SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                           -----------------------

                                    FORM 10-K
                           ------------------------

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

     For the fiscal year ended November 1, 1998
                                       OR
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

      For the transition period from  ........... to ............

                         Commission File Number 0-18208

                              MAXXIM MEDICAL, INC.
             (Exact name of registrant as specified in its charter)


                                TEXAS 76-0291634
                  (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
                      OF INCORPORATION) IDENTIFICATION NO.)

               10300 49th Street North, Clearwater, Florida 33762
               (Address of principal executive offices) (zip code)
        Registrant's telephone number, including area code: 813-561-2100

                            -----------------------

Securities  registered pursuant to Section 12(b) of the Act:

  Title of each class              Name of each exchange on which registered

  Common Stock, $.001 par value    New York Stock Exchange

Securities  registered pursuant to Section 12(g) of the Act:
                                      None

      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  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ].

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

     The aggregate  market value of the  registrant's  Common  Stock,  $.001 par
value,  held by  non-affiliates  of the  registrant as of January 15, 1999,  was
$398,411,581  based  on the  closing  price on that  date on the New York  Stock
Exchange.  As of January 15, 1999,  14,260,562 shares of the registrant's Common
Stock, $.001 par value, were outstanding.
                       Documents Incorporated by Reference

     Portions of the Registrant's definitive proxy statement for the 1999 Annual
Meeting  of  Shareholders  to be filed  pursuant  to  Regulation  14A  under the
Securities  Exchange  Act of 1934 are  incorporated  herein by reference in Part
III, Items 10, 11, 12, and 13.
================================================================================

<PAGE>



                           ANNUAL REPORT ON FORM 10-K

Item 1:       Business

Overview

     Maxxim Medical is a major, diversified developer, manufacturer, distributor
and marketer of disposable  specialty  medical products such as custom procedure
trays,  medical  gloves,   cardiology  and  interventional  radiology  products,
containment products,  infection control products,  and electrosurgical  systems
primarily for use in the  operating  room at hospitals or surgery  centers.  The
Company is the second largest  provider of sterilized  custom procedure trays in
the United States and believes that it currently  controls  approximately 29% of
that market,  as well as  approximately  58% of the rapidly  growing  acute care
market for  non-latex  examination  gloves.  Subsequent to year end, the Company
entered the  endoscopy  market  through the  acquisition  of Circon  Corporation
("Circon").
See "Recent Developments."

     The Company sells over 23,000 products to  approximately  7,000 accounts in
North  America  and  Europe.  Products  are  distributed  through  four  primary
distribution  channels:  North American  Surgical sales,  North American Medical
sales, European sales, and Original Equipment Manufacturing  (OEM)/Export sales.
Products  included in the  Surgical  distribution  channel are custom  procedure
trays, drapes and gowns, imaging products, and electrosurgery devices.  Products
included in the Medical  distribution  channel are non-latex medical examination
and surgical gloves, critical care products, containment products, and IV safety
devices.  The  Company's  European  operation  distributes  all of the Company's
products  through  a direct  sales  force in the  Benelux  region  and  utilizes
distributors  throughout  the remainder of Europe.  The European  operation also
manufactures  and distributes  Medica products which are  self-manufactured  and
assembled  single-use  hospital  supply  products and custom  procedure kits for
transfusion,   infusion  and  patient  monitoring.   The  Company  maintains  an
administrative  staff to support  sales of its  products  to OEM  customers  and
international customers outside of North America and Europe.

     The Company has  experienced  significant  growth since its initial  public
offering  in  1990,  principally  by  successfully   integrating  several  major
acquisitions of specialty medical products and custom procedure tray businesses.
Since fiscal 1989,  these  acquisitions,  combined  with internal  growth,  have
generated  a compound  annual  growth  rate of 46.4% in net sales,  45.2% in net
income and 15.2% in diluted earnings per share.  Significant recent acquisitions
include Sterile Concepts and Circon.  In July 1996, the Company acquired Sterile
Concepts,  which  increased  its custom  procedure  tray  business  by over 200%
thereby dramatically expanding the Company's vertical integration opportunities.
In January  1999,  subsequent  to the  Company's  fiscal  year end,  the Company
acquired  all of the  outstanding  common  stock  of  Circon  Corporation.  This
acquisition  will provide the Company  with an array of  endoscope  products and
will enhance its ability to compete in the healthcare  market place. See "Recent
Developments."

Industry Trends

     The  Company's  products  compete in the  multi-billion  dollar  market for
specialty medical products. Management believes that demand in the United States
for the Company's single-use medical products has been favorably impacted by the
emphasis  on  less  invasive  surgical  procedures,   outpatient  care  and  the
continuing  pressure  to  improve  productivity,  contain  costs and  reduce the
transmission of infectious  diseases.  Demographic  trends, such as the aging of
the population, have also had a favorable effect on the demand for the Company's
products since older people generally require more medical care and undergo more
surgical procedures.

      Although the aggregate number of surgical  procedures  performed in Europe
is approximately  equivalent to the number of surgical  procedures  performed in
the United States,  the prevalence of single-use  products and custom  procedure
trays in Europe is not as great as in the United  States.  The Company  believes
that  European  healthcare  providers  will  increase  their  use of  disposable
products  and custom  procedure  trays for  substantially  the same reasons that
caused United States healthcare  providers to do so. Certain European  countries
have implemented healthcare price controls and have experienced consolidation of
hospitals  and  shifting  of surgical  procedures  away from  hospitals  towards
outpatient  surgery centers.  The Company believes that these  developments will
increase  the  demand  among  European  healthcare  providers  for  the  greater
efficiency and productivity  associated with the single-use products of the type
it manufactures.

     Management  believes that there has been a growing trend by large customers
to concentrate their purchases of medical products with fewer, larger suppliers,
and that recent  acquisitions,  including  Sterile  Concepts  and  Circon,  have
significantly  improved the Company's ability to attract and service such larger
customers.  Management  believes  that this trend will  continue  to benefit the
Company as it grows and diversifies its product lines.

     The growth in the market for  gloves,  both latex and  non-latex,  over the
past  several  years has largely  resulted  from the  increased  concerns  among
healthcare  professionals  over protection  from the  transmission of infectious
diseases,  particularly HIV and Hepatitis B. The non-latex  segment of the glove
market  has grown  rapidly  principally  as a result of  reported  increases  in
allergic  reactions to the water  soluble  proteins in latex and to the chemical
and other additives used in processing latex and manufacturing  latex gloves. In
1991, the FDA issued a medical alert warning healthcare  professionals about the
increased  incidence  of allergic  reactions to latex  medical  products by both
medical personnel and patients.

Strategic Objectives

     The  Company's  goal  is to  be a  major,  profitable  medical  company  by
enhancing its position as a leading  developer,  manufacturer,  distributor  and
marketer of a diversified range of single-use specialty medical products for use
in medical treatment  facilities,  both domestically and abroad. To achieve this
long-term  goal, the Company's  objectives in fiscal 1999 are to: (i) assimilate
Circon,  (ii) continue to increase  sales,  (iii) improve  profitablility,  (iv)
increase shareholder value with continued improvement in earnings per share, (v)
expand its European presence and (vi) continue product line expansions.

         Assimilate  Circon.  (See "Recent  Developments"  for a description  of
         Circon's products and markets) In certain respects, the assimilation of
         Circon will be challenging due to the size of the  organization and its
         recent sub-par financial  performance.  In other respects,  the Company
         will easily realize  benefits due to Circon's  technological  expertise
         and  management  experience.  However,  in  order to  achieve  the full
         benefit of the  acquisition,  the  Company  must  immediately  begin to
         leverage   selling   relationships,   manufacturing   competences   and
         technological  expertise to create  opportunities to improve short-term
         and long-term financial results.

         Continue to Increase  Sales.  Many of the product  lines and markets in
         which  the  Company  participates  are  very  competitive.  It  is  the
         Company's desire to have a leading or substantial  market share in each
         of the  markets  it  services.  The  custom  procedure  tray  market is
         especially  important to the Company because it is the vehicle which is
         instrumental  to selling  single-use  products  to  medical  providers.
         Therefore,  a  focus  on  increasing  sales  in all  product  lines  is
         fundamental to the Company.

         Improve  Profitability.  Vertical  integration of Company  manufactured
         products in procedure  trays;  maximizing  the  utilization  of Company
         facilities;   emphasizing   relationships  with  large  buying  groups,
         healthcare provider networks and healthcare distributors;  as well as a
         constant  focus on the reduction of operating  expenses have been,  and
         will  continue to be, an important  and integral  part of the Company's
         strategy to increase profitability.

         Increase  Shareholder Value by Continuing  Improvements in Earnings per
         Share. The Company has achieved a 15.2%  compounded  annual growth rate
         in diluted  earnings  per share  since its initial  public  offering in
         1990.  The Company has a goal of maintaining at least a 15% increase in
         diluted earnings per share going forward.

         Expand European  Presence.  Management  believes that the international
         market  for  single-use  medical  products  is in the  early  stage  of
         development.  The Company first  established its beachhead in Europe in
         January 1995. In fiscal 1998, European sales were $45.8 million or 8.8%
         of total Company sales. As the aggregate number of procedures performed
         in Europe is  approximately  equivalent to those in the United  States,
         the  Company  feels  it  has  significant  opportunity  to  expand  its
         penetration of European healthcare markets. .

         Continue  Product Line  Expansions.  The Company  continually  conducts
         research and  development of new products and  enhancements to existing
         products.  In particular,  product  improvement and line extension have
         been, and are expected to continue to be, important sources of revenue.
         Another  part of the  Company's  strategy  has  been  to add or  expand
         product lines through acquisitions, enabling the Company to develop its
         core business of  manufacturing,  distributing and marketing  specialty
         medical products. The Company believes that the acquisitions of Sterile
         Concepts and Circon,  as well as the glove product lines  acquired from
         Becton  Dickinson  ("Glove  Operations"),   have  significantly  helped
         further this strategy. With Sterile Concepts, the Company increased its
         custom tray business by over 200%,  providing  greater direct  customer
         contact while  increasing the Company's  distribution of its disposable
         medical  products.  The Company  entered the medical  glove market as a
         worldwide market leader by acquiring the glove operations. The addition
         of Circon  expands the  Company's  products into the field of endoscopy
         with  offerings  of  both  capital  equipment  and  disposable  medical
         products. Geographically,  these acquisitions provided the Company with
         expanded  manufacturing coverage of domestic and international markets.
         The Company  intends to continue to pursue  acquisitions  of businesses
         and product lines that promote its strategy and complement its existing
         product  offerings  or  increase  market  share,  and to  continue  its
         internal  product  development  and  enhancement  efforts  in  order to
         increase the number of products  that can be sold  directly or included
         in its custom procedure trays.

Products

     Custom  Procedure  Trays  --  The  Company  assembles  and  markets  custom
procedure trays for use in a variety of medical and surgical procedures.  Custom
procedure trays are assembled with single-use products selected by the operating
room personnel  performing a certain  medical or surgical  procedure.  Among the
types of  single-use  medical or  surgical  products  typically  included in the
custom  procedure trays are surgical  gowns,  surgical  drapes,  electrosurgical
accessories, instruments, needles, gloves, syringes, tubing, sponges, towels and
gauze.  The  Company's  ValuQuote(TM)  system  allows  account  managers to meet
customers on-site to design  cost-effective custom procedure tray configurations
in accordance with individual customer specifications,  from a selection of over
9,000 component  parts,  which are  manufactured  either by the Company or third
party vendors.  The  computer-aided  design of custom  procedure tray prototypes
helps to ensure that client  product and sequencing  needs are met.  Assembly of
custom  procedure  trays is then  performed in  facilities  located in Temecula,
California,  Clearwater,  Florida,  Richmond,  Virginia and Athens,  Texas.  The
Company's  EnCompass(TM)  program  bundles the customer's  choice of sterile and
nonsterile procedure-based products and then converts into an efficient disposal
system after use.  World-wide  custom procedure tray sales were  $307,862,000 in
fiscal 1998 or 59% of the Company's net sales.

     Gloves -- The Company manufactures and distributes a complete line of
surgical and non-latex medical  examination  gloves. The gloves,  which are sold
under  brand  names  such  as   Tru-Touch(TM),   SensiCare(TM),   Tradition(TM),
Eudermic(TM),   Integron(TM)  and  Neolon(TM),   are  manufactured  from  latex,
synthetic rubber and various non-latex materials and are offered lightly powered
or powderfree. The Company's non-latex medical examination gloves currently hold
an  estimated  58% share of the United  States  acute care  market.  The Company
believes  that  its  non-latex  medical  examination  gloves  provide  a  viable
alternative  to traditional  latex medical  examination  gloves,  and the recent
concern of healthcare  professionals about purported allergic reactions to latex
medical  examination  gloves has increased  demand for the  Company's  non-latex
medical  examination  and  surgical  gloves,   particularly  for  the  Company's
SensiCare(TM),  Tru-Touch(TM)  and Neolon(TM)  gloves.  The Company continues to
research  and  develop new  compounds  to improve its  non-latex  products.  The
gloves,  together  with drape and gown  products,  allow the  Company to provide
healthcare  personnel  with  infection  control  apparel from head to foot.  The
gloves  are  manufactured  at the  Company's  facilities  in Honea  Path,  South
Carolina,  Los  Gatos,  California,   Eaton,  Ohio,  Mississauga,   Canada,  and
Aalst/Erembodegem,   Belgium.   The  highly  mechanized,   non-labor   intensive
facilities  in  California,  Ohio,  Canada and Belgium are  currently  producing
non-latex medical examination gloves  continuously at full capacity.  World-wide
glove sales were $109,784,000 in fiscal 1998 or 21% of the Company's net sales.

     Other Products -- The Company manufactures single-use specialty vascular 
access and pressure  monitoring  products for the cardiology and  interventional
radiology  markets as well as a range of  medical  waste  containment  products,
sharps  disposals,  a complete line of single-use,  non-woven  infection control
apparel for operating room  personnel,  patient  draping  systems,  a variety of
single-use  medical bowls and  containers,  a line of  electrosurgery  accessory
products   and   Medica   products.   Medica   products   consist   of   various
self-manufactured  and assembled  single-use hospital supply products and custom
procedure  kits for  transfusion,  infusion and patient  monitoring.  World-wide
sales of these products outside of custom  procedure trays were  $104,870,000 or
20% of the Company's net sales.

Product Development and Patents

     The Company is continually  conducting research and developing new products
utilizing a team  approach  that  involves its  engineering,  manufacturing  and
marketing  resources.  Although  the Company  has  developed a number of its own
products,  most of its research and development  efforts have  historically been
directed towards product improvement and enhancement of previously  developed or
acquired products.  Company research and development expenses were approximately
$5,649,000,   $5,158,000,   and  $5,124,000  in  fiscal  1998,  1997  and  1996,
respectively.

     The Company actively pursues a policy of seeking patent  protection both in
the U.S. and abroad for its  proprietary  technology.  There can be no assurance
that the  Company's  patents will not be  invalidated  or that any issued patent
will provide  protection  that has  commercial  significance.  Litigation may be
necessary to protect the  Company's  patent  position.  Such  litigation  may be
costly and time  consuming,  and there can be no assurance that the Company will
be successful  in such  litigation.  Since no patent  covers  product sales that
constituted  5% or more of net sales of the Company in fiscal 1998,  the Company
does not believe that the  invalidation  of any patents  owned by or licensed to
the  Company  would  have  a  material  adverse  effect  on it or  its  business
prospects.  While the  protection  of  patents  is  important  to the  Company's
business, management does not believe any one patent is essential to the success
of the Company.

     The Company  also  relies on trade  secrets  and  continuing  technological
advancement  to maintain  its  competitive  position.  It is the practice of the
Company  to  enter  into  confidentiality  agreements  with  key  employees  and
consultants.  There can be no  assurance,  however,  that  these  measures  will
prevent the  unauthorized  disclosure or use of the Company's  trade secrets and
know-how or that others may not  independently  develop similar trade secrets or
know-how  or  obtain  access  to  the  Company's  trade  secrets,   know-how  or
proprietary technology.

     Maxxim Medical is a registered trademark of the Company.  Argon(TM),  Argon
BiCath(R),  Argo-Bagz(TM),  Boundary(R),  Cool  Zone(TM),  Dextron(TM),  Dextren
Clear(TM), Dextron PF(TM), EnCompass(TM),  Eudermic(TM),  Jawz(TM),  Medica(TM),
Neolon(TM), Procedure Based Case Management(TM),  SensiCare(R), SensiCare PF(R),
SmartCart(TM),   Sterile   Design(R),   Sterile   Concepts(TM),   Tradition(TM),
Tru-Touch(R)  and  ValuQuote(TM)  are  proprietary  common law trademarks of the
Company.

Manufacturing and Distribution

     The Company's products are manufactured  and/or assembled from a variety of
component  parts and  materials,  all of which are  expected  to  continue to be
readily  available  at  reasonable  costs  from a variety of  manufacturers  and
suppliers.  Most of the medical and surgical  specialty products included in the
Company's   procedure  trays  are  purchased  from  other  domestic  or  foreign
manufacturers.   The  Company's  glove   manufacturing   facilities  are  highly
mechanized,  unlike  most of the  Company's  other  operations  which  are labor
intensive. For products other than gloves, the Company's remaining manufacturing
operations currently operate using one or two shifts per day, so the Company has
capacity to produce  additional  product by adding additional  shifts.  The four
exam  glove  manufacturing   facilities  operate  almost  continuously  at  full
capacity.

     In  North  America,   the  Company  has  twenty-one   distribution  centers
throughout the United States and Ontario,  Canada.  Customers may choose to have
products  delivered  directly  from one of  these  distribution  centers  or the
regional  or  national  distributor  of their  choice.  In Europe,  the  Company
utilizes a contract warehousing and logistics company to deliver products to its
customers and distributors.  The Company's products are primarily  warehoused at
facilities  in the  Netherlands  and Belgium  which are linked to the  Company's
European   computer  system  at  its   headquarters  in   s'Hertogenbosch,   the
Netherlands.

Sales and Marketing

     Management  believes  that its approach to selling is  consistent  with the
desires of its customers to identify with  individual  account  managers who are
supported by product specialists. The Company believes that maintenance of these
product  specialists  enables  it to  provide  better  customer  service  and to
maintain  specialized  expertise in each product  line.  The  Company's  account
managers  typically  attempt to  establish  and  maintain  direct  contact  with
operating room personnel or other medical  professionals  that directly  utilize
the  Company's  procedure  trays and  specialty  products.  As  medical  product
purchases  are  typically  made on a  centralized  basis by hospital  purchasing
departments, and increasingly by healthcare networks, account managers must also
maintain  relationships with purchasing  department  personnel.  The Company has
approximately  145 account  managers  representing its products in North America
and 24 in Europe.

     The Company's products are typically  purchased pursuant to purchase orders
or supply agreements in which the purchaser  specifies whether such products are
to be supplied  through a national  distributor or directly by the Company.  The
Company  derives its revenues  principally  through its supply  agreements  with
hospitals and outpatient  surgery  centers.  In response to the trend within the
hospital industry toward requiring suppliers to provide reduced order turnaround
time and more  frequent  deliveries  to a greater  number of locations  within a
hospital,  the Company  distributes to certain customers  pursuant to agreements
with national and regional distributors.  Under these agreements,  the customers
remain under contract with the Company.  Pricing to its ultimate  customer under
these supply  agreements is usually  established  for the contract  period which
will  typically  be from one to three  years.  The  Company  views its  ultimate
customers as the medical  professionals  who use its  products,  rather than the
distributors.

     It is the  Company's  policy and  practice  to  maintain  an  inventory  of
finished  products or component parts and materials  sufficient to ship products
within a few days of receipt of a product order. As a result, the Company had no
significant backlog of unshipped orders at November 1, 1998. Management believes
that such policy and practice are typical of industry practice.

     No individual customer or affiliated group of customer accounts represented
more than  five  percent  of the  Company's  net sales in any of the past  three
fiscal years. The Company  regularly sells its products through  wholesalers and
distributors  including  Owens & Minor,  Inc.  ("Owens & Minor"),  a diversified
distribution  company.  Sales  through  Owens & Minor  totaled  25.7%  of  North
American  product sales in fiscal 1998, 23.1% in fiscal 1997 and 31.3% in fiscal
1996.  Since Owens & Minor  typically  serves as a distributor  under a purchase
order or supply  agreement  between  the  customer  and the Company and does not
purchase for its own account,  it is not  considered to be the Company's  actual
customer.

Competition

     In general,  the Company's  products  compete with the products of numerous
major companies in the business of developing,  manufacturing,  distributing and
marketing  medical  specialty  products.  Some of these competitors have greater
financial or other  resources  than the Company.  The Company  believes that the
principal  competitive  factors in each of its markets are product  features and
benefits,  customer service and pricing.  The Company does not typically provide
the least  expensive  products  available  in the markets in which it  competes.
Instead,   the  Company  emphasizes  overall  value  through  a  combination  of
competitive pricing, product quality and customer service.

     In North America, the Company competes for sales of custom procedure trays,
critical care products and gloves with numerous major companies, including among
others,  Allegiance  Corporation,  Baxter Healthcare Corp. and Johnson & Johnson
and  divisions  or  subsidiaries  thereof.  In  Europe,  the  Company's  primary
competition  includes the European  divisions of these same companies as well as
locally based competitors such as Schneider Worldwide and the Molnlycke division
of Tamro.

Effects of Healthcare Reform

     The recent government focus on healthcare reform and on the escalating cost
of medical care has  increased  pressures on all  participants  in the heathcare
industry  to reduce the costs of products  and  services.  The Company  does not
believe that the continuation of these trends will have a significant  effect on
the Company's results of operations or financial condition; however, the Company
believes that  healthcare  legislation  may have some  beneficial  effect on its
business by increasing the availability of healthcare, emphasizing less invasive
surgery and increasing the need for efficiency of healthcare personnel.

Government Regulation

  Domestic:

     Most of the products  developed,  manufactured and sold by the Company (and
products  likely to be  researched,  developed  or  marketed  in the future) are
subject to  regulation  as medical  devices by the Food and Drug  Administration
("FDA").  The  FDA  regulates  the  development,  production,  distribution  and
promotion of medical  devices in the U.S.  Various states in which the Company's
products are sold or may be sold in the future may impose additional  regulatory
requirements.

     Pursuant  to the Food Drug & Cosmetic  Act  ("FDCA"),  a medical  device is
ultimately classified as either a Class I, Class II or Class III device. Class I
devices are subject only to general controls that are applicable to all devices.
Such controls include regulations regarding FDA inspections of facilities, "Good
Manufacturing Practices," labeling,  maintenance of records and filings with the
FDA. Class II devices must meet general performance standards established by the
FDA. Class III devices require the most stringent pre-market approval by the FDA
before  they can be  marketed  and must  adhere  to such  standards  once on the
market.  Such pre-market  approval can involve extensive testing to prove safety
and  efficacy  of the  devices.  Most of the  Company's  products  are  Class II
devices.  FDA  marketing  approval of these  devices is obtained  under  Section
510(k) of the FDCA,  which  provides for FDA approval on an expedited  basis for
products that can be shown to be substantially equivalent to devices in commerce
prior to May 1976 (the  month  and year of  enactment  of the FDCA.  Most of the
Company's  remaining  products  are Class I devices.  Recent  passage of the FDA
Modernization  Act of 1997 has  lessened  some of the  burden of  reporting  and
scrutiny  on  several  Class I and  certain  Class II  devices.  The  Company is
actively involved with the Medical Device Manufacturing  Association ("MDMA"), a
Washington,  D.C. based industry lobbying group. The MDMA is currently providing
input on the implementation of several aspects of this new legislation.

     At present, most of the Company's products and manufacturing facilities are
subject to pervasive  and  continuing  regulation  by the FDA. All phases of the
manufacturing and distribution process are governed by FDA regulation.  Products
must be produced in registered  establishments and be manufactured in accordance
with "Good Manufacturing  Practices," as such term is defined under the FDCA. In
addition,  all such devices must be periodically  listed with the FDA.  Labeling
and  promotional  activities are subject to scruntiny by the FDA and, in certain
instances,  by the  Federal  Trade  Commission.  The  export of  devices is also
subject to regulation in certain instances.

     The mandatory  Medical Device Reporting  ("MDR")  regulation  obligates the
Company  to  provide  information  to the FDA on  injuries  alleged to have been
associated  with the use of a product  or in  connection  with  certain  product
failures  which  could  cause  injury.  If as a result of FDA  inspections,  MDR
reports  or other  information,  the FDA  believes  that the  Company  is not in
compliance  with the law, the FDA can institute  proceedings  to detain or seize
products,  enjoin future  violations,  impose product  labeling  restrictions or
enforce product recalls or withdrawals from the market.

     In addition  to the  foregoing,  numerous  other  federal,  state and local
agencies,  such as  environmental,  fire hazard control,  working  condition and
other similar  regulators,  have  jurisdiction to take actions that could have a
material  adverse effect upon the Company's  ability to do business.  Compliance
with  federal,  state and local  provisions  that have been  enacted  or adopted
regulating  the  discharge  of  materials  into the  environment,  or  otherwise
relating to the  protection  of the  environment,  including in  particular  the
stringent regulation of the use of ethylene oxide in the sterilization  process,
have not had, and are not  anticipated  to have,  any  material  effect upon the
capital expenditures,  earnings or competitive position of the Company or any of
its subsidiaries.

  International:

     The products  manufactured and sold by the Company in Europe are subject to
the European Community  regulations for medical devices.  The European Community
has  a  registration  process  which  includes   registration  of  manufacturing
facilities ("ISO  certification") and product certification ("CE Mark"). The ISO
certification  requires  that  there  be  functioning  quality  systems  at each
facility,  and following an acceptable  certification  inspection,  the facility
receives an ISO certification  number. The CE Mark certification  applies to the
products  or  product  types  which  meet the  European  requirements  for those
products.  Following  CE Mark  certification,  the CE symbol is  printed  on the
product  label  to  show  the  customer  that  the  product  complies  with  the
requirements of the European market.  The Company has obtained ISO certification
and CE Mark  certification  for its facilities and products in Europe as well as
for  those   facilities   and   products  in  North   America   which  are  sold
internationally.

     Similar to the domestic  regulatory bodies,  Europe has numerous government
and local  agencies  which have  jurisdiction  to take actions that could have a
material  adverse  effect  upon the  Company's  ability to conduct  business  in
Europe.  European  governmental  and local  agencies  have  enacted  or  adopted
regulations  which concern the discharge of materials into the  environment,  or
otherwise relating to the protection of the environment, which have not had, and
are not anticipated to have, any material effect upon the capital  expenditures,
earnings or competitive position of the Company or any of its subsidiaries.

Environmental

     The  Company  is  subject to a variety  of  environmental  laws,  rules and
regulations, as are other companies in the same or similar business. The Company
believes  that  it is in  substantial  compliance  with  such  laws,  rules  and
regulations;  however,  these laws,  rules and  regulations  change from time to
time,  and such changes may affect the ongoing  business and  operations  of the
Company.  From time to time,  the  Company has  received,  and in the future may
receive,   requests  from  environmental   regulatory   authorities  to  provide
information or to conduct  investigative or remediation  activities with respect
to its facilities.  None of these requests, if made, is expected, by management,
to have a material adverse effect on the Company's business.

Employees

     At November 1, 1998, the Company had approximately 2,954 full-time domestic
employees  and  1,114  foreign  employees.  None  of the  Company's  U.S.  based
employees is represented by a union. Management believes that its relations with
its employees are satisfactory.

Recent Developments

     Effective January 8, 1999, Maxxim acquired all the outstanding common stock
of Circon. The Company believes that this acquisition is an excellent  strategic
fit with its  long-term  objectives.  Circon  provides a unique  opportunity  to
strengthen  Maxxim's  long-term  competitive  position and brings an outstanding
array of products.  The combination of Maxxim and Circon creates immediate scale
opportunities and cost synergies and will offer expanded marketing  capabilities
and customer base. Information, including financial information about Circon and
its  business,  is contained in Schedule  14D-1,  filed with the  Commission  on
November 30, 1998,  Schedule 14D-1 as amended by Amendment No. 1, filed with the
Commission on December 10, 1998,  Schedule  14D-1 as amended by Amendment No. 2,
filed with the  Commission  on January 5, 1999 and Schedule  14D-1 as amended by
Amendment No. 3, filed with the Commission on January 6,1999.

<PAGE>




Business

     Circon  designs,  manufactures,  markets  and  services  medical  endoscopy
systems for diagnosis and minimally invasive surgery.  Circon's systems are used
for a growing number of medical  specialties,  including  urology,  arthroscopy,
laparoscopy,  gynecology, thoracoscopy and plastic surgery. Circon also designs,
assembles and markets miniature color video systems used with endoscope systems.

Industry

     Minimally  invasive  surgery  refers to  surgical  procedures  which can be
accomplished  without a major incision or other  traumatization  to the patient,
and, in some cases without general  anesthesia.  Endoscopy,  which refers to the
visualization  of  interior  organs and  tissues,  is one of the most  important
minimally invasive surgical techniques. In addition to decreasing patient trauma
and frequently avoiding general anesthesia,  endoscopy can substantially  reduce
or  eliminate  postoperative  hospitalization.  The  resulting  cost savings and
patient  benefits  have caused  government  reimbursement  programs,  as well as
private  insurance and prepaid health plans,  to encourage the use of endoscopic
procedures over traditional open surgery.

     Specialized  endoscopes  for various  diagnostic  and  surgical  procedures
include  laparoscopes  (used for abdominal  cavity surgery below the diaphragm),
thoracoscopes (used for chest surgery above the diaphragm),  ureteroscopes (used
for urinary tract  surgery),  cystoscopes  (used for surgery in the  uro-genital
tract) and  arthroscopes  (used for knee and other  joint  surgery).  Endoscopic
procedures are often televised using miniature video camera systems connected to
the endoscope.  The procedures are performed in hospitals,  ambulatory  surgical
centers and physicians' offices.

Products

        Circon  manufactures  products  which  comprise the core  technology  of
endoscopy  --- the  endoscope  system  comprised of rigid  endoscopes,  flexible
endoscopes  and  medical  video  systems.  Circon  also  manufactures  accessory
instrumentation  which are used in  conjunction  with  endoscope  systems  for a
variety  of  diagnostic  and  therapeutic  applications  such as  electrosurgery
systems, manual instruments,  cryosurgery products,  wound closure products, and
tubal  ligation  products.  In  addition,  Circon  manufactures   cost-effective
diagnostic and disposable  products for specific  applications  such as ureteral
stents, vacuum curettage products, urinary diagnostic products and gynecological
diagnostic products.

Primary Markets

     Urology.  The Company  believes that Circon products have the largest share
of the urology  endoscope  market in the United States and more Circon  products
are in  current  use in that  market  than those of any  competitor.  Having the
largest installed base is an important advantage when introducing new technology
and  products.  Circon's  urology  products are used for  diagnosis  and surgery
throughout the urinary tract, including the urethra,  prostate,  bladder, ureter
and kidney.

     The  demand  for  ways  of  diagnosing  and  correcting   medical  problems
associated  with the urinary tract and the prostate has increased as the average
age of the U.S. population has increased. In addition, the Company believes that
the introduction of new products such as vaporizing electrodes, lasers and other
new endoscopic urological  instruments with features not found in older products
coupled with the growing  familiarity  of urologists and the general public with
these innovative endoscopic techniques are factors contributing to the growth of
the urology market.

     Circon offers a  comprehensive  product line for the urology  market place.
The breadth of Circon's  urology  products  includes  urodynamic  equipment  for
diagnosing  urinary  problems,  flexible  scopes for  examining  the bladder and
complete urinary tract,  rigid scopes and accessories for correcting  prostrate,
bladder and kidney  problems,  as well as ureteral  stents used to insure proper
urine flow post-operatively.

     Gynecology.  Circon  currently  develops,  manufactures and markets medical
devices and systems for use in  gynecological  procedures.  The products include
endoscopy  systems,  tubal ligation  systems,  cryosurgical and  electrosurgical
systems, colposcopic equipment, curettage systems, hemorrhoid treatments systems
and  uterine  resectoscope  systems  as  well  as  disposable  products  used in
conjunction with these systems.

     Colposcopes  are  optical  diagnostic  instruments  used in  gynecology  to
examine the cervix at high  magnification to detect abnormal tissues which could
lead to cervical cancer or other lesions.  A range of accessory  instruments are
offered   which  provide   various   magnification   levels  and   documentation
capabilities (35mm photography,  Polaroid photography,  videocolposcopy,  etc.).
Colposcopes  are also  used in  conjunction  with  law  enforcement  efforts  to
diagnose and document evidence in rape and child abuse cases.

     The cryosurgical  system is marketed  principally to gynecology offices and
clinics. The primary application is to precisely destroy defined areas of benign
or pre-malignant  lesions of the cervix. A cryosurgical system consists of a gas
cylinder (usually nitrous oxide or carbon dioxide), a gun assembly,  and special
tips configured for the intended  application.  During  cryosurgery,  the tip is
cooled by rapidly  expanding gas to  temperatures  low enough to freeze abnormal
tissues and destroy the lesion.  Cryosurgery  offers the advantage of less pain,
faster healing, less scarring and faster and more cost-efficient  treatment over
conventional surgery procedures.  Other medical specialties also use cryosurgery
for dermatology, proctology, ophthalmology and other procedures.

     General  Surgery/Laparoscopy.  Circon  offers a  complete  line of  medical
instrumentation specifically designed to allow the general surgeon to remove the
gall  bladder   endoscopically  using  a  procedure  called  video  laparoscopic
cholecystectomy.  The surgeon performs the procedure  through small punctures in
the abdomen through which specially-designed surgical instruments are inserted.

     Some  of  the  emerging  markets  Circon  is  beginning  to  enter  include
thoracoscopy, arthroscopy, gastroenterology and cardiology.

Sales and Marketing

     Circon sells its  endoscopy/urological  products, video systems and primary
care  products to  hospitals,  surgi-centers,  clinics and  physicians'  offices
throughout  the  United  States.  These  products  are  sold by a  direct  sales
organization  with 156  employee  representatives,  including  131 direct  sales
personnel,  16 region  managers,  3 area managers,  1 vice president of sales, 1
national contract manager,  1 video specialist and 3 nurses.  The domestic sales
and marketing  activities  are supervised and supported by an in-house sales and
marketing group, including telemarketing, of approximately 84 individuals.

     In international  markets,  Circon employs 35 individuals and sells through
70 local  dealers.  The  international  organization  includes  4  direct  sales
representatives  in Canada.  Circon's  German  subsidiary,  Circon  GmbH,  has 2
employees in sales and marketing.  Circon France SA, Circon's French subsidiary,
has 6 sales  representatives,  2 marketing managers and 3 administrative support
personnel. International sales are denominated in U.S. dollars except sales made
by Circon  GmbH  which are  denominated  in German  marks,  sales made by Circon
Canada  which are  denominated  in  Canadian  dollars,  and sales made by Circon
France which are denominated in French francs. Circon bears the risk of currency
exchange losses from German,  Canadian and French customers although no material
losses have occurred in the past.

     Circon's key decision maker for most purchases of Circon products is either
the physician utilizing the equipment or the materials manager.  Circon tends to
reach these  individuals  through a combination of direct selling,  national and
regional group contracts, training seminars, telemarketing,  advertising, direct
mail and trade shows.  Circon  participated in  approximately  300  exhibitions,
workshops   and   conventions   worldwide   during  1998  in  which  the  Circon
representatives   demonstrated  endoscopes,   urological  stents,  video  camera
products and primary care urodynamic products.

     Circon  maintains  a  specialized  sales force for  Endotek(TM)  Urodynamic
products and utilizes  approximately  23 independent  representatives  and sales
organizations  who devote a  substantial  portion  of their time to selling  the
primary care, cryosurgery and electrosurgery products.

     Circon  establishes  and  maintains  long-term  relationships  with faculty
members  of  leading  medical  schools  as  well as with  leading  surgeons  and
endoscopists throughout the world. Circon's management,  product development and
marketing  personnel  periodically  meet with these faculty  members,  corporate
advisors and practitioners at hospitals,  clinics, company facilities,  teaching
seminars and trade shows.  Intensive  concentrations occur with regard to new or
planned  products within the  specialist's  particular  area of interest.  These
relationships have provided information concerning  practitioners' needs as well
as valuable marketing contacts and goodwill.  In addition,  working with leading
practitioners  of  medical  skills  in new  product  development  is a source of
product innovation. The majority of the Company's sales are to repeat customers.
Circon sales for fiscal 1997, 1996, and 1995 were $159,954,000, $153,779,000 and
$160,447,000, respectively.

Research and Development

     The  medical  endoscopy  system  business  has  seen  numerous   continuing
engineering  innovations.  Circon  believes that its ability to apply  technical
innovations  quickly to products designed for specific medical  applications has
been and will continue to be important to its success. Expenditures for research
and development were  $11,896,000,  $10,941,000 and $10,828,000 in 1996, 1997 
and 1998, respectively.  During 1997 and 1998, Circon's development efforts were
directed toward expansion of the endoscope  product line for gynecology,  office
hysteroscopy, transvaginal hydrolaparoscopy (THL), a new flexible cystoscope and
ureteroscope,  a new  distortion  free  rigid  endoscope,  and  new  alternative
versions  of  the  VaporTrode(TM)  electrode  for  urology.   Endovideo  product
development  concentrated  on  a  new  digital  camera  platform  with  enhanced
performance  and  user-controlled  features.  Circon  has  continued  to develop
cost-effective  procedure-based disposables such as the 5mm Tripolar(TM) Cutting
Forceps, new ureteral stents,  electrosurgical/suction irrigation products and a
new fluid management pump for hysteroscopy.

Manufacturing and Service

     Circon   manufactures   entire   endoscope   systems,   using   proprietary
technologies  and exacting quality  assurance.  Lens assemblies are manufactured
from blocks of optical glass, some of which Circon manufactures from raw silica.
Glass fibers are drawn using advanced "3G" or "glass on glass" processes. Circon
has developed,  refined and automated the  technology  required for grinding and
polishing large quantities of lenses and prisms having  dimensions and radius of
curvatures  less than one  millimeter.  These  lenses and prisms are used in the
manufacturing  of high performance  small diameter  flexible  endoscopes.  A key
component in lens  manufacturing  is the application of appropriate  coatings to
the surfaces of each lens, using state-of-the-art vapor deposition equipment.

     In addition, Circon manufactures endoscopic video systems,  electrosurgical
generators  and  electrodes  required  for  electrosurgical   procedures.   Most
components used in the  manufacturing of video and  electrosurgical  devices are
bought  from  outside  suppliers  to  Circon  specifications.  Some  components,
including  certain  sensors and cables,  are currently  purchased  from a single
source.  The loss of any  single  source  of  supply  would  have no more than a
temporary effect on the Company's operations.

     Circon's  manufacturing  organization follows good manufacturing  practices
within  the FDA's  regulated  guidelines.  At the same time,  quality  assurance
consistently strives for worldclass standards per ISO 9000 regulations. In 1996,
the  Racine  facility  became  ISO  9002  certified.  In  1998,  Circon's  other
facilities  became ISO 9001 and EN46001  certified  and obtained a "CE" mark for
all of its products. Such mark is obtained by demonstrating  compliance with the
ISO quality system standards, and for medical device manufacturers,  the medical
Device Directive promulgated by the European union.

Service and Repairs

     Circon provides a two-year warranty on endovideo systems sold in the United
States.  Most endovideo system repairs are performed by Circon in Santa Barbara,
California within 24 hours of receipt. For repairs requiring more than 24 hours,
loaner  systems are provided to the customer.  Circon also provides  service and
ongoing  maintenance to customers  with video  equipment that is no longer under
warranty.

     All endoscope  repairs are performed in Stamford,  Connecticut and Norwalk,
Ohio.  For rigid  out-of-warranty  endoscopes  and other  equipment  repairs  or
service,  Circon offers a repair exchange  instrument  typically in less than 48
hours for a fee well below the cost of a new instrument.

Patents and Trademarks

     While  Circon  holds  numerous  patents  covering  certain  aspects  of its
endoscope, video, electrosurgical,  silicone stent and accessing technology, the
Company does not believe that its business is materially dependent on any single
patent or license.

     Circon utilizes several trademarks,  including "Circon",  "ACMI",  "BICAP",
"Cabot" and "Surgitek".


<PAGE>



Government Regulation and Reimbursement Programs

     The  medical  devices  manufactured  and  marketed by Circon are subject to
regulation  by the  FDA as  well  as  state  and  foreign  regulatory  agencies.
Depending  on  the  classification  of  medical  device,   different  levels  of
regulation  apply,   ranging  from  extensive  premarket  testing  and  approval
procedures for Class III devices,  such as implantable devices, to substantially
lower levels of regulation for Class II devices, such as endoscopes, and Class I
devices,  such as video  cameras.  While  Circon does market a Class III device,
most of Circon's  products  are Class I or II. Some of Circon's new products and
some improvements to existing products require premarket notification to the FDA
under  an  expedited  procedure  known as a 510(K)  that is  available  only for
products which are substantially equivalent to a legally marketed device. If the
FDA  rejects  Circon's  claim  that  there  is such a  substantially  equivalent
product,  Circon  would be required to obtain  premarket  approval  from the FDA
which involves a procedure requiring extensive clinical testing, additional cost
and substantial delay in the introduction of the product to market.

     FDA  and  state   regulations  also  require  adherence  to  certain  "good
manufacturing  practices"  ("GMP") which mandate detailed quality  assurance and
record-keeping  procedures,  and  Circon  is  subject  to  unscheduled  periodic
regulatory inspections. In 1998, Circon received a "warning letter" from the FDA
citing  Circon  for  marketing  a device  that had not been  cleared by the FDA.
Although Circon had a reasonable  position as to why clearance was not required,
Circon promptly filed a 510(K) for the subject device as the FDA indicated. That
510(K)  was  subsequently  cleared by the FDA.  On  previous  occasions,  Circon
received FDA "regulatory  letters"  notifying Circon of deficiencies and warning
of enforcement  action if the deficiencies  were not corrected.  Circon believes
that  the  deficiencies  have  been  corrected  and  that  it is in  substantial
compliance with FDA regulations.

     The system for Medicare  reimbursement of hospital expenses is based on the
diagnosis of the patient. Under this Diagnostic Related Groups ("DRG") system, a
hospital  is paid a  fixed  amount  for  admitting  a  patient  with a  specific
diagnosis  according to a schedule of fees,  regardless of the hospital's actual
costs  of  treating  the  patient.  Whether  or not  the  DRG  reimbursement  is
sufficient to cover the  hospital's  costs in a particular  case, the ceiling on
reimbursement  may provide an incentive to reduce such costs. To the extent that
the DRG  program,  and similar  programs of private  insurers,  provide  such an
incentive,  Circon  believes  that they  promote the use of  minimally  invasive
diagnostic and surgical procedures such as endoscopy which reduce  postoperative
hospitalization  costs.  Circon is unable to predict  whether  future changes to
reimbursement or other healthcare reform efforts will materially affect sales of
Circon's products.

Competition

     The Company  believes that Circon's  products have the largest share of the
urology  endoscope market in the United States.  Major competitors in endoscopic
markets  include a Japanese  company  (Olympus  Optical Co. Ltd.) and two German
companies (Karl Storz GmbH and Richard Wolf GmbH).  These companies,  as well as
Stryker  Corporation  and Dyonics (an affiliate of Smith & Nephew plc),  are the
principal  competitors  in the  miniature  medical color video camera market and
hold a larger share of the International market than Circon.

     The urology market is relatively  mature and dominated by a small number of
competitors.   The  principal   competitive  factors  are  product  quality  and
reliability,  product  features,  innovation,  price and  service.  The  Company
believes that it competes favorably with respect to each of these factors.

     The  gynecology  market  is a  rapidly  growing  area in which  Circon  has
substantial presence.  With the addition of Cabot's line of specialty office and
disposable products to Circon's hysteroscopy products, the Company believes that
Circon is well  positioned  with respect to competition  and provides a complete
array of products.

     Some surgical  procedures which utilize Circon's products could potentially
be replaced or reduced in importance by  alternative  medical  procedures or new
drugs.  Since 1992, Merck & Co., Inc. has been marketing a drug that,  according
to clinical testing reported by the pharmaceutical  company, caused the prostate
gland to stop  growing in most cases,  to shrink in some  cases,  and to restore
urine flow to near-normal  rates in some cases.  Abbott  Laboratories,  Inc. and
Pfizer,   Inc.  also  have  drugs  which  are  FDA  approved  for  treatment  of
hypertension and of benign prostatic  hyperplasia.  High percentages of patients
using  these  drugs are  reported  to be  showing  some  levels  of  symptomatic
improvement.  Alternative  procedures under evaluation include implantation of a
stent (metal coil) in the prostate to provide mechanical relief from pressure on
the urethra,  and  hyperthermia  to shrink the prostate using  microwave  probes
inserted rectally or urethrally. Another procedure under evaluation uses a laser
probe  inserted in the urethra to treat the  prostate.  Circon is unable at this
time to assess the efficacy,  safety, cost effectiveness,  physician  acceptance
and potential regulatory approval of these new drugs, modalities and alternative
medical  procedures.  To the extent that any of them  significantly  reduces the
need for Circon's products, sales of it's products could be adversely affected.

     The  markets  in which  Circon's  products  compete  are  characterized  by
continuing  technical  innovation  and  competition.  In order to continue to be
competitive, Circon is engaged in continuing efforts to improve its products, to
develop additional  products and, where appropriate,  to distribute  products of
other  manufacturers.  There is no assurance that  competition  will not further
intensify,  either  from  existing  competitors  or from new  entrants  into the
markets, or that some future medical  breakthrough or technological  development
will not confer a competitive advantage on another company.

Employees

     As of December 31, 1998, Circon had 1,180 full-time employees,  of whom 667
were engaged in manufacturing, 149 in research and development, 280 in sales and
marketing and 84 in  administration.  Approximately 380 employees are covered by
collective  bargaining  agreements.  Circon's collective  bargaining  agreements
covering  union  workers  expire in January 2002 and March 2003.  Circon has not
experienced any strikes or other work stoppages in recent years.

Item 2:    Properties

     The Company's principal executive and administrative offices are located in
Clearwater,  Florida. The following table sets forth information with respect to
the  Company's  principal  facilities.  Each of the  facilities in the table may
include office,  product  development,  manufacturing  and/or  warehouse  space.
Several of the facilities may also serve as regional distribution centers.
<TABLE>
<CAPTION>

                                                 Owned or         Building Area
          Location                           Leased Facility      (square feet)
          <S>                                        <C>                  <C>

          Los Gatos, California.............         Owned               79,000
          Santa Barbara, California*........         Owned               76,000
          San Diego, California.............         Leased              45,000
          Temecula, California..............         Leased             162,500
          Stamford, Connecticut*............         Leased              98,000
          Clearwater, Florida...............         Owned               21,000
          Clearwater, Florida...............         Owned              189,500
          Oldsmar, Florida..................         Leased              20,000
          Columbus, Mississippi.............         Owned              135,000
          Eaton, Ohio.......................         Owned              230,000
          Norwalk, Ohio*....................         Owned               52,000
          Norwalk, Ohio*....................         Leased              14,000
          Honea Path, South Carolina........         Owned               89,000
          Athens, Texas.....................         Owned              142,900
          Richmond, Virginia................         Leased             253,000
          Clarksburg, West Virginia.........         Owned               45,000
          Racine, Wisconsin*................         Owned              109,000
          Aalst/Erembodegem, Belgium........         Owned              150,700
          Mississuagua, Ontario, Canada.....         Owned              170,000
          La Romana, Dominican Republic.....         Leased              69,000
          Ommen, The Netherlands............         Owned               24,340
          s'Hertogenbosch, The Netherlands..         Owned               25,000
          s'Hertogenbosch, The Netherlands..         Leased              20,580
</TABLE>


     * Facilities recently acquired as a result of the Circon acquisition.



     The  Company  has  distribution  centers in twenty  states  throughout  the
country and also owns,  operates or contracts for the use of various other minor
facilities.

     Management believes that the Company's facilities, whether leased or owned,
are  adequate to meet its current  needs and should  continue to be adequate for
the foreseeable future.


<PAGE>



Item 3:    Legal Proceedings

     The Company has been named as a defendant  in various  lawsuits  arising in
the  ordinary  course  of  business.   Management  believes  that  the  ultimate
resolution of such  litigation  will not have a material  adverse  impact on the
Company's  results of operations  or financial  position (see Note 5 of Notes to
Consolidated Financial Statements).

     Circon is involved in the following legal proceedings:

     On May 28, 1996,  two  purported  stockholders  of Circon,  Bart Milano and
Elizabeth  Heaven,  commenced  an action in the  Superior  Court of the State of
California  for the County of Santa  Barbara,  Case No.  213476,  purportedly on
behalf of themselves and all others who purchased  Circon's common stock between
May 2, 1995 and February 1, 1996,  against Circon,  Richard A. Auhll,  Rudolf R.
Schulte,  Harold R. Frank,  John F.  Blokker,  Paul W.  Hartloff,  Jr., R. Bruce
Thompson, Jon D. St. Clair,  Frederick A. Miller, David P. Zielinski,  Winton L.
Berci,  Jurgen Zobel,  Trevor Murdoch and Warren G. Wood. That complaint alleged
that  defendants  violated  Sections 11 and 15 of the Federal  Securities Act of
1933, as amended,  Sections 25400-02 and 25500-02 of the California Corporations
Code,  and  Sections  1709-10 of the  California  Civil Code,  by  disseminating
allegedly false and misleading  statements  relating to Circon's  acquisition of
Cabot Medical Corp. by merger and to the combined  companies'  future  financial
performance.  In  general  the  complaint  alleged  that  defendants  knew  that
synergies  from the merger  would not be  achieved,  but  misrepresented  to the
public that they would be achieved,  in order to obtain  approval for the merger
so they would be executives of a much larger  corporation.  This alleged conduct
allegedly had the effect of inflating  Circon's  stock price.  On July 29, 1996,
defendants  filed  demurrers  to the  complaint  on the ground that  plaintiffs'
allegations fail to state facts  sufficient to constitute a cause of action.  On
or about  August 6,  1996,  plaintiffs  served  their  response  to  defendants'
demurrers,  stating their  intention to file an amended  complaint  prior to the
hearing on defendants' demurrers.  On September 20, 1996, plaintiffs voluntarily
dismissed  Rudolf R.  Schulte,  Harold R.  Frank,  John F.  Blokker  and Paul W.
Hartloff,  Jr.  from the action,  without  prejudice.  On  September  30,  1996,
plaintiffs,  joined by a third  purported  stockholder  of Circon,  Adam Zetter,
filed a first amended  complaint against the remaining  defendants.  Plaintiffs'
amended complaint is substantially similar to the original complaint, but adds a
new purported cause of action under the unfair business practices  provisions of
the California  Business & Professions Code,  Sections 17200, et seq. and 17500,
et seq. Like the original  complaint,  the amended complaint seeks  compensatory
and/or  punitive  damages,  attorneys  fees  and  costs,  and any  other  relief
(including  injunctive  relief) deemed proper.  On December 2, 1996,  defendants
filed demurrers to the amended  complaint again on the grounds that  plaintiffs'
allegations fail to state facts  sufficient to constitute a cause of action.  On
April 17, 1997, a hearing was held  regarding  the  defendants  demurrers to the
first  amended  complaint.  By order  dated May 28,  1997,  the  Superior  Court
overruled the defendant's  demurrers to the amended  complaint.  The parties are
now engaged in discovery proceedings. Circon believes plaintiffs' allegations to
be without merit and intends to vigorously defend the lawsuit.

     On August 15, 1996, an action captioned Steiner v. Auhll, et al., No. 15165
was filed in the Court of Chancery of the State of Delaware. Shortly thereafter,
three  substantially  similar  actions  were  filed by three  other  individuals
claiming to be stockholders  of Circon.  All four actions allege that Circon and
certain  of its  officers  and  directors  breached  their  fiduciary  duties to
Circon's stockholders by taking steps to resist the hostile tender offer by U.S.
Surgical  Corporation  announced  on August 2, 1996.  All four of these  actions
purport to be brought as class actions on behalf of all Circon stockholders.  On
August 16, 1996, a separate  action  captioned Krim v. Circon Corp., et al., No.
153767,  was filed in the Superior  Court of  California in Santa  Barbara.  The
plaintiff in that action also claims to be a Circon  stockholder and purports to
bring his claim as a class action. On September 27, 1996, that action was stayed
by the  Court in favor of the  actions  pending  in  Delaware;  the  Court  also
encouraged  the  plaintiff to refile his action in Delaware.  On or about August
30, 1996, the Chancery Court  consolidated  the four Delaware  complaints into a
single  action,  and  plaintiffs  filed an  amended  complaint.  Circon  and its
officers and directors filed an answer to the amended  complaint on November 12,
1996. On July 15, 1998,  plantiffs agreed to postpone further action in the case
until after Circon holds its annual meeting later in the year.  Circon  believes
plaintiffs' allegations to be without merit and intends to vigorously defend the
lawsuits in the event that plaintiffs continue to pursue the matter. The Parties
are currently in discussions regarding the litigation.

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

     There were no matters  submitted to a vote of the  security  holders of the
Company  through  the  solicitation  of proxies or  otherwise  during the fourth
quarter of the fiscal year ended November 1, 1998.


<PAGE>


                                     PART II

Item 5:a: Market For the Registrant's Common Equity and Related Stockholder
Matters

     Since December 22, 1993,  the Company's  Common Stock has traded on the New
York Stock Exchange  under the symbol "MAM." The following  table sets forth the
high and low sale prices on the New York Stock Exchange for the Common Stock for
the periods indicated:
<TABLE>
     <S>                                      <C>                <C>

                                              High              Low
Fiscal Year Ended November 2, 1997:
   First Quarter.........................    $15 1/8            $12 1/4
   Second Quarter........................     16                 12 5/8
   Third Quarter.........................     19 5/16            13 1/4
   Fourth Quarter........................     26                 19 1/2
Fiscal Year Ended November 1, 1998:
   First Quarter.........................     24 15/16           19 1/2
   Second Quarter........................     28 15/16           22 1/8
   Third Quarter.........................     29 3/8             22 7/8
   Fourth Quarter........................     26 15/16           16 1/8
Fiscal Year Ending October 31, 1999:
   First Quarter (through January 15, 1999)   29 3/4             24 3/4
</TABLE>

     As of January 15, 1999,  there were 237 holders of record of the  Company's
Common Stock.

     The Company has never paid cash dividends on its Common Stock.  The Company
presently  intends to retain  earnings to finance the  expansion of its business
and,  therefore,  does not expect to pay any cash  dividends in the  foreseeable
future.  Any  determination as to the payment of cash dividends will depend upon
the Company's  earnings,  general financial  condition,  capital needs and other
factors deemed  pertinent by the Board of Directors,  as well as any limitations
imposed by  lenders  under  credit  facilities.  The  Company's  present  credit
facility prohibits payments of dividends.

           b:  Recent Sales of Unregistered Securities

     On July 30, 1996, the Company issued an aggregate of $100,000,000 principal
amount of 10 1/2% Senior Subordinated Promissory Notes due 2006 (the "Notes") to
NationsBanc  Capital  Markets,  Inc. and Bear Stearns & Co. Inc.  (the  "Initial
Purchasers").  The Notes  were  issued to the  Initial  Purchasers  in a private
offering in  reliance  on Section  4(2) under the  Securities  Act of 1933.  The
Initial Purchasers  subsequently resold the Notes in reliance on Rule 144A under
the  Securities  Act of 1933.  Total  commissions  and fees paid to the  Initial
Purchasers were $3,000,000.

     On October 3, 1997,  the Company  called for  redemption of  $10,000,000 in
principal  amount of its  $28,750,000 6 3/4%  Debentures due March 1, 2003, (the
"Debentures") effective as of November 4, 1997 (the "First Redemption Date"). On
the First  Redemption  Date,  the  redemption  price of 104.17% of the principal
amount,  or $1,041.70 plus accrued  interest of $11.81 per $1,000 face amount of
the Debentures  was paid to the holders of Debentures  called for redemption who
had not exercised their right to convert their  Debentures into common stock. As
of November 2, 1997,  $5,398,000 of the  Debentures  had converted  into 299,882
shares of the Company's common stock and debt issuance costs of $166,000 related
to these converted  debentures were written off to additional paid-in capital in
fiscal  1997  and  are  reflected  in the  accompanying  consolidated  financial
statements.

     On  November  12,  1997,  the  Company  called  for the  redemption  of the
remaining  outstanding  principal amount of Debentures  effective as of December
12, 1997 (the "Second  Redemption  Date").  On the Second  Redemption  Date, the
redemption price of 104.17% of the principal  amount,  or $1,041.70 plus accrued
interest  of $18.94 per $1,000  face  amount of the  Debentures  was paid to the
holders who had not  exercised  their  right to convert  their  Debentures  into
common stock. In the first quarter of fiscal 1998, $22,983,000 of the Debentures
converted  into  1,276,732  shares of common  stock and debt  issuance  costs of
$701,000  related to these  converted  Debentures were written off to additional
paid-in  capital and are reflected in the  accompanying  consolidated  financial
statements.  The Company paid $369,000 to debenture holders who did not exercise
their right to convert upon surrender of their certificates in fiscal 1998.

     The common stock described  above was issued in  transactions  exempt under
the Securities Act of 1933, pursuant to Sections 3(a)(9) and 4(2).


<PAGE>



Item 6.    Selected Consolidated Financial Data

     The following selected  historical  consolidated  financial data is derived
from the consolidated  financial  statements of the Company. The information for
the five fiscal years 1998,  1997, 1996, 1995 and 1994 has been derived from the
Company's Consolidated Financial Statements which financial statements have been
audited by KPMG LLP, independent  certified public accountants.  The information
in the table should be read in  conjunction  with  "Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations"  and the Company's
Consolidated  Financial Statements and Notes thereto appearing elsewhere in this
Form 10K.
<TABLE>
<CAPTION>

                                                                              Fiscal Year Ended
                                                   -------------------------------------------------------------------------
                                                 ---------------------------------------------------------------------------
                                                      1998            1997           1996           1995           1994
                                                 -------------- -------------- --------------  -------------- --------------
<S>                                                    <C>            <C>            <C>            <C>              <C>
                                                                 (In thousands, except per share data)
Statement of Operations Data:
   Net sales...................................  $     522,516   $    529,552   $    399,836   $     265,726  $     191,382
   Cost of sales...............................        381,638        397,691        294,164         186,495        129,569
                                                  -------------- -------------- --------------  -------------- --------------
   Gross profit................................        140,878        131,861        105,672          79,231         61,813
   Operating expenses..........................         94,410         90,101         77,980          60,329         48,390
   Nonrecurring charges........................              -              -              -          10,845              -
                                                  --------------    ----------- --------------  -------------- --------------
   Income from operations......................         46,468         41,760         27,692           8,057         13,423
   Interest expense............................       ( 13,998 )     ( 22,145 )     ( 13,143 )       ( 4,088 )      ( 2,059 )
   Other income, net...........................          1,620          2,751            583           1,014            859  
                                                  -------------- -------------- --------------  -------------- --------------
   Income before income taxes (1)..............         34,090         22,366         15,132           4,983         12,223
   Income taxes................................         14,454          9,485          6,422           2,054          4,538
   Changes in accounting for income taxes......              -              -              -               -            380
                                                 -------------- -------------- --------------  -------------- --------------
   Net income..................................  $      19,636   $     12,881   $      8,710   $       2,929  $       8,065
                                                 ============== ============== ==============  ============== ==============
   
   Basic earnings per share (2), (3)...........  $        1.55   $       1.55   $       1.08   $        0.36  $        1.10
                                                 ============== ============== ==============  ============== ==============

   Diluted earnings per share (2), (3).........  $        1.50   $       1.42   $       1.02   $        0.36  $        1.05
                                                 ============== ============== ==============  ============== ==============

                                                      1998            1997           1996           1995           1994
                                                 -------------- -------------- --------------  -------------- --------------
                                                                              (In thousands)
Balance Sheet Data:
   Working capital.............................  $     108,918   $     99,815   $  122,086     $      73,286  $      82,886
   Total assets................................        468,051        424,046      465,347           264,490        165,416
   Long-term liabilities (includes current 
     portion) (4):
     Bank debt and other.......................         13,800         91,300      128,590            76,987              -
     Convertible debentures....................              -         23,352       28,750            28,750         28,750
     Senior notes..............................        100,000        100,000      100,000                 -              -
   Shareholders' equity........................        272,909        137,928      123,556           116,351        111,470
                                                                    
--------
<FN>

(1) Income before income taxes includes the following  nonrecurring  charges and
benefits:  a. A pre-tax  gain in fiscal  1997 of $1.5  million  from the sale of
equity securities. b. Pre-tax charges in fiscal 1996 of $3.5 million relating to
the acquisition of Sterile Concepts. c. Pre-tax  charges in fiscal 1995 of $10.8
million  related to the formation of the  Company's  Case  Management division.
 
(2) For information  concerning calculation of earnings per share, see Note 1 of
the Notes to  Consolidated  Financial  Statements.  The Company has restated all
previous  earnings  per  share  data  to  comply  with  Statement  of  Financial
Accounting Standards No. 128, "Earnings per Share".

(3) Fiscal 1994 basic and diluted  earnings per share exclude a $.05 and $.04  
adjustment  respectively,  to reflect the change in accounting for income taxes.

(4) Excludes capital leases and other long-term obligations of the Company.
</FN>
</TABLE>


<PAGE>


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

     Maxxim Medical is a major, diversified developer, manufacturer, distributor
and marketer of disposable  specialty  medical products such as custom procedure
trays,  medical  gloves,  containment  products,   electrosurgical  systems  and
disposable  products  primarily  for use in the  operating  room at hospitals or
surgery centers. The Company has grown significantly during the past five years.
Net  sales  increased  from  $191,382,000  in 1994 to  $522,516,000  in 1998,  a
compound  annual  growth  rate of  29%.  This  growth  resulted  primarily  from
acquisitions  of established  businesses or product lines.  Set forth below is a
brief description of the most significant acquisitions made by the Company since
1993. (See Note 2 of the Notes to Consolidated Financial Statements).

     CIRCON.  In January  1999,  the Company  completed  a tender  offer for the
outstanding  common  stock of Circon.  Circon was the largest  U.S.  producer of
endoscope  systems and maintained  leading  market share in urology  endoscopes,
gynecology endoscopes, gynecology sterilization,  suction/irrigation and premium
urology  stents.  As  this  acquisition  occurred  subsequent  to year  end,  no
financial  results  are  included  in  this  report.  (See  "Business  -  Recent
Developments" and Note 16 of the Notes to Consolidated Financial Statements).

     WINFIELD  MEDICAL.  In June 1998,  the Company  purchased  the  outstanding
common stock of Winfield Medical. Winfield Medical was a developer, manufacturer
and distributor of medical products, primarily sharps disposal and medical waste
containment   products.   This  acquisition  has  expanded  the  Company's  core
technologies into film extrusion and blow molding.

     STERILE CONCEPTS. In July 1996, the Company acquired the outstanding common
stock of Sterile Concepts through completion of a tender offer. Sterile Concepts
assembled,   packaged  and  distributed   sterile  custom  procedure  trays  for
hospitals,  outpatient  surgery centers and medical clinics.  As a result of the
acquisition,  the Company became the second largest producer of custom procedure
trays in the United  States and holds an  approximate  29% market  share in this
product segment.

     GLOVE  OPERATIONS.  In June 1995, the Company acquired the Glove Operations
from  Becton  Dickinson.  The  gloves,  which are sold under such brand names as
Tru-Touch(R),   SensiCare(R),   Tradition(TM),   Eudermic(TM),  Dextren(TM)  and
Neolon(TM),  include latex and non-latex surgical and examination versions. This
acquisition  gave the  Company a leading  worldwide  market  share in  non-latex
medical examination gloves.

MEDICA.  In January  1995,  the  Company  purchased  Medica B.V.  ("Medica"),  a
Netherlands    corporation.    Medica's   operations   included   manufacturing,
fabricating,  distributing  and  selling  various  types of  disposable  medical
supplies in Europe, principally in The Netherlands and Belgium.

     The  following   discussion   should  be  read  in  conjunction   with  the
consolidated  financial  statements  and the  related  notes  thereto  and other
detailed information appearing elsewhere herein.

Results of Operations

     The following table presents selected financial information for the periods
indicated  as a  percentage  of net sales and sets forth the  percentage  dollar
increase (decrease) of such items from period to period.
<TABLE>
<CAPTION>

                                                                                                 Percent Change
                                                    Fiscal Year Ended                          from Prior Period
                                          --------------------------------------       ------------------------------------
                                            1998          1997          1996           1998 vs. 1997       1997 vs. 1996
                                          ----------    ----------    ----------       ---------------    -----------------
<S>                                           <C>           <C>            <C>               <C>                <C>

Net sales...............................     100.0 %       100.0 %       100.0 %            -1.3 %             32.4 %
Gross profit............................      27.0          24.9          26.4               6.8               24.8
Marketing and selling expenses..........      12.6          11.8          13.0               5.2               20.9
General and administrative expenses.....       5.5           5.2           6.5               3.9                5.0
Income from operations..................       8.9           7.9           6.9              11.3               50.8
Interest expense........................      (2.7 )        (4.2 )        (3.3 )           -36.8               68.5
Other income, net.......................       0.3           0.5           0.2             -41.1              371.9
Income before income taxes..............       6.5           4.2           3.8              52.4               47.8
Income taxes............................       2.7           1.8           1.6              52.4               47.7
Net income..............................       3.8           2.4           2.2              52.4               47.9
</TABLE>



<PAGE>


Fiscal 1998 Compared to 1997

     Net  Sales  -  Net  sales  for  fiscal  1998  were   $522,516,000,   versus
$529,552,000  reported  for  fiscal  1997.  The  decrease  of 1.3% is  primarily
attributable  to the planned  cessation  of low margin  custom  procedure  trays
during  fiscal  1998.  The  decrease  in custom  tray sales is offset in part by
increases in glove sales  throughout  the year and the  addition of  containment
products to the  Company's  product line in the third and fourth  quarters.  The
increase in glove sales during the year is  primarily  due to changes in product
mix as well as the  acquisition of a glove plant in the fourth quarter of fiscal
1998.

     Gross Profit - The  Company's  gross profit  increased to  $140,878,000  in
fiscal 1998 from $131,861,000 reported in fiscal 1997.  Additionally,  the gross
profit  margin  rose to 27.0% in fiscal  1998 from 24.9% in fiscal  1997.  Gross
margin dollar and rate increases are primarily due to the Company's  fiscal 1998
focus on  product  profitablity.  As a result of the  planned  cessation  of low
margin custom  procedure  trays,  the shift to sales of higher margin gloves and
the addition of higher margin containment  products,  the Company's gross margin
increased 2.1 percentage points year over year.

     Operating   Expenses  -  Marketing  and  selling   expenses   increased  to
$65,837,000  in fiscal  1998 from  $62,603,000  reported  in fiscal  1997.  As a
percentage of net sales,  these expenses were 12.6% and 11.8% in fiscal 1998 and
1997, respectively.  This increase in both total dollar and percent of net sales
is the  result  of  increased  administrative  fees  paid  on  group  purchasing
contracts,  lower sales in fiscal 1998, and higher selling costs associated with
the containment products. General and administrative expenses increased modestly
from  $27,498,000  in fiscal  1997 to  $28,573,000  in fiscal  1998,  and,  as a
percentage  of net sales,  these  expenses  were 5.5% in fiscal 1998 and 5.2% in
fiscal 1997.  The increase in general and  administrative  expenses is primarily
attributable to the acquisition of Winfield Medical in fiscal 1998.

     Income  from  Operations  -  Income  from  operations  increased  11.3%  to
$46,468,000 in fiscal 1998, from  $41,760,000 in fiscal 1997. As a percentage of
sales, income from operations  increased 1.0 percentage points in fiscal 1998 to
8.9% from 7.9% in fiscal 1997.

     Interest Expense - The Company's  interest expense decreased to $13,998,000
in fiscal 1998 from $22,145,000 in fiscal 1997. The decrease in interest expense
is due to the repayment of the term loan and revolving credit agreement from the
proceeds of the Company's  secondary  common stock  offering  completed in March
1998.

     Income Taxes - Maxxim's  effective income tax rate was 42.4% in both fiscal
1998 and  fiscal  1997.  The  Company's  effective  tax rate is higher  than the
statutory rate  primarily as a result of  nondeductible  amortization  resulting
from goodwill recorded in past acquisitions.

     Net Income - As a result of the foregoing, fiscal 1998 net income increased
52.4% to  $19,636,000  as  compared  to fiscal  1997 net income of  $12,881,000.
Diluted  earnings  per share were $1.50 and $1.42 for fiscal years 1998 and 1997
respectively  and  weighted  average  shares  outstanding  were  13,124,057  and
9,830,506, respectively.

Fiscal 1997 Compared to 1996

     Net Sales - Net sales for fiscal 1997 were  $529,552,000,  a 32.4% increase
over the  $399,836,000  reported  for fiscal 1996 due to the  increase in custom
procedure  tray  sales.  Fiscal  1997  sales  reflected  a full  year of  custom
procedure  tray sales from the Sterile  Concepts  acquisition as compared to the
three  months of sales in fiscal  1996 (see Note 2 of the Notes to  Consolidated
Financial Statements).

     Gross Profit - The Company's gross profit was $131,861,000 for fiscal 1997,
a 24.8%  increase  over the  $105,672,000  reported for fiscal  1996.  The gross
profit  margin  declined  to 24.9% in  fiscal  1997 from  26.4% in  fiscal  1996
primarily due to the  acquisition of Sterile  Concepts (which had a gross margin
of 19.1% in fiscal 1996). However, gross margins improved each quarter since the
acquisition  from  23.4% in the fourth  quarter  of fiscal  1996 to 25.6% in the
fourth quarter of fiscal 1997.

     Operating   Expenses  -  Marketing  and  selling  expenses  increased  from
$51,781,000  in  fiscal  1996 to  $62,603,000  in  fiscal  1997;  however,  as a
percentage of net sales,  these expenses dropped from 13.0% to 11.8% in the same
periods.  General and  administrative  expenses  increased  from  $26,199,000 in
fiscal 1996 to $27,498,000  in fiscal 1997;  but once again,  as a percentage of
net sales, these expenses dropped from 6.5% to 5.2% for the respective  periods.
The  Company  estimates  that  operating   expenses  for  fiscal  1996  included
approximately  $1,640,000 of one-time expenses as a result of the acquisition of
Sterile Concepts. The reduction of expense rates resulted from the leveraging of
the Sterile Concepts operations with the existing operations of the Company.

     Income  from  Operations  -  Income  from  operations  increased  50.8%  to
$41,760,000  in fiscal 1997,  from  $27,692,000  in fiscal 1996.  Excluding  the
one-time  expenses  in fiscal  1996  mentioned  above,  income  from  operations
increased from $29,332,000,  or 7.3% of net sales in fiscal 1996 to $41,760,000,
or 7.9% of net sales in fiscal 1997.

     Interest Expense - The Company's  interest expense increased to $22,145,000
in fiscal 1997 from  $13,143,000  in fiscal  1996.  The Company  estimates  that
interest expense for fiscal 1996 includes  approximately  $1,889,000 of one-time
bridge financing  expenses related to the acquisition of Sterile  Concepts.  The
increase in interest expense is the direct result of the increase in outstanding
debt incurred to finance the acquisition of Sterile Concepts.

     Income Taxes - Maxxim's  effective income tax rate was 42.4% in both fiscal
1997 and  fiscal  1996.  The  Company's  effective  tax rate is higher  than the
statutory rate as a result of nondeductible amortization expenses resulting from
goodwill recorded in past acquisitions.

     Net  Income - As a result of the  foregoing,  fiscal  1997 net  income  was
$12,881,000  as  compared  to  fiscal  1996 net  income of  $8,710,000.  Diluted
earnings  per  share  were  $1.42  and  $1.02  for  fiscal  years  1997 and 1996
respectively.

Liquidity and Capital Resources

     At  November  1,  1998,  the  Company  had  cash and  cash  equivalents  of
$4,125,000,   working  capital  of   $108,918,000,   long-term   liabilities  of
$130,843,000 and shareholders  equity of $272,909,000.  Cash flow from operating
activities  was  $55,542,000  in fiscal 1998 versus  $49,577,000 in fiscal 1997.
Cash flow from  operating  activities  was favorably  impacted by a reduction in
inventory  and  accounts  receivable  balances  resulting  from an  increase  in
management's focus on asset management.

     On October 3, 1997,  the Company  called for  redemption of  $10,000,000 in
principal  amount of its  $28,750,000 6 3/4% due March 1, 2003,  effective as of
November 4, 1997. On November 12, 1997, the Company called for the redemption of
the remaining  outstanding  principal  amount of the Debentures  effective as of
December 12, 1997. In fiscal 1998,  $22,983,000 of the Debentures converted into
1,276,732  shares of common stock and debt issuance costs of $705,000 related to
these converted  Debentures were written off to additional paid-in capital.  The
Company paid $369,000 to debenture  holders who did not exercise  their right to
convert upon surrender of their  certificates in fiscal 1998. (See Note 3 of the
Notes to Consolidated Financial Statements).

     In March 1998, the Company completed an offering of 4,025,000 shares of its
common  stock at a price to the public of $24.00 per  share,  including  525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting  offering costs and commissions,  the Company received net proceeds of
approximately $91,418,000.  The Company used the proceeds to repay the term loan
and a revolving line of credit facility.

     Subsequent  to November 1, 1998,  the Company  entered into a Third Amended
and  Restated  Credit  Agreement  ("Credit   Agreement")  with  several  lending
institutions in connection  with the acquisition of Circon ("the  Transaction").
This new Credit Agreement replaced the Company's  previous credit facility.  The
Credit  Agreement  provides for a term loan of  $200,000,000  and a $125,000,000
revolving  line of credit.  Upon full  payment for all of the Circon  shares and
transaction  expenses,  the term  loan  will be fully  drawn  and  approximately
$60,000,000 of the revolver will be used to finance the Circon  acquisition (See
Note 16 of the Notes to Consolidated Financial Statements). Both loans mature on
January 6, 2005 with the term loan requiring repayment in twenty-four  quarterly
installments ranging from $5,000,000 to $10,000,000,  commencing April 30, 1999.
Both loans bear interest, payable quarterly on the Interest Period as defined in
the Credit  Agreement.  The interest rate is prime or, for LIBOR  advances,  the
LIBOR rate,  plus a margin  ranging from 1.5% to 2.75%,  indexed  according to a
defined  financial  ratio. In connection  with the credit agreement, the Company
incurred  approximately  $5,500,000 in  commitment  fees which will be amortized
over the life of the agreement.


     In June  1998,  the  Company  used  approximately  $31,267,000  in cash and
assumed  $5,300,000 of capital lease obligations in connection with the purchase
of  Winfield  Medical.  (See  Note  2 of the  Notes  to  Consolidated  Financial
Statements).

     In September  1998, the Company  purchased a glove plant for  approximately
$16,096,000 in cash. The manufacturing  plant located in Eaton,  Ohio,  produces
synthetic  examination  gloves used  primarily  in hospitals  and other  medical
facilities.  The purchase provided the Company immediate additional capacity and
a highly  experienced  work  force.  (See  Note 2 of the  Notes to  Consolidated
Financial Statements).

           The Company  believes that its present cash  balances,  together with
internally generated cash flows and borrowings under the Credit Agreement,  will
be  sufficient  to meet its future  working  capital  requirements.  The Company
intends to pursue  strategic  acquisitions  which promote its growth strategy or
complement its present product  offerings and increase market share. The Company
anticipates  using bank or other  commercial  financing,  seller  financing  and
additional  sale of debt or  equity  securities  to  finance  any such  possible
acquisitions.

Inflation

     The Company believes inflation has not had a material effect on its results
of operations for the past three years.  Historically,  the Company  believes it
has been able to minimize  the effect of  inflation  by  increasing  the selling
prices of its products,  improving its  manufacturing  efficiency and increasing
its employee productivity.

Year 2000

     Maxxim Medical relies on electronic  information  systems technology ("IS")
to operate its business. The Company continuously seeks to improve these systems
in order to provide better service to its customers and to support the Company's
growth  objectives.  The  Company has  established  a  three-phased  approach to
address year 2000 issues,  including embedded  technology ("ET") utilized in the
Company's  facilities and equipment.  The three phases included in the Company's
approach are (1) identification, (2) compliance, and (3) validation. Internally,
the Company has substantially  completed,  with the aid of outside  consultants,
the  identification  and  compliance  phases  and is  currently  completing  the
validation  phase.  The validation  phase  consists  primarily of monitoring and
testing  of new  software  and all other  components  and  interfaces  that were
implemented or upgraded as part of the software  installation  or as a result of
other  identified  year 2000  deficiencies.  The Company expects to complete all
phases of the year 2000  project  during the first half of 1999.  The Company is
not currently aware of any significant exposure that would prevent it from being
year 2000 compliant on a timely basis.

     Externally,  the Company is  formally  communicating  with its  significant
suppliers,  customers  and  other  third  parties  to  assess  their  year  2000
readiness.  The Company is currently also determining its potential  exposure if
any of these external parties fail to correct their year 2000 issues in a timely
manner.  The Company is currently in the compliance  and validation  phases with
most of its  significant  external  parties which  includes the  monitoring  and
testing of  significant  interfaces  with those  external  parties  among  other
things.  There can be no guaranty that such  external  parties will achieve year
2000 compliance on a timely basis and failure by such significant external party
to achieve compliance could have a material adverse effect on the Company.

     The Company has not yet  obtained  information  sufficient  to quantify the
potential effects of possible internal and external year 2000 non-compliance, to
determine  the likely worst case  scenarios or to develop  contingency  plans to
deal  with such  scenarios.  However,  as the  Company  completes  its year 2000
project during the first half of 1999, the appropriate contingency plans will be
developed  and the  implementation  will begin.  While the Company has proceeded
over the past two  years in what it  believes  to be a  reasonable  and  prudent
manner to identify and  remediate  year 2000 issues,  there can be no assurances
that the Company's internal and external contingency plans, once developed, will
substantially  reduce  the  risk  of year  2000  non-compliance.  A  significant
interruption in the Company's business due to a year 2000  non-compliance  issue
could  have a  material  adverse  effect on the  Company's  financial  position,
operations and liquidity.

     The total  incremental  direct and indirect  costs,  of the Company's  year
2000 project,  are estimated to be approximately  $1.0 million,  including costs
totaling  approximately  $0.1  million  incurred  through  November 1, 1998 and
exclusive of Circon;  the total incremental direct and indirect costs related to
Circon's year 2000 project are not yet known.  The  estimated  costs of the year
2000  project  are not  expected  to have a  material  impact  on the  Company's
business,   operations  or  financial  condition  in  the  future  periods.  The
anticipated  impact and the total  costs of the year 2000  project  are based on
management's best estimates and information currently available.

Foreign Currency

     The Company's results of operations and the value of its foreign assets are
affected by  fluctuations  in foreign  currency  exchange  rates.  The impact of
changes in exchange  rates on results of  operations  has been  minimal  since a
majority of the Company's  exports are  contracted  in the Company's  functional
currencies.  Foreign currency  transaction  gains and losses are included in the
Consolidated Statements of Operations.


<PAGE>



Euro

     On  January  1,  1999,  eleven  member  countries  of  the  European  Union
established  fixed  conversion  rates between their national  currencies and the
"euro," which will  ultimately  result in the  replacement  of the currencies of
these participating countries with the euro (the "Euro Conversion"). The Company
is currently  assessing  the  potential  impact of the Euro  Conversion  and has
initiated  an  internal  analysis  to plan  for  the  conversion  and  implement
remediation  measures.  The  Company's  analysis  will  encompass  the costs and
consequences  of  incomplete  or untimely  resolution  of any  required  systems
modifications,  various  technical and  operational  challenges  and other risks
including  possible effects on the Company's  financial  position and results of
operations.  Costs associated with the Euro Conversion are being expensed by the
Company  during  the  period in which they are  incurred  and are not  currently
anticipated  to  be  material.   The  Company  presently   believes  that,  with
remediation measures, any material risks associated with the Euro Conversion can
be mitigated.

Forward-Looking Statements

     Statements, either written or oral, that are not historical facts and which
express the Company's intent, belief or current expectations for the future with
respect to financial  performance or operating  strategies are  "forward-looking
statements" within the meaning of Section 21E of the Securities  Exchange Act of
1934.  These  statements  are  made to  provide  the  public  with  management's
assessment of the Company's  business.  Caution must be taken to consider  these
statements  in light of the  following  assumptions:  the Company  assumes  that
products in development  will be introduced  successfully  and on schedule;  the
Company  will  make  acquisitions   which  contribute  to   profitability;   key
distributors  will make  purchases at the same level as their sales;  demand for
the Company's  products will follow recent growth trends;  competitors  will not
introduce new products  which will  substantially  reduce the  Company's  market
share in its most  significant  product  lines;  the  Company  will  continue to
manufacture high quality products at competitive  costs and maintain or increase
product  pricing,  and the  Company  will  become  Year 2000  compliant  without
material  expenditures  and the Company's key suppliers and customers  also will
become Year 2000 complaint so that the Company's  business is not disrupted.  In
the event  any of the above  factors  do not  occur as  management  anticipates,
actual results could differ  materially from the  expectations  expressed in the
forward-looking  statements.  Further information relating to factors that could
cause  actual  results to differ  from those  anticipated  is  included  but not
limited to information under the headings "Business"and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in this Form 10-K
report and "Risk Factors" in the Company's Form S-3  Registraiton  Statement and
Prospectus  effective  March 10, 1998.  The Company  disclaims  any intention or
obligation to update or revise forward-looking  statements,  whether as a result
of new information, future events or otherwise.

New Accounting Pronouncements

     Information  regarding the impact of new accounting  pronouncements  on the
results of operations,  financial  position or cash flows is set forth in Note 1
of the  Notes to  Consolidated  Financial  Statements  under  the  caption  "New
Accounting Pronouncements."

Item 7a:  Quantitative and Qualitative Disclosures About Market Risk

     Not applicable to the Company for this annual report on Form 10-K.



<PAGE>



Item 8:   Financial Statements and Supplementary Data


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   As of November 1, 1998 and November 2, 1997
                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                       1998                1997
                                                                ----------------     ---------------
<S>                                                                    <C>                     <C>

                  ASSETS
Current assets:
   Cash and cash equivalents..................................  $          4,125     $         3,130
   Accounts receivable, net of allowances of $1,840 and $3,181,
   respectively...............................................            70,429              77,209
   Inventory, net.............................................            79,648              83,184
   Net current deferred tax asset.............................            10,325               8,691
   Prepaid expenses and other.................................             8,690               2,309
                                                                ----------------     ---------------
                  Total current assets........................           173,217             174,523
Property and equipment........................................           169,048             122,938
   Less: accumulated depreciation.............................           (41,538)           ( 31,384)
                                                                ----------------     ---------------
                                                                         127,510              91,554
Goodwill and other intangibles, net of accumulated amortization
   of $21,127 and $14,982, respectively.......................           164,014             150,234
Other assets, net.............................................             3,310               7,735
                                                                ----------------     ---------------
                  Total assets.................................  $       468,051      $      424,046
                                                                ================     ===============

             LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Current maturities of long-term debt and capital lease 
     obligations.............................................    $           508              12,750
   Current maturities of other long-term obligations.........              2,036               3,133
   Accounts payable..........................................             35,834              32,194
   Accrued liabilities.......................................             25,921              26,631
                                                                ----------------     ---------------
                  Total current liabilities..................             64,299              74,708
Long-term debt, net of current maturities....................             13,800              78,550
10 1/2% Senior subordinated notes............................            100,000             100,000
6 3/4% Convertible subordinated debentures...................                  -              23,352
Capital lease obligations, net of current maturities.........              4,531                   -
Other long-term obligations, net of current maturities.......                808               3,300
Net non-current deferred tax liability.......................             11,704               6,208
                                                                ----------------     ---------------
                  Total liabilities..........................            195,142             286,118
Commitments and contingencies................................
Shareholders'equity..........................................
   Preferred Stock, $1.00 par, 20,000,000 shares authorized,
     none issued or outstanding..............................                  -                   -
   Common Stock, $.001 par value, 40,000,000 shares authorized, 
     14,238,822 and 8,871,355 shares issued and outstanding, 
     respectively............................................                 14                   9
   Additional paid-in capital................................            219,268             103,872
   Net unrealized gain on investment securities, net of tax...               796                   -
   Retained earnings..........................................            64,886              45,250
   Subscriptions receivable...................................           ( 5,200)            ( 5,200)
   Cumulative translation adjustment..........................           ( 6,855)            ( 6,003)
                                                                ----------------     ---------------
           Total shareholders' equity.........................           272,909             137,928
                                                                ----------------     ---------------
           Total liabilities and shareholders' equity.........  $        468,051     $       424,046

          See accompanying notes to Consolidated Financial Statements.
</TABLE>


<PAGE>



                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF OPERATIONS  
     Fiscal years ended November 1, 1998, November 2, 1997 and November 3, 1996
                     (In thousands except per share amounts)
<TABLE>
<CAPTION>

                                                    1998                 1997             1996
                                              --------------       -------------     -------------
<S>                                                    <C>                <C>                  <C>

Net sales.......................            $       522,516      $       529,552     $     399,836
Cost of sales...................                    381,638              397,691           294,164
                                              ---------------    ---------------     -------------
Gross profit....................                    140,878              131,861           105,672
                                              ---------------    ---------------     -------------
Operating expenses
   Marketing and selling........                     65,837               62,603            51,781
   General and administrative...                     28,573               27,498            26,199
                                              ---------------    ---------------     -------------
                                                     94,410               90,101            77,980
                                              ---------------    ---------------     -------------
Income from operations...........                    46,468               41,760            27,692
Interest expense.................                  ( 13,998 )           ( 22,145 )        ( 13,143 )
Other income, net................                     1,620                2,751               583
                                              ---------------    ---------------     --------------
Income before income taxes.......                    34,090               22,366            15,132
Income taxes.....................                    14,454                9,485             6,422
                                              ---------------    ---------------     -------------
Net income.......................             $      19,636      $        12,881     $       8,710
                                              ===============    ===============     =============

Basic earnings per share........              $        1.55      $          1.55     $        1.08
                                              ===============    ===============     =============

Diluted earnings per share.......             $        1.50      $          1.42     $        1.02
                                              ===============    ===============     =============


          See accompanying notes to Consolidated Financial Statements.
</TABLE>



<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIAIRES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                          Unrealized
                                                      Additional                            Cumulative     Gain on
                                   Common Stock        Paid-In     Retained   Subscriptions Translation   Investment
                                Shares    Par Value    Capital     Earnings    Receivable   Adjustment    Securities      Total
                               --------  ----------- ------------ ----------- ------------ ------------  ------------ -----------
<S>                                <C>       <C>            <C>         <C>          <C>           <C>            <C>         <C>

Balances at October 31,1995       8,088      $8        $91,677      $23,659     $     -         $1,007     $       -     $116,351
Stock option compensation....         -       -            311            -           -              -             -          311
Stock options exercised, 
including federal income tax 
benefit of $123..............        41       -            417            -           -              -             -          417
Payment received on officer 
 loan........................         -       -             40            -           -              -             -           40
Unrealized gain on investment
 securities - net of tax.....         -       -              -            -           -              -           259          259
Net income...................         -       -              -        8,710           -              -             -        8,710
Translation adjustment.......         -       -              -            -           -        ( 2,532 )           -      ( 2,532)
                               --------  ----------- ------------ ----------- ------------ ------------  ------------ ------------
Balances at November 3, 1996     8,129        8         92,445       32,369           -        ( 1,525 )         259      123,556
Senior management stock
 purchase....................      400        1          5,199            -     ( 5,200 )            -             -            -
Officer loan, net of payment
 received....................        -        -           ( 11 )          -           -              -             -         ( 11)
Stock options 
 compensation................        -        -            471            -           -              -             -          471
Stock options exercised,
 including federal income tax 
 benefit of $122.............       43        -            536            -           -              -             -          536
Realized gain on sale of
 investment securities - net  
 of tax......................        -        -              -            -           -              -         ( 259 )      ( 259)
Conversion of convertible
 debentures..................      299        -          5,232            -           -              -             -        5,232
Net income...................        -        -              -       12,881           -              -             -       12,881
Translation adjustment.......        -        -              -            -           -        ( 4,478 )           -      ( 4,478)
                               --------  ----------- ------------ ----------- ------------ ------------  ------------ ------------

Balance at November 2, 1997      8,871        9        103,872       45,250     ( 5,200 )      ( 6,003 )           -      137,928
Officer loan, net of payment
 received....................        -        -           ( 40 )          -           -              -             -         ( 40)
Stock options   
 compensation................        -        -            625            -           -              -             -          625
Stock options exercised,
 including federal income tax 
 benefit of $269.............       66        -          1,119            -           -              -             -        1,119
Conversion of convertible
 debentures..................    1,277        1         22,278            -           -              -             -       22,279
Secondary stock offering.....    4,025        4         91,414            -           -              -             -       91,418
Net unrealized gain on 
 investment securities, net 
 of tax......................        -        -              -            -           -              -           796          796
Net income...................        -        -              -       19,636           -              -             -       19,636
Translation adjustment.......        -        -              -            -           -          ( 852 )           -        ( 852)
                               --------  ----------- ------------ ----------- ------------ ------------  ------------ ------------
 Balance at November 1, 1998    14,239      $14       $219,268     $ 64,886    $( 5,200 )    $ ( 6,855 )        $796     $272,909
                               ========  =========== ============ =========== ============ ============  ============ ============

          See accompanying notes to Consolidated Financial Statements.
</TABLE>

                             MAXXIM MEDICAL, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS  
   Fiscal years ended November 1,  1998, November 2, 1997, and November 3, 1996
                                             (In thousands)
<TABLE>
<CAPTION>

                                                                                     1998         1997         1996
                                                                                  -----------  -----------  -----------
<S>                                                                                       <C>         <C>            <C>

Cash flows from operating activities:
  Net income....................................................................  $    19,636  $    12,881  $     8,710
  Adjustment to reconcile net income to net cash provided by operating  
     activities: 
     Deferred income tax expense................................................        5,584        3,846        3,352
     Depreciation and amortization..............................................       19,400       17,495       14,968
     Compensation expense for outstanding stock options.........................          625          471          311
     Gain on sale of building...................................................         ( 25 )          -            -
     Gain on sale of investment in equity securities............................            -      ( 1,510 )          -
     Changes in current assets and liabilities, net of effects of asset 
     acquisitions and dispositions and business combinations:
     Decrease (increase) in accounts receivable, net............................       10,680        8,694      ( 8,793 )
     Decrease (increase) in inventory, net......................................        6,057       11,073      ( 9,447 )
     Increase in prepaid expenses and other.....................................        ( 454 )      ( 619 )    ( 2,248 )
     (Decrease) increase in accounts payable....................................      ( 1,716 )         23       10,299
     Decrease in accrued liabilities............................................      ( 4,245 )    ( 2,777 )   ( 16,795 )
                                                                                  -----------  -----------  -----------
Net cash provided by operating activities.......................................       55,542       49,577          357
                                                                                  -----------  -----------  -----------
Cash flows from investing activities:
  Proceeds from building sale...................................................        1,200          500            -
  Proceeds from sale of investment securities...................................        1,650        3,130            -
  Purchase of investment securities.............................................            -            -      ( 1,620 )
  Proceeds from the sale of Henley assets.......................................            -            -        6,000
  Purchase of Winfield Medical, net of cash acquired............................     ( 31,267 )          -            -
  Purchase of glove plant assets and assumption of liabilities, net.............     ( 16,096 )          -            -
  Purchase of Sterile Concepts, net of cash acquired............................            -            -    ( 118,676 )
  Purchase of property and equipment,  net of asset acquisitions and business  
     combinations...............................................................     ( 23,441 )    ( 6,829 )   ( 10,625 )
                                                                                   -----------  -----------  -----------
Net cash used in investing activities...........................................     ( 67,954 )    ( 3,199 )  ( 124,921 )
                                                                                   -----------  -----------  -----------
Cash flows from financing activities:
  Payments on long-term borrowings..............................................     ( 81,000 )    ( 7,500 )   ( 73,687 )
  Increase in long-term borrowings..............................................            -            -       90,000
  Net borrowing (payments) on revolving line of credit..........................        3,500     ( 29,790 )     35,290
 (Decrease) increase in other long-term obligations and capital lease
      obligations...............................................................      ( 4,143 )    ( 4,153 )      4,580
  Net proceeds from secondary stock offering....................................       91,418            -            -
  Net proceeds from the issuance of 10 1/2% Notes...............................            -            -       97,000
  Payments on Sterile Concepts debt.............................................            -            -     ( 34,247 )
  Increase (decrease) in bank overdraft.........................................        2,843      ( 7,893 )      6,091
  Other, net....................................................................          753          529          457
                                                                                  -----------  -----------  -----------
Net cash provided by (used in)  financing activities............................       13,371     ( 48,807 )    125,484
                                                                                  -----------  -----------  -----------
Effect of foreign currency translation adjustment...............................           36        ( 391 )       ( 44 )
                                                                                  -----------  -----------  -----------
Net increase (decrease) in cash and cash equivalents............................          995      ( 2,820 )        876
Cash and cash equivalents at beginning of year...................................       3,130        5,950        5,074
                                                                                  -----------  -----------  -----------
Cash and cash equivalents at end of year........................................  $     4,125  $     3,130  $     5,950
                                                                                  ===========  ===========  ===========
Supplemental cash flow disclosures:
  Interest paid during the period...............................................     $ 13,718     $ 21,643      $ 9,090
  Income taxes paid during the period...........................................        5,568        6,147        5,336
  Noncash investing and financing activities
     Conversion of 63/4% convertible subordinated debentures....................     $ 22,278      $ 5,232        $   -
     Conversion of note receivable into investment securities...................        4,000            -            -
     Receipt of investment securities in exchange for certain assets and   
       intangible assets........................................................        2,706            -            -
     Subscriptions receivable from senior management for stock purchase.........            -        5,200            -
     Note received on building sale.............................................            -          300            -
     Convertible note received from sale of Henley assets.......................            -            -        7,000
     Net unrealized gain on investment..........................................          796            -          259

          See accompanying notes to Consolidated Financial Statements.
</TABLE>


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Maxxim Medical,  Inc.  ("Maxxim"),  a Texas  corporation,  and its  subsidiaries
(collectively,  "the Company")  develops,  manufactures,  and markets  specialty
medical products.

Basis of Presentation

Certain  reclassifications  have  been  made  to the  fiscal  1997  consolidated
financial statements to conform with the fiscal 1998 presentation.

Principles of Consolidation

     The accompanying  consolidated financial statements include the accounts of
Maxxim  and  its  wholly  owned  subsidiaries.   All  significant   intercompany
transactions and balances have been eliminated in consolidation.

Cash Equivalents and Financial Instruments

     Cash  equivalents  consist  of highly  liquid  investments  purchased  with
original maturities of three months or less.

Investment Securities

     Investment  securities  at November  1, 1998  consist of  corporate  equity
securities and are reflected in the Balance Sheet in prepaid  expenses and other
current   assets.    The   Company   classifies   its   equity   securities   as
available-for-sale.   Available-for-sale   securities   are   recorded  at  fair
value.Unrealized  holding  gains and losses,  net of the related tax effect,  on
available-for-sale  securities  are excluded from earnings and are reported as a
separate  component of shareholders'  equity until realized.  Realized gains and
losses  from the  sale of  available-for-sale  securities  are  determined  on a
specific   identification   basis.   A  decline  in  the  market  value  of  any
available-for-sale security below cost that is deemed to be other than temporary
results in a reduction  in  carrying  amount to fair value.  The  impairment  is
charged  to  earnings  and a new cost  basis for the  security  is  established.
Dividend income is recognized when earned.

     At  November 1, 1998,  the cost,  gross  unrealized  holding  gains,  gross
unrealized holding losses and fair value of available-for-sale equity securities
were $4,810,000, $1,794,000, $420,000, and $6,184,000, respectively. The Company
had no  investment  securities  at November 2, 1997.  Proceeds  from the sale of
investment securities  available-for-sale were $1,650,000,  $3,130,000 and $0 in
1998,  1997 and 1996,  respectively  and gross realized gains included in income
were $0,  $1,510,000,  $0, and in 1998,  1997 and 1996,  respectively,  which is
reflected in other  income in the  Consolidated  Statements  of  Operations.  In
adjusting the Company's investment  securities to fair value, an unrealized gain
of $796,000, net of tax, was recognized at November 1, 1998.

Concentration Of Credit Risk

     Trade  receivables  have a concentration  of credit risk with hospitals and
healthcare distributors..  The Company performs continuing credit evaluations of
its  customers  and generally  does not require  collateral;  however in certain
circumstances,  the Company may  require  letters of credit from its  customers.
Historically,  the Company has not  experienced  significant  losses  related to
receivables  from individual  customers or groups of customers in any geographic
area.

Inventory

     Inventory is priced at the lower of cost or market.  In determining  market
value, allowances for excess and obsolete items are provided. Cost is determined
using the average cost method.


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     Inventory  as of  November  1, 1998 and  November  2,  1997,  included  the
following:
<TABLE>
<CAPTION>

                                                                                        1998           1997
                                                                                     ----------    -----------
                                                                                          (In thousands)
   <S>                                                                                    <C>              <C>
   
   Raw Materials................................                                       $33,936        $36,613
   Work in Progress.............................                                         8,450          7,227
   Finished Goods...............................                                        43,487         43,393
   Allowance for excess and obsolete inventory..                                        (6,225)        (4,049)
                                                                                    ----------    -----------
                                                                                       $79,648        $83,184
                                                                                    ==========    ===========
</TABLE>

Property and Equipment

     The costs of ordinary maintenance and repairs are expensed,  while renewals
and  betterments  are  capitalized.  Depreciation  on property and  equipment is
computed for financial  reporting  purposes using the straight-line  method over
the estimated useful lives of the assets. As of November 1, 1998 and November 2,
1997, property and equipment included the following:
<TABLE>
<CAPTION>

                                                           Useful Life           1998              1997
                                                         ----------------- ---------------   ---------------
                                                                                    (In thousands)
         <S>                                                 <C>                      <C>                 <C>
         Land......................................                         $       15,815    $       15,610
         Buildings and improvements................          5-25 years             47,658            40,240
         Machinery and equipment...................          2-10 years            100,579            64,370
         Furniture and fixtures....................          3-5 years               4,996             2,718
         Accumulated depreciation..................                               ( 41,538 )        ( 31,384 )
                                                                           ---------------   ---------------
                                                                           $      127,510    $       91,554
                                                                           ===============   ===============
</TABLE>

     In fiscal 1997,  the Company  adopted  Statement  of  Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-lived  Assets and for
Long-lived  Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121 requires that
long-lived  assets  and  certain   identifiable   intangibles  be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying value of an asset may not be recoverable.  Recoverability  of assets to
be held and used is measured by comparison of the carrying amount of an asset to
future net cash flows (undiscounted and without interest charges) expected to be
generated  by the asset.  If such  assets are  considered  to be  impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets  exceed the fair value of the assets.  The adoption of SFAS
No. 121 did not have a material impact on the Company's  Consolidated  Financial
Statements.

Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
Deferred tax assets and liabilities are recognized for the estimated  future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss carryforwards.  Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

Goodwill And Intangibles

     Goodwill  represents the excess of the aggregate  price paid by the Company
in business  combinations  accounted for as purchases over the fair market value
of the tangible and  identifiable  intangible net assets  acquired.  Goodwill is
being amortized on a straight-line  basis from 10 to 40 years.  Other intangible
assets are being amortized on a  straight-line  basis for periods ranging from 3
to 15 years. The Company  assesses the  recoverability  of intangible  assets by
determining  whether  amortization  of the asset balance over its remaining life
can be  recovered  through  undiscounted  future  operating  cash  flows  of the
acquired operation. The amount of asset impairment, if any, is measured based on
projected   discounted  future  operating  cash  flows  using  a  discount  rate
reflecting  the Company's  average cost of funds.  The Company  believes that no
impairment of goodwill exists.


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue Recognition

     The Company  recognizes  revenue upon  shipment to  customers,  pursuant to
customer orders.  The Company grants rebates to certain of its customers.  These
sales and related receivables are recorded net of the expected rebate.

Research and Development Expenses

     The Company is continually  conducting research and developing new products
utilizing a team  approach  that  involves its  engineering,  manufacturing  and
marketing  resources.  Although  the Company  has  developed a number of its own
products,  most of its research and development  efforts have  historically been
directed towards product improvement and enhancement of previously  developed or
acquired products.  Company research and development expenses were approximately
$5,649,000,   $5,158,000,  and  $5,124,000,  in  fiscal  1998,  1997  and  1996,
respectively.

Earnings Per Share

     The Company  adopted  Statement of Financial  Accounting  Standard No. 128,
"Earnings  per Share" (SFAS No. 128) during the first quarter of fiscal 1998. In
accordance  with SFAS No. 128,  basic earnings per share is computed by dividing
net earnings available to common  shareholders by the weighted average number of
common  shares  outstanding  during the period.  Diluted  earnings  per share is
determined on the assumption that  outstanding  dilutive stock options have been
exercised and the aggregate  proceeds as defined were used to reacquire  Company
common  stock  using the average  price of such common  stock for the period and
assuming the conversion of the convertible subordinated debentures from the date
of issue. Prior period earnings per share amounts have been restated.

     The following  table  summarizes the  calculation  of net income,  weighted
average  number of common shares and weighted  average  number of diluted common
shares  outstanding  for  purposes of the  computation  of earnings per share in
accordance with SFAS No. 128:
<TABLE>
<CAPTION>

                                                                               Per Share
                                              Income             Shares         Amounts
                                           ---------------    -----------    -------------
<S>                                          <C>                   <C>                <C>
         1998                                 (In thousands, except per share amounts)
Basic EPS
Net Income............................   $         19,636         12,665   $         1.55
                                                                              =============
Effects of dilutive securities:
Convertible Debt......................   $            107             94
Options...............................                  -            365
                                           ---------------    -----------
Diluted EPS...........................   $          19,743        13,124   $          1.50
                                           ===============    ===========    =============

         1997
Basic EPS
Net Income............................   $         12,881          8,326   $         1.55
                                                                             =============

Effects of dilutive securities:
Convertible Debt......................   $          1,123          1,297
Options...............................                  -            208
                                           ---------------    -----------
Diluted EPS...........................   $         14,004           9,831  $         1.42
                                           ===============    ===========    =============
</TABLE>
<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>

                                                                               Per Share
                                               Income             Shares        Amounts
                                          -----------------    ----------   -------------- 
                                           (In thousands, except per share amounts)
<S>                                                   <C>             <C>             <C>  
         1996
Basic EPS
Net Income..........................     $          8,710          8,102   $         1.08
                                                                            =============
Effects of dilutive securities:
Convertible Debt....................     $          1,364          1,597
Options.............................                    -            162
                                            ---------------    -----------
Diluted EPS.........................     $         10,074          9,861             $ 1.02
                                            ===============    ===========    =============
</TABLE>

Stock Based Compensation

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation"  (SFAS No. 123). SFAS No. 123 allows a company to adopt a new fair
value based method of accounting for its stock based  compensation  plans, or to
continue to follow the intrinsic  method of accounting  prescribed by Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock to Employees."

     The  Company  has  elected to continue to follow APB Opinion No. 25. If the
Company had adopted  SFAS No. 123,  the  Company's  net income and  earnings per
share for the years  ended  November 1, 1998,  November 2, 1997 and  November 3,
1996 would have been impacted as discussed in Note 9.

Use Of Estimates In The Preparation Of Financial Statements

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

52 Week Fiscal Year

     Commencing in fiscal year 1994, the Company implemented a fiscal year which
ends on the Sunday nearest to the end of the month of October.

Translation Of Foreign Currency Financial Statements

     Assets and  liabilities of foreign  subsidiaries  have been translated into
United States dollars at the  applicable  rates of exchange in effect at the end
of the period  reported.  Revenues  and  expenses  have been  translated  at the
applicable  weighted  average  rates of  exchange  in effect  during  the period
reported.  Translation  adjustments  are  reflected  as a separate  component of
shareholders  equity.  Any  transaction  gains and  losses are  included  in net
income.

New Accounting Pronouncements

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
No. 130  "Reporting  Comprehensive  Income"  (SFAS No.  130)  which  establishes
standards for reporting and display of comprehensive  income and its components.
The components of comprehensive  income refer to revenues,  expenses,  gains and
losses that are excluded  from net income under  current  accounting  standards,
including  foreign  currency   translation  items,   minimum  pension  liability
adjustments and unrealized  gains and losses on certain  investments in debt and
equity  securities.  SFAS No. 130  requires  that all items that are  recognized
under accounting  standards as components of comprehensive income be reported in
a  financial  statement  displayed  in equal  prominence  with  other  financial
statements;  the total or other comprehensive income for a period is required to
be  transferred  to a component  of equity  that is  separately  displayed  in a
statement of financial position at the end of an accounting period. SFAS No. 130
is effective for both interim and annual  periods  beginning  after December 15,
1997.  The  Company  plans to adopt SFAS No. 130 in the first  quarter of fiscal
1999.
                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
No. 131,  "Disclosure  About Segments of an Enterprise and Related  Information"
(SFAS No. 131) which is effective for the Company's  fiscal year ending in 1999.
This statement establishes standards for reporting segment information in annual
and interim  financial  statements.  It also  establishes  standards for related
disclosure of products and  services,  geographical  areas and major  customers.
Under SFAS No. 131,  reporting  segments are determined  consistent with the way
management organizes and evaluates financial  information  internally for making
operating decisions and assessing performance.  The Company does not believe the
adoption  of SFAS No. 131 will have a  material  on its  consolidated  financial
statements.

Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"), was issued by the Financial
Accounting  Standards  Board  in  June  1998.  SFAS  No.  133  standardizes  the
accounting for derivative instruments,  including certain derivative instruments
embedded in other contracts. Under the standard,  entities are required to carry
all derivative instruments in the statement of financial position at fair value.
SFAS No. 133 is effective for all fiscal  quarters of all fiscal years beginning
after June 15, 1999.  The Company will adopt SFAS No. 133 beginning in the first
quarter of fiscal 2000.  As of November 1, 1998,  the Company had no  derivative
instruments.

(2) BUSINESS COMBINATIONS, SIGNIFICANT ASSET ACQUISITIONS AND DISPOSITIONS

Business Combinations

     On June 26, 1998, the Company  purchased all of the issued and  outstanding
common  stock  of  Winfield  Medical.   The  assets  acquired  in  the  Winfield
acquisition consist primarily of accounts receivable,  inventory,  furniture and
equipment and leased manufacturing and other facilities in San Diego, California
and Clarksburg,  West Virginia.  Winfield Medical was a developer,  manufacturer
and   distributor  of  medical   products.   The  purchase  price  consisted  of
approximately $31,267,000 in cash and the assumption of approximately $5,300,000
of capital  lease  obligations.  The  acquisition  has been  accounted  for as a
purchase with the purchase price and direct acquisition costs allocated based on
fair value of assets acquired and liabilities assumed. Goodwill of approximately
$23,300,000  was  recorded in  connection  with this  transaction,  and is being
amortized on a straight line basis over 30 years.

     On July 30, 1996,  the Company  successfully  completed a tender offer (the
"Tender  Offer") for Sterile  Concepts.  As of completion of a merger of Sterile
Concepts  and  Maxxim in  September  of 1996,  all of the  outstanding  stock of
Sterile  Concepts  was  purchased  for  approximately  $110,500,000,   excluding
acquisition  costs of approximately  $8,600,000 paid in fiscal 1996 and $465,000
of cash  acquired with the  acquisition.  The Company also  refinanced  existing
Maxxim  debt of  approximately  $72,700,000  contemporaneously  with and  repaid
approximately   $34,200,000   of  Sterile   Concepts   debt  shortly  after  the
consummation  of the Tender Offer.  Funding to complete the acquisition and debt
repayment was derived from  approximately  $121,000,000  of  borrowings  under a
$165,000,000  amended  credit  facility  with  its  primary  lender  and the net
proceeds of  $97,000,000  from the  offering of  $100,000,000  of 10 1/2% Senior
Subordinated  Notes (See Note 3). The assets  acquired in the  Sterile  Concepts
acquisition consist primarily of accounts receivable,  inventory,  furniture and
equipment  and leased  assembly  and other  facilities  in  Richmond,  Virginia,
Temecula,  California and Minnetonka,  Minnesota.  Sterile  Concepts  assembles,
packages and sterilizes custom procedure trays for hospitals, outpatient surgery
centers and  medical  clinics.  In the fourth  quarter of fiscal  1996,  Sterile
Concepts was integrated into the already existing custom procedure tray assembly
and packaging  operations of the Company.  The  acquisition was accounted for by
the purchase method of accounting and approximately $116,000,000 of goodwill was
recorded with the transaction, which is being amortized on a straight line basis
over 40 years.  One time costs of $3,500,000  relating to the  acquisition  were
recorded in the fourth fiscal quarter of fiscal 1996.

Asset Acquisition

     In  September  1998,  the Company  acquired  the  property,  equipment  and
inventory and assumed liabilities of a non-latex medical examination glove plant
in Eaton, Ohio for approximately $16,096,000. This acquisition was accounted for
by the purchase method of accounting.


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Asset Dispositions

     In May 1998,  the Company sold certain  assets and  liabilities  associated
with  its  Bovie  brand of  electrosurgical  products  to  An-Con  Genetics  for
3,000,000 shares of An-Con Genetics common stock.  Included in this sale was the
"Bovie"  Tradename  which  An-Con  Genetics  now uses as its Company  name.  The
assets, which were sold at net book value,  consisted primarily of inventory and
intangibles.  The  Company's  consolidated  financial  statements  reflect these
available-for-sale securities at fair value at November 1, 1998.

     Effective  May 1, 1996,  the Company  sold  certain  assets  related to its
Henley Healthcare division  operations to Henley Healthcare,  Inc., formerly and
at the time of the transaction, Lasermedics, Inc. for approximately $13,000,000,
which consisted of approximately $6,000,000 in cash and a $7,000,000 convertible
note.  The assets,  which were sold at net book value,  consisted  primarily  of
receivables,  inventory,  furniture and equipment,  two manufacturing facilities
located in Sugar Land and Belton,  Texas,  and intangible  assets related to the
Henley product lines. The assets were used by the Henley division to manufacture
and sell various types of products for the physical medicine, rehabilitation and
pain management markets.  In fiscal 1998, the Company, at its option,  converted
$4,000,000 of the convertible  note into 2,000,000  shares of Henley  Healthcare
common  stock.  Subsquent to this  conversion,  the Company sold 975,000  shares
during fiscal 1998 in various private transactions.  The Company's  consolidated
financial statements reflect the remaining available-for-sale securities at fair
value at November 1, 1998.

(3)      DEBT AND OTHER LONG-TERM OBLIGATIONS

Long-Term Debt

     The following  summarizes the Company's  long-term debt at November 1, 1998
and November 2, 1997:
<TABLE>
<CAPTION>

                                                1998            1997
                                            ------------   -------------
                                                    (In thousands)
     <S>                                            <C>              <C>

     Revolving line of credit...........    $    13,800     $    10,300
     Term loan..........................              -          81,000
     Less - Current maturities..........              -        ( 12,750 )
                                            ------------   -------------
                                            $    13,800     $    78,550
                                            ============   =============
</TABLE>

Credit Facility

     On July 30, 1996,  the Company  entered into a Second  Amended and Restated
Credit Agreement ("Credit  Agreement") with several lending  institutions.  This
new Credit Agreement replaced the Company's previous credit facility. The Credit
Agreement  provided for a term loan of $90,000,000  and a $75,000,000  revolving
line of credit.  At  closing,  the term loan was fully  drawn and  approximately
$31,000,000  of the revolver was used in  conjunction  with proceeds from the 10
1/2% Senior Subordinated Notes to finance the Sterile Concepts  acquisition (See
Note 2). Both loans mature on July 30, 2002;  however,  the term loan was repaid
in March 1998 from the net proceeds of the Company's public stock offering. (See
Note 13). The  interest  rate for the credit  facilities  is prime or, for LIBOR
advances,  the LIBOR  rate,  plus a margin  ranging  from 1.0% to 2.0%,  indexed
according to a defined  financial  ratio.  For fiscal 1998, the weighted average
rate of interest on the revolver was 5.94% In  connection  with this  repayment,
$464,000 of financing costs were written off to interest expense. On November 1,
1998,  the unused  portion of the revolver was  approximately  $61,200,000.  The
credit  facility is  unsecured  and  requires  the  Company to maintain  certain
customary financial and operating ratios and prohibits payment of dividends.




<PAGE>



                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     In  connection  with the  acquisition  of Circon (See Note 16), the Company
entered into a Third Amended and Restated Credit Agreement ("Credit  Agreement")
with  several  lending  institutions.  This new Credit  Agreement  replaced  the
Company's  previous credit facility.  The Credit  Agreement  provides for a term
loan  of  $200,000,000  and  a  $125,000,000  revolving  line  of  credit.  Upon
completion  of  the  acquisition,   the  term  loan  will  be  fully  drawn  and
approximately  $60,000,000  of the  revolver  will be used to finance the Circon
acquisition.  Both loans mature on January 6, 2005 with the term loan  requiring
repayment in  twenty-four  quarterly  installments  ranging from  $5,000,000  to
$10,000,000,  commencing  April 30,  1999.  Both  loans bear  interest,  payable
quarterly  on the  Interest  Period as  defined  in the  Credit  Agreement.  The
interest  rate is prime or, for LIBOR  advances,  the LIBOR rate,  plus a margin
ranging from 1.5% to 2.75%, indexed according to a defined financial ratio.

10 1/2% Senior Subordinated Notes

     In  July  1996,  the  Company  issued   $100,000,000   of  10  1/2%  Senior
Subordinated  Notes  ("Notes").  The Notes  mature on  August  1,  2006,  unless
previously   redeemed  by  the  Company.   Interest  on  the  Notes  is  payable
semi-annually on February 1 and August 1, commencing on February 1, 1997.

     The notes will not be redeemable at the Company's option prior to August 1,
2001.  Thereafter,  the Notes will be subject to redemption at the option of the
Company,  in  whole or in part,  upon  not less  than 30 nor more  than 60 days'
notice,  at the redemption prices (expressed as percentages of principal amount)
set forth  below plus  accrued  and unpaid  interest  thereon to the  applicable
redemption date, if redeemed during the twelve-month  period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>

              Year                                Percentage
             ------                               ----------
              <S>                                     <C>

              August 1, 2001.................      105.25%
              August 1, 2002.................      103.50%
              August 1, 2003.................      101.75%
              August 1, 2004 and thereafter..      100.00%
</TABLE>

     Net proceeds from the offering of  approximately  $97,000,000  were used in
conjunction  with proceeds  from the new credit  facility to finance the Sterile
Concepts acquisition (See Note 2).

6 3/4% Convertible Subordinated Debentures

     In  March  1993,  the  Company  issued  $28,750,000  of 6 3/4%  Convertible
Subordinated  Debentures  (the  "Debentures")  due March 1, 2003. The Debentures
were  convertible  at the option of the holder into Common Stock at a conversion
price of $18 per share and paid interest every six months  commencing  September
1, 1993, through maturity on March 1, 2003.

     On October 3, 1997, the Company called for  redemption of  $10,000,000,  in
principal amount, of the Debentures effective as of November 4, 1997 (the "First
Redemption Date"). On the First Redemption Date, the redemption price of 104.17%
of the principal amount, or $1,041.70 plus accrued interest of $11.81 per $1,000
face amount of the Debentures  was paid to the holders of Debentures  called for
redemption who had not exercised  their right to convert their  Debentures  into
common  stock.  As of November 2, 1997,  $5,398,000 of the  debentures  had been
converted  into 299,882  shares of the Company's  common stock and debt issuance
costs of $166,000  related to these  converted  debentures  were  written off to
additional  paid-in capital in fiscal 1997 and are reflected in the accompanying
consolidated financial statements.

     On  November  12,  1997,  the  Company  called  for the  redemption  of the
remaining outstanding  Debentures effective as of December 12, 1997 (the "Second
Redemption  Date").  On the Second  Redemption  Date,  the  redemption  price of
104.17% of the principal  amount,  or $1,041.70 plus accrued  interest of $18.94
per $1,000  face  amount of the  Debentures  was paid to the holders who had not
exercised  their right to convert their  Debentures  into common  stock.  In the
first quarter of fiscal 1998,  $22,983,000 of the Debentures were converted into
1,276,732  shares  of the  Company's  common  stock and debt  issuance  costs of
$705,000  related to these  converted  debentures were written off to additional
paid-in  capital and are reflected in the  accompanying  consolidated  financial
statements in fiscal 1998.  The Company paid  $369,000 to debenture  holders who
did not exercise their right to convert upon surrender of their  certificates in
fiscal 1998.
                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Future Minimum Principal Payments

     Future minimum  principal  payments on long-term debt and other obligations
are as follows:
<TABLE>
<CAPTION>

               Fiscal Years                  (In thousands)
               <S>                                   <C>

               1999.................   $          2,036
               2000.................                505
               2001.................                175
               2002.................             13,928
               2003.................                  -
               Thereafter...........            100,000
                                       -----------------
                                       $        116,644
                                       =================
</TABLE>

(4)      FINANCIAL INSTRUMENTS

         During the first  quarter of fiscal 1996,  the Company  entered into an
interest  rate swap  agreement  with its  primary  lender in order to reduce the
impact  of  changes  in  variable  interest  rates on  consolidated  results  of
operations  and future cash  outflows for interest.  The  agreement  converted a
portion of the  non-indexed  part of the interest  rate of the Credit  Agreement
facilities to a fixed rate of 5.4%. The original notional amount of the swap was
$63,750,000  with an  expiration  of March 31, 2000.  During  fiscal  1998,  the
Company  sold this  agreement  for  $191,000.  In  fiscal  1998,  the  Company's
financial position and results of operations were not materially impacted by the
swap agreement.

     The  Company  used the  interest  rate swap to  manage  the  interest  risk
associated  with its borrowings and to manage the Company's  allocation of fixed
and variable rate debt. The Company  accounted for its interest rate swap on the
accrual  method,  whereby  the net  receivable  or payable was  recognized  on a
periodic basis and included as a component of interest expense. The Company does
not trade in derivative securities.

     The estimated fair value of cash and cash equivalents, accounts receivable,
and accounts  payable,  approximate  their carrying  amount.  The estimated fair
values and carrying  amounts of long-term  borrowings and the interest rate swap
were as follows:
<TABLE>
<CAPTION>

                                                                     1998                                   1997
                                                      ------------------------------------   ------------------------------------
                                                        Carrying Amount      Fair Value        Carrying Amount        Fair Value
                                                      --------------------  --------------   --------------------   -------------
                                                                  (In thousands)                         (In thousands)
    <S>                                                              <C>               <C>                <C>               <C>    
    Swap agreement, receiving fixed.....              $                 -      $        -    $              -       $       310
    Long-term debt(including current maturities)                ( 121,683 )     ( 130,133 )         ( 221,085 )       ( 230,559 )

   Fair values were  determined  from quoted market prices or discounted  cash
flows.
</TABLE>



<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(5)      COMMITMENTS AND CONTINGENCIES

Capital Leases

     The  Company  leases a  production  facility  and various  equipment  under
long-term leases and has the option to purchase the assets for a nominal cost at
the termination of the lease.

     Included in property,  plant and equipment  are the  following  assets held
under capital leases:
<TABLE>
<CAPTION>

                                        1998            1997
                                     ------------   -----------
                                            (In thousands)
     <S>                                    <C>              <C>

     Land....................       $       271     $         -
     Buildings...............             1,914               -
     Machinery and equipment.             6,240               -
     Accumulated amortization             ( 358 )             -
                                    ------------    -----------
                                    $     8,067     $         -
                                    ============    ===========
</TABLE>

     Future  minimum lease  payments for assets under capital leases at November
1, 1998 are as follows:
<TABLE>
<CAPTION>

               Fiscal Years                                 (In thousands)
               <S>                                                 <C>

               1999....................................... $      854
               2000.......................................        784
               2001.......................................        760
               2002.......................................        760
               2003.......................................        760
               Thereafter.................................      2,455
                                                            ----------
               Total minimum lease payments...............      6,373
               Less- amount representing interest.........      1,334
                                                            ----------
               Present value of net minimum lease payments.     5,039
               Less current maturities.....................       508
                                                            -----------
                                                           $    4,531
                                                            ===========
</TABLE>

Operating Leases

     The Company is obligated under various operating leases. Rent expense under
these operating  leases for fiscal years 1998,  1997 and 1996 was  approximately
$3,430,000,  $3,519,000  and  $1,215,000,  respectively.  Minimum  future rental
payments are as follows:
<TABLE>
<CAPTION>

               Fiscal Years              (In thousands)
               <S>                              <C>

               1999..........         $      3,533
               2000..........                3,322
               2001..........                3,367
               2002..........                3,144
               2003..........                2,484
               Thereafter....                3,658
                                       ------------
                                      $     19,508
                                       ============
</TABLE>



<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Claims And Litigation

     On May 9, 1994, an out of court  settlement was reached between the Company
and Futurmed  Intervention,  Inc., a Texas corporation,  ("Futurmed"),  Angiomed
Aktengesellschaft,  a German corporation ("Angiomed") and a number of individual
defendants.  Pursuant  to the  terms  of the  agreement,  Futurmed  will pay the
Company $4,150,000,  which is guaranteed by Angiomed. The defendants also agreed
to certain covenants  regarding supply of certain products,  non-competition and
other matters. Of the settlement amount,  $1,150,000, was paid to the Company by
Futurmed at the time of the settlement  with $3,000,000 to be paid in five equal
annual  installments  of  $600,000  which  began June 1, 1995 and will  continue
through June 1, 1999.  The remaining  $600,000  future  payment is secured by an
irrevocable  letter of credit in favor of the Company.  The proceeds received at
settlement  were used to offset  legal  expenses  incurred  and to  establish  a
reserve for defective,  excess and obsolete inventory  previously purchased from
Angiomed. Installment proceeds are being recorded as non-operating income.

     Since March  1996,  the  Company  has been  served  with  various  lawsuits
alleging  various adverse  reactions to the latex used in certain of the medical
gloves  alleged to have been  manufactured  by the Company or the prior owner of
the assets relating to the Company's Glove Operations acquired in June 1995. The
Company  believes  that most of such claims  relate to gloves  produced and sold
prior to June 1995, and that such prior obligation has been assumed by the prior
owner. The Company is aware that there has been an increasing number of lawsuits
brought  against  latex  glove   manufactures  with  respect  to  such  allergic
reactions.  The Company, like its competitors,  has continued to manufacture and
sell latex gloves and,  therefore,  may be subject to further claims surrounding
the manufacture of these latex gloves.

     In the ordinary  course of business,  the Company has been named in various
other lawsuits.  While the final  resolution of any matter may have an impact on
the Company's  consolidated financial results for a particular reporting period,
management  believes,  based on  consultation  with  counsel,  that the ultimate
resolution of these matters and the matters  specifically  discussed  above will
not have a  material  adverse  impact on the  Company's  financial  position  or
results of operations.

Product Liability

      The Company currently has product liability insurance which it believes to
be adequate for its business.  The Company's existing policy expires October 31,
1999.

(6)        INCOME TAXES

      The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>

                                           1998            1997          1996
                                       ------------    -----------   -----------
                                                     (In thousands)
       <S>                                      <C>            <C>           <C>

       Current domestic.........      $       8,189   $      3,784  $      1,050
       Current foreign..........                681          1,855         2,020
                                       ------------    -----------   -----------
                                      $       8,870   $      5,639  $      3,070
                                       ------------    -----------   -----------
       Deferred domestic........      $       5,118   $      3,724  $      2,693
       Deferred foreign.........                466            122           659
                                       ------------    -----------   -----------
                                      $       5,584   $      3,846  $      3,352
                                       ------------    -----------   -----------
       Total....................      $      14,454   $      9,485  $      6,422
                                       ============    ===========   ===========

</TABLE>


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     Income tax  expense  differed  from the amounts  computed  by applying  the
statutory U.S. federal income tax rate as a result of the following:
<TABLE>
<CAPTION>

                                                       1998           1997          1996
                                                   -----------    -----------   -----------
       <S>                                               <C>            <C>           <C>

       Statutory rate......................               35%            35%           35%
       Amortization of goodwill............                3              4             4
       State taxes, net of federal benefit.                3              2             2
       Other, net..........................                1              1             1
                                                   -----------    -----------   -----------

       Effective rate.......................              42%            42%           42%
                                                   ===========    ===========   ===========
</TABLE>

         The net effects of temporary  differences that give rise to significant
portions of the deferred tax assets and deferred tax  liabilities at November 1,
1998 and November 2, 1997 are presented below:

<TABLE>
<CAPTION>

                                                                                          1998            1997
                                                                                      ------------   -------------
                                                                                             (In thousands)
     <S>                                                                                  <C>              <C>

     Current deferred:
         Deferred tax assets:
         Accounts receivable, principally due to allowance for doubtful accounts..... $     1,359     $     1,257
         Inventory, principally due to reserve for obsolescence and costs inventoried
           for tax purposes..........................................................       3,507           3,369
         Net operating loss carryforwards............................................         629              84
         Accruals and provisions not currently deductible............................       4,830           4,160
                                                                                      ------------   -------------
                                                                                           10,325           8,870
         Deferred tax liabilities:
         Tax over book depreciation..................................................           -           ( 179 )
                                                                                      ------------   -------------

         Net current deferred tax asset.............................................. $    10,325     $     8,691
                                                                                      ============   =============

     Noncurrent deferred:
         Deferred tax assets:
         Net operating loss carryforwards...........................................  $     1,440     $       506
         Deferred tax liabilities:
         Book over tax amortization.................................................      ( 7,299 )       ( 5,933 )
         Differences between book and tax basis of property and equipment...........      ( 5,845 )         ( 781 )
                                                                                      ------------   -------------

         Net noncurrent deferred tax liability......................................  $  ( 11,704 )   $   ( 6,208 )
                                                                                      ============   =============
</TABLE>

     There is no  valuation  allowance  as of the fiscal year ended  November 1,
1998. It is the opinion of management  that future  operations  will more likely
than not generate taxable income to realize the deferred tax assets.

     At November 1, 1998,  the Company has $10.1 million of net  operating  loss
carryforwards  for federal  income tax purposes  which were  acquired in various
acquisitions.  The  utilization of certain net operating loss  carryforwards  is
subject to limitations  under U.S.  Federal Income Tax laws. The Company did not
record a  deferred  tax  asset for $4.2  million  of these  net  operating  loss
carryforwards in the allocation of the purchase price of these acquisitions, for
which subsequently recognized benefits will be allocated to reduce goodwill. The
net operating loss  carryforwards are available to offset future federal taxable
income, if any, through 2009.


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(7)        ACCRUED LIABILITIES

     Accrued  liabilities  as of  November  1, 1998 and  November 2, 1997 are as
follows:
<TABLE>
<CAPTION>

                                                          1998            1997
                                                      ------------    -----------
                                                              (In thousands)
     <S>                                                 <C>                <C>

     Health insurance and benefit accrual............. $   7,799     $     8,471
     Accrued taxes payable............................     5,314           3,831
     Fees payable to hospital buying groups...........     2,357           1,941
     Accrued payroll and commissions..................     2,958           2,751
     Accrued interest payable.........................     2,807           3,349
     Other............................................     4,686           6,288
                                                       ----------     -----------
                                                       $    25,921   $    26,631
                                                      ============   =============
</TABLE>

(8)        GOODWILL AND INTANGIBLES

     Goodwill and intangibles,  net of accumulated amortization,  as of November
1, 1998 and November 2, 1997 are as follows:

<TABLE>
<CAPTION>
                                                        1998            1997
                                                    ------------   -------------
                                                            (In thousands)
     <S>                                                 <C>                <C>

     Goodwill......................................  $   146,381     $   128,782
     Patents.......................................       12,069          13,336
     Debt offering costs...........................        2,660           4,343
     Non-compete agreements........................        2,269           3,048
     Other intangibles.............................          635             725
                                                     ------------   -------------
                                                     $   164,014     $   150,234
                                                     ============   =============
</TABLE>

(9)        STOCK OPTION AGREEMENTS

     Commencing  with November 1, 1989, it has been the practice of the board of
directors to grant stock  options to certain  employees of the Company from time
to time. The Company has also granted options to its non-employee directors from
time to time.  The shares  purchasable  by  employees  under  such stock  option
agreements  (subject to continued  employment  with the Company)  vest over five
years. The shares purchasable by non-employee  directors under such stock option
agreements  (subject to continued  director  service to the Company) vest over a
period of one to three years. Set forth below is certain  information  regarding
such issuances,  exercises and cancellations of options in each of the indicated
fiscal years:

<TABLE>
<CAPTION>
                                                                         Weighted
                                                                      Average Exercise
                                                      Shares               Price
                                                  --------------      -------------
       <S>                                               <C>                <C>    
        Balance at October 29, 1995.......            581,300            $ 11.22
        Fiscal 1996:
           Granted.........................           275,000              11.48
           Exercised.......................          ( 41,180 )             7.06
           Cancelled.......................          ( 21,420 )            12.06
                                                  --------------
        Balance at November 3, 1996........           793,700              11.40
        Fiscal 1997:
           Granted.........................           294,800              11.48
           Exercised.......................          ( 43,000 )            12.99
           Cancelled.......................          ( 28,780 )            11.68
                                                  --------------
       Balance at November 2, 1997.........         1,016,720              11.40

</TABLE>

<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>

                                                                         Weighted 
                                                                      Average Exercise
                                                      Shares               Price
                                                   --------------      --------------
        <S>                                             <C>                 <C>     
        Fiscal 1998:
           Granted........................            302,800           $  19.64
           Exercised......................           ( 65,760 )            12.94
           Cancelled......................           ( 11,680 )            13.13
                                                   -------------
        Balance at November 1, 1998.......          1,242,080              13.31
                                                   =============
</TABLE>


     The  1,242,080  options  outstanding  as of November  1, 1998 had  exercise
prices ranging between $10.73 and $24.76,  a weighted  average exercise price of
$13.31 and a weighted average remaining contract life of 2.68 years. At November
1, 1998,  options to purchase  667,476 shares,  were  exercisable  with exercise
prices ranging between $10.73 and $19.02,  and a weighted average exercise price
of $11.84.

     The Company has elected to continue to follow APB Opinion No. 25:  however,
if the Company  adopted SFAS No. 123, the  Company's net income and earnings per
share for the years ended  November 1, 1998,  November 2, 1997,  and November 3,
1996 would have been reduced as follows:
<TABLE>
<CAPTION>

                                            1998                        1997                         1996
                                 --------------------------- --------------------------- ------------------------------
                                  As Reported    Proforma     As Reported    Proforma     As Reported      Proforma
                                 -------------- ------------ -------------- ------------ -------------  ----------------
                                                   (In thousands, except per share amounts)
<S>                                      <C>           <C>           <C>          <C>             <C>             <C>

Net income...................        $ 19,636     $ 19,042       $ 12,881     $ 12,638         $ 8,710        $ 8,663
Basic earnings per share.....            1.55         1.50           1.55         1.52            1.08           1.07
Diluted earnings per share...            1.50         1.46           1.42         1.40            1.02           1.02
</TABLE>

     The weighted  average fair value of options granted in 1998, 1997, and 1996
was $13.58,  $6.59, and $7.10,  respectively.  The fair value of each option was
determined  using  the  Black-Scholes  option  valuation  model.  The key  input
variables  used in  valuing  the  options  were as  follows:  average  risk-free
interest rate based on 5-year Treasury bonds,  stock price volatility of 53% for
1998 and 36% for 1997 and 1996,  and estimated  option terms ranging from 2 to 6
years.  The Company has no present  plans to pay  dividends on its Common Stock.
The  effect  of  applying  SFAS  No.  123  as   calculated   above  may  not  be
representative of the effects on reported net income for future years.

(10)     SAVINGS PLAN

     The  Company  has a 401(k)  savings  plan  which  permits  participants  to
contribute up to 15 percent of their base  compensation  (as defined) each year.
The Company will match at least 25 percent of a participant's contribution up to
a maximum of 6 percent of gross pay. The Company's  matching  percentage  may be
adjusted  as  Company  profitability   dictates.   Employer  contributions  were
$910,000,  $801,000,  and  $606,000  for the  1998,  1997 and 1996  plan  years,
respectively.

(11)     DEFERRED COMPENSATION PLAN

     During 1998, the Company established a nonqualified  deferred  compensation
plan for key employees of the Company. Under the program, participants may elect
to reduce their  compensation and to have elective  deferrels  credited to their
accounts by making an election  under the Plan,  but no  participants  may defer
more than 90% of their base and 100% of bonuses.  The Company will match 100% of
the first 6% of the participants'  compensation deferral. Vesting in the plan is
100%  immediate and the  retirement  age under the plan is age 55. A participant
terminating  employment  before retirement age is entitled to a lump sum payment
of all vested amounts. In fiscal 1998 employer contributions were $50,200.


<PAGE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(12)     MANAGEMENT STOCK PURCHASE PLAN

     In May 1997,  the Company issued 400,000 shares of common stock pursuant to
a Senior  Management  Stock  Purchase  Plan at $13.00 per  share.  The stock was
issued in exchange for an aggregate of $5,200,000 in non-interest  bearing, full
recourse  promissory  notes due May 23,  2000 from the  participating  managers.
These notes have been recorded as  subscriptions  receivable and are included in
the shareholders'  equity section of the Consolidated  Balance Sheet. Payment of
these notes also is secured by the pledge of the 400,000 shares of common stock.

(13)     PUBLIC OFFERING OF COMMON STOCK

     In March 1998, the Company completed an offering of 4,025,000 shares of its
common  stock at a price to the public of $24.00 per  share,  including  525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting  offering costs and commissions,  the Company received net proceeds of
approximately $91,418,000.  The Company used approximately $20,000,000 to expand
glove production capacity and the balance to repay the Company's term loan and a
revolving creditfacility.

 (14)    SHAREHOLDER RIGHTS PLAN

     On July 10, 1997, the Board of Directors of the Company declared a dividend
of one right to purchase preferred stock ("Right") for each outstanding share of
the Company's  Common Stock,  par value $0.001 per share  ("Common  Stock"),  to
stockholders  of record at the close of  business  on  September  15,  1997 (the
"Record Date").

     The Rights will have certain anti-takeover effects. The Rights are designed
to protect and maximize  the value of the  outstanding  equity  interests in the
Company in the event of an  unsolicited  attempt by an acquiror to take over the
Company  in a manner or on terms not  approved  by the Board of  Directors.  The
Rights will cause  substantial  dilution to any person or group that attempts to
acquire the Company without the approval of the Company's Board of Directors. As
a result,  the overall  effect of the Rights may be to render more  difficult or
discourage any attempt to acquire the Company,  even if such  acquisition may be
favorable to the interests of the Company's  stockholders.  Because the Board of
Directors can redeem the Rights or approve a Permitted  Offer, the Rights should
not interfere with a merger or other business  combination approved by the Board
of Directors of the Company.

     The description and terms of the Rights are set forth in a Rights Agreement
dated  as of July  10,  1997,  as it may from  time to time be  supplemented  or
amended  (the  "Rights  Agreement"),  between the  Company and Harris  Trust and
Savings Bank, as Rights Agent.

(15)     QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                                        First          Second           Third          Fourth
                                                      -----------   -------------    ------------    -----------
                                                                (In thousands, except per share data)
    <S>                                                     <C>            <C>             <C>              <C>

    Year ended November 1, 1998
         Net Sales..................                  $    128,003  $    132,958     $    128,057    $    133,498
         Gross Profit...............                        33,061        34,742           35,324          37,751
         Net Income.................                         3,751         4,719            5,444           5,722
         Basic earnings per share...                          0.38          0.38             0.38            0.40
         Diluted earnings per share.                          0.37          0.37             0.37            0.39

    Year ended November 2, 1997
         Net Sales..................                  $    133,401  $    136,042     $    128,654    $    131,455
         Gross Profit...............                        32,236        33,439           32,489          33,697
         Net Income.................                         3,459         2,717            3,192           3,513
         Basic earnings per share...                          0.43          0.33             0.38            0.41
         Diluted earnings per share.                          0.39          0.31             0.34            0.37
</TABLE>


                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(16)     SUBSEQUENT EVENTS (UNAUDITED)


     On January 6, 1999, the Company  successfully  completed a tender offer for
Circon Corporation  ("Circon").  Upon the completion of the merger of Circon and
Maxxim on January 8, 1999, all of the outstanding  stock of Circon was purchased
for approximately  $15.00 per share or $257,000,000,  including certain fees and
expenses  incurred in connection with the acquisition.  The Company obtained all
funds required in connection with the acquisition  through a bank loan, pursuant
to the Third Amended and Restated Credit Agreement, dated as of January 4, 1999.
(See Note 3). The Company will account for this  acquisition  by the purchase of
accounting method in the first quarter of fiscal 1999.


<PAGE>


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Maxxim Medical, Inc.:

     We have audited the  consolidated  financial  statements of Maxxim Medical,
Inc. and  subsidiaries  as listed in Item 14 a) 1. In connection with our audits
of the  consolidated  financial  statements,  we also have audited the financial
statement schedule as listed in 14 a) 2. These consolidated financial statements
and  financial  statement  schedule  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and financial statement schedule based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the  financial  position of Maxxim
Medical, Inc. and subsidiaries as of November 1, 1998, and November 2, 1997, and
the results of operations  and their cash flows for the years ended  November 1,
1998,  November  2, 1997 and  November 3, 1996,  in  conformity  with  generally
accepted  accounting  principles.  Also in our  opinion,  the related  financial
statement  schedule,  when  considered  in  relation  to the basic  consolidated
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information set forth therein.

                                                                       KPMG LLP

Houston, Texas
January 7, 1999




<PAGE>


Item  9:  Changes  in and  Disagreements  with  Accountants  on  Accounting  And
Financial Disclosures

     None.

PART III

Item 10:     Directors and Executive Officers of the Registrant

     The  information is furnished  under the captions  "Directors and executive
officers of the registrant"  and "Compliance  with Section 16(a) of the Exchange
Act"  in  the  Company's   definitive   proxy  statement  for  its  1999  Annual
Shareholders Meeting, which is incorporated herein by reference.

     The  following  table  sets  forth  certain  information  with  respect  to
executive  officers of the Company.  Executive officers are elected by the Board
of Directors to hold office until their successors are elected and qualified.
<TABLE>
<CAPTION>

Name                          Age     Position(s) with Company
<S>                           <C>      <C>   

Kenneth W. Davidson..........  51     Chairman of the Board, President and Chief
                                              Executive Officer

Peter M. Graham..............  52     Senior Executive Vice President, Chief 
                                              Operating Officer and Secretary

David L. Lamont..............  52     Executive Vice President, Research and 
                                              Product Development

Alan S. Blazei...............  43     Executive Vice President, Controller and 
                                              Treasurer

Henry T. DeHart..............  52     Executive Vice President, Manufacturing
                                               Operations

Joseph D. Dailey.............  50     Executive Vice President, Information
                                               Services

Jack F. Cahill...............  49     Executive Vice President, Sales and
                                               Marketing

Suzanne R. Garon.............  46     Executive Vice President, Human Resources

Rob W. Beek..................  54     Executive Vice President, Managing 
                                               Director, Maxxim Medical Europe

</TABLE>

Item 11:      Executive Compensation

     Information concerning management  remuneration will be furnished under the
caption "Election of Directors - Executive  Compensation and Other Information,"
"- Director  Compensation" and "Approval of 1999  Non-Employee  Directors' Stock
Option Plan" in the  Company's  definitive  proxy  statement for its 1999 Annual
Shareholders Meeting, which is incorporated herein by reference.

Item 12:      Security Ownership of Certain Beneficial Owners and Management

     The  information  under  the  caption  "Security  Ownership"  contained  in
Registrant's definitive proxy statement for its 1999 Annual Shareholders Meeting
is incorporated herein by reference.

Item 13:      Certain Relationships and Related Party Transactions

     The  information  under  the  caption  "Election  Of  Directors  -  Certain
Transactions" and "Employment  Contracts"  contained in Registrant's  definitive
proxy statement for its 1999 Annual Shareholders  Meeting is incorporated herein
by reference.

Item 14:     Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      Documents filed as part of this report:

(1)      Financial Statements:
<TABLE>
<CAPTION>

                                                                                               Page
          <S>                                                                                   <C>

         Consolidated Balance Sheets of the Company as of November 1, 1998 and
            November 2, 1997.................................................................   20
         Consolidated Statements of Operations of the Company for the years ended
            November 1, 1998, November 2, 1997 and November 3, 1996...........................  21
         Consolidated Statements of Shareholders' Equity of the Company for the years
            Ended   November  1,  1998,   November  2,  1997  and   November  3,1996........... 22
         Consolidated Statements of Cash Flows of the Company for the years ended
            November 1, 1998, November 2, 1997 and November 3, 1996............................ 23
         Notes to Consolidated Statements of the Company....................................... 24
         Independent Auditors Report on Consolidated Financial Statements and
            Financial Statement Schedule of the Company........................................ 39
</TABLE>


(2) The following  consolidated  financial statement schedule of Maxxim Medical,
Inc. is included in Item 14(d):

         Schedule II - Valuation and Qualifying Accounts and Allowances

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting  regulations  of the  Securities  and  Exchange  Commission  are  not
required  under  the  related  instructions,  are  inapplicable  or  information
required is included in the consolidated  financial  statements and,  therefore,
have been omitted.

(b)      Reports on Form 8-K

         None.

     (c) Exhibits

 Exhibit
Number                                      Description of Exhibit

3.1(a)   - Restated  Articles of  Incorporation of the Company - Exhibit No. 3.1
         to the Registration  Statement on Form S-1 of Registrant,  Registration
         No.  33-32630,  filed with the  Commission  on  December  19,  1989 and
         incorporated herein by reference.

3.1(b)   - Articles of Amendment to Articles of  Incorporation - Exhibit No. 3.1
         (b)  to  the   Registration   Statement  on  Form  S-1  of  Registrant,
         Registration  No.  33-57800,  filed with the  Commission on February 2,
         1993 and incorporated herein by reference.

3.2      - Bylaws  of the  Registrant  -  Exhibit  No.  3.2 to the  Registration
         Statement on Form S-1 of Registrant,  Registration No. 33-32630,  filed
         with the  Commission  on December 19, 1989 and  incorporated  herein by
         reference.

3.3      -  Certificate  and  Agreement  of Merger and  Articles  of Merger with
         attached  Plan and  Agreement  of Merger of the  Registrant  and Henley
         Holding Company - Exhibit No. 3.3 to the Registration Statement on Form
         S-1 of Registrant, Registration No. 33-32630, filed with the Commission
         on December 19, 1989 and incorporated herein by reference.

4.1 - Specimen  Common Stock  Certificate - Exhibit No. 4.1 to the  Registration
Statement on Form S-1 of Registrant,  Registration No. 33-57800,  filed with the
Commission on February 2, 1993 and incorporated herein by reference.
<PAGE>



Exhibit
Number                                      Description of Exhibit

4.2      - Indenture  dated March 18, 1993 between the  Registrant  and Trustee,
         for 6 3/4% Convertible Subordinated Debentures due 2003 Exhibit No. 4.2
         to the Registration  Statement on Form S-1 of Registrant,  Registration
         No.  33-57800,  filed  with the  Commission  on  February  2,  1993 and
         incorporated herein by reference.

4.3  - Specimen  Debenture - Exhibit No. 4.3 to the  Registration  Statement  on
     Form  S-1  of  Registrant,   Registration  No.  33-57800,  filed  with  the
     Commission on February 2, 1993 and incorporated herein by reference.

4.4  -  Indenture  dated  July  30,  1996,  by  and  among  Maxxim,  as  Issuer,
     Maxxim-Delaware, Purchaser, Fabritek La Romana, Inc., Maxxim Medical Canada
     Limited, Medica B.V. and Medica Inc., Maxxim Medical Canada Limited, Medica
     B.V. and Medica  Hospital  Supplies,  N.V., as  Guarantors  and First Union
     National Bank of North Carolina, as Trustee - Exhibit No. 4 to the Form 8-K
     of   Registrant,   filed  with  the  Commission  on  August  14,  1996  and
     incorporated herein by reference

4.5  - Rights  Agreement dated as of July 10, 1997 between Maxxim Medical,  Inc.
     and Harris Trust and Savings  Bank, as Rights Agent - Exhibit I to the Form
     8-A of the  Registrant  filed  with the  Commission  on July  11,  1997 and
     incorporated herein by reference.

4.6 -Third Amended and Restated Credit  Agreement,  dated as of January 4, 1999,
     by and among the Registrant, NationsBank, N.A., as Agent, The Bank of Nova
     Scotia and First Union Bank, as managing agents, and the Banks named 
     therein - Exhibit(b)(2) to Amendment No. 2 to Schedule 14-D1 filed with the
     Commission on January 5, 1999 and incorporated herein by reference.

10.1*- Consulting  Agreement dated November 1, 1989,  between the Registrant and
     Ernest J. Henley - Exhibit No. 10.13 to the Registration  Statement on Form
     S-1 of Registrant,  Registration No. 33-32630, filed with the Commission on
     December 19, 1989 and incorporated herein by reference.

10.2*    -  Employment  Agreement  dated  November 1, 1989,  between  Kenneth W.
         Davidson and the  Registrant - Exhibit No. 10.2 to the Annual Report of
         Form 10-K of  Registrant,  for the fiscal year ended  October 30, 1994,
         filed with the Commission on January 26, 1995 and  incorporated  herein
         by reference.

10.3*    - Form of Amended and Restated Stock Option Agreement dated November 1,
         1990,  between the Registrant and various  officers of the Registrant -
         Exhibit  No.  10.12  to  the  Registration  Statement  on  Form  S-1 of
         Registrant,  Registration  No.  33-44536,  filed with the Commission on
         December 16, 1991 and incorporated herein by reference.

10.4*    - Form of Stock  Option  Agreement  dated  effective  November 1, 1990,
         between the Registrant and various officers of the Registrant - Exhibit
         No.  10.11 to the  Registration  Statement  on Form S-1 of  Registrant,
         Registration  No.  33-44536,  filed with the Commission on December 16,
         1991 and incorporated herein by reference.

10.5*    - Form of Non-Employee  Director Stock Option Agreement dated effective
         February  28,  1991,   between  the  Registrant  and  the  non-employee
         directors of the  Registrant  - Exhibit No.  10.14 to the  Registration
         Statement on Form S-1 of Registrant,  Registration No. 33-44536,  filed
         with the  Commission  on December 16, 1991 and  incorporated  herein by
         reference.

10.6*    - Form of Stock  Option  Agreement  dated  effective  November 1, 1991,
         between the Registrant and various officers of the Registrant - Exhibit
         No.  10.15 to the  Registration  Statement  on Form S-1 of  Registrant,
         Registration  No.  33-44536,  filed with the Commission on December 16,
         1991 and incorporated herein by reference.

10.7*- 1992 Employee  Stock Option Plan - Exhibit No. 10.13 to the Annual Report
     of Form 10-K of  Registrant,  for fiscal year ended  October 31, 1992 filed
     with the  Commission  on  January  29,  1993  and  incorporated  herein  by
     reference.

10.8*    - 1993  Non-Employee  Director Stock Option Plan - Exhibit No. 10.14 to
         the Registration  Statement on Form S-1 of Registrant,  Registation No.
         33-57800,   filed  with  the   Commission   on  February  2,  1993  and
         incorporated herein by reference.

10.9*    - 1994  Non-Employee  Director Stock Option Plan - Exhibit No. 10.11 to
         the Annual Report of Form 10-K of Registrant, for the fiscal year ended
         October  31,  1993 filed with the  Commission  on January  28, 1994 and
         incorporated herein by reference.

Exhibit
Number                                      Description of Exhibit

10.10*-  Form of 1995  Employee  Stock  Option Plan - Exhibit  No.  10.10 to the
         Annual  Report of Form 10-K of  Registrant,  for the fisal  year  ended
         October 31,  1994,  filed with the  Commission  on January 26, 1995 and
         incorporated herein by reference.

10.11* - Form of 1995  Non-Employee  Directors'  Stock Option Plan - Exhibit No.
     10.11 to the Annual Report of Form 10-K of  Registrant,  for the fisal year
     ended October 31, 1994,  filed with the  Commission on January 26, 1995 and
     incorporated herein by reference.

10.12* - Form of 1996  Non-Employee  Directors'  Stock Option Plan - Exhibit No.
     10.12 to the Annual Report of Form 10-K of Registrant,  for the fiscal year
     ended  November 3, 1996,  filed with the Commission on January 22, 1996 and
     incorporated herein by reference.

10.13* - Form of 1997  Non-Employee  Directors'  Stock Option Plan - Exhibit No.
     4.5 to the Registration  Statement on Form S-8 of Registrant filed with the
     Commission on May 22, 1997 and incorporated herein by reference.

10.14* - Form of 1997  Employee  Stock  Option  Plan -  Exhibit  No.  4.2 to the
     Registration  Satement on Form S-8 of Registrant  filed with the Commission
     on May 22, 1997 and incorporated herein by reference.

10.15* -  Senior  Management  Stock  Purchase  Plan  -  Exhibit  No.  4.6 to the
     Registration   Statement  on  Form  S-8  of  Registration  filed  with  the
     Commission on May 22, 1997 and incorporated herein by reference.

10.16    - Agreement of Purchase and Sale of Assets, dated June 30, 1995, by and
         among Purchaser and Becton,  Dickinson and Company and Becton Dickinson
         Vascular Access Inc - Exhibit No. 2.1 to the Current Report of Form 8-K
         of Registrant,  dated June 30, 1995,  filed with the Commission on July
         14, 1995 and incorporated herein by reference.

10.17    - Agreement of Purchase and Sale of Assets, dated June 30, 1995, by and
         among Maxxim Medical Canada Limited and Becton  Dickinson  Canada Inc -
         Exhibit No. 2.2 to the Current Report of Form 8-K of Registrant,  dated
         June  30,  1995,  filed  with  the  Commission  on July  14,  1995  and
         incorporated herein by reference.

10.18- Agreement  of Purchase and Sale of Assets,  dated June 30,  1995,  by and
     among N.V. Medica Hospital  Supplies and N.V. Becton Dickinson Benelux S.A.
     - Exhibit No. 2.3 to the Current  Report of Form 8-K of  Registrant,  dated
     June 30, 1995,  filed with the Commission on July 14, 1995 and incorporated
     herein by reference.

10.19-  Purchase  Agreement  dated July 18,  1996  between  Maxxim  and  Initial
     Purchasers  relating  to the Old Notes -  Exhibit  No. 3 to the Form 8-K of
     Registrant,  filed with the Commission on August 14, 1996 and  incorporated
     herein by reference.

10.20-  Agreement  and Plan of Merger  dated as of June 10,  1996,  by and among
     Maxxim-Delaware,  Maxxim  Acquisition and Sterile Concepts - Exhibit (d) to
     Schedule 14D-1 of Registrant,  Maxxim-Delaware,  and Purchaser,  filed with
     the Commission on June 14, 1996 and incorporated herein by reference.

10.21- Second  Amended and Restated  Credit  Agreement,  dated July 30, 1996, by
     and among Maxxim,  NationsBank of Texas, N.A. and the banks named therein -
     Exhibit No. 2 to the Form 8-K of  Registrant,  filed with the Commission on
     August 14, 1996 and incorporated herein by reference.

10.22*   - Termination  Agreement  between  Registrant and Kenneth W. Davidson -
         Exhibit No. 4.4 to the Quarterly  Report of Form 10-Q of Registrant for
         the quarterly  period ended May 4, 1997,  filed with the  Commission on
         June 13, 1997 and incorporated herein by reference.

10.23*   - Employment  Agreement  between  Registrant  and Kenneth W. Davidson -
         Exhibit No. 10.2 to the Quarterly Report of Form 10-Q of Registrant for
         the quarterly  period ended February 1, 1998, filed with the Commission
         on March 18, 1998 and incorporated herein by reference.



Exhibit
Number                                      Description of Exhibit

10.24*   - Form of 1998 Non-Employee  Directors' Stock Option Plan - Exhibit No.
         10.1 to the  Quarterly  Report  of  Form  10-Q  of  Registrant  for the
         quarterly  period ended February 1, 1998,  filed with the Commission on
         March 18, 1998 and incorporated herein by reference.

10.25 - Agreement  and Plan of Merger,  dated as of November  21,  1998,  by and
        among MMI Acquisition Corp., the Registrant  and Circon  Corporation - 
        Exhibit (c)(1) to Schedule 14-D1 filed with the Commission on November 
        30, 1998 and incorporated herein by reference.

10.26 - Offer to Purchase for Cash All Outstanding Shares of Common Stock 
        (including the Associated Preferred Stock Purchase Rights) of Circon
        Corporation at $15.00 Net Per Share by MMI Acquisition Corp. (a wholly-
        owned subsidiary of the Registrant) and the Registrant, dated November
        30, 1998 - Exhibit (a)(1) to Schedule 14D-1, filed with the Commission
        on November 30, 1998 and incorporated herein by reference.

10.27* -  Key Employee Non-Qualified Deferred Compensation Plan effective July
          1, 1998.


21       - Subsidiaries of the Registrant

23 -     Consent of KPMG LLP

27 -     Financial Data Schedule (for SEC use only)

------------------
o        Compensatory plan or agreement.

(d)      Schedules



                                                                    SCHEDULE II

                      MAXXIM MEDICAL, INC. AND SUBSIDIARIES

                VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
                     Fiscal Years Ended 1998, 1997 and 1996
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                  Balance at      Charged to                      Balance
                                                                   Beginning      Operating                        at End
Description                                                         of Year        Expenses      Deductions       of Year
-----------                                                         -------        --------      ----------       -------
<S>                                                                <C>            <C>             <C>              <C>     
1998:  Allowance for uncollectible accounts receivable.......      $     3,181    $     1,271     $ ( 2,612 )     $  1,840
1997:  Allowance for uncollectible accounts receivable.......      $     3,901    $     1,800     $ ( 2,520 )     $  3,181
1996:  Allowance for uncollectible accounts receivable.......      $     2,054    $     3,075     $ ( 1,228 )     $  3,901
1998:  Allowance for excess and obsolete inventory...........      $     4,049    $     3,313     $ ( 1,137 )     $  6,225
1997:  Allowance for excess and obsolete inventory...........      $     4,606    $     1,585     $ ( 2,142 )     $  4,049
1996:  Allowance for excess and obsolete inventory...........      $     5,149    $     2,133     $ ( 2,676 )     $  4,606

               The notes to the consolidated financial statements
                     of Maxxim Medical,Inc. and subsidiaries
                     are an integral part of this schedule.

</TABLE>

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     MAXXIM MEDICAL, INC.

                                     By: /s/ KENNETH W. DAVIDSON
                                             Kenneth W. Davidson
                                           Chairman of the Board,
                                    President and Chief Executive Officer

Dated:  January 29, 1999

     Pursuant to the  requirements  of the  Securities  Act of 1934, as amended,
this report has been signed by the following persons in the capacities indicated
on January 29, 1999.

                  Signatures                 Title

   /s/ KENNETH W. DAVIDSON      Chairman of the Board, President and Chief
         (Kenneth W. Davidson)   Executive Officer (principal executive officer)

  /s/    PETER M. GRAHAM        Senior Executive Vice President, Secretary and
         (Peter M. Graham)       Chief Operating Officer (principal financial
                                 officer)

 /s/     ALAN S. BLAZEI         Executive Vice President, Treasurer and
         (Alan S. Blazei)          Controller (principal accounting officer)

  /s/  ERNEST J. HENLEY, PH.D.  Director
        (Ernest J. Henley, Ph. D)

  /s/  PETER G. DORFLINGER      Director
         (Peter G. Dorflinger)

  /s/  MARTIN GRABOIS, M.D.     Director
        (Martin Grabois, M.D.)

  /s/  RICHARD O. MARTIN, PH.D. Director
          (Richard O. Martin, M.D.)

  /s/  HENK R. WAFELMAN, ING.   Director
         (Henk R. Wafelman, Ing.)

  /s/  DONALD R. DePRIEST       Director
         (Donald R. DePriest)