                        |  |                   | 3,154  |               |   | 2,445 
|Accrued income taxes                                                                                                                                               |  |                   | 603    |               |   |      
|Current portion of long-term debt                                                                                                                                  |  |                   | 4,360  |               |   | 5,360 
|                                                                                                                                                                   |  |                   |        |               |   |       
|TOTAL CURRENT LIABILITIES:                                                                                                                                         |  |                   | 12,988 |               |   | 13,633
|                                                                                                                                                                   |  |                  
|Deferred income taxes                                                                                                                                              |  |                   | 3,137  |               |   | 3,137 
|Long-term debt, less current portion                                                                                                                               |  |                   | 4,705  |               |   | 11,720
|                                                                                                                                                                   |  |                   |        |               |   |       
|TOTAL LIABILITIES:                                                                                                                                                 |  |                   | 20,830 |               |   | 28,490
|                                                                                                                                                                   |  |                  
|COMMITMENTS                                                                                                                                                        |  |                   |        |               |   |       
|                                                                                                                                                                   |  |                  
|SHAREHOLDERS EQUITY:                                                                                                                                              |  |                   |        |               |   |       
|Common stock 15,000,000 shares authorized, $.001 par value; issued and outstanding 10,255,536 shares at September 30, 2004 and 10,194,036
shares at March 31, 2004 |  |                   | 10     |               |   | 10    
|Additional paid-in capital, net                                                                                                                                    |  |                   | 17,681 |               |   | 16,415
|Retained earnings                                                                                                                                                  |  |                   | 45,512 |               |   | 40,382
|                                                                                                                                                                   |  |                   |        |               |   |       
|TOTAL SHAREHOLDERS EQUITY:                                                                                                                                        |  |                   | 63,203 |               |   | 56,807
|                                                                                                                                                                   |  |                   |        |               |   |       
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY:                                                                                                                          |  | $                 | 84,033 |               | $ | 85,297
|                                                                                                                                                                   |  |                   |        |               |   |       



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



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##### Table of Contents

Item 1.



MEDICAL ACTION INDUSTRIES INC.

Statements of Earnings

(dollars in thousands except per share data)

(Unaudited)



|                                             |  |                                 |        |   |      |   |        |  
|-------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                             |  | Three Months EndedSeptember 30, |       
|                                             |  | 2004                            |        |   | 2003 |  
|Net sales                                    |  | $                               | 35,146 |   |      | $ | 32,356 |  
|                                             |  |                                
|Cost of sales                                |  |                                 | 26,126 |   |      |   | 23,875 |  
|                                             |  |                                 |        |   |      |   |        |  
|Gross profit                                 |  |                                 | 9,020  |   |      |   | 8,481  |  
|                                             |  |                                
|Selling, general and administrative expenses |  |                                 | 4,697  |   |      |   | 4,396  |  
|Interest expense                             |  |                                 | 78     |   |      |   | 252    |  
|Interest income                              |  |                                 | (2     | ) |      |   | (17    | )
|                                             |  |                                 |        |   |      |   |        |  
|Income before income taxes                   |  |                                 | 4,247  |   |      |   | 3,850  |  
|Income tax expense                           |  |                                 | 1,586  |   |      |   | 1,474  |  
|                                             |  |                                 |        |   |      |   |        |  
|Net income                                   |  | $                               | 2,661  |   |      | $ | 2,376  |  
|                                             |  |                                 |        |   |      |   |        |  
|Net income per share basic                   |  | $                               | .26    |   |      | $ | .24    |  
|                                             |  |                                 |        |   |      |   |        |  
|Net income per share diluted                 |  | $                               | .26    |   |      | $ | .23    |  
|                                             |  |                                 |        |   |      |   |        |  



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



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##### Table of Contents

Item 1.



MEDICAL ACTION INDUSTRIES INC.

Statements of Earnings

(dollars in thousands except per share data)

(Unaudited)



|                                             |  |                               |        |   |      |   |        |  
|-------------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ------ | -
|                                             |  | Six Months EndedSeptember 30, |       
|                                             |  | 2004                          |        |   | 2003 |  
|Net sales                                    |  | $                             | 68,467 |   |      | $ | 62,977 |  
|                                             |  |                              
|Cost of sales                                |  |                               | 50,657 |   |      |   | 46,351 |  
|                                             |  |                               |        |   |      |   |        |  
|Gross profit                                 |  |                               | 17,810 |   |      |   | 16,626 |  
|                                             |  |                              
|Selling, general and administrative expenses |  |                               | 9,440  |   |      |   | 8,765  |  
|Interest expense                             |  |                               | 193    |   |      |   | 574    |  
|Interest income                              |  |                               | (8     | ) |      |   | (35    | )
|                                             |  |                               |        |   |      |   |        |  
|Income before income taxes                   |  |                               | 8,185  |   |      |   | 7,322  |  
|Income tax expense                           |  |                               | 3,055  |   |      |   | 2,762  |  
|                                             |  |                               |        |   |      |   |        |  
|Net income                                   |  | $                             | 5,130  |   |      | $ | 4,560  |  
|                                             |  |                               |        |   |      |   |        |  
|Net income per share basic                   |  | $                             | .50    |   |      | $ | .46    |  
|                                             |  |                               |        |   |      |   |        |  
|Net income per share diluted                 |  | $                             | .49    |   |      | $ | .45    |  
|                                             |  |                               |        |   |      |   |        |  



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



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##### Table of Contents

Item 1.



MEDICAL ACTION INDUSTRIES INC.

Statements of Cash Flows

(dollars in thousands)

(Unaudited)



|                                                                                  |  |                               |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months EndedSeptember 30, |        
|                                                                                  |  | 2004                          |         |   | 2003 |  
|OPERATING ACTIVITIES                                                              |  |                               |         |   |      |   |         |  
|Net income                                                                        |  | $                             | 5,130   |   |      | $ | 4,560   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                               | 1,156   |   |      |   | 1,130   |  
|Provision for doubtful accounts                                                   |  |                               | 48      |   |      |   | 30      |  
|Provision for impairment of property, plant and equipment                         |  |                               | 75      |   |      |   |        |  
|Loss (gain) on sale of property and equipment                                     |  |                               | 36      |   |      |   | (9      | )
|Tax benefit from exercise of options                                              |  |                               | 145     |   |      |   | 910     |  
|Changes in operating assets and liabilities:                                      |  |                               |         |   |      |   |         |  
|Accounts receivable                                                               |  |                               | (288    | ) |      |   | (490    | )
|Inventories                                                                       |  |                               | 437     |   |      |   | 999     |  
|Prepaid expense and other current assets                                          |  |                               | (139    | ) |      |   | (261    | )
|Other assets                                                                      |  |                               | (100    | ) |      |   | (4      | )
|Accounts payable                                                                  |  |                               | (957    | ) |      |   | (808    | )
|Income taxes payable                                                              |  |                               | 837     |   |      |   | 408     |  
|Accrued expenses, payroll and payroll taxes                                       |  |                               | 709     |   |      |   | 533     |  
|                                                                                  |  |                               |         |   |      |   |         |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |  |                               | 7,089   |   |      |   | 6,998   |  
|                                                                                  |  |                               |         |   |      |   |         |  
|INVESTING ACTIVITIES                                                              |  |                               |         |   |      |   |         |  
|Purchase of property, plant and equipment                                         |  |                               | (306    | ) |      |   | (274    | )
|Proceeds from sale of property and equipment                                      |  |                               | 20      |   |      |   | 75      |  
|Repayment of loans to officers                                                    |  |                               | 428     |   |      |   |        |  
|                                                                                  |  |                               |         |   |      |   |         |  
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                               |  |                               | 142     |   |      |   | (199    | )
|                                                                                  |  |                               |         |   |      |   |         |  
|FINANCING ACTIVITIES                                                              |  |                               |         |   |      |   |         |  
|Proceeds from revolving line of credit and long term borrowings                   |  |                               | 15,700  |   |      |   | 11,675  |  
|Principal payments on revolving line of credit and long term debt                 |  |                               | (23,715 | ) |      |   | (19,500 | )
|Proceeds from exercise of employee stock options                                  |  |                               | 784     |   |      |   | 703     |  
|                                                                                  |  |                               |         |   |      |   |         |  
|NET CASH USED IN FINANCING ACTIVITIES                                             |  |                               | (7,231  | ) |      |   | (7,122  | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Decrease in cash                                                                  |  |                               |        |   |      |   | (323    | )
|Cash at beginning of year                                                         |  |                               | 545     |   |      |   | 892     |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash at end of period                                                             |  | $                             | 545     |   |      | $ | 569     |  
|                                                                                  |  |                               |         |   |      |   |         |  



The accompanying notes
are an integral part of these financial statements



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Item 1.



MEDICAL ACTION INDUSTRIES INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



Note 1. SIGNIFICANT ACCOUNTING POLICIES



BASIS OF PRESENTATION



The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) 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 US GAAP 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 six (6) month period ended September 30, 2004 are not
necessarily indicative of the results that may be expected for the year ended March 31, 2005. For further information, refer to the financial statements and footnotes thereto included in the Companys annual report for the year ended March 31,
2004.



STOCK COMPENSATION



In accordance with the provisions of SFAS No. 123, the Company has elected to apply APB 25
and related interpretations in accounting for its employee and director stock-based awards. All employee and director stock-based awards were granted with an exercise price equal to the fair market value of the Companys common stock on their
date of grant.



Therefore, under the provisions of APB 25, no compensation
expense has been recognized with respect to such awards. If the Company had elected to recognize compensation expensed based on the fair value of the employee and director stock-based awards granted at grant date as prescribed by SFAS No. 123, net
income and earnings per share would have been reduced to the pro forma amounts indicated in the table below:



|                                                                                                                                             |  |                                              |       |                               |   |       |  |      |       |  |   |      
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ----- | ----------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                                                                                                                             |  | Three Months EndedSeptember 30,              |       | Six Months EndedSeptember 30,
|                                                                                                                                             |  | 2004                                         |       | 2003                          |   | 2004  |  | 2003
|                                                                                                                                             |  | (dollars in thousands except per share data)
|Net income  as reported                                                                                                                     |  | $                                            | 2,661 |                               | $ | 2,376 |  | $    | 5,130 |  | $ | 4,560
|Deduct: Total stock-based employee compensation expense determined under fair value based method from all awards, net of related tax
effects |  |                                              | 222   |                               |   | 350   |  |      | 483   |  |   | 565  
|                                                                                                                                             |  |                                              |       |                               |   |       |  |      |       |  |   |      
|Net income  pro forma                                                                                                                       |  | $                                            | 2,439 |                               | $ | 2,026 |  | $    | 4,647 |  | $ | 3,995
|                                                                                                                                             |  |                                              |       |                              
|Earnings per share  as reported:                                                                                                            |  |                                              |       |                               |   |       |  |      |       |  |   |      
|Basic                                                                                                                                        |  | $                                            | .26   |                               | $ | .24   |  | $    | .50   |  | $ | .46  
|Diluted                                                                                                                                      |  |                                              | .26   |                               |   | .23   |  |      | .49   |  |   | .45  
|Earnings per share  pro forma                                                                                                               |  |                                              |       |                               |   |       |  |      |       |  |   |      
|Basic                                                                                                                                        |  | $                                            | .24   |                               | $ | .20   |  | $    | .45   |  | $ | .40  
|Diluted                                                                                                                                      |  |                                              | .23   |                               |   | .20   |  |      | .45   |  |   | .40  



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Note 2. INVENTORIES



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



|                |  |                           |        |               |   |       
|--------------- |  | ------------------------- | ------ | ------------- | - | ------
|                |  | September 30,2004         |        | March 31,2004
|                |  | (Unaudited)               |        |              
|                |  | (in thousands of dollars)
|Finished Goods  |  | $                         | 9,521  |               | $ | 9,753 
|Work in Process |  |                           | 95     |               |   |      
|Raw Materials   |  |                           | 8,563  |               |   | 8,863 
|                |  |                           |        |               |   |       
|Total           |  | $                         | 18,179 |               | $ | 18,616
|                |  |                           |        |               |   |       



Note 3. NET INCOME PER SHARE



Basic earnings per share is based on the weighted average number of
common shares outstanding without consideration of potential common shares. Diluted earnings per share is based on the weighted average number of common and potential common shares outstanding. The calculation takes into account the shares that may
be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average prices during the periods. Excluded from the calculation of earnings per share are options and
warrants to purchase 138,500 and 20,000 shares for the three (3) and six (6) months ended



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Item 1.



Note 3.(continued)



September 30, 2004 and 47,500 and 33,750 shares respectively for the three (3) and six (6) months ended September 30, 2003, as their inclusion would not have been dilutive. The following table sets forth the
computation of basic and diluted earnings per share for the three (3) and six (6) months ended September 30, 2004 and for the three (3) and six (6) months ended September 30, 2003.



|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|----------------------------------------------------------------------------- |  | -------------------------------------------- | ---------- | ------------------------------ | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                                              |  | Three Months EndedSeptember 30,              |            | Six Months Ended September 30,
|                                                                              |  | 2004                                         |            | 2003                           |   | 2004       |  | 2003
|                                                                              |  | (dollars in thousands except per share data)
|Numerator:                                                                    |  |                                              |            |                                |   |            |  |      |            |  |   |           
|                                                                              |  |                                              |            |                               
|Net income for basic and dilutive earnings per share                          |  | $                                            | 2,661      |                                | $ | 2,376      |  | $    | 5,130      |  | $ | 4,560     
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Denominator:                                                                  |  |                                              |            |                                |   |            |  |      |            |  |   |           
|                                                                              |  |                                              |            |                               
|Denominator for basic earnings per share - weighted average shares            |  |                                              | 10,254,603 |                                |   | 9,960,083  |  |      | 10,241,258 |  |   | 9,916,873 
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Effect of dilutive securities:                                                |  |                                              |            |                                |   |            |  |      |            |  |   |           
|                                                                              |  |                                              |            |                               
|Employee and director stock options                                           |  |                                              | 171,917    |                                |   | 221,808    |  |      | 187,868    |  |   | 242,317   
|Warrants                                                                      |  |                                              | 8,674      |                                |   | 8,916      |  |      | 8,796      |  |   | 7,829     
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Dilutive potential common shares                                              |  |                                              | 180,591    |                                |   | 230,724    |  |      | 196,664    |  |   | 250,146   
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Denominator for diluted earnings per share - adjusted weighted average shares |  |                                              | 10,435,194 |                                |   | 10,190,807 |  |      | 10,437,922 |  |   | 10,167,019
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Basic earnings per share                                                      |  | $                                            | .26        |                                | $ | .24        |  | $    | .50        |  | $ | .46       
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           
|Diluted earnings per share                                                    |  | $                                            | .26        |                                | $ | .23        |  | $    | .49        |  | $ | .45       
|                                                                              |  |                                              |            |                                |   |            |  |      |            |  |   |           



Note 4. STOCKHOLDERS EQUITY



For the three (3) and six (6) months ended September 30, 2004, 10,500 and
61,500 stock options were exercised by employees of the Company in accordance with the Companys 1989 Non-Qualified Stock Option Plan and the 1994 Stock Incentive Plan, respectively. The exercise price of the options exercised ranged from
$12.75 per share to $13.30 per share for the three (3) months ended September 30, 2004 and $3.00 per share to $13.30 per share for the six (6) months ended September 30, 2004.



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Item 1.



Note 4. (continued)



The net cash proceeds from these exercises were $139,000 and $784,000 for the three (3) and six (6) months ended September 30, 2004, respectively.



For the three (3) and six (6) months ended September 30, 2003, 6,350 and 280,850 stock options were exercised by employees and directors of
the Company in accordance with the Companys 1989 Non-Qualified Stock Option Plan, the 1994 Stock Incentive Plan, and the Companys 1996 Non-Employee Director Stock Option Plan, respectively. The exercise price of the options exercised
ranged from $4.00 per share to $12.75 per share for the three (3) months ended September 30, 2003 and $3.00 per share to $12.75 per share for the six (6) months ended September 30, 2003.



The net cash proceeds from these exercises were $37,000 and $703,000 for the three (3) and six (6) months ended September 30, 2003,
respectively. During the three (3) and six (6) months ended September 30, 2003, 2,500 warrants granted in July 2000 were exercised through the cashless exercise provision in the agreement, pursuant to which, 1,890 shares of the Companys common
stock were issued.



Note 5. IMPACT OF RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS



In November 2002, the Emerging Issues Task Force
(EITF) reached a consensus opinion on EITF 00-21, Revenue Arrangements with Multiple Deliverables. The consensus provides that revenue arrangements with multiple deliverables should be divided into separate units of
accounting if certain criteria are met. The consideration for the arrangement should be allocated to the separate units of accounting based on their relative fair values, with different provisions if the fair value of all deliverables are not known
or if the fair value is contingent on delivery of specified items or performance conditions. Applicable revenue recognition criteria should be considered separately for each separate unit of accounting. EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. Entities may elect to report the change as a cumulative effect adjustment in accordance with APB Opinion 20, Accounting Changes. Management believes the adoption of EITF
00-21 will not have a material effect on the Companys financial position or results of operations.



In December 2003, the FASB issued FASB Interpretation No. (FIN) 46R (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether
it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which
was issued in January 2003. The Company is required to apply FIN 46R to variable interests in variable interest entities as of March 31, 2004. Management believes that the application of this interpretation will not have a material effect on the
Companys financial condition or results of operations.



11



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##### Table of Contents

Item 1.



Note 6. OTHER MATTERS



The Company is a party to lawsuits arising out of the conduct of its ordinary course of business, including those related to product liability and the sale and distribution of its products, which management believes
are covered by insurance. While the results of such lawsuits cannot be predicted with certainty, management does not expect that the ultimate liabilities, if any, will have a material adverse effect on the financial position or results of operations
of the Company.



12



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##### Table of Contents

Item 2.



MANAGEMENTS
DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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, and (iv) 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 from 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 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, 2004.



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-looking 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.



13



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##### Table of Contents

Item 2.



Six Months ended September 30, 2004 compared to Six Months ended September 30, 2003



Overview



The following table sets forth certain operational data for the periods indicated:



|                                             |  |                               |        |      |   |       
|-------------------------------------------- |  | ----------------------------- | ------ | ---- | - | ------
|                                             |  | Six months endedSeptember 30,
|                                             |  | 2004                          |        | 2003
|                                             |  | (dollars in thousands)       
|Net sales                                    |  | $                             | 68,467 |      | $ | 62,977
|Gross profit                                 |  | $                             | 17,810 |      | $ | 16,626
|Selling, general and administrative expenses |  | $                             | 9,440  |      | $ | 8,765 
|Income before taxes                          |  | $                             | 8,185  |      | $ | 7,322 
|Net income                                   |  | $                             | 5,130  |      | $ | 4,560 



The following table sets forth certain
operational data as a percentage of net sales for the periods indicated:



|                                             |  |                                |   |  |      |  
|-------------------------------------------- |  | ------------------------------ | - |  | ---- | -
|                                             |  | Six months ended September 30, |  
|                                             |  | 2004                           |   |  | 2003 |  
|Net sales                                    |  | 100                            | % |  | 100  | %
|Gross profit                                 |  | 26.0                           | % |  | 26.4 | %
|Selling, general and administrative expenses |  | 13.8                           | % |  | 13.9 | %
|Income before taxes                          |  | 11.9                           | % |  | 11.6 | %
|Net income                                   |  | 7.5                            | % |  | 7.2  | %



The Company experienced its most
successful six months ever in terms of revenue and profitability. The Companys revenue increased by 9% to $68,467,000 and its net income increased by 13% to $5,130,000 for the six months ended September 30, 2004 over the six months ended
September 30, 2003.



Gross margin dollars increased primarily due to increased
sales volume from greater domestic market penetration primarily of its minor procedure kits and trays product line. Gross margin as a percentage of sales decreased slightly primarily due to lower average selling prices due to increased competition
in the domestic market.



The Companys financial condition was
strengthened during the six months ended September 30, 2004 as a result of net cash provided by operating activities of $7,089,000, which included $5,130,000 of net income and $1,156,000 of depreciation and amortization and net cash provided by
investing activities of $142,000. Investing activities included the repayment of loans to officers in the amount of $428,000. The Company also received $784,000 in proceeds from the exercise of



14



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##### Table of Contents

Item 2.



stock options. Those were the major factors in the Companys net paydown of long-term debt of $7,015,000, during the six months ended September 30, 2004 and
corresponding reduction in the Companys debt to equity ratio to .14 at September 30, 2004 from .30 at March 31, 2004.



Results of Operations



The following table sets forth the major sales variance components for the six months ended September 30, 2004 versus September 30, 2003:



|                                              |  |   |        |  
|--------------------------------------------- |  | - | ------ | -
|(dollars in thousands)                        | 
|Six months ended September 30, 2003 net sales |  | $ | 62,977 |  
|New products                                  |  |   | 616    |  
|Volume of existing products                   |  |   | 6,657  |  
|Price/mix                                     |  |   | (1,783 | )
|                                              |  |   |        |  
|Six months ended September 30, 2004 net sales |  | $ | 68,467 |  
|                                              |  |   |        |  



Net sales for the six months ended
September 30, 2004 increased $5,490,000 or 9% to $68,467,000 from $62,977,000 for the six months ended September 30, 2003. The increase in net sales was primarily attributed to a $3,531,000, or 23% increase in net sales of minor procedure kits and
trays, a $901,000, or 8% increase in net sales of operating room towels, a $445,000, or 2% increase in net sales of containment systems, a $368,000 or 112% increase in net sales of patient slippers and a $332,000 or 11% increase in net sales of
operating room accessories. Laparotomy sales dollars decreased $59,000 or 1%. The increase in net sales was primarily attributed to $616,000 of net sales of new products, an increase of $6,657,000 due to increased sales volume of existing products
and a decrease of $1,783,000 due to lower average selling prices and change in sales mix on existing products.



Net sales of minor procedure kits and trays, operating room towels, containment systems, patient slippers and operating room accessories increased primarily due to greater domestic market penetration. Unit sales of
operating room towels increased 16% and average selling prices decreased 7%. Unit sales of laparotomy sponges increased 3% and average selling prices decreased 4%. Management believes that the decrease in average selling prices of operating room
towels and laparotomy sponges was primarily due to increased competition in the domestic market, which it believes will continue throughout fiscal 2005.



The Company has entered into agreements with nearly every major group purchasing organization. These agreements, which expire at various times over the next several
years, can be terminated typically on ninety (90) day advance notice and do not contain minimum purchase requirements. The Company, to date, has been able to achieve significant compliance to their respective member hospitals. The termination or
non-renewal of any of these agreements may result in the significant loss of business or lower average selling prices. In some cases, as these agreements are renewed, the average selling prices could be materially lower.



Collection systems for the containment of medical waste is the Companys largest product
line. The primary raw material utilized in the manufacture of this product line is plastic resin. During fiscal 2004, world events caused the cost of plastic resin to increase and be extremely volatile. The Company anticipates this volatility to
continue in fiscal 2005. In the past, the Company has been



15



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##### Table of Contents

Item 2.



able, from time to time, to increase selling prices for certain of these products to recover a portion of the increased cost. However, the Company is unable to give any
assurance that it will be able to pass along future cost increases to its customers, if necessary.



Gross profit for the six months ended September 30, 2004 increased 7% to $17,810,000 from $16,626,000 for the six months ended September 30, 2003. Gross profit as a percentage of net sales was 26.0% and 26.4% for the
six months ended September 30, 2004 and 2003, respectively. The increase in gross profit dollars was primarily attributable to the increase in net sales. The decrease in gross margin percentage was due primarily to lower average selling prices.



The following table sets forth sales, cost of sales and selling, general and
administrative expense data for the periods indicated:



|                                             |  |                               |        |   |      |   |        |  
|-------------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ------ | -
|                                             |  | Six months endedSeptember 30, |       
|                                             |  | 2004                          |        |   | 2003 |  
|                                             |  | (dollars in thousands)        |       
|Net sales                                    |  | $                             | 68,467 |   |      | $ | 62,977 |  
|Cost of sales                                |  |                               | 50,657 |   |      |   | 46,351 |  
|Gross profit                                 |  | $                             | 17,810 |   |      | $ | 16,626 |  
|Gross profit percentage                      |  |                               | 26.0   | % |      |   | 26.4   | %
|Selling, general and administrative expenses |  |                               | $9,440 |   |      |   | $8,765 |  
|As a percentage of net sales                 |  |                               | 13.8   | % |      |   | 13.9   | %



Selling, general and administrative
expenses for the six months ended September 30, 2004 increased 8% to $9,440,000 from $8,765,000 for the six months ended September 30, 2003. As a percentage of net sales, selling, general and administrative expenses decreased to 13.8% for the six
months ended September 30, 2004 from 13.9% for the six months ended September 30, 2003. Selling, general and administrative expenses increased primarily due to the increased insurance expense associated with the Companys growth, increased
amortization of bank fees associated with accelerated principal payments, increased outside accounting costs associated with Sarbanes-Oxley Section 404 compliance and increased payroll related expenses.



Interest expense for the six months ended September 30, 2004 decreased 66% to $193,000 from
$574,000 for the six months ended September 30, 2003. The decrease in interest expense was attributable to a decrease in the average principal loan balances during the six months ended September 30, 2004, as compared to the six months ended
September 30, 2003. The decrease in principal loan balances outstanding was primarily attributable to net cash provided by operating activities.



Net income for the six months ended September 30, 2004 increased to $5,130,000 from $4,560,000 for the six months ended September 30, 2003. The increase in net income is
attributable to the aforementioned increase in net sales and gross profit and a decrease in interest expense, which were partially offset by an increase in selling, general and administrative expenses.



16



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##### Table of Contents

Item 2.



Three Months ended September 30, 2004 compared to Three Months ended September 30, 2003



Overview



The following table sets forth certain operational data for the periods indicated:



|                                             |  |                                 |        |      |   |       
|-------------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                                             |  | Three months endedSeptember 30,
|                                             |  | 2004                            |        | 2003
|                                             |  | (dollars in thousands)         
|Net sales                                    |  | $                               | 35,146 |      | $ | 32,356
|Gross profit                                 |  | $                               | 9,020  |      | $ | 8,481 
|Selling, general and administrative expenses |  | $                               | 4,697  |      | $ | 4,396 
|Income before taxes                          |  | $                               | 4,247  |      | $ | 3,850 
|Net income                                   |  | $                               | 2,661  |      | $ | 2,376 



The following table sets forth certain
operational data as a percentage of net sales for the periods indicated:



|                                             |  |                                 |   |  |      |  
|-------------------------------------------- |  | ------------------------------- | - |  | ---- | -
|                                             |  | Three months endedSeptember 30, |  
|                                             |  | 2004                            |   |  | 2003 |  
|Net sales                                    |  | 100                             | % |  | 100  | %
|Gross profit                                 |  | 25.7                            | % |  | 26.2 | %
|Selling, general and administrative expenses |  | 13.4                            | % |  | 13.6 | %
|Income before taxes                          |  | 12.1                            | % |  | 11.9 | %
|Net income                                   |  | 7.6                             | % |  | 7.3  | %



The Company experienced its most
successful quarter ever in terms of revenue and profitability. The Companys revenue increased by 9% to $35,146,000 and its net income increased by 12% to $2,661,000 for the quarter ended September 30, 2004 over the quarter ended September 30,
2003.



Gross margin dollars increased primarily due to increased sales volume
from greater domestic market penetration primarily of its minor procedure kits and trays product line. Gross margin as a percentage of sales decreased slightly primarily due to lower average selling prices due to increased competition in the
domestic market.



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##### Table of Contents

Item 2.



Results of Operations



The following table sets forth the major sales variance components for the quarter ended September 30, 2004 versus September 30, 2003:



|                                                |  |   |        |  
|----------------------------------------------- |  | - | ------ | -
|(dollars in thousands)                          | 
|Three months ended September 30, 2003 net sales |  | $ | 32,356 |  
|New products                                    |  |   | 307    |  
|Volume of existing products                     |  |   | 3,573  |  
|Price/mix                                       |  |   | (1,090 | )
|                                                |  |   |        |  
|Three months ended September 30, 2004 net sales |  | $ | 35,146 |  
|                                                |  |   |        |  



Net sales for the three months ended
September 30, 2004 increased $2,790,000 or 9% to $35,146,000 from $32,356,000 for the three months ended September 30, 2003. The increase in net sales was primarily attributed to a $1,646,000, or 20% increase in net sales of minor procedure kits and
trays, a $507,000, or 9% increase in net sales of operating room towels a $242,000, or 118% increase in net sales of patient slippers and a $401,000 or 4% increase in containment systems. Laparotomy sponge sales dollars increased $14,000 or 0.4%.
The increase in net sales was primarily attributed to $307,000 of net sales of new products, an increase of $3,573,000 due to increased sales volume of existing products and a decrease of $1,090,000 due to lower average selling prices and change in
sales mix on existing products.



Net sales of minor procedure kits and trays,
operating room towels, patient slippers and containment systems increased primarily due to greater domestic market penetration. Unit sales of operating room towels increased 13% and average selling prices decreased 3%. Unit sales of laparotomy
sponges increased 4% and average selling prices decreased 4%. Management believes that the decrease in average selling prices of operating room towels and laparotomy sponges was primarily due to increased competition in the domestic market, which it
believes will continue throughout fiscal 2005.



The Company has entered into
agreements with nearly every major group purchasing organization. These agreements, which expire at various times over the next several years, can be terminated typically on ninety (90) day advance notice and do not contain minimum purchase
requirements. The Company, to date, has been able to achieve significant compliance to their respective member hospitals. The termination or non-renewal of any of these agreements may result in the significant loss of business or lower average
selling prices. In some cases, as these agreements are renewed, the average selling prices could be materially lower.



Collection systems for the containment of medical waste is the Companys largest product line. The primary raw material utilized in the manufacture of this product
line is plastic resin. During fiscal 2004, world events caused the cost of plastic resin to increase and be extremely volatile. The Company anticipates this volatility to continue in fiscal 2005. In the past, the Company has been able, from time to
time, to increase selling prices for certain of these products to recover a portion of the increased cost. However, the Company is unable to give any assurance that it will be able to pass along future cost increases to its customers, if necessary.



18



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##### Table of Contents

Item 2.



Gross profit for the three months ended September 30, 2004 increased 6% to $9,020,000 from $8,481,000 for the three months ended September 30, 2003. Gross profit as a
percentage of net sales was 25.7% and 26.2% for the three months ended September 30, 2004 and 2003, respectively. The increase in gross profit dollars was primarily attributable to the increase in net sales. The decrease in gross margin percentage
was due primarily to lower average selling prices and to a lesser extent a change in sales mix.



The following table sets forth sales, cost of sales and selling, general and administrative expense data for the periods indicated:



|                                             |  |                                 |        |   |      |   |        |  
|-------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                             |  | Three months endedSeptember 30, |       
|                                             |  | 2004                            |        |   | 2003 |  
|                                             |  | (dollars in thousands)          |       
|Net sales                                    |  | $                               | 35,146 |   |      | $ | 32,356 |  
|Cost of sales                                |  |                                 | 26,126 |   |      |   | 23,875 |  
|Gross profit                                 |  | $                               | 9,020  |   |      | $ | 8,481  |  
|Gross profit percentage                      |  |                                 | 25.7   | % |      |   | 26.2   | %
|Selling, general and administrative expenses |  | $                               | 4,697  |   |      | $ | 4,396  |  
|As a percentage of net sales                 |  |                                 | 13.4   | % |      |   | 13.6   | %



Selling, general and administrative
expenses for the three months ended September 30, 2004 increased 7% to $4,697,000 from $4,396,000 for the three months ended September 30, 2003. As a percentage of net sales, selling, general and administrative expenses decreased to 13.4% for the
three months ended September 30, 2004 from 13.6% for the three months ended September 30, 2003. Selling, general and administrative expenses increased primarily due to the increase in outside accounting fees associated with Sarbanes-Oxley Section
404 compliance and increased payroll related expenses.



Interest expense for
the three months ended September 30, 2004 decreased 69% to $78,000 from $252,000 for the three months ended September 30, 2003. The decrease in interest expense was attributable to a decrease in the average principal loan balances during the three
months ended September 30, 2004, as compared to the three months ended September 30, 2003. The decrease in principal loan balances outstanding was primarily attributable to net cash provided by operating activities.



Net income for the three months ended September 30, 2004 increased to $2,661,000 from
$2,376,000 for the three months ended September 30, 2003. The increase in net income is attributable to the aforementioned increase in net sales and gross profit and a decrease in interest expense, which were partially offset by an increase in
selling, general and administrative expenses.



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##### Table of Contents

Item 2.



Liquidity and Capital Resources



The following table sets forth certain liquidity and capital resources data for the periods indicated:



|                         |  |                        |  |                |       
|------------------------ |  | ---------------------- |  | -------------- | ------
|                         |  | September 30, 2004     |  | March 31, 2004
|                         |  | (dollars in thousands)
|Accounts Receivable, net |  | $10,910                |  | $              | 10,670
|Days Sales Outstanding   |  | 28.7                   |  |                | 30.1  
|Inventories, net         |  | $18,179                |  | $              | 18,616
|Inventory Turnover       |  | 5.5                    |  |                | 5.4   
|Current Assets           |  | $30,774                |  | $              | 31,066
|Working Capital          |  | $17,786                |  | $              | 17,433
|Current Ratio            |  | 2.4                    |  |                | 2.3   
|Total Borrowings         |  | $9,065                 |  | $              | 17,080
|Shareholders Equity     |  | $63,203                |  | $              | 56,807
|Debt to Equity Ratio     |  | 0.14                   |  |                | 0.30  



The Company had working capital of
$17,786,000 with a current ratio of 2.4 to 1 at September 30, 2004 as compared to working capital of $17,433,000 with a current ratio of 2.3 to 1 at March 31, 2004. Total borrowings outstanding, including Industrial Revenue Bonds of $3,340,000, were
$9,065,000 with a debt to equity ratio of .14 to 1 at September 30, 2004 as compared to $17,080,000 with a debt to equity ratio of .30 to 1 at March 31, 2004. The decrease in total borrowings outstanding at September 30, 2004 was primarily
attributable to net cash provided by operating activities of $7,089,000, proceeds from exercise of employee stock options of $784,000 and proceeds from the repayment of loans to officers in the amount of $428,000.



The Company has financed its operations primarily through cash flow from operations and
borrowings from its existing credit facilities. The Company had a cash balance of $545,000 at September 30, 2004 and March 31, 2004.



The Companys operating activities provided cash of $7,089,000 for the six months ended September 30, 2004 as compared to $6,998,000 provided for the six months
ended September 30, 2003. Net cash provided for the six months ended September 30, 2004 consisted primarily of net income from operations, decreases in inventories, depreciation, amortization and increases in income taxes payable. These sources of
cash more than offset the decreases in accounts payable and increases in accounts receivable. The decrease in accounts payable was due to purchasing strategies during the quarter ended March 31, 2004 so as to procure lower costs on certain inventory
items.



Investing activities provided net cash of $142,000 and used net cash of
$199,000 for the six months ended September 30, 2004 and September 30, 2003, respectively. The principal activity during the six months ended September 30, 2004 was repayment of loans to officers in the amount of $428,000, which was partially offset
by $306,000 of cash used to purchase property and equipment.



20



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##### Table of Contents

Item 2.



Financing activities used cash of $7,231,000 for the six months ended September 30, 2004 compared to $7,122,000 used for the six months ended September 30, 2003.
Financing activities consisted of net principal payments under the Companys existing credit facility of $8,015,000. Other financing activities include cash proceeds from the exercise of stock options of $784,000.



At September 30, 2004, the Company had no material commitments for capital expenditures.



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



Item 3.



Quantitative and Qualitative
Disclosures about Market Risk



The Company is exposed to interest rate
change market risk with respect to its credit facility with a financial institution which is priced based on the alternate base rate of interest plus a spread of up to 3/4%, or at LIBOR rate plus a spread of up to 31/4%. The spread over the alternate base rate and LIBOR rates is determined based upon the Companys performance with regard to agreed-upon financial ratios. The Company decides at its sole discretion as to whether borrowings will
be at the alternate base rate or LIBOR. At September 30, 2004, $4,000,000 was outstanding under the credit facility. Changes in the alternate base rates or LIBOR rates during fiscal 2005 will have a positive or negative effect on the Companys
interest expense. Each 1% fluctuation in the interest rate will increase or decrease interest expense for the Company by approximately $40,000 on an annualized basis.



In addition, the Company is exposed to interest rate change market risk with respect to the proceeds received from the issuance and sale by
the Buncombe County Industrial and Pollution Control Financing Authority Industrial Development Revenue Bonds. At September 30, 2004, $3,340,000 was outstanding for these Bonds. The Bonds bear interest at a variable rate determined weekly. During
the six months ended September 30, 2004, the average interest rate on the Bonds approximated 1.3%. Each 1% fluctuation in interest rates will increase or decrease the interest expense on the Bonds by approximately $33,000 on an annualized basis.



A significant portion of the Companys raw materials are purchased from
China. All such purchases are transacted in U.S. dollars. The Companys financial results, therefore, could be impacted by factors such as changes in foreign currency, exchange rates or weak economic conditions in foreign countries in the
procurement of such raw materials. To date, sales of the Companys products outside the United States have not been significant.



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##### Table of Contents

Item 4.



Procedures and Controls



The Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of September 30, 2004. Based on this evaluation, the Companys Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the
Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms. Such evaluation did not identify any change in the Companys internal control over financial reporting that occurred during the six months
ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

MEDICAL ACTION INDUSTRIES INC.



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



| | A. | The Registrant held its Annual Meeting of Stockholders on August 5, 2004.
| | -- | -------------------------------------------------------------------------



| | B. | Two Directors were elected at the Annual Meeting to serve until the Annual Meeting of Stockholders in 2007. The names of the Directors and votes cast in favor of their
election and votes withheld are as follows:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |           |  |               
|----------------- |  | --------- |  | --------------
|Name              |  | Votes for |  | Votes Withheld
|Bernard Wengrover |  | 9,115,784 |  | 267,865       
|Paul D. Meringolo |  | 9,115,784 |  | 267,865       



and, a nominee to
serve in Class III until the Annual Meeting of Stockholders in 2005:



|                 |  |           |  |        
|---------------- |  | --------- |  | -------
|William W. Burke |  | 9,115,784 |  | 267,865



| | C. | The stockholders approved a proposal to approve amendments to the Companys 1994 Stock Incentive Plan (Incentive Plan) to require (i) stock awards granted
thereunder not vest prior to one (1) year if based upon performance criteria; and three (3) years pro rata if time based, (ii) any such restriction not be waived except under certain circumstances; and, (iii) Stockholder approval in order to
materially amend or increase any benefit under the Incentive Plan; 6,495,593 shares voted in favor of the proposal, 443,922 shares voted against and 33,179 shares abstained from voting.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | D. | The stockholders also approved a proposal to ratify the appointment of Grant Thornton LLP as independent certified public accountants of the Company for the fiscal year ended March
31, 2005; 9,267,966 shares voted in favor of the proposal, 104,134 shares voted against and 11,549 shares abstained from voting.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 5. Other Information



None



Item 6. Exhibits and Reports on Form 8-K



| | (a) | Exhibits
| | --- | --------



31.1 and 31.2  Certifications pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002



32.1 and 32.2  Certifications pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002



| | (b) | Reports on Form 8-K
| | --- | -------------------



| | (i) | Current Report on Form 8-K dated July 23, 2004, covering Item 5.02.  Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers and
Item 9.01.  Financial Statements and Exhibits
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Current Report on Form 8-K dated July 29, 2004, covering Item 7  Financial Statements and Exhibits and Item 12  Results of Operations and Financial Condition
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Current Report on Form 8-K dated August 6, 2004, covering Item 5.02.  Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers
and Item 9.01.  Financial Statements and Exhibits
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



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##### Table of Contents

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|----------------------- |  | ------------------------------ |  | ----------------------------------------------------------------------------
|                        |  | MEDICAL ACTION INDUSTRIES INC.
|                        |  |                               
|Dated: October 29, 2004 |  | By:                            |  | /s/ Richard G. Satin                                                        
|                        |  |                                |  | Richard G. Satin                                                            
|                        |  |                                |  | Principal Financial Officer Vice President of Operations and General Counsel