<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

     For the quarterly period ended            March 31, 1999
                                     -----------------------------------------

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

     For  the transition period from                     to
                                     -------------------    --------------------

                         Commission file Number: 0-18338


                               I-Flow Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


        California                                      33-0121984
--------------------------------------------------------------------------------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                     Identification No.)


20202 Windrow Drive, Lake Forest, CA                      92630
--------------------------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)


                                 (949) 206-2700
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)



--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

        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. 

                                [X] Yes   [ ] No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

        Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                [X] Yes   [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.

        As of March 31, 1999 there were 14,225,316 shares outstanding of Common
Stock.


<PAGE>   2

                               I-FLOW CORPORATION

                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 1999

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
Part I: Financial Information                                                    
                                                                                 
     Item 1. Financial Statements                                                
                                                                                 
     Consolidated Balance Sheets as of March 31, 1999 (Unaudited)                
             and December 31, 1998                                             3 
                                                                                 
     Consolidated Statements of Operations for the three-months                  
             ended March 31, 1999 (Unaudited) and 1998 (Unaudited)             4 
                                                                                 
     Consolidated Statements of Cash Flows for the three-months                  
             ended March 31, 1999 (Unaudited) and 1998 (Unaudited)             5 
                                                                                 
     Notes to Consolidated Financial Statements (Unaudited)                    6 
                                                                                 
     Item 2. Management's Discussion and Analysis of Financial Condition         
             and Results of Operations                                         9 
                                                                                 
     Item 3. Quantitative and Qualitative Disclosures about Market Risk       11 
                                                                                 
Part II:  Other Information                                                   12 
                                                                                 
     Signatures                                                               13 
</TABLE>


                                       2


<PAGE>   3

                               I-FLOW CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         March 31,    December 31,   
                                                           1999           1998       
                                                       ------------   ------------   
                                                               (Unaudited)           
<S>                                                    <C>            <C>            
ASSETS                                                                               
  CURRENT ASSETS:                                                                    
    Cash and cash equivalents                          $    772,000   $    971,000   
    Accounts receivable, net                              7,302,000      7,490,000   
    Inventories, net                                      4,762,000      4,328,000   
    Prepaid expenses and other                              583,000        638,000   
                                                       ------------   ------------   
       Total current assets                              13,419,000     13,427,000   
                                                       ------------   ------------   
PROPERTY:                                                                            
    Furniture, fixtures and equipment                     6,989,000      6,789,000   
    Less accumulated depreciation                        (3,727,000)    (3,362,000)  
                                                       ------------   ------------   
       Property, net                                      3,262,000      3,427,000   
                                                       ------------   ------------   
OTHER ASSETS                                                                         
    Goodwill and other intangibles, net                   7,196,000      7,223,000   
    Notes receivable and other                              442,000        259,000   
                                                       ------------   ------------   
TOTAL                                                  $ 24,319,000   $ 24,336,000   
                                                       ============   ============   
                                                                                     
LIABILITIES AND SHAREHOLDERS' EQUITY                                                 
                                                                                     
CURRENT LIABILITIES:                                                                 
    Accounts payable                                   $  1,408,000   $  1,300,000   
    Accrued payroll and related expenses                  1,439,000      1,453,000   
    Current portion of long-term debt                     2,006,000      2,083,000   
    Borrowings under line-of-credit                       1,705,000      1,979,000   
    Other liabilities                                        20,000         24,000   
                                                       ------------   ------------   
       Total current liabilities                          6,578,000      6,839,000   
                                                       ------------   ------------   
LONG-TERM DEBT                                            2,340,000      2,680,000   
                                                                                     
COMMITMENTS AND CONTINGENCIES                                                        
                                                                                     
SHAREHOLDERS' EQUITY:                                                                
    Preferred stock - no par value; 5,000,000 shares                                 
      authorized; 131,667 and 301,250 series B shares                                
      issued and outstanding at March 31, 1999 and                                   
      December 31, 1998, respectively (aggregate                                     
      preference on liquidation of $316,000 at                                       
      March 31, 1999)                                       299,000        686,000   
    Common stock - no par value; 40,000,000 shares                                   
      authorized; 14,225,316 and 14,044,428 shares                                   
      issued and outstanding at March 31, 1999 and                                   
      December 31, 1998, respectively                    38,122,000     37,735,000   
    Common stock warrants                                   615,000        615,000   
    Cumulative other comprehensive income                    24,000             --   
    Accumulated deficit                                 (23,659,000)   (24,219,000)  
                                                       ------------   ------------   
       Net shareholders' equity                          15,401,000     14,817,000   
                                                       ------------   ------------   
TOTAL                                                  $ 24,319,000   $ 24,336,000   
                                                       ============   ============   
</TABLE>

See accompanying notes to consolidated financial statements


                                       3

<PAGE>   4

                               I-FLOW CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                            March 31,
                                                  ----------------------------
                                                      1999             1998
                                                  -----------      -----------
<S>                                               <C>              <C>        
Net revenues                                      $ 6,218,000      $ 4,072,000
                                                  -----------      -----------
Costs and expenses:
  Cost of sales                                     2,439,000        1,810,000
  Selling and marketing                             1,067,000          853,000
  General and administrative                        1,769,000        1,189,000
  Product development                                 241,000          210,000
                                                  -----------      -----------
    Total costs and expenses                        5,516,000        4,062,000

Operating income                                      702,000           10,000

Interest expense                                      123,000          151,000
Income taxes                                           21,000            7,000
                                                  -----------      -----------
Net income (loss)                                 $   558,000      $  (148,000)
                                                  -----------      -----------
Net income (loss) per share
     Basic and diluted                            $      0.04      $     (0.01)
                                                  ===========      ===========
Comprehensive Operations:
     Net income (loss)                            $   558,000      $  (148,000)
     Foreign currency translation adjustment           24,000           60,000
                                                  ===========      ===========
     Comprehensive income (loss)                  $   582,000      $   (88,000)
                                                  ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements


                                       4

<PAGE>   5
 
                               I-FLOW CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED     
                                                                   MARCH 31,         
                                                           ------------------------- 
                                                              1999          1998     
                                                           ----------    ----------- 
<S>                                                        <C>           <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:                                                
Net income (loss)                                          $  558,000    $  (148,000)
Adjustments to reconcile net income (loss) to                                        
  net cash provided (used) by operations:                                            
  Depreciation and amortization                               595,000        298,000 
  Changes in operating assets and liabilities:                                       
    Accounts receivable                                       188,000      1,656,000 
    Inventories                                              (434,000)      (295,000)
    Prepaid expenses and other                                 55,000        (98,000)
    Accounts payable, accrued expenses and                                           
      other liabilities                                        94,000     (2,024,000)
                                                           ----------    ----------- 
Net cash provided (used) by operating activities            1,056,000       (611,000)
                                                           ----------    ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                
  Property (acquisitions) disposals                          (200,000)        55,000 
  Change in other assets                                     (388,000)      (360,000)
                                                           ----------    ----------- 
Net cash used by investing activities                        (588,000)      (305,000)
                                                           ----------    ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                
  Net (repayments proceeds from line of credit               (274,000)     2,263,000 
  Payments on notes payable                                  (417,000)    (1,500,000)
  Proceeds from exercise of stock options and warrants             --         13,000 
                                                           ----------    ----------- 
Net cash provided (used) by financing activities             (691,000)       776,000 
                                                           ----------    ----------- 
Effect of exchange rates on cash                               24,000         60,000 
                                                                                     
NET DECREASE IN CASH AND CASH EQUIVALENTS                    (199,000)       (80,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              971,000        715,000 
                                                           ----------    ----------- 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $  772,000    $   635,000 
                                                           ==========    =========== 
SUPPLEMENTAL CASH FLOW INFORMATION:                                                  
  Interest paid                                            $  125,000    $   155,000 
                                                           ----------    ----------- 
  Income tax payments                                      $   12,000    $     7,000 
                                                           ----------    ----------- 
  Preferred stock dividends payable                        $    4,000    $    19,000 
                                                           ----------    ----------- 
  Liabilities issued and assumed in connection with                                  
    acquisition:                                                                     
    Fair value of assets acquired (including intangibles)                $ 8,254,000 
    Common stock issued                                                   (3,044,000)
                                                                         ----------- 
Liabilities issued and assumed                                           $ 5,210,000 
                                                                         =========== 
</TABLE>
 
See accompanying notes to consolidated financial statements.


                                       5

<PAGE>   6

                               I-FLOW CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.      BASIS OF PRESENTATION

        The accompanying unaudited consolidated financial statements contain all
        adjustments (consisting only of normal recurring adjustments) which, in
        the opinion of management, are necessary to present fairly the financial
        position of the Company at March 31, 1999 and the results of its
        operations and its cash flows for the three-months ended March 31, 1999
        and 1998. Certain information and footnote disclosures normally included
        in financial statements have been condensed or omitted pursuant to rules
        and regulations of the Securities and Exchange Commission although the
        Company believes that the disclosures in the financial statements are
        adequate to make the information presented not misleading.

        The financial statements included herein should be read in conjunction
        with the financial statements of the Company included in the Company's
        Annual Report on Form 10-K for the year ended December 31, 1998 filed
        with the Securities and Exchange Commission on March 31, 1999.

        Certain amounts previously reported have been reclassified to conform
        with the presentation at March 31, 1999.

2.      INVENTORIES

        Inventories consisted of the following as of March 31, 1999 and December
31, 1998:

<TABLE>
<CAPTION>
                                                March 31,        December 31, 
                                                  1999               1998     
                                               -----------       -----------  
<S>                                            <C>               <C>          
            Raw Materials                      $ 3,835,000       $ 3,507,000  
            Work in Process                        437,000           172,000  
            Finished Goods                       1,684,000         1,869,000  
            Reserve for obsolescence            (1,194,000)       (1,220,000) 
                                               -----------       -----------  
                  Total                        $ 4,762,000       $ 4,328,000  
                                               ===========       ===========  
</TABLE>

3.      EARNINGS PER SHARE

        In December 1997, the Company adopted Statement of Financial Accounting
        Standards ("SFAS") No. 128, Earnings per Share. SFAS No. 128 redefines
        earnings per share under generally accepted accounting principles. Under
        the new standard, primary net income per share is replaced by basic net
        income per share and fully diluted net income per share is replaced by
        diluted net income per share. All historical earnings per share
        information has been restated as required by SFAS No. 128.

        Basic net income (loss) per share is computed using the weighted average
        number of common shares outstanding during the periods presented.

        Diluted net income (loss) per share is computed using the weighted
        average number of common and common equivalent shares outstanding during
        the periods presented assuming the conversion of all shares of the
        Company's convertible preferred stock into common stock and the exercise
        of all in-the-money stock options. Common equivalent shares have not
        been included where inclusion would be antidilutive.


                                       6

<PAGE>   7

        The following is a reconciliation between the net income (loss) and the
        number of shares used in the basic and diluted net income (loss) per
        share calculations:

<TABLE>
<CAPTION>
                                                          Three Months Ended 
                                                               March 31,     
                                                          ------------------ 
                                                           1999       1998   
                                                          ------     ------  
                                                        (Amounts in thousands)
<S>                                                      <C>         <C>   
Net income (loss)                                            558       (148) 
Less preferred stock dividends                                (4)       (19) 
                                                          ------     ------  
Net income (loss) available to common shareholders           554       (167) 
                                                          ------     ------  
Basic net income (loss) per  share                                           
   Weighted average number of shares outstanding          14,099     12,951  
   Effect of dilutive securities:                                            
      Preferred stock                                        140        700  
      Stock options                                          454         --  
                                                          ------     ------  
Diluted net income (loss) per share                                          
   Weighted average number of shares outstanding          14,693     13,651  
                                                          ======     ======  
</TABLE>

4.      BUSINESS SEGMENTS

        The Company operates in two business segments: manufacturing and
        marketing of medical infusion pumps and rentals of medical infusion
        pumps.

        Business segment information is as follows for the three-months ended
        March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                     Manufacturing                                  
                                     and Marketing     Rentals        Consolidated   
                                     -------------    ----------      ------------   
<S>                                  <C>               <C>            <C>           
        1999                                                                        
        Revenues                      $4,228,000      $1,990,000      $ 6,218,000   
        Operating income                 292,000         410,000          702,000   
        Assets                        20,254,000       8,549,000       24,319,000   
                                                                                    
        1998                                                                        
        Revenues                       2,989,000       1,083,000        4,072,000   
        Operating income               (342,000)         352,000           10,000   
        Assets                        19,948,000       8,704,000       24,609,000   
</TABLE>

5.      ACQUISITION OF INFUSYSTEMS II, INC. AND VENTURE MEDICAL, INC.

        On February 9, 1998, the Company entered into an Agreement and Plan of
        Merger (the "Agreement") with, InfuSystems II, Inc. ("InfuSystem"),
        Venture Medical, Inc. ("VMI") and the shareholders of InfuSystem and
        VMI, contemplating the merger of InfuSystem and VMI with and into a
        wholly-owned subsidiary of the Company. Pursuant to the Agreement, VMI
        and InfuSystem were merged (the "Merger") with and into the subsidiary
        effective as of February 11, 1998. The acquisition was accounted for
        under the purchase method of accounting and the purchase price has been
        allocated to the net assets acquired and goodwill.

        In the Merger, all of the outstanding shares of Common Stock of VMI and
        InfuSystems were exchanged for shares of Common Stock of the Company.
        The aggregate number of shares of Common Stock of the


                                       7


<PAGE>   8

        Company issued in the Merger to the shareholders of VMI and InfuSystems
        was 972,372 shares, valued at approximately $2.9 million (subject to
        certain post-closing adjustments). As contemplated by the Agreement,
        shares of Common Stock of the Registrant issued in the Merger valued at
        $1.5 million (the "Escrowed Shares") were withheld and were delivered to
        an escrow agent, to be deposited in escrow. The Escrowed Shares, or cash
        equal to the closing value of the Escrowed Shares, will be held for a
        period of two years during which time they will be subject to claims by
        the Company to satisfy the obligations of InfuSystems, VMI and the
        shareholders of InfuSystems and VMI under the Agreement (subject to the
        possible earlier release of a portion of the Escrowed Shares in
        connection with collection of certain accounts receivable). At each of
        the six-month, one-year, eighteen-month and two-year anniversaries of
        the closing, if the value of the Company's Common Stock at such time is
        less than the value of its Common Stock as of the closing ($2.98 per
        share), then the Company will be obligated to pay additional amounts as
        merger consideration. Any additional amounts are to be calculated
        pursuant to the formula set forth in the Agreement. At the Company's
        election, it may pay such additional merger consideration by the
        issuance of additional shares of its Common Stock, in cash, or any
        combination thereof. In August 1998, the Company issued 234,806 shares
        of its Common Stock pursuant to the valuation floor provision for the
        six-month anniversary. There was no incremental value ascribed to these
        additional shares for purchase accounting of the acquisition. In March
        1999, the Company paid $286,081 pursuant to the valuation floor
        provision for the one-year anniversary.


                                       8


<PAGE>   9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


        Certain disclosures made by the Company in this report and in other
        reports and statements released by the Company are and will be
        forward-looking in nature, such as comments that express the Company's
        opinions about trends and factors that may impact future operating
        results. Disclosures that use words such as the Company "believes,"
        "anticipates," or "expects" or use similar expressions are intended to
        identify forward-looking statements. Such statements are subject to
        certain risks and uncertainties that could cause actual results to
        differ from those expected. Readers are cautioned not to place undue
        reliance on these forward-looking statements. The Company undertakes no
        obligation to publish revised forward-looking statements to reflect the
        occurrence of unanticipated events. Readers are also urged to carefully
        review and consider the various disclosures made by the Company in this
        report that seek to advise interested parties of the risks and other
        factors that affect the Company's business, as well as in the Company's
        periodic reports on Forms 10-K, 10-Q, and 8-K filed with the Securities
        and Exchange Commission. The risks affecting the Company's business
        include reliance on the success of the home health care industry, the
        ability to penetrate hospital accounts, the health care reimbursement
        system in place now and in the future, competition in the industry,
        demand in foreign countries, customer credit risks, technological
        changes and product availability. Any such forward-looking statements,
        whether made in this report or elsewhere, should be considered in
        context with the various disclosures made by the Company about its
        business.

RESULTS OF OPERATIONS

        Net revenues during the three-months ended March 31, 1999 were
        $6,218,000 compared to $4,072,000 for the same period in the prior year,
        an increase of 53%. In February 1998, the Company acquired two new
        subsidiaries, InfuSystems II, Inc. and Venture Medical, Inc., both of
        which were national ambulatory infusion pump management and distribution
        companies based in Detroit, Michigan. These companies were merged into
        InfuSystem, Inc. ("InfuSystem"), a wholly owned subsidiary of the
        Company. Rental revenues generated by InfuSystem, Inc. of $1,990,000 and
        $1,083,000 were included in net revenues for the three-months ended
        March 31, 1999 and 1998, respectively.

        Net product revenues increased from $2,989,000 for the three months
        ended March 31, 1998 to $4,228,000 for the same period in 1999. Revenues
        in early 1998 were adversely affected by the restructuring of the
        Company's worldwide distribution network as well as existing high
        distributor inventory levels early in 1998, which caused a short-term
        decline in shipments of infusion products to the Company's previous
        distribution partners. New distribution partners and new products were
        added in 1998 that contributed significantly to the increased product
        revenues for the three-months ended March 31, 1999.

        In March 1998, the Company entered into an agreement with B. Braun
        Melsungen AG (G.BRN), a world leader in the manufacture and distribution
        of pharmaceuticals and infusion products, to distribute I-Flow's
        elastomeric infusion pumps in Western Europe, Eastern Europe, the Middle
        East, Asia Pacific, South America and Africa. The Company also entered
        into a similar agreement under which B. Braun of America, Inc.
        distributes I-Flow's elastomeric pumps to its full line IV solution
        customers in the United States. During the three months ended March 31,
        1999 and 1998, aggregate sales to these two companies accounted for
        approximately 12% and 10%, respectively, of the Company's net revenues.

        I-Flow received permission in June 1998 from the Food and Drug
        Administration ("FDA") to market the PainBuster(TM) in the United
        States. I-Flow's PainBuster pain management system provide continuous
        infusion of a non-narcotic, local anesthetic directly into the
        intraoperative site for post-operative pain management. In September
        1998, the Company entered into a letter of understanding to distribute
        the PainBuster through Smith & Nephew, Inc., a leading worldwide
        healthcare company offering a broad range of products for the care and
        repair of bones, joints, skin and other soft tissue. In January 1999,
        DonJoy, the division of Smith & Nephew that distributes the PainBuster,
        was spun off and the Company's letter of understanding with Smith &
        Nephew expired on February 28, 1999. However, DonJoy continued to
        purchase the PainBuster since that time at the same terms of the letter.
        During the three months ended March 31, 1999, sales of the PainBuster to
        Smith & Nephew were $969,000.


                                       9


<PAGE>   10

        In May 1999, the Company signed a distribution agreement with DonJoy
        under which they become the exclusive United States and Canadian
        distributor for orthopaedic surgery applications of the PainBuster. The
        agreement calls for I-Flow to receive a $2 million licensing fee during
        1999 and for DonJoy to meet minimum purchase commitments for 1999 and
        beyond in order to maintain distribution rights.

        Cost of sales of $2,439,000 were incurred during the three-months ended
        March 31, 1999, compared to $1,810,000 in the prior year. As a
        percentage of net sales, cost of sales decreased from 44% to 39%
        compared to the same period in the prior year. This increase in gross
        profit is mainly attributable to the inclusion of InfuSystem for the
        entire period ended March 31, 1999. As primarily a service business,
        InfuSystem has a considerably higher gross margin than the Company's
        traditional manufacturing business. Additionally, sales of the new
        PainBuster product in the first quarter of 1999 added to the gross
        margin, as this product currently has higher margins than the Company's
        traditional products.

        Selling and marketing expenses for the three-months ended March 31, 1999
        increased over the same period in the prior year by $214,000 or 25%.
        This increase is primarily due to the addition of such expenses for
        InfuSystem for the entire three-month period in 1999 versus
        approximately one-half of the three-month period for 1998. InfuSystem
        selling and marketing expenses included in the consolidated financial
        statements totaled $386,000 and $138,000 for the periods ended March 31,
        1999 and 1998.

        General and administrative expenses for the three-months ended March 31,
        1999 increased $525,000 or 50% from the same period in the prior year,
        primarily due to the addition of InfuSystem for the entire three-month
        period in 1999 compared to approximately one-half of the three-month
        period for 1998. For the three-months ended March 31, 1999 and 1998,
        InfuSystem incurred general and administrative expenses of $531,000 and
        $240,000, respectively. Without the InfuSystem general and
        administrative expenses, the Company's general and administrative
        expenses for the three-months ended March 31, 1999 would have increased
        by $234,000 primarily due to increased payroll and related costs.

        Product development expenses for the three-months ended March 31, 1999
        increased over the same period in the prior year by $31,000, or 15%. The
        Company will continue to incur product development expenses as it
        continues its efforts to introduce new and improved technology and
        cost-efficient products into the market.

LIQUIDITY AND CAPITAL RESOURCES

        During the three months ended March 31, 1999, funds of $1,056,000 were
        provided by operating activities consisting of net income of $558,000
        plus non-cash expenses of $595,000 less net changes in operating assets
        and liabilities of $97,000. These changes in operating assets and
        liabilities consisted of: (1) a decrease in accounts receivable of
        $188,000 due to improved collections, (2) a decrease in prepaid expenses
        and other of $55,000, and (3) an increase in accounts payable, accrued
        expenses, and other liabilities of $94,000 due to the timing of payments
        of trade accounts payable, less (4) an increase in inventories of
        $434,000 due to lower than expected sales for certain products.

        The Company used funds for investing activities during the three-months
        ended March 31, 1999 for acquiring leasehold improvements, furniture,
        fixtures, equipment, and other assets aggregating $588,000 for use in
        its operations. Included in such amount is payment of $286,000 to the
        former shareholders of InfuSystem (see Note 6 of Notes to Consolidated
        Financial Statements).

        During the three-months ended March 31, 1999, funds of $691,000 were
        used for financing activities consisting primarily of payments on notes
        payable net of borrowings of $417,000 and a net reduction on the
        Company's line of credit of $274,000.

        As of March 31, 1999, the Company had cash funds of $772,000 and net
        receivables of $7,302,000. To date, the Company has financed its
        operations and working capital requirements primarily through equity
        financings and bank borrowings. Management believes the Company's funds
        are sufficient to provide for its short and long-term projected needs
        for operations. However, the Company may decide to sell additional
        equity or increase its borrowings in order to fund increased product
        development or for other purposes.


                                       10


<PAGE>   11

YEAR 2000 COMPLIANCE

        Many computer systems and software products are coded to accept only two
        digit entries in the date code field. These date code fields will need
        to accept four digit entries to distinguish 21st century dates from 20th
        century dates. As a result, prior to the end of 1999, computer systems
        and/or software used in many companies may need to be upgraded to comply
        with such "Year 2000" requirements.

        The Company has determined that it will be necessary to modify or
        replace portions of its hardware and software so that its computer
        systems properly recognize dates beyond December 31, 1999. The Company
        believes that with modifications and conversions, the Year 2000 issue
        can be managed, and the associated risks mitigated. The Company has
        received confirmation from vendors of certain software used for internal
        operations that current releases or upgrades, if installed, are designed
        to be Year 2000 compliant. The Company is in the process of installing
        such upgrades to its current systems and believes that substantially all
        of the upgrades will be completed by June 30, 1999. The Company,
        however, has contacted the companies on which I-Flow relies heavily to
        determine the extent to which the Company may be vulnerable to such
        parties' failure to resolve their own Year 2000 issues. Where
        practicable, the Company will assess and attempt to mitigate its risks
        with respect to failure of these entities to be Year 2000 ready. The
        effect, if any, on the Company's results of operations from the failure
        of such parties to be Year 2000 ready is not reasonably estimable.

        The Company is in the process of evaluating its own products for
        potential Year 2000 issues and making such products Year 2000 compliant.
        The vast majority of the Company's products are not date sensitive and
        the Company does not directly rely on any of its vendors' or customers'
        systems. The Company does not believe that there will be significant
        issues or costs associated with making its products Year 2000 compliant.
        However, there can be no assurance that such products do not contain
        undetected errors or defects associated with year 2000 date functions.

        The Company has been using both external and internal resources to
        reprogram or replace its software for the Year 2000 issues. To date, the
        amounts incurred and expensed for developing and carrying out the plan
        have not had a material effect on the Company's operations. The Company
        plans to complete Year 2000 modifications, including testing, by early
        1999. The total estimated remaining cost for addressing the Year 2000
        issue is approximately $66,000, and is not expected to be material to
        the Company's operations. All remaining Year 2000 issues costs will be
        funded through operating cash flows. Although the Company is not aware
        of any material operational issues or costs associated with preparing
        its products or internal information systems for the year 2000, there
        can be no assurances that the Company will not experience serious
        unanticipated negative consequences and/or material costs caused by
        undetected errors or defects in the technology used in its internal
        systems, which are composed predominantly of third party software and
        hardware.

        Should the Company be unable to completely mitigate internal and
        external Year 2000 risks, this could result in a system failure or
        miscalculations causing disruptions of operations, including, among
        other things, a temporary inability to process transactions, send
        invoices, or engage in similar normal business activities at the Company
        or its vendors and suppliers. The Company believes, that under a worst
        case scenario, it could continue the majority of its normal business
        activities on a manual basis.


                                       11

<PAGE>   12

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

FOREIGN CURRENCY

        The Company has a subsidiary operation in Mexico. Accordingly, the
        Company is exposed to transaction gains and losses that could result
        from changes in foreign currency exchange rates. The Company believes
        that this foreign currency market risk is not material.


                                       12

<PAGE>   13

                           PART II - OTHER INFORMATION

Items 1. - 5. Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits

    Exhibit No.                               Exhibit
    -----------                               -------

       3.1          Restated Articles of Incorporation of the Company (2)

       3.2          Certificate of Amendment to Restated Articles of
                    Incorporation dated June 14, 1991 (3)

       3.3          Certificate of Amendment to Restated Articles of
                    Incorporation dated May 12, 1992 (4)

       3.4          Certificate of Determination covering Company's Series B
                    Preferred Stock filed with the Secretary of State on October
                    5, 1992 (4)

       3.5          Restated Bylaws as of July 22, 1991 of the Company (3)

       4.1          Specimen Common Stock Certificate (4)

       4.2          Warrant Agreement between the Company and American Stock
                    Transfer & Trust Company, as Warrant Agent, dated February
                    13, 1990 (1)

       4.3          Form of Warrant dated July 22, 1996, issued in conjunction
                    with the acquisition of Block Medical, Inc. (5)

      27            Financial Data Schedule

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

(1) Incorporated by reference to exhibit with this title filed with the
    Company's Registration Statement (#33-32263-LA) declared effective February
    1, 1990.

(2) Incorporated by reference to exhibit with this title filed with the
    Company's Form 10-K for its fiscal year ended September 30, 1990.

(3) Incorporated by reference to exhibit with this title filed with the
    Company's Registration Statement (#33-41207-LA) declared effective August 8,
    1991.

(4) Incorporated by reference to exhibit with this title filed with the
    Company's Post Effective Amendment to its Registration Statement
    (#33-41207-LA) declared effective November 6, 1992.

(5) Incorporated by reference to exhibit with this title filed with the
    Company's Report on Form 8-K dated July 22, 1996.

         (b)  Reports on Form 8-K.

              During the quarter ended March 31, 1999, the Company filed no 
              Current Reports on Form 8-K.


                                       13

<PAGE>   14

                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
        Registrant has duly caused this Report to be signed on its behalf by the
        undersigned thereunto duly authorized.


                                                   I-FLOW CORPORATION
                                                 -------------------------
                                                       (Registrant)


        Date: May 12, 1999                       /s/ Donald M. Earhart
                                                 -------------------------------
                                                 Donald M. Earhart,
                                                 Chairman, President and CEO


        Date: May 12, 1999                       /s/ Gayle L. Arnold
                                                 -------------------------------
                                                 Gayle L. Arnold,
                                                 Vice President, Finance, Chief
                                                 Financial Officer


                                       14

<PAGE>   15

                                INDEX TO EXHIBITS

    Set forth below is a list of the exhibits included or incorporated by
reference as part of this report:

    Exhibit No.                               Exhibit
    -----------                               -------

       3.1          Restated Articles of Incorporation of the Company (2)

       3.2          Certificate of Amendment to Restated Articles of
                    Incorporation dated June 14, 1991 (3)

       3.3          Certificate of Amendment to Restated Articles of
                    Incorporation dated May 12, 1992 (4)

       3.4          Certificate of Determination covering Company's Series B
                    Preferred Stock filed with the Secretary of State on October
                    5, 1992 (4)

       3.5          Restated Bylaws as of July 22, 1991 of the Company (3)

       4.1          Specimen Common Stock Certificate (4)

       4.2          Warrant Agreement between the Company and American Stock
                    Transfer & Trust Company, as Warrant Agent, dated February
                    13, 1990 (1)

       4.3          Form of Warrant dated July 22, 1996, issued in conjunction
                    with the acquisition of Block Medical, Inc. (5)

      27            Financial Data Schedule

-----------------
(1) Incorporated by reference to exhibit with this title filed with the
    Company's Registration Statement (#33-32263-LA) declared effective February
    1, 1990.

(2) Incorporated by reference to exhibit with this title filed with the
    Company's Form 10-K for its fiscal year ended September 30, 1990.

(3) Incorporated by reference to exhibit with this title filed with the
    Company's Registration Statement (#33-41207-LA) declared effective August 8,
    1991.

(4) Incorporated by reference to exhibit with this title filed with the
    Company's Post Effective Amendment to its Registration Statement
    (#33-41207-LA) declared effective November 6, 1992.

(5) Incorporated by reference to exhibit with this title filed with the
    Company's Report on Form 8-K dated July 22, 1996.