##### Table of Contents



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

FORM 10-Q

(Mark One)

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|(xbox) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
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|       |  |                                                                                         
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|       |  | For the quarterly period endedMarch 31, 2002                                            
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|       |  |                                                                                         
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|(box)  |  | 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)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0121984                          
|                                                              
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                              
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|                                                               |  |                                     
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|20202 Windrow Drive, Lake Forest, CA                           |  | 92630                               
|                                                              
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

(949) 206-2700

(Registrants Telephone Number, Including Area Code)


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.
(xbox)
Yes       (box) No

As of May 10, 2002 there were 15,440,886 shares outstanding of common
stock.





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TABLE OF CONTENTS



|                             |                                                                                               |                                                                              |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- |  |  |  |  |  | 
|                             |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                                       
|                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
|                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                             
|                             |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                        
|                             | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                             | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II   OTHER INFORMATION
|                             | Item 1. Legal Proceedings                                                                    
|                             | Item 2. Changes in Securities and Use of Proceeds                                            
|                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                  
|INDEX TO EXHIBITS           
|EXHIBIT 4.1                 



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##### Table of Contents



I-FLOW CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2002Table of Contents

|                           |                                                                                               |                                                                                                                                                    |    |      |   | 
|-------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                           |                                                                                               |                                                                                                                                                    |    | Page
|                           |                                                                                               |                                                                                                                                                    |    |     
|                           | Part I: Financial Information                                                                 |                                                                                                                                                    |    |      |  
|                          
|                          
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|                           |                                                                                               |                                                                                                                                                    |    |     
|                          
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|                           | Item 1. Financial Statements                                                                  |                                                                                                                                                    |    |      |  
|                          
|                          
|                          
|                          
|                           |                                                                                               | Condensed Consolidated Balance Sheets as of March 31, 2002 (Unaudited)
and December 31, 2001                                                       |    |      | 1 | 
|                          
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           |                                                                                               | Condensed Consolidated Statements of Operations and Comprehensive Operations
for the three month periods ended March 31, 2002 and 2001 (Unaudited) |    |      | 2 | 
|                          
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                          
|                          
|                           |                                                                                               | Condensed Consolidated Statements of Cash Flows for the three-month periods
ended March 31, 2002 and 2001 (Unaudited)                              |    |      | 3 | 
|                          
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|                          
|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           |                                                                                               | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                                   |    |      | 4 | 
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           | Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                                                                    |    | 8    |  
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                                                    |    | 11   |  
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|Part II: Other Information |                                                                                               |                                                                                                                                                    |    |     
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           | Item 1. Legal Proceedings                                                                     |                                                                                                                                                    |    | 11   |  
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           | Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                                                                    |    | 11   |  
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                           | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                                    |    | 11   |  
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|                           |                                                                                               |                                                                                                                                                    |    |     
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|                          
|Signatures                 |                                                                                               |                                                                                                                                                    | 15 |     





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##### Table of Contents






I-FLOW CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |   |             |            | 
|------------------------------------ | --------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | ----------- | ---------- | ------------ | - | ----------- | ---------- | 
|                                     |                 |                                                                                                                                                                                          |                           |   | March 31,   |            | December 31,
|                                     |                 |                                                                                                                                                                                          |                           |   | 2002        |            | 2001        
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |             
|ASSETS                               |                 | (Unaudited)                                                                                                                                                                              |                           |   |             |           
|                                     | CURRENT ASSETS: |                                                                                                                                                                                          |                           |   |             |            |              |   |            
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Cash and cash equivalents                                                                                                                                                                |                           | $ | 2,024,000   |            |              | $ | 2,033,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Accounts receivable, net                                                                                                                                                                 |                           |   | 9,665,000   |            |              |   | 10,010,000  |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Inventories, net                                                                                                                                                                         |                           |   | 7,030,000   |            |              |   | 6,984,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Prepaid expenses and other                                                                                                                                                               |                           |   | 425,000     |            |              |   | 353,000     |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Deferred taxes                                                                                                                                                                           |                           |   | 2,294,000   |            |              |   | 2,294,000   |           
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                     |                 |                                                                                                                                                                                          | Total current assets      |   |             | 21,438,000 |              |   |             | 21,674,000 | 
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                     |                 | Property, net                                                                                                                                                                            |                           |   | 5,049,000   |            |              |   | 4,805,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Goodwill, net                                                                                                                                                                            |                           |   | 6,115,000   |            |              |   | 6,115,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Other long-term assets                                                                                                                                                                   |                           |   | 1,099,000   |            |              |   | 1,068,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Deferred taxes                                                                                                                                                                           |                           |   | 2,042,000   |            |              |   | 2,042,000   |           
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|TOTAL                                |                 | $                                                                                                                                                                                        | 35,743,000                |   |             | $          | 35,704,000   |  
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                    
|                                    
|                                    
|                                    
|CURRENT LIABILITIES:                 |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Accounts payable                                                                                                                                                                         |                           | $ | 3,101,000   |            |              | $ | 3,115,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Accrued payroll and related expenses                                                                                                                                                     |                           |   | 1,591,000   |            |              |   | 1,875,000   |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Income taxes payable                                                                                                                                                                     |                           |   | 645,000     |            |              |   | 576,000     |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Current portion of long-term debt                                                                                                                                                        |                           |   | 190,000     |            |              |   | 221,000     |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Other liabilities                                                                                                                                                                        |                           |   | 33,000      |            |              |   | 65,000      |           
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                     |                 |                                                                                                                                                                                          | Total current liabilities |   |             | 5,560,000  |              |   |             | 5,852,000  | 
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|LONG-TERM DEBT, less current portion |                 |                                                                                                                                                                                          | 47,000                    |   |             |            | 83,000       |  
|                                    
|                                    
|                                    
|                                    
|STOCKHOLDERS EQUITY:                |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Preferred stock  $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding at
March 31, 2002 (unaudited) and December 31, 2001,
respectively                      |                           |   |            |            |              |   |            |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Common stock  $0.001 par value; 40,000,000 shares
authorized; 15,440,755 and 15,344,550 shares
issued and outstanding at March 31, 2002 (unaudited)
and December 31, 2001, respectively |                           |   | 42,495,000  |            |              |   | 42,274,000  |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Accumulated other comprehensive income                                                                                                                                                   |                           |   | 10,000      |            |              |   | 1,000       |           
|                                    
|                                    
|                                    
|                                    
|                                     |                 | Accumulated deficit                                                                                                                                                                      |                           |   | (12,369,000 | )          |              |   | (12,506,000 | )         
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|                                     |                 |                                                                                                                                                                                          | Net stockholders equity  |   |             | 30,136,000 |              |   |             | 29,769,000 | 
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  
|TOTAL                                |                 | $                                                                                                                                                                                        | 35,743,000                |   |             | $          | 35,704,000   |  
|                                     |                 |                                                                                                                                                                                          |                           |   |             |            |              |  

See accompanying notes to consolidated financial statements.

1



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##### Table of Contents






I-FLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE OPERATIONS
(Unaudited)

|                               |                            |                          |                                         |           |                    |         |         |           |           |         |  
|------------------------------ | -------------------------- | ------------------------ | --------------------------------------- | --------- | ------------------ | ------- | ------- | --------- | --------- | ------- | -
|                               |                            |                          |                                         |           | Three Months Ended
|                               |                            |                          |                                         |           | March 31,         
|                               |                            |                          |                                         |           |                   
|                               |                            |                          |                                         |           | 2002               |         | 2001   
|                               |                            |                          |                                         |           |                    |         |        
|Revenues:                      |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|                               | Net revenues               |                          | $                                       | 8,550,000 |                    |         | $       | 7,992,000 |          
|                              
|                              
|                              
|                              
|                               |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|Costs and expenses:            |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|                               | Cost of sales              |                          |                                         | 3,456,000 |                    |         |         | 3,346,000 |          
|                              
|                              
|                              
|                              
|                               | Selling and marketing      |                          |                                         | 2,367,000 |                    |         |         | 1,291,000 |          
|                              
|                              
|                              
|                              
|                               | General and administrative |                          |                                         | 1,974,000 |                    |         |         | 2,205,000 |          
|                              
|                              
|                              
|                              
|                               | Product development        |                          |                                         | 526,000   |                    |         |         | 558,000   |          
|                               |                            |                          |                                         |           |                    |         |         |          
|                               |                            | Total costs and expenses |                                         |           | 8,323,000          |         |         |           | 7,400,000 |        
|                              
|                              
|                              
|                              
|Operating income               |                            |                          | 227,000                                 |           |                    |         | 592,000 |          
|                              
|                              
|                              
|                              
|Interest expense (income), net |                            |                          | (1,000                                  | )         |                    |         | 47,000  |          
|                              
|                              
|                              
|                              
|Income taxes                   |                            |                          | 92,000                                  |           |                    |         | 229,000 |          
|                               |                            |                          |                                         |           |                    |         |         |          
|Net income                     |                            | $                        | 136,000                                 |           |                    | $       | 316,000 |          
|                               |                            |                          |                                         |           |                    |         |         |           |          
|                               |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|Net income per share           |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|                               |                            |                          | Basic                                   |           | $                  | 0.01    |         |           | $         | 0.02    |  
|                               |                            |                          |                                         |           |                    |         |         |           |          
|                               |                            |                          | Diluted                                 |           | $                  | 0.01    |         |           | $         | 0.02    |  
|                               |                            |                          |                                         |           |                    |         |         |           |          
|Comprehensive Operations:      |                            |                          |                                         |           |                    |         |         |          
|                              
|                              
|                              
|                              
|                               |                            |                          | Net income                              |           | $                  | 136,000 |         |           | $         | 316,000 |  
|                              
|                              
|                              
|                              
|                               |                            |                          | Foreign currency translation adjustment |           |                    | 9,000   |         |           |           | (79,000 | )
|                               |                            |                          |                                         |           |                    |         |         |          
|                               |                            |                          | Comprehensive income                    |           | $                  | 145,000 |         |           | $         | 237,000 |  
|                               |                            |                          |                                         |           |                    |         |         |          

See accompanying notes to consolidated financial statements.

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##### Table of Contents






I-FLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |          |            |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------------------------------- | --------- | ------------------ | -------- | ---- | --------- | -------- | ---------- | -
|                                                                                  |                                                                                      |                                                           |           | Three Months Ended
|                                                                                  |                                                                                      |                                                           |           | March 31,         
|                                                                                  |                                                                                      |                                                           |           |                   
|                                                                                  |                                                                                      |                                                           |           | 2002               |          | 2001
|                                                                                  |                                                                                      |                                                           |           |                    |          |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                                                                      | $                                                         | 136,000   |                    |          | $    | 316,000   |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Adjustments to reconcile net income
to net cash provided by operating activities: |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Depreciation and amortization                                                        |                                                           |           | 479,000            |          |      |           | 682,000  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Compensation expense related to stock option grants                                  |                                                           |           | 201,000            |          |      |           | 135,000  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Change in allowance for doubtful accounts                                            |                                                           |           | (23,000            | )        |      |           | 26,000   |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Change in inventory obsolescence reserve                                             |                                                           |           | 54,000             |          |      |           | (12,000  | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Changes in operating assets and liabilities, net of effect of business acquisitions: |                                                           |           |                    |          |      |           |          |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Accounts receivable                                       |           |                    | 370,000  |      |           |          | 2,110,000  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Inventories                                               |           |                    | (100,000 | )    |           |          | (428,000   | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Prepaid expenses and other                                |           |                    | 133,000  |      |           |          | 1,000      |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Accounts payable and accrued payroll and related expenses |           |                    | (475,000 | )    |           |          | (1,143,000 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Income taxes payable                                      |           |                    | 69,000   |      |           |          | 207,000    |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      | Other liabilities                                         |           |                    | (33,000  | )    |           |          | (5,000     | )
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Net cash provided by operating activities                                         |                                                                                      |                                                           | 811,000   |                    |          |      | 1,889,000 |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Property acquisitions                                                                |                                                           |           | (656,000           | )        |      |           | (298,000 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cash paid for acquisition                                                            |                                                           |           |                   |          |      |           | (165,000 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Change in other assets                                                               |                                                           |           | (96,000            | )        |      |           | (22,000  | )         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Net cash used in investing activities                                             |                                                                                      |                                                           | (752,000  | )                  |          |      | (485,000  | )       
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Net repayments on line of credit                                                     |                                                           |           |                   |          |      |           | (500,000 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Payments on notes payable                                                            |                                                           |           | (67,000            | )        |      |           | (247,000 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Proceeds from exercise of stock options and warrants                                 |                                                           |           | 22,000             |          |      |           | 3,000    |           
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Net cash used in financing activities                                             |                                                                                      |                                                           | (45,000   | )                  |          |      | (744,000  | )       
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Effect of exchange rates on cash                                                  |                                                                                      |                                                           | (23,000   | )                  |          |      | (55,000   | )       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |                                                                                      |                                                           | (9,000    | )                  |          |      | 605,000   |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD                                  |                                                                                      |                                                           | 2,033,000 |                    |          |      | 1,184,000 |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |                                                                                      | $                                                         | 2,024,000 |                    |          | $    | 1,789,000 |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|SUPPLEMENTAL CASH FLOW INFORMATION:                                               |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Interest paid                                                                     |                                                                                      | $                                                         | 2,000     |                    |          | $    | 57,000    |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Income tax payments                                                               |                                                                                      | $                                                         | 22,000    |                    |          | $    |          |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Liabilities issued and assumed in connection with acquisition:                    |                                                                                      |                                                           |           |                    |          |      |           |         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Fair value of assets acquired (including intangibles)                                |                                                           | $         |                   |          |      | $         | 165,000  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Cash outflows for business acquisition                                               |                                                           |           |                   |          |      |           | (165,000 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Common stock issued                                                                  |                                                           |           |                   |          |      |           |         |           
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         
|Liabilities issued and assumed                                                    |                                                                                      | $                                                         |          |                    |          | $    |          |         
|                                                                                  |                                                                                      |                                                           |           |                    |          |      |           |         

See accompanying notes to consolidated financial statements.

3



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##### Table of Contents






I-FLOW CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. |  | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) that, in
the opinion of management, are necessary to present fairly the financial
position of I-Flow Corporation (the Company) at March 31, 2002 and the
results of its operations and its cash flows for the three month periods
ended March 31, 2002 and 2001. 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, 2001 filed
with the Securities and Exchange Commission on April 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | Certain amounts previously reported have been reclassified to conform
with the presentation at March 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|2. |  | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Inventories consisted of the following:

| |                 |       |   |           |           |              |   |           |           | 
| | --------------- | ----- | - | --------- | --------- | ------------ | - | --------- | --------- | 
| |                 |       |   | March 31, |           | December 31,
| |                 |       |   | 2002      |           | 2001        
|
| | Raw Materials   |       | $ | 4,579,000 |           |              | $ | 4,553,000 |          
|
|
|
|
| | Work in Process |       |   | 611,000   |           |              |   | 199,000   |          
|
|
|
|
| | Finished Goods  |       |   | 1,840,000 |           |              |   | 2,232,000 |          
|
| |                 |       |   |           |           |              |   |          
|
|
|
|
| |                 | Total |   | $         | 7,030,000 |              |   | $         | 6,984,000 | 
|



|3. |  | Earnings Per Share                                                                                                                                                                                                                   
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Basic net income per share is computed using the weighted average number
of common shares outstanding during the periods presented, excluding
unvested restricted stock which the Company has a right to repurchase.                 
|  
|   |  | Diluted net income per share is computed using the weighted average
number of common and common equivalent shares outstanding during the
periods utilizing the treasury stock method for stock options and
unvested restricted stock.

4



---



##### Table of Contents





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

|                             |                                                      |                                             |     |                    |     |   |     |        |     | 
|---------------------------- | ---------------------------------------------------- | ------------------------------------------- | --- | ------------------ | --- | - | --- | ------ | --- | 
|                             |                                                      |                                             |     | Three Months Ended
|                             |                                                      |                                             |     | March 31,         
|                             |                                                      |                                             |     |                   
|(Amounts in thousands)       |                                                      | 2002                                        |     | 2001              
|                            
|Net income                   |                                                      | $                                           | 136 |                    |     | $ | 316 |       
|                            
|Basic net income per share   |                                                      |                                             |     |                    |     |   |     |       
|                             | Weighted average number of common shares
outstanding |                                             |     | 15,366             |     |   |     | 15,010 |    
|                            
|                            
|                            
|                            
|                             | Effect of dilutive securities:                       |                                             |     |                    |     |   |     |        |    
|                            
|                            
|                            
|                            
|                             |                                                      | Stock options and unvested restricted stock |     |                    | 844 |   |     |        | 493 | 
|                            
|Diluted net income per share |                                                      |                                             |     |                    |     |   |     |       
|                             | Weighted average number of common shares
outstanding |                                             |     | 16,210             |     |   |     | 15,503 |    
|                            



|   |  | Potential common shares of 4,123,000 and 4,147,000 have been excluded
from diluted weighted average common shares for the three-month periods
ended March 31, 2002 and 2001, respectively, as the effect would be
anti-dilutive.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | Business Segments                                                                                                                                                                                                               
|  
|   |  | The Company operates in two business segments: manufacturing and
marketing of medical infusion products, and rentals of medical infusion
pumps.                                                                                 
|  
|   |  | Business segment information is as follows for the three-month periods
ended March 31, 2002 and 2001:                                                                                                                           

|                        |  |                   |        |         |  |              |        |  |  |   |        | 
|----------------------- |  | ----------------- | ------ | ------- |  | ------------ | ------ |  |  | - | ------ | 
|                        |  | Manufacturing and |        |         |  |              |        |  |  |  
|(Amounts in thousands)  |  | Marketing         |        | Rentals |  | Consolidated
|                       
|2002                    |  |                   |        |         |  |              |        |  |  |   |        | 
|Revenues                |  | $                 | 6,059  |         |  | $            | 2,491  |  |  | $ | 8,550  | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  |                   | (378   | )       |  |              | 605    |  |  |   | 227    | 
|                       
|                       
|                       
|                       
|Assets                  |  |                   | 24,166 |         |  |              | 11,577 |  |  |   | 35,743 | 
|                       
|                       
|                       
|                       
|2001                    |  |                   |        |         |  |              |        |  |  |   |        | 
|Revenues                |  |                   | 5,461  |         |  |              | 2,531  |  |  |   | 7,992  | 
|                       
|                       
|                       
|                       
|Operating income        |  |                   | 139    |         |  |              | 453    |  |  |   | 592    | 
|                       
|                       
|                       
|                       
|Assets                  |  |                   | 22,209 |         |  |              | 11,695 |  |  |   | 33,904 | 

5



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##### Table of Contents





|5. |  | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations(SFAS 141) and SFAS No. 142, Goodwill and Other Intangible
Assets(SFAS 142). FASB also issued SFAS No. 143, Accounting for
Obligations Associated with the Retirement of Long-Lived Assets(SFAS
143), and SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets(SFAS 144), in August and October 2001, respectively.                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | SFAS 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method. SFAS 141 superseded APB
Opinion No. 16, Business Combinations, and Statement of Financial
Accounting Standards No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | SFAS 142 addresses the financial accounting and reporting requirements
for acquired goodwill and other intangible assets. Under SFAS 142, the
Company is no longer required to amortize goodwill and other intangible
assets with indefinite lives, but will be required to subject these
assets to periodic testing for impairment. SFAS 142 supersedes APB
Opinion No. 17, Intangible Assets, and becomes effective for fiscal years
beginning after December 15, 2001. The Company adopted the provisions of
SFAS 142 in January 2002. As of March 31, 2002, of the total net
goodwill of $6,115,000, $3,476,000 has been allocated to the
manufacturing and marketing segment and $2,639,000 has been allocated to
the rentals segment. A reconciliation of net income is shown below for
all periods presented to conform to the requirements of SFAS 142.

|                                          |                       |   |                              |      |      |   |          |      | 
|----------------------------------------- | --------------------- | - | ---------------------------- | ---- | ---- | - | -------- | ---- | 
|                                          |                       |   | Three Months Ended March 31,
|                                          |                       |   |                             
|                                          |                       |   | 2002                         |      | 2001
|                                         
|Reported net income                       |                       | $ | 136,000                      |      |      | $ | 316,000  |     
|                                         
|                                         
|                                         
|                                         
|Add back: Goodwill amortization           |                       |   |                             |      |      |   | 246,000  |     
|                                         
|                                         
|                                         
|                                         
|Less: Tax effect of goodwill amortization |                       |   |                             |      |      |   | (103,000 | )   
|                                         
|                                         
|                                         
|                                         
|                                         
|Adjusted net income                       |                       |   | 136,000                      |      |      |   | 459,000  |     
|                                         
|Basic and diluted earnings per share      |                       |   |                              |      |      |   |          |     
|                                         
|                                         
|                                         
|                                         
|                                          | Reported net income   |   |                              | 0.01 |      |   |          | 0.02 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Goodwill amortization |   |                              |     |      |   |          | 0.01 | 
|                                         
|                                          | Adjusted net income   |   | $                            | 0.01 |      |   | $        | 0.03 | 
|                                         



| |  | Amortizable intangible assets included in other long-term assets in the
accompanying condensed consolidating balance sheets are as follows:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |                      |           |              |  |     |         |  |  |   |         | 
|---------------- |  | -------------------- | --------- | ------------ |  | --- | ------- |  |  | - | ------- | 
|                 |  | As of March 31, 2002
|                 |  |                      |          
|                 |  | Carrying             |           | Accumulated  |  |     |         |  |  |  
|                 |  | Amount               |           | Amortization |  | Net
|                
|Patents          |  | $                    | 1,449,000 |              |  | $   | 597,000 |  |  | $ | 852,000 | 
|                
|                
|                
|                
|Licensing Rights |  |                      | 150,000   |              |  |     | 98,000  |  |  |   | 52,000  | 
|                
|Total            |  |                      | 1,599,000 |              |  |     | 695,000 |  |  |   | 904,000 | 
|                

6



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##### Table of Contents



|                 |  |          |           |              |  |                         |         |  |  |   |         | 
|---------------- |  | -------- | --------- | ------------ |  | ----------------------- | ------- |  |  | - | ------- | 
|                 |  |          |           |              |  | As of December 31, 2001 |         |  |  |  
|                 |  |          |          
|                
|                
|                
|                
|                
|                
|                
|                
|                 |  | Carrying |           | Accumulated  |  |                         |        
|                 |  | Amount   |           | Amortization |  | Net                    
|                
|Patents          |  | $        | 1,457,000 |              |  | $                       | 615,000 |  |  | $ | 842,000 | 
|                
|                
|                
|                
|Licensing Rights |  |          | 150,000   |              |  |                         | 90,000  |  |  |   | 60,000  | 
|                
|                 |  |          |           |              |  |                         |         |  |  |   |         | 
|                
|                
|                
|                
|Total            |  |          | 1,607,000 |              |  |                         | 705,000 |  |  |   | 902,000 | 
|                



| |  | Amortization expense for the three months ended March 31, 2002 was
$60,000. Amortization expense of intangible assets is expected to be
approximately $230,000 in each of the next five fiscal years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets.
SFAS 143 is effective for fiscal years beginning after June 15, 2002,
with early adoption permitted. The Company is currently evaluating the
provisions of SFAS 143 but expects that the provisions of SFAS 143 will
not have a material impact on its consolidated results of operations and
financial position upon adoption.                                                                                                                                                                     
|
| |  | SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets and new standards for reporting
discontinued operations. SFAS 144 superseded SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of,and APB Opinion No. 30, Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions.The provisions of SFAS 144 are effective in fiscal years
beginning after December 15, 2001 and, in general, are to be applied
prospectively. The adoption of SFAS 144 did not have a material impact
on the Companys consolidated results of operations and financial
position.

7



---



##### Table of Contents






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 which express the Companys
opinions about trends and factors that may impact future operating
results. Disclosures that use words such as believes, anticipates,
or expects or use similar expressions are intended to identify
forward-looking statements. Forward-looking statements are subject to
certain risks and uncertainties, which could cause actual results to
differ significantly from those expected, and readers are cautioned not
to place undue reliance on these forward-looking statements. The Company
undertakes no obligation to republish 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 which seek to advise interested parties of the
risks and other factors that affect the Companys business, as well as in
the Companys reports on Forms 10-K, 10-Q and 8-K that are periodically
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 Companys success in pursuing its direct sales
strategy, the reimbursement system currently in place and future changes
to that system, competition in the industry, economic conditions in
foreign countries, technological changes and product availability. All
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-month period ended March 31, 2002 were
$8,550,000 compared to $7,992,000 for the same period in the prior year,
representing an increase of 7%. The net increase in revenues of
$558,000 for the three-month period ended March 31, 2002 compared to the
same period in the prior year was primarily due to an increase in
regional anesthesia product revenues of $357,000 and an increase in
international revenues of $318,000.                                                                                                                    
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company incurred cost of sales of $3,456,000 and $3,346,000 during
the three-month periods ended March 31, 2002 and 2001, respectively.
This represents an increase of 3%. However, during the three-month
period ended March 31, 2002, cost of sales as a percentage of net
revenues decreased by approximately 2% mainly due to the increased
average selling prices on the Companys ON-Q Post-Operative Pain Relief
System as a result of the change in distribution method from a third
party distributor to a direct sales force selling to hospitals and other
end-users.
|
| |  | Selling and marketing expenses for the three-month period ended March 31,
2002 increased over the same period in the prior year by $1,076,000, or
83%. The increase was primarily due to the additional costs associated
with the new direct sales force and related marketing expenses necessary
to support the ON-Q Post-Operative Pain Relief System. The Company
acquired exclusive distribution rights for the ON-Q product from
Ethicon-Endo Surgery, Inc. effective January 1, 2002.                                                                                         
|
| |  | General and administrative expenses for the three-month period ended
March 31, 2002 decreased compared to the same period in the prior year by
$231,000, or 10%. As a percentage of net revenues, general and
administrative expenses decreased by 5%. This decrease was primarily due
to a $246,000 decrease in goodwill amortization.                                                                                                                                                                                                                                             
|
| |  | Product development expenses for the three-month period ended March 31,
2002 decreased compared to the same period in the prior year by $32,000,
or 6%, due to decreased consulting expenses and pre-production material
costs. 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. As a percentage of net sales,
product development expense decreased by 1%.                                                                                        

8



---



##### Table of Contents





| |  | During the quarter ended March 31, 2002, the Company recorded income tax
expense of $92,000, compared to income tax expense of $229,000 for the
quarter ended March 31, 2001. The Companys effective tax rate decreased
slightly to 40.4% during the quarter ended March 31, 2002 from 42.0% in
the prior year quarter.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources



| |  | During the three-month period ended March 31, 2002, cash of $811,000 was
provided by operating activities consisting of net income of $136,000
plus non-cash expenses of $960,000, less net changes in operating assets
and liabilities of $285,000.                                                                                                                                                                                         
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company used cash in investing activities during the three-month
period ended March 31, 2002 aggregating $752,000, compared to $485,000
for the same period in the prior year. The expenditures in the three
months ended March 31, 2002 consisted of $656,000 used to acquire
leasehold improvements, furniture, fixtures and equipment for use in the
Companys operations along with a net outflow related to other assets of
$96,000.
|
| |  | During the three-month period ended March 31, 2002, cash of $45,000 was
used in financing activities consisting of $67,000 of payments on notes
payable, partially offset by $22,000 in proceeds from the exercise of
stock options.                                                                                                                                                                                                         
|
| |  | As of March 31, 2002, the Company had cash and cash equivalents of
$2,024,000 and net accounts receivable of $9,665,000. Management
believes the Companys funds are sufficient to provide for its projected
needs for operation during the next 12 months. However, the Company may
decide to sell additional equity or increase its borrowings in order to
fund increased product development or for other purposes.                       

New Accounting Pronouncements



| |  | In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations(SFAS 141) and SFAS No. 142, Goodwill and Other Intangible
Assets(SFAS 142). FASB also issued SFAS No. 143, Accounting for
Obligations Associated with the Retirement of Long-Lived Assets(SFAS
143), and SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets(SFAS 144), in August and October 2001, respectively.                                                                                                                                                                                                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | SFAS 141 requires that all business combinations initiated after June 30,
2001 be accounted for under the purchase method. SFAS 141 superseded APB
Opinion No. 16, Business Combinations, and Statement of Financial
Accounting Standards No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | SFAS 142 addresses the financial accounting and reporting requirements
for acquired goodwill and other intangible assets. Under SFAS 142, the
Company is no longer required to amortize goodwill and other intangible
assets with indefinite lives, but will be required to subject these
assets to periodic testing for impairment. SFAS 142 supersedes APB
Opinion No. 17, Intangible Assets, and becomes effective for fiscal years
beginning after December 15, 2001. The Company adopted the provisions of
SFAS 142 in January 2002. As of March 31, 2002, of the total net
goodwill of $6,115,000, $3,476,000 has been allocated to the
manufacturing and marketing segment and $2,639,000 has been allocated to
the rentals segment. A reconciliation of net income is shown below for
all periods presented to conform to the requirements of SFAS 142.
|
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

9



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##### Table of Contents



|                                          |                       |   |                              |      |      |   |          |      | 
|----------------------------------------- | --------------------- | - | ---------------------------- | ---- | ---- | - | -------- | ---- | 
|                                          |                       |   | Three Months Ended March 31,
|                                         
|                                          |                       |   | 2002                         |      | 2001
|                                         
|Reported net income                       |                       | $ | 136,000                      |      |      | $ | 316,000  |     
|                                         
|                                         
|                                         
|                                         
|Add back: Goodwill amortization           |                       |   |                             |      |      |   | 246,000  |     
|                                         
|                                         
|                                         
|                                         
|Less: Tax effect of goodwill amortization |                       |   |                             |      |      |   | (103,000 | )   
|                                         
|Adjusted net income                       |                       |   | 136,000                      |      |      |   | 459,000  |     
|                                         
|Basic and diluted earnings per share      |                       |   |                              |      |      |   |          |     
|                                         
|                                         
|                                         
|                                         
|                                          | Reported net income   |   |                              | 0.01 |      |   |          | 0.02 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Goodwill amortization |   |                              |     |      |   |          | 0.01 | 
|                                         
|                                          | Adjusted net income   |   | $                            | 0.01 |      |   | $        | 0.03 | 
|                                         



| |  | Amortizable intangible assets included in other long-term assets in the
accompanying condensed consolidating balance sheets are as follows:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |                      |           |              |  |     |         |  |  |   |         | 
|---------------- |  | -------------------- | --------- | ------------ |  | --- | ------- |  |  | - | ------- | 
|                 |  | As of March 31, 2002
|                 |  |                      |          
|                
|                 |  | Carrying             |           | Accumulated  |  |    
|                 |  | Amount               |           | Amortization |  | Net
|                
|Patents          |  | $                    | 1,449,000 |              |  | $   | 597,000 |  |  | $ | 852,000 | 
|                
|                
|                
|                
|Licensing Rights |  |                      | 150,000   |              |  |     | 98,000  |  |  |   | 52,000  | 
|                
|Total            |  |                      | 1,599,000 |              |  |     | 695,000 |  |  |   | 904,000 | 
|                

|                 |  |                         |           |              |  |     |         |  |  |   |         | 
|---------------- |  | ----------------------- | --------- | ------------ |  | --- | ------- |  |  | - | ------- | 
|                 |  | As of December 31, 2001
|                 |  |                         |          
|                
|                 |  | Carrying                |           | Accumulated  |  |     |         | 
|                 |  | Amount                  |           | Amortization |  | Net
|                
|Patents          |  | $                       | 1,457,000 |              |  | $   | 615,000 |  |  | $ | 842,000 | 
|                
|                
|                
|                
|Licensing Rights |  |                         | 150,000   |              |  |     | 90,000  |  |  |   | 60,000  | 
|                
|Total            |  |                         | 1,607,000 |              |  |     | 705,000 |  |  |   | 902,000 | 
|                



| |  | Amortization expense for the three months ended March 31, 2002 was
$60,000. Amortization expense of intangible assets is expected to be
approximately $230,000 in each of the next five fiscal years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | SFAS 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets.
SFAS 143 is effective for fiscal years beginning after June 15, 2002,
with early adoption permitted. The Company is currently evaluating the
provisions of SFAS 143 but expects that the provisions of SFAS 143 will
not have a material impact on its consolidated results of operations and
financial position upon adoption.                                                                                                                                                                     
|
| |  | SFAS 144 establishes a single accounting model for the impairment or
disposal of long-lived assets and new standards for reporting
discontinued operations. SFAS 144 superseded SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of,and APB Opinion No. 30, Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions.The provisions of SFAS 144 are effective in fiscal years
beginning after December 15, 2001 and, in general, are to be applied
prospectively. The adoption of SFAS 144 did not have a material impact
on the Companys consolidated results of operations and financial
position.

10



---



##### Table of Contents






Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency



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




PART II   OTHER INFORMATION




Item 1.Legal Proceedings

On April 23, 2002, The Company filed an action in the Superior Court of Orange
County, California against dj Orthopedics, Inc. and Donjoy, LLC (collectively,
dj). The Companys Complaint alleges, among other matters, that dj has
materially breached the Distribution Agreement, as amended, between the parties
which relates to djs distribution of the Companys PainBuster® infusion kits
and Soaker Catheters. It is the Companys strong contention that djs
distribution rights are plainly and strictly limited under the Distribution
Agreement to the orthopedic market, and that dj is specifically prohibited from
soliciting, selling or accepting orders for these products to or from any
customer for non-orthopedic applications. The Companys complaint seeks
monetary damages, injunctive relief and declaratory relief (including a
determination that the Company may properly terminate the Distribution
Agreement as a result of djs breach). Dj has not yet filed responsive
pleadings, but has verbally advised that they will file a counter-claim of some
kind or nature. Formal discovery has not yet commenced.




Item 2.Changes in Securities and Use of Proceeds

On February 26, 2002, the Board of Directors of the Company authorized and
declared a dividend of one Right for each share of common stock of the Company.
On March 8, 2002, the Company entered into a Rights Agreement with American
Stock Transfer & Trust Company, as Rights Agent, and it filed a Certificate of
Designation with the State of Delaware regarding its Series A Preferred Stock.
The Company paid the Rights dividend to the holders of record of common stock
as of the close of business on March 15, 2002. Currently, there are no
separate Rights certificates. Each Right is attached to each share of Company
common stock and trades automatically with the common stock. Rights will not
be separable from common stock or exercisable, unless certain events described
in the Rights Agreement occur. Common stock certificates issued after March
15, 2002 and prior to the Distribution Date (as defined in the Rights
Agreement) will contain a notation incorporating the Rights Agreement by
reference. Upon the occurrence of certain events described in the Rights
Agreement, the Rights will separate from the common stock and may thereafter
become exercisable to purchase additional securities. The Companys Current
Report on Form 8-K, filed March 13, 2002, and the exhibits attached thereto
contain more information about the Rights, the Rights Agreement and the Series
A Preferred Stock.




|                                                                                                           | 
|---------------------------------------------------------------------------------------------------------- | 
|Item 6.                     Exhibits
and Reports on Form 8-K
                                 (a) Exhibits

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

|            |  |                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                              
|2.1         |  | Merger Agreement by and between I-Flow Corporation, a Delaware
corporation, and I-Flow Corporation, a California corporation, dated
July 27, 2001 (1)
|           
|           
|           
|           
|            |  |                                                                                                                                                      
|           
|           
|           
|           
|3.1         |  | Certificate of Incorporation of I-Flow Corporation, a Delaware
corporation (1)                                                                       
|           
|           
|           
|           
|            |  |                                                                                                                                                      
|           
|           
|           
|           
|3.2         |  | Bylaws of I-Flow Corporation, a Delaware Corporation (1)                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                      
|           
|           
|           
|           
|3.3         |  | Certificate of Designation Regarding Series A Junior Participating
Cumulative Preferred Stock (15)                                                   

11



---



##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                               
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|4.1         |  | Specimen Common Stock Certificate                                                                                                                                                                                                                                     
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.2         |  | Warrant Agreement between the Company and American Stock Transfer
&
Trust Company, as Warrant Agent, dated February 13, 1990 (3)                                                                                                                                      
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.3         |  | Form of Warrant dated July 22, 1996, issued in conjunction with the
acquisition of Block Medical, Inc. (16)                                                                                                                                                           
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.4         |  | Rights Agreement, dated as of March 8, 2002, by and between
I-Flow Corporation and American Stock Transfer & Trust Company, as
Rights Agent, which includes, as Exhibit A, the Form of Right
Certificate, the Form of Assignment and Form of Election to Purchase
(15)
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.1        |  | 1987-1988 Incentive Stock Option Plan and Non-Statutory Stock Option
Plan Restated as of March 23, 1992 (5) *                                                                                                                                                         
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.2        |  | 1992 Non-Employee Director Stock Option Plan (6) *                                                                                                                                                                                                                    
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.3        |  | License and Transfer Agreement with SoloPak Pharmaceuticals Inc.,
dated March 6, 1996 (7)                                                                                                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.4        |  | 1996 Stock Incentive Plan (8) *                                                                                                                                                                                                                                       
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.5        |  | Agreement for Purchase and Sale of Assets dated as of July 3, 1996 by
and among I-Flow Corporation, Block Medical, Inc. and Hillenbrand
Industries, Inc. (4)                                                                                                          
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.6        |  | Lease Agreement between Industrial Developments International, Inc.
as Landlord and I-Flow Corporation as Tenant dated April 14, 1997 (9)                                                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.7        |  | Agreement and Plan of Merger by and among I-Flow Corporation, I-Flow
Subsidiary, Inc., Venture Medical, Inc., and InfuSystems II, Inc. and
the Shareholders of Venture Medical, Inc. and InfuSystems II, Inc.
(10)                                                    
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.8        |  | Loan and Security Agreement between Silicon Valley Bank and I-Flow
Corporation dated September 28, 1995 (11)                                                                                                                                                          
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.9        |  | Amendment to Loan Agreement between Silicon Valley Bank and
I-Flow Corporation dated March 2, 1998 (11)                                                                                                                                                               
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.10       |  | Agreement and Plan of Merger by and Among I-Flow Corporation, Spinal
Acquisition Corp., Spinal Specialties, Inc. and the Shareholders of
Spinal Specialties, Inc. dated January 13, 2000 (12)                                                                         
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.11       |  | I-Flow Corporation 2001 Equity Incentive Plan*(2)                                                                                                                                                                                                                     
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.20       |  | Employment Agreement with Donald M. Earhart dated May 16, 1990 (13) *                                                                                                                                                                                                 
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.21       |  | Amendment #1 to Employment Agreement with Donald M. Earhart dated
June 21, 2001*(2)                                                                                                                                                                                   
|           
|10.22       |  | Promissory Note with Donald M. Earhart dated June 15, 2001(2)                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                       
|10.23       |  | Amended and Restated Employment Agreement with James J. Dal Porto
dated June 21, 2001*(2)                                                                                                                                                                             

12



---



##### Table of Contents



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

|      |  |                                                                                
|----- |  | -------------------------------------------------------------------------------
|     
|     
|     
|     
|      |  |                                                                                
|     
|     
|     
|     
|10.24 |  | Employment Agreement with James R. Talevich dated June 30, 2000 (14)*          
|     
|     
|     
|     
|      |  |                                                                                
|     
|     
|     
|     
|10.25 |  | Agreement Re: Change in Control with Donald M. Earhart dated June 21,
2001*(2) 
|     
|     
|     
|     
|      |  |                                                                                
|     
|     
|     
|     
|10.26 |  | Agreement Re: Change in Control with James J. Dal Porto dated June
21, 2001*(2)
|     
|     
|     
|     
|      |  |                                                                                
|     
|     
|     
|     
|10.27 |  | Agreement Re: Change in Control with James R. Talevich dated June 21,
2001*(2) 



---

|*    |  | Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to applicable rules of the Securities and
Exchange Commission.                      
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(1)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Current Report on Form 8-K on August 3, 2001.                                                             
|    
|    
|    
|    
|(2)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Quarterly Report on Form 10-Q for the Quarter ended
June 30, 2001.                                        
|    
|    
|    
|    
|(3)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement (#33-32263-LA) declared effective
February 1, 1990.                                
|    
|    
|    
|    
|(4)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated July 22, 1996.                                                                   
|    
|    
|    
|    
|(5)  |  | 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.
|    
|    
|    
|    
|(6)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1991.                                                    
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1995.                                                    
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement (#333-16547) declared effective November
20, 1996.                                 
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated April 14, 1997.                                                                  
|    
|    
|    
|    
|(10) |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated February 9, 1998.                                                                
|    
|    
|    
|    
|(11) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1997.                                                    
|    
|    
|    
|    
|(12) |  | Incorporated by reference to exhibit with this title filed with the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.                                       
|    
|    
|    
|    
|(13) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended September 30, 1990.                                                   
|    
|    
|    
|    
|(14) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 2000.                                                    

13



---



##### Table of Contents



|(15) |  | Incorporated by reference to exhibit with this title filed with the
Companys Current Report on Form 8-K, filed with the Securities and
Exchange Commission on March 13, 2002.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(16) |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement on Form S-3, filed February 10, 1997.                                    



| | (b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                                  
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On March 13, 2002, the Company filed a Report on Form 8-K to report
that the Companys Board of Directors had authorized and declared a
dividend of one preferred stock purchase right for each share of
Company common stock. The report also contained a description of
the Rights.

14



---



##### Table of Contents






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.

|      |  |              |  |                                                                                                                     
|----- |  | ------------ |  | --------------------------------------------------------------------------------------------------------------------
|Date: |  | May 15, 2002 |  | /s/ Donald M.
Earhart
Donald M. Earhart
President, Chairman and Chief Executive Officer
(As Duly Authorized Officer)
|     
|      |  |              |  |                                                                                                                     
|     
|Date: |  | May 15, 2002 |  | /s/ James R.
Talevich
James R. Talevich
Chief Financial Officer
(As Principal Financial Officer)                    

15



---



##### Table of Contents






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                                                                                                                                                                                                                                                               
|2.1         |  | Merger Agreement by and between I-Flow Corporation, a Delaware
corporation, and I-Flow Corporation, a California corporation, dated
July 27, 2001 (1)                                                                                                                 
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|3.1         |  | Certificate of Incorporation of I-Flow Corporation, a Delaware
corporation (1)                                                                                                                                                                                        
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|3.2         |  | Bylaws of I-Flow Corporation, a Delaware Corporation (1)                                                                                                                                                                                                              
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|3.3         |  | Certificate of Designation Regarding Series A Junior Participating
Cumulative Preferred Stock (15)                                                                                                                                                                    
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.1         |  | Specimen Common Stock Certificate                                                                                                                                                                                                                                     
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.2         |  | Warrant Agreement between the Company and American Stock Transfer
& Trust Company, as Warrant Agent, dated February 13, 1990 (3)                                                                                                                                      
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.3         |  | Form of Warrant dated July 22, 1996, issued in conjunction with the
acquisition of Block Medical, Inc. (16)                                                                                                                                                           
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|4.4         |  | Rights Agreement, dated as of March 8, 2002, by and between
I-Flow Corporation and American Stock Transfer & Trust Company, as
Rights Agent, which includes, as Exhibit A, the Form of Right
Certificate, the Form of Assignment and Form of Election to Purchase
(15)
|           
|10.1        |  | 1987-1988 Incentive Stock Option Plan and Non-Statutory Stock Option
Plan Restated as of March 23, 1992 (5) *                                                                                                                                                         
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.2        |  | 1992 Non-Employee Director Stock Option Plan (6) *                                                                                                                                                                                                                    
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.3        |  | License and Transfer Agreement with SoloPak Pharmaceuticals Inc.,
dated March 6, 1996 (7)                                                                                                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.4        |  | 1996 Stock Incentive Plan (8) *                                                                                                                                                                                                                                       
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.5        |  | Agreement for Purchase and Sale of Assets dated as of July 3, 1996 by
and among I-Flow Corporation, Block Medical, Inc. and Hillenbrand
Industries, Inc. (4)                                                                                                          
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.6        |  | Lease Agreement between Industrial Developments International, Inc.
as Landlord and I-Flow Corporation as Tenant dated April 14, 1997 (9)                                                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.7        |  | Agreement and Plan of Merger by and among I-Flow Corporation, I-Flow
Subsidiary, Inc., Venture Medical, Inc., and InfuSystems II, Inc. and
the Shareholders of Venture Medical, Inc. and InfuSystems II, Inc.
(10)                                                    
|           
|           
|           
|           
|            |  |                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.8        |  | Loan and Security Agreement between Silicon Valley Bank and I-Flow
Corporation dated September 28, 1995 (11)                                                                                                                                                          
|           
|10.9        |  | Amendment to Loan Agreement between Silicon Valley Bank and I-Flow Corporation dated March 2, 1998 (11)                                                                                                                                                               
|           
|           
|           
|           



---



##### Table of Contents



|            |  |                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                     
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.10       |  | Agreement and Plan of Merger by and Among I-Flow Corporation, Spinal
Acquisition Corp., Spinal Specialties, Inc. and the Shareholders of
Spinal Specialties, Inc. dated January 13, 2000(12)
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.11       |  | I-Flow Corporation 2001 Equity Incentive Plan*(2)                                                                                                                                           
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.20       |  | Employment Agreement with Donald M. Earhart dated May 16, 1990 (13) *                                                                                                                       
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.21       |  | Amendment #1 to Employment Agreement with Donald M. Earhart dated
June 21, 2001*(2)                                                                                                         
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.22       |  | Promissory Note with Donald M. Earhart dated June 15, 2001(2)                                                                                                                               
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.23       |  | Amended and Restated Employment Agreement with James J. Dal Porto
dated June 21, 2001*(2)                                                                                                   
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.24       |  | Employment Agreement with James R. Talevich dated June 30, 2000 (14) *                                                                                                                      
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.25       |  | Agreement Re: Change in Control with Donald M. Earhart dated June 21,
2001*(2)                                                                                                              
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.26       |  | Agreement Re: Change in Control with James J. Dal Porto dated June
21, 2001*(2)                                                                                                             
|           
|           
|           
|           
|            |  |                                                                                                                                                                                             
|           
|           
|           
|           
|10.27       |  | Agreement Re: Change in Control with James R. Talevich dated June 21,
2001*(2)                                                                                                              



---

|*    |  | Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to applicable rules of the Securities and
Exchange Commission.                      
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(1)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Current Report on Form 8-K on August 3, 2001.                                                             
|    
|    
|    
|    
|(2)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Quarterly Report on Form 10-Q for the Quarter ended
June 30, 2001.                                        
|    
|    
|    
|    
|(3)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement (#33-32263-LA) declared effective
February 1, 1990.                                
|    
|    
|    
|    
|(4)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated July 22, 1996.                                                                   
|    
|    
|    
|    
|(5)  |  | 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.
|    
|    
|    
|    
|(6)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1991.                                                    
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1995.                                                    
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement (#333-16547) declared effective November
20, 1996.                                 
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated April 14, 1997.                                                                  
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|(10) |  | Incorporated by reference to exhibit with this title filed with the
Companys Report on Form 8-K dated February 9, 1998.                                                                
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|(11) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 1997.                                                    
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|(12) |  | Incorporated by reference to exhibit with this title filed with the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.                                       
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|(13) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended September 30, 1990.                                                   
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|(14) |  | Incorporated by reference to exhibit with this title filed with the
Companys Form 10-K for its fiscal year ended December 31, 2000.                                                    
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|(15) |  | Incorporated by reference to exhibit with this title filed with the
Companys Current Report on Form 8-K, filed with the Securities and
Exchange Commission on March 13, 2002.          
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|(16) |  | Incorporated by reference to exhibit with this title filed with the
Companys Registration Statement on Form S-3, filed February 10, 1997.