##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

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

(IRS Employer
    Identification No.)20202 Windrow Drive,
    Lake Forest, CA(Address of Principal
    Executive Offices)

92630(Zip
    Code)   Registrants telephone number, including area code:
 (949) 206-2700
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value
    Rights to Purchase Preferred Stock

The Nasdaq Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    company o(Do
    not check if a smaller reporting company)   Rule 12b-2 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K




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##### Table of Contents





PART I
  Item 1.
    Business.  The
    Company
    ®
    (949) 206-2700 www.iflo.com Form 10-K.
  Acquisitions
    and Divestitures
      The
    Companys Products
   1




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##### Table of Contents



Net Revenues by Market Segment

2008


2007


2006Infusion PumpsRegional Anesthesia


75
%


77
%


73
%IV Infusion Therapy


21
%


23
%


27
%Subtotal


96
%


100
%


100
%Antimicrobial Materials


4
%






Total


100
%


100
%


100
%   Regional
    Anesthesia
  Pain
    Relief Kits
  ® tm tm ® ® post-surgical
  Journal of American College of Surgeons
     2




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##### Table of Contents



www.AskYourSurgeon.com Form 10-K.
  IV
    Infusion Therapy
  Elastomerics
  ® tm
  Non-Electric IV
    Bag Delivery Systems
  ®
  Antimicrobial
    Materials
  ® ®
  Sales and
    Distribution
         3




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##### Table of Contents



I-Flows
      Sales to Unaffiliated Customers:

2008


2007


2006(Amounts in thousands)United States

$
116,820


$
100,790


$
78,136Europe

$
13,069


$
12,371


$
12,840Asia/Pacific Rim


1,210



2,085



1,362Other


1,956



1,228



1,244All Foreign Countries in the Aggregate

$
16,235


$
15,684


$
15,446   Competition
   4




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##### Table of Contents



CompanysNumber of Known


EstimatedMarket


CompetitiveU.S. Market Description

Participants(1)


PositionRegional AnesthesiaPain Relief Kits


13



1IV Infusion TherapyElastomerics


4



1Antimicrobial MaterialsWound Dressings


12



3Medical Device Treatment


10



3     (1)
    
    Includes the Company.  Manufacturing
    and Operations
    non-proprietary
  Backlog
    Product
    Development
    Patents
    and Trademarks
   5




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Government
    Regulation
           6




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Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K www.iflo.com
 7




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Item 1A.
    Risk
    Factors.  RISK
    FACTORS RELATING TO OUR BUSINESS AND THE INDUSTRY IN WHICH WE
    OPERATE
  The
    recent global economic and financial market crisis may have a
    negative effect on our business and operations that could
    adversely affect our financial condition and the results of our
    operations.
  non-life
  If one or
    more of our products proves to be defective or is misused by a
    health care practitioner, we may be subject to claims of
    liability that could adversely affect our financial condition
    and the results of our operations.
    extra-articular e.g.
   8




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We have
    experienced net losses in prior periods. Future losses are
    possible.
    We have
    invested substantial resources into the sales and marketing of
    the ON-Q PainBuster. If this product does not achieve
    significant clinical acceptance or if our direct sales strategy
    is not successful, our financial condition and operating results
    will be adversely affected.
    We
    recently acquired AcryMed in an effort to expand our strategic
    focus to include general surgical site care management. If we
    are unsuccessful in integrating AcryMeds operations with
    our own, or if we fail to successfully develop and commercialize
    AcryMeds technologies, our results of operations may be
    adversely affected.
    Our
    products are highly regulated by a number of governmental
    agencies, and we have experienced product recalls and recently
    received a warning letter from the FDA. Any changes to the
    existing rules and regulations of these agencies may also
    adversely impact our ability to manufacture and market our
    products.
   9




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Our
    compliance with laws frequently involves our subjective
    judgment. If we are wrong in any of our interpretations of the
    laws, we could be subjected to substantial penalties for
    noncompliance.
    Our
    customers frequently receive reimbursement from private insurers
    and governmental agencies. Any change in the overall
    reimbursement system may adversely impact our
    business.
   10




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Our
    industry is intensely competitive and changes rapidly. If we are
    unable to maintain a technological lead over our competitors,
    our business operations will suffer.
    We rely
    on independent suppliers for parts and materials necessary to
    assemble our products. Any delay or disruption in the supply of
    parts may prevent us from manufacturing our products and
    negatively impact our operations.
    We
    manufacture the majority of our products in Mexico. Any
    difficulties or disruptions in the operation of our plant may
    adversely impact our operations.
    We are
    dependent on our proprietary technology and the patents,
    copyrights and trademarks that protect our products. If
    competitors are able to independently develop products of
    equivalent or superior capabilities, the results of our
    operations could be adversely impacted.
   11




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A
    significant portion of our sales is to customers in foreign
    countries. We may lose revenues, market share and profits due to
    exchange rate fluctuations and other factors related to our
    foreign business.
      We
    currently rely on two distributors for a significant percentage
    of our sales. If our relationship with these distributors were
    to deteriorate, our sales may materially decline.
    We may
    need to raise additional capital in the future to fund our
    operations. We may be unable to raise funds when needed or on
    acceptable terms.
    Additional
    financings may be dilutive to stockholders, involve the issuance
    of securities that are more senior to our stock or impose
    operational restrictions.
   12




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The
    preparation of our financial statements in accordance with
    accounting principles generally accepted in the United States
    requires us to make estimates, judgments and assumptions that
    may ultimately prove to be incorrect.
    Our
    financial results could be adversely impacted by recording
    impairment losses or incurring capital losses on stock sales in
    connection with our ownership of HAPC common stock.
  Accounting for Certain Investments in Debt and Equity
    Securities
  Our
    financial results could be adversely impacted by asset
    impairments or other charges.
  Goodwill and Other Intangible
    Assets Accounting for the Impairment or
    Disposal of Long-Lived Assets, Accounting by Creditors for
    Impairment of a Loan, an Amendment of FASB Statements No. 5
    and 15 ,
   13




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##### Table of Contents



Failure
    to achieve and maintain effective internal control over
    financial reporting in accordance with Section 404 of the
    Sarbanes-Oxley Act could have a material adverse effect on our
    business and our stock price.
    RISK
    FACTORS RELATED SPECIFICALLY TO OUR COMMON STOCK
  The
    average trading volume for our common stock is relatively low
    when compared to most larger companies. As a result, there may
    be less liquidity and more volatility associated with our common
    stock, even if our business is doing well.
      
    announcements of technological innovations, new products or
    clinical studies by us or others;
    government regulation;
    changes in the coverage or reimbursement rates of private
    insurers and governmental agencies;
    developments in patent or other proprietary rights;
    future sales of substantial amounts of our common stock by
    existing stockholders or by us; and
    comments by securities analysts and general market conditions. 14




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##### Table of Contents



Future
    sales of our common stock by existing stockholders or holders of
    awards under our equity incentive plans could negatively affect
    the market price of our stock and make it more difficult for us
    to sell stock in the future.
    
    24,016,875 shares of common stock that are freely tradable
    in the public markets;
    517,315 shares of restricted stock that are subject to
    outstanding awards under our 2001 Equity Incentive Plan; and
    an aggregate of 2,676,896 shares of common stock that are
    subject to outstanding awards under our various equity incentive
    plans, including shares of restricted stock units and stock
    options.    Anti-takeover
    devices may prevent a sale, or changes in the management, of
    I-Flow.
      We do not
    pay dividends and this may negatively affect the price of our
    stock.
    In the
    future, our common stock may be removed from listing on the
    Nasdaq Global Market and may not qualify for listing on any
    stock exchange, in which case it may be difficult to find a
    market in our stock.
    Item 1B.
    Unresolved
    Staff Comments.   15




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##### Table of Contents



Item 2.
    Properties.          Item 3.
    Legal
    Proceedings.  Chondrolysis
    Litigation
  intra-articular e.g.
    Accounting for
    Contingencies Reasonable Estimation of the Amount of a Loss
 16




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Other
    Litigation
  ®
    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   17




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EXECUTIVE
    OFFICERS OF THE REGISTRANT
    Name

Age

PositionDonald M. Earhart

64

President, Chief Executive Officer and Chairman of the BoardJames J. Dal Porto

55

Executive Vice President, Chief Operating Officer, Director and
    SecretaryJames R. Talevich

58

Chief Financial Officer and Treasurer   Donald M. Earhart
  James J. Dal Porto
  James R. Talevich
 18




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##### Table of Contents



PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Common
    Stock Information
    High


Low20071st Quarter

$
16.92


$
13.602nd Quarter

$
17.47


$
14.033rd Quarter

$
20.86


$
16.524th Quarter

$
19.77


$
14.7520081st Quarter

$
16.88


$
11.792nd Quarter

$
14.29


$
10.103rd Quarter

$
11.28


$
8.234th Quarter

$
9.54


$
3.43       Information
    About Our Equity Compensation Plans
    Weighted-


Number of SecuritiesAverage Exercise


Remaining Available forNumber of Securities


Price of


Future Issuance Underto be Issued Upon


Outstanding


Equity CompensationExercise of


Options,


Plans (ExcludingOutstanding Options,


Warrants and


Securities Reflected inPlan Category

Warrants and Rights


Rights


First Column)Equity compensation plans approved by security holders


2,671,896
(1)

$
8.80



2,218,027
(2)Equity compensation plans not approved by security holders


5,000
(3)

$
15.20




(4)     (1)
    
    Includes 676,390 shares of restricted stock units with no
    exercise price and outstanding options to purchase a total of
    1,995,506 shares of the Companys common stock under
    the 1996 Stock Incentive Plan and the I-Flow Corporation 2001
    Equity Incentive Plan.(2)
    
    All shares of common stock that remain available for future
    issuance are under the I-Flow Corporation 2001 Equity Incentive
    Plan.(3)
    
    Consists of options to purchase 5,000 shares of the
    Companys common stock issued to Thomas Winters, M.D.
    to acquire the non-exclusive rights to utilize intellectual
    property owned by Dr. Winters, including registered United
    States patents. Dr. Winters was not, at the time, an
    employee, director or consultant to the Company.(4)
    
    No shares available for future issuance. The Companys 2001
    Restricted Stock Plan and 2003 Restricted Stock Plan have both
    been terminated. 19




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##### Table of Contents



Material
    Features of Non-Stockholder Approved Plans
  Winters
    Options
    Stock
    Performance Graph
    
  12/31/03



12/31/04



12/31/05



12/31/06



12/31/07



12/31/08I-Flow Corporation


$
100.00



$
130.96



$
105.03



$
107.40



$
113.36



$
34.48Industry Index



100.00




117.16




128.63




135.58




172.38




92.84Nasdaq Market Index



100.00




108.81




111.28




122.75




135.69




65.06  20




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##### Table of Contents



Item 6.
    Selected
    Financial Data.  Form 10-K. Form 10-K.
  Years Ended December 31,2008(1)


2007(2)


2006(3)


2005


2004(Amounts in thousands, except per share amounts)Consolidated Statements of Operations and Comprehensive
    Operations Data:Net revenues

$
133,055


$
116,474


$
93,582


$
72,119


$
51,796Cost of revenues


36,619



32,025



26,267



19,662



15,703Gross profit


96,436



84,449



67,315



52,457



36,093Operating expenses:Selling and marketing


73,143



71,928



57,731



49,899



41,199General and administrative


22,268



17,664



15,012



16,269



10,637Product development


5,044



2,657



2,436



2,549



2,779Certain litigation and insurance charges


14,397















Purchased in-process research and development charges


11,600















Impairment of intangibles


380















Total operating expenses


126,832



92,249



75,179



68,717



54,615Operating loss


(30,396
)


(7,800
)


(7,864
)


(16,260
)


(18,522
)Impairment loss on investment


(4,569
)


(6,118
)










Interest and other income


4,913



2,425



933



937



525Loss from continuing operations before income taxes


(30,052
)


(11,493
)


(6,931
)


(15,323
)


(17,997
)Income tax benefit (provision)


(448
)


2,500



17,561



2,334



(2,050
)Income (loss) from continuing operations, net of tax


(30,500
)


(8,993
)


10,630



(12,989
)


(20,047
)Discontinued operations:Income from discontinued operations, net of tax






4,825



3,044



4,584



2,937Gain on sale of discontinued operations, net of tax






45,396











Net income (loss)

$
(30,500
)

$
41,228


$
13,674


$
(8,405
)

$
(17,110
)Per share of common stock, basic:Income (loss) from continuing operations, net of tax

$
(1.26
)

$
(0.37
)

$
0.47


$
(0.58
)

$
(0.97
)Income from discontinued operations, net of tax






0.20



0.13



0.20



0.14Gain on sale of discontinued operations, net of tax






1.90











Net income (loss)

$
(1.26
)

$
1.73


$
0.60


$
(0.38
)

$
(0.83
)Per share of common stock, diluted:Income (loss) from continuing operations, net of tax

$
(1.26
)

$
(0.37
)

$
0.44


$
(0.58
)

$
(0.97
)Income from discontinued operations, net of tax






0.20



0.13



0.20



0.14Gain on sale of discontinued operations, net of tax






1.90











Net income (loss)

$
(1.26
)

$
1.73


$
0.57


$
(0.38
)

$
(0.83
)Weighted-average common shares outstanding:Basic


24,275



23,889



22,887



22,397



20,628Diluted


24,275



23,889



24,071



22,397



20,628Consolidated Balance Sheet Data:(1)Working capital

$
70,072


$
117,187


$
56,548


$
49,733


$
57,948Total assets


148,687



188,655



112,146



82,953



84,430Long-term obligations


6,015



6,402











Total stockholders equity

$
119,045


$
155,576


$
92,004


$
70,049


$
73,219     (1)
    
    In 2008, the Company recorded $14.4 million in certain
    litigation and insurance charges, which was comprised of
    $3.5 million in expense for additional retroactive product
    liability coverage and $10.9 million in loss 21




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contingency related to lawsuits seeking damages from the Company
    as a result of alleged chondrolysis. See Note 9 of Notes to
    Consolidated Financial Statements.During the third quarter of 2008, the Company recorded
    $11.6 million of in-process research and development that
    was expensed as of the date of its acquisition of AcryMed. See
    Note 5 of Notes to Consolidated Financial Statements.The Company determined there was impairment as of
    December 31, 2008 on certain developed technology
    intangible assets acquired in the AcryMed transaction and as
    result, recorded an impairment charge of $380,000 in the fourth
    quarter of 2008. See Notes 1 and 2 of Notes to Consolidated
    Financial Statements.During the third quarter of 2008, the Company recognized an
    other-than-temporary impairment of $4.6 million on its
    investment in HAPC common stock. See Note 3 of Notes to
    Consolidated Financial Statements.On February 15, 2008, the Company acquired AcryMed for
    $26.7 million in cash. The Companys consolidated
    financial statements for the year ended December 31, 2008
    include AcryMeds contributions subsequent to the
    February 15, 2008 acquisition date. See Note 5 of
    Notes to Consolidated Financial Statements.(2)
    
    During the fourth quarter of 2007, the Company recognized an
    other-than-temporary impairment of $6.1 million on its
    investment in HAPC common stock. See Note 3 of Notes to
    Consolidated Financial Statements.In October 2007, the Company completed its sale of InfuSystem to
    HAPC. In accordance with SFAS No. 144, Accounting for
    Impairment or Disposal of Long-Lived Assets(SFAS 144), the Company has reclassified
    the results from InfuSystem as discontinued operations,
    reclassifying previously reported results to reflect all prior
    periods on a comparable basis. See Note 4 of Notes to
    Consolidated Financial Statements.(3)
    
    In 2006, the Company recorded a release of the valuation
    allowance for deferred tax assets with an incremental tax
    benefit of approximately $16.8 million. The income tax
    benefit was consistent with the guidance in Statement of
    Financial Accounting Standards No. 109, Accounting for
    Income Taxes, which addresses financial accounting for
    deferred tax assets. The Company regularly reviews its deferred
    tax assets for recoverability and establishes a valuation
    allowance when management believes it is more likely than not,
    based on available evidence, that projected future taxable
    income will be insufficient to recover the deferred tax assets.
    Due to the then-pending sale of InfuSystem to HAPC, management
    believed it was more likely than not that the Company would
    realize the benefits of the existing net deferred tax asset at
    December 31, 2006.The Company recorded a full valuation allowance against its
    deferred tax assets in the fourth quarter of 2004.  SELECTED
    QUARTERLY FINANCIAL DATA (UNAUDITED)
  Three Months Ended(1)March 31,


June 30,


Sept. 30,


Dec 31,2008


2008


2008


2008(Amounts in thousands, except per share amounts)Net revenues

$
28,415


$
35,316


$
32,242


$
37,082Gross profit


21,228



25,617



23,660



25,931Loss before income taxes


(1,292
)


(11,538
)


(15,364
)


(1,858
)Net loss


(537
)


(11,425
)


(14,127
)


(4,411
)Per share of common stock  basic and diluted:Net loss


(0.02
)


(0.47
)


(0.59
)


(0.18
)Weighted-average common shares  basic and diluted


24,603



24,459



24,062



23,988   22




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##### Table of Contents



Three Months Ended(2)March 31,


June 30,


Sept. 30,


Dec 31,2007


2007


2007


2007(Amounts in thousands, except per share amounts)Net revenues

$
24,306


$
29,075


$
28,231


$
34,862Gross profit


18,018



21,021



20,730



24,680Loss from continuing operations before income taxes


(3,500
)


(2,366
)


(1,123
)


(4,504
)Loss from continuing operations, net of tax


(2,207
)


(1,570
)


(845
)


(4,371
)Income (loss) from discontinued operations, net of tax


1,286



2,169



2,004



(634
)Gain on sale of discontinued operations, net of tax














45,396Net income (loss)


(921
)


599



1,159



40,391Per share of common stock  basic and diluted:Loss from continuing operations, net of tax


(0.09
)


(0.06
)


(0.03
)


(0.18
)Net income (loss)


(0.04
)


0.03



0.05



1.66Weighted-average common shares  basic and diluted


23,550



23,694



24,010



24,304     (1)
    
    In 2008, the Company recorded $14.4 million in certain
    litigation and insurance charges, which was comprised of
    $3.5 million in expense for additional retroactive product
    liability coverage and $10.9 million in loss contingency
    related to lawsuits seeking damages from the Company as a result
    of alleged chondrolysis. Of the $14.4 million recorded in
    2008, $12.2 million, $0.1 million and
    $2.1 million were recorded in the second, third and fourth
    quarters of 2008, respectively. See Note 9 of Notes to
    Consolidated Financial Statements.During the third quarter of 2008, the Company recorded
    $11.6 million of in-process research and development that
    was expensed as of the date of its acquisition of AcryMed. See
    Note 5 of Notes to Consolidated Financial Statements.The Company determined there was impairment as of
    December 31, 2008 on certain developed technology
    intangible assets acquired in the AcryMed transaction and as
    result, recorded an impairment charge of $380,000 in the fourth
    quarter of 2008. See Notes 1 and 2 of Notes to Consolidated
    Financial Statements.During the third quarter of 2008, the Company recognized an
    other-than-temporary impairment of $4.6 million on its
    investment in HAPC common stock. See Note 3 of Notes to
    Consolidated Financial Statements.On February 15, 2008, the Company acquired AcryMed for
    $26.7 million in cash. The Companys consolidated
    financial statements for the year ended December 31, 2008
    include AcryMeds contributions subsequent to the
    February 15, 2008 acquisition date. See Note 5 of
    Notes to Consolidated Financial Statements.(2)
    
    During the fourth quarter of 2007, the Company recognized an
    other-than-temporary impairment of $6.1 million on its
    investment in HAPC common stock. See Note 3 of Notes to
    Consolidated Financial Statements.In October 2007, the Company completed its sale of InfuSystem to
    HAPC. In accordance with SFAS 144, the Company has
    reclassified the results from InfuSystem as discontinued
    operations, reclassifying previously reported results to reflect
    all prior periods on a comparable basis. See Note 4 of
    Notes to Consolidated Financial Statements. 23




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Forward-Looking
    Statements
  forward-looking Forms 10-Q 8-K
  Overview
      ®
 24




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##### Table of Contents



Consolidated
    Results of Operations for the Year Ended December 31, 2008
    Compared to the Year Ended December 31, 2007
  Revenues
        ® ® tm tm
   25




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##### Table of Contents



Cost
    of Revenues
    Selling
    and Marketing Expenses
        General
    and Administrative Expenses
  non-cash
   26




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Product
    Development Expenses
    Certain
    Litigation and Insurance Charges
    Accounting for
    Contingencies Reasonable Estimation of the
    Amount of a Loss ,
 27




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Purchased
    In-Process Research and Development
    Impairment
    on Intangibles
  long-lived
  Impairment
    Loss on Investments
  Accounting for
    Certain Investments in Debt and Equity Securities other-than-temporary.
  Interest
    and Other Income
   28




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##### Table of Contents



Income
    Taxes
    Consolidated
    Results of Operations for the Year Ended December 31, 2007
    Compared to the Year Ended December 31, 2006
  Revenues
        Cost
    of Revenues
    Selling
    and Marketing Expenses
   29




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##### Table of Contents



General
    and Administrative Expenses
      Product
    Development Expenses
    Impairment
    Loss on Investments
    Interest
    and Other Income
    Income
    Taxes
   30




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Accounting for Income Taxes
      Liquidity
    and Capital Resources
           31




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32




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Total Number of





Total Number of





Maximum Number ofShares Repurchased





Shares Purchased





Shares That May YetFor Tax





Under the Stock





Be Purchased UnderWithholding/


Average


Repurchase


Average


the StockExercise Price


Price Paid


Program


Price Paid


Repurchase Program2008

Purposes(1)


per Share


(2)


per Share


(2)January 1  January 31


55,414


$
14.31






$




February 1  February 29


125,418



14.02











2,000,000March 1  March 31


449



13.87



93,000



14.37



1,907,000April 1  April 30










7,500



14.52



1,899,500May 1  May 31










484,153



12.61



1,415,347June 1  June 30










143,351



12.27



1,271,996July 1  July 31


134



10.16











1,271,996August 1  August 31


444



9.11



45,785



9.80



1,226,211September 1  September 30


179



10.09



58,606



9.94



1,167,605October 1  October 31


688



7.30











1,167,605November 1  November 30


67



4.24



75,057



3.64



1,092,548December 1  December 31


83,120



5.50











1,092,548Total


265,913


$
11.38



907,452


$
11.70



1,092,548     (1)
    
    The total number of shares repurchased represents shares
    delivered to or withheld by the Company in connection with
    employee payroll tax withholding upon vesting of restricted
    stock and restricted stock units and the satisfaction of payment
    of the exercise price and employee tax withholding for the
    exercise of certain outstanding stock options.(2)
    
    The stock repurchase program authorized the repurchase of up to
    2,000,000 shares of the Companys common stock. The
    program will be in existence until August 8, 2009, unless
    the program is terminated sooner by the board of directors.  Contractual
    Obligations and Commercial Commitments
    Payment Due by PeriodLess than


1 to 3


3 to 5


More than1 Year


Years


Years


5 Years


Total(Amounts in thousands)Operating Lease Obligations for Facilities

$
1,287


$
1,772


$



$



$
3,059Purchase Commitments with Suppliers(1)


7,191















7,191Total Contractual Obligations and Commercial Commitments

$
8,478


$
1,772


$



$



$
10,250     (1)
    
    Includes contractual agreements and purchase orders for raw
    materials, finished goods and services to be incurred in the
    ordinary course of business, which are enforceable and legally
    binding.  Accounting for Uncertainty in Income Taxes Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others
 33




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##### Table of Contents



New
    Accounting Pronouncements
  Fair Value
    Measurements ,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Business Combinations Business
    Combinations
  No. FAS 142-3, Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
  No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions Are Participating Securities (FSP 03-6-1). FSP 03-6-1 Earnings per Share FSP 03-6-1 FSP 03-6-1
 34




---



##### Table of Contents



FSP 03-6-1
  No. FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active (FSP 157-3). FSP 157-3 FSP 157-3 No. FAS 157-3
    Critical
    Accounting Policies
    Revenue
    Recognition
        Accounts
    Receivable
   35




---



##### Table of Contents



Inventories
  part-by-part first-in,
  Short-Term
    Investments
  , SFAS No. 115-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments (FSP 115-1).
  FSP 115-1. FSP 115-1
  Deferred
    Taxes
     36




---



##### Table of Contents



Contingencies
  Accounting for Contingencies Reasonable Estimation of the
    Amount of a Loss
      Goodwill
   37




---



##### Table of Contents



Stock-Based
    Compensation
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk.  Interest
    Rate Risk
      Foreign
    Currency
    Item 8.
    Financial
    Statements and Supplementary Data.  Financial
    Statements
   38




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##### Table of Contents



Financial
    Statement Schedule
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  Balance at


Charged to





Balance atBeginning of


Costs





End ofClassification

Period


and Expenses


Deductions(1)


Period(Amounts in thousands)Year Ended December 31, 2006:Allowance for doubtful accounts

$
3,072


$
442


$
(109
)

$
3,405Year Ended December 31, 2007:Allowance for doubtful accounts


3,405



730



(2,173
)


1,962Year Ended December 31, 2008:Allowance for doubtful accounts


1,962



458



(357
)


2,063       (1)
    
    Deductions in all years reported represent reductions to the
    reserve account and the related asset account. Specifically,
    deductions from the reserve for allowance for doubtful accounts
    represent the write-off of uncollectible accounts receivable
    balances.  Selected
    Quarterly Financial Data
    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
  (b)
    Management
    Report on Internal Control Over Financial
    Reporting  Rules 13a-15(f) 15d-15(f)
  
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Company;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and 39




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##### Table of Contents




    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on the
    financial statements.          March 9,
    2009
  (c)
    Change
    in Internal Control Over Financial Reporting    Item 9B.
    Other
    Information   40




---



##### Table of Contents



PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services.   41




---



##### 



PART IV
  Item 15.  Exhibits, Financial Statement
    Schedules.
     
 Page in ThisReport(1) Financial StatementsThe documents described in the Index to Consolidated
    Financial Statements are included in this report


43(2) Financial Statement Schedule included herein:Schedule II  Valuation and Qualifying
    Accounts


39All other schedules are omitted, as the required information is
    inapplicable.(3) ExhibitsThe list of exhibits contained in the accompanying Index to
    Exhibits is incorporated herein by reference.EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1      (b)
    
    See (a)(3) above.(c)
    
    There are no financial statements required by Regulation S-X
    (17 CFR 210) which are or will be excluded from the
    annual report to shareholders by
    Rule 14a-3(b). 42




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated
    Financial Statements
   
 PageReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2008 and 2007


F-3Consolidated Statements of Operations and
    Comprehensive Operations For the Years Ended December 31,
    2008, 2007 and 2006


F-4Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2008, 2007 and
    2006


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2008, 2007 and 2006


F-6Notes to Consolidated Financial Statements


F-8Financial Statement
    Schedule Schedule II  Valuation and
    Qualifying Accounts


39   43




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm      Internal Control  Integrated Framework
       F-1




---



##### Table of Contents



Internal Control  Integrated Framework
  Accounting for Uncertainty in Income Taxes,
  
    F-2




---



##### Table of Contents



I-FLOW
    CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2008


2007(Amounts in thousands,except share and pershare amounts)ASSETSCurrent assets:Cash and cash equivalents

$
39,276


$
78,571Short-term investments


3,384



14,379Short-term investments  HAPC common stock


5,703



10,533Accounts receivable, less allowance for doubtful accounts of
    $2,063 and $1,962 at December 31, 2008 and 2007,
    respectively


21,930



22,443Inventories


15,819



13,128Prepaid expenses and other current assets


3,356



1,267Note receivable, HAPC  current


3,270



2,044Deferred taxes


961



1,499Total current assets


93,699



143,864Property, net


4,127



3,318Goodwill


12,233



Other intangible assets, net


4,201



2,586Other long-term assets


170



133Note receivable, HAPC  noncurrent


26,980



30,250Deferred taxes


7,277



8,504Total assets

$
148,687


$
188,655LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,882


$
4,570Accrued payroll and related expenses


6,138



7,724Income taxes payable






12,450Accrued litigation costs (Note 9)


10,467



Other current liabilities


2,140



1,933Total current liabilities


23,627



26,677Other liabilities


6,015



6,402Commitments and contingencies (Note 9)Stockholders equity:Preferred stock, $0.001 par value per share;
    5,000,000 shares authorized; no shares issued and
    outstanding






Common stock, $0.001 par value per share;
    40,000,000 shares authorized, 24,534,190 and
    24,973,537 shares issued and outstanding at
    December 31, 2008 and 2007, respectively


136,338



142,197Accumulated other comprehensive loss


(379
)


(207
)Retained earnings (accumulated deficit)


(16,914
)


13,586Total stockholders equity


119,045



155,576Total liabilities and stockholders equity

$
148,687


$
188,655   See accompanying Notes to Consolidated Financial
    Statements.
 F-3




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##### Table of Contents



I-FLOW
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE
    OPERATIONS
  Year Ended December 31,2008


2007


2006(Amounts in thousands, except pershare amounts)Net revenues

$
133,055


$
116,474


$
93,582Cost of revenues


36,619



32,025



26,267Gross profit


96,436



84,449



67,315Operating expensesSelling and marketing


73,143



71,928



57,731General and administrative


22,268



17,664



15,012Product development


5,044



2,657



2,436Certain litigation and insurance charges (Note 9)


14,397







Purchased in-process research and development charges
    (Note 5)


11,600







Impairment of intangibles (Note 1)


380







Total operating expenses


126,832



92,249



75,179Operating loss


(30,396
)


(7,800
)


(7,864
)Impairment loss on investment


(4,569
)


(6,118
)


Interest and other income


4,913



2,425



933Loss from continuing operations before income taxes


(30,052
)


(11,493
)


(6,931
)Income tax benefit (provision)


(448
)


2,500



17,561Income (loss) from continuing operations, net of tax


(30,500
)


(8,993
)


10,630Discontinued operations:Income from discontinued operations, net of tax






4,825



3,044Gain on sale of discontinued operations, net of tax






45,396



Net income (loss)

$
(30,500
)

$
41,228


$
13,674Per share of common stock, basic:Income (loss) from continuing operations, net of tax

$
(1.26
)

$
(0.37
)

$
0.47Income from discontinued operations, net of tax






0.20



0.13Gain on sale of discontinued operations, net of tax






1.90



Net income (loss)

$
(1.26
)

$
1.73


$
0.60Per share of common stock, diluted:Income (loss) from continuing operations, net of tax

$
(1.26
)

$
(0.37
)

$
0.44Income from discontinued operations, net of tax






0.20



0.13Gain on sale of discontinued operations, net of tax






1.90



Net income (loss)

$
(1.26
)

$
1.73


$
0.57Weighted-average shares:Basic


24,275



23,889



22,887Diluted


24,275



23,889



24,071Comprehensive Income (Loss):Net income (loss)

$
(30,500
)

$
41,228


$
13,674Unrealized gain (loss) on securities, net of tax


(171
)


7



96Foreign currency translation adjustments


(1
)


(51
)


(17
)Comprehensive income (loss)

$
(30,672
)

$
41,184


$
13,753   See accompanying Notes to Consolidated Financial
    Statements.
 F-4




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##### Table of Contents



I-FLOW
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Accumulated


RetainedOther


EarningsCommon Stock


Comprehensive


(AccumulatedShares


Amount


Income (Loss)


Deficit)


Total(Amounts in thousands)Balance, January 1, 2006


22,629


$
110,890


$
(242
)

$
(40,599
)

$
70,049Exercise of common stock options and warrants and vested
    restricted stock units


745



2,691











2,691Stock-based compensation






5,511











5,511Issuance of restricted stock awards


522Issuance of stock from stock upward repricing event


5Unrealized gain on securities










96







96Foreign currency translation adjustment










(17
)






(17
)Net income














13,674



13,674Balance, December 31, 2006


23,901



119,092



(163
)


(26,925
)


92,004Cumulative effect of adjustments from adoption of FIN 48
    (Note 8)














(717
)


(717
)Balance, January 1, 2007


23,901



119,092



(163
)


(27,642
)


91,287Exercise of common stock options and warrants and vested
    restricted stock units


1,027



7,096











7,096Tax benefit from exercise of stock options and vested restricted
    stock and restricted stock units






10,248











10,248Stock-based compensation






7,261











7,261Tax shares withheld and retired in connection with vested
    restricted stock and restricted stock units


(95
)


(1,500
)










(1,500
)Issuance of restricted stock awards


141Unrealized gain on securities










7







7Foreign currency translation adjustment










(51
)






(51
)Net income














41,228



41,228Balance, December 31, 2007


24,974


$
142,197


$
(207
)

$
13,586


$
155,576Exercise of common stock options and vested restricted stock
    units


542



353











353Tax benefit from exercise of stock options and vested restricted
    stock and restricted stock units






46











46Stock-based compensation






6,973











6,973Shares withheld and retired in connection with tax withholdings
    for the exercise of stock options and vested restricted stock
    and restricted stock units and the satisfaction of payment of
    exercise price


(266
)


(2,618
)










(2,618
)Purchase and retirement of treasury stock


(907
)


(10,613
)










(10,613
)Issuance of restricted stock awards


191Unrealized loss on securities, net










(171
)






(171
)Foreign currency translation adjustment










(1
)






(1
)Net income














(30,500
)


(30,500
)Balance, December 31, 2008


24,534


$
136,338


$
(379
)

$
(16,914
)

$
119,045   See accompanying Notes to Consolidated Financial
    Statements.
 F-5




---



##### Table of Contents



I-FLOW
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(Amounts in thousands)Cash flows from operating activities:Net income (loss)

$
(30,500
)

$
41,228


$
13,674Income from discontinued operations, net of tax






(4,825
)


(3,044
)Gain on sale of discontinued operations, net of tax






(45,396
)


Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Purchased in-process research and development charges


11,600







Stock-based compensation


6,973



6,515



5,116Impairment loss on investment


4,569



6,118



Depreciation and amortization


2,217



1,604



1,432Deferred taxes


1,455



7,663



(17,666
)Excess tax benefit from exercise of stock options and vested
    restricted stock and restricted stock units


(760
)


(8,565
)


Amortization of deferred financing fees from note receivable,
    HAPC


(711
)






Write-off of inventory


582



633



72Provision for doubtful accounts receivable


458



730



442Impairment of intangibles


380







Loss (gain) on disposal of property


(4
)


(2
)


40Changes in operating assets and liabilities, net of effect of
    discontinued operations and AcryMed acquisition:Accounts receivable


992



(4,238
)


(5,954
)Inventories


(2,522
)


(150
)


(2,154
)Prepaid expenses and other assets


(637
)


187



(279
)Accounts payable and accrued payroll and related expenses


(2,037
)


826



3,289Income taxes payable


(13,805
)


(13,003
)


(210
)Accrued litigation costs


10,467







Other liabilities


249



4,084



152Net cash used in operating activities from continuing operations


(11,034
)


(6,591
)


(5,090
)Net cash provided by operating activities of discontinued
    operations






7,464



8,872Net cash provided by (used in) operating activities


(11,034
)


873



3,782   See accompanying Notes to Consolidated Financial
    Statements.
 F-6




---



##### Table of Contents



I-FLOW
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
  Year Ended December 31,2008


2007


2006(Amounts in thousands)Cash flows from investing activities:Acquisition of AcryMed, net of cash acquired


(26,663
)






Receipt of principal payments on note receivable, HAPC


2,044



409



Receipt of deferred financing fees from note receivable, HAPC


75



2,586



Property acquisitions


(1,664
)


(1,437
)


(1,193
)Proceeds from sale of property


11







Purchase of HAPC common stock






(16,652
)


Purchases of other investments


(13,275
)


(18,121
)


(19,600
)Maturities of investments


24,268



21,884



14,838Patents and licensing right acquisitions


(910
)


(389
)


(628
)Net cash used in investing activities from continuing operations


(16,114
)


(11,720
)


(6,583
)Net cash provided by (used in) investing activities from
    discontinued operations






64,225



(2,506
)Net cash provided by (used in) investing activities


(16,114
)


52,505



(9,089
)Cash flows from financing activities:Purchase and retirement of common and treasury stock


(13,231
)


(1,500
)


Proceeds from exercise of stock options and warrants


353



7,096



2,691Excess tax benefit from exercise of stock options and vested
    restricted stock and restricted stock units


760



8,565



Net cash provided by (used in) financing activities from
    continuing operations


(12,118
)


14,161



2,691Net cash provided by financing activities from discontinued
    operations






2,183



Net cash provided by (used in) financing activities


(12,118
)


16,344



2,691Effect of exchange rates on cash


(29
)


(51
)


(17
)Net increase (decrease) in cash and cash equivalents


(39,295
)


69,671



(2,633
)Net (increase) decrease in cash and cash equivalents from
    discontinued operations






(388
)


508Cash and cash equivalents at beginning of year


78,571



9,288



11,413Cash and cash equivalents at end of year

$
39,276


$
78,571


$
9,288SUPPLEMENTAL CASH FLOW INFORMATION:Interest paid

$



$



$
47Income tax payments

$
13,557


$
333


$
286Tax benefit from exercise of stock options

$
46


$
10,248


$
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:Property acquisitions

$
36


$
598


$
1,126Issuance of note receivable, HAPC in conjunction with the sale
    of InfuSystem

$



$
32,703


$
   See accompanying Notes to Consolidated Financial
    Statements.
 F-7




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes
    to Consolidated Financial Statements
  1.
    Nature of
    Operations and Summary of Significant Accounting
    Policies  Nature of Operations
  Principles of Consolidation
  Cash and Cash Equivalents
  Short-term Investments Accounting for Certain
    Investments in Debt and Equity Securities , other-than-temporary
  SFAS No. 115-1, The Meaning of
    Other-Than-Temporary
    Impairment and Its Application to Certain Investments Other Than Temporary
    Impairment of Certain Investments in Dept and Equity
    Securities other-than-temporary. other-than-temporary,
  other-than-temporary other-than-temporary other-than-temporary
 F-8




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  other-than-temporary.
  Inventories first-in,
  2008


2007(Amounts in thousands)Raw Materials

$
7,501


$
6,534Work in Process


2,612



2,056Finished Goods


5,706



4,538Total

$
15,819


$
13,128   Long-Lived Assets Accounting for Impairment
    or Disposal of Long-Lived Assets
  Property
  2008


2007(Amounts in thousands)Equipment

$
10,710


$
9,215Furniture and fixtures


2,960



2,129Accumulated depreciation and amortization


(9,543
)


(8,026
)Total

$
4,127


$
3,318   Goodwill Goodwill
    and Other Intangible Assets
 F-9




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Revenue Recognition
    Discontinued
    Operations
  month-to-month
    Accounts Receivable
  Product Warranties
  Accrued Litigation Costs Accounting for
    Contingencies Reasonable Estimation of the
    Amount of a Loss out-of-pocket
 F-10




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Other Liabilities
  2008


2007(Amounts in thousands)FIN 45 Liability(1)

$
3,979


$
3,713FIN 48 Liability(2)


838



898Deferred Finance Income(3)


1,155



1,791Other


43



Total

$
6,015


$
6,402     (1)
    
    Pursuant to the sale of InfuSystem, Inc.
    (InfuSystem) on October 25, 2007, the Company
    recorded a liability in accordance with FASB Interpretation
    No. 45, Guarantors Accounting and Disclosure
    Requirements for Guarantees, Including Indirect Guarantees of
    Indebtedness of Others(FIN 45), which
    represents the estimated fair value of its indemnification to
    HAPC for all tax exposures arising prior to the closing of the
    sale of InfuSystem. See Note 8 on Income Taxes.(2)
    
    The amount represents the liability recognized in connection
    with the Companys adoption of FASB Interpretation
    No. 48, Accounting for Uncertainty in Income Taxes(FIN 48), effective January 1, 2007. See
    Note 8 on Income Taxes.(3)
    
    The amount represents the facility and ticking fees that were
    received by the Company at the close of the sale of InfuSystem
    in connection with its commitment to provide HAPC with a secured
    promissory note. The fees were recorded as deferred finance
    income and amortized on straight-lined basis over four years,
    which is the term of the note. See Note 4 on Discontinued
    Operations.  Income Taxes Accounting for Income Taxes
  Accounting for Stock-Based
    Compensation SFAS No. 123-revised Share-Based Payment Accounting
    for Stock-Based Compensation Accounting for Stock Issued to Employees Share-Based
    Payment
 F-11




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##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2008


2007


2006(Amounts in thousands)Continuing operations:Selling and marketing

$
1,028


$
2,446


$
2,373General and administrative


5,945



4,069



2,794Subtotal


6,973



6,515



5,167Discontinued operations:Selling and marketing






116



254General and administrative






630



141Subtotal






746



395Total

$
6,973


$
7,261


$
5,562   option-pricing non-employee
  Year Ended December 31,2007

2006Expected life (in years)

5.0

5.0Risk-free interest rate

3.49%  5.03%

4.53%  5.07%Volatility

51%  54%

55%  57%Dividend yield

0.00%

0.00%      F-12




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Stock
    Options
    Weighted-AverageWeighted-


RemainingAverage


Contractual


AggregateNumber


Exercise Price


Term


Intrinsicof Shares


per Share


(In years)


Value(Amounts in thousands, except per share and year amounts)Options outstanding at December 31, 2005


3,828


$
9.66Options granted


242


$
13.56Options exercised


(607
)

$
4.33Options forfeited or expired


(169
)

$
14.78Options outstanding at December 31, 2006


3,294


$
10.66Options granted


160


$
15.82Options exercised


(733
)

$
9.49Options forfeited or expired


(208
)

$
15.34Options outstanding at December 31, 2007


2,513


$
10.97Options granted





$
Options exercised


(337
)

$
3.96Options forfeited or expired


(175
)

$
15.06Options outstanding at December 31, 2008


2,001


$
11.79



0.96


$
1,790Options vested and exercisable at December 31, 2008


1,905


$
11.63



0.87


$
1,790    F-13




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Options Outstanding


Options ExercisableWeighted-Average








Weighted-Number


Remaining


Weighted-


Number


Averageof Shares


Contractual


Average


of Shares


ExerciseRange of Exercise Prices

Outstanding


Life in Years


Exercise Price


Exercisable


Price$1.28


243,282



2.00


$
1.28



243,282


$
1.28$1.29 - $3.37


299,132



1.00


$
3.37



299,132


$
3.37$3.38 - $13.54


45,523



1.16


$
12.10



37,601


$
12.15$13.55


628,329



0.01


$
13.55



628,329


$
13.55$13.56 - $17.57


231,740



2.17


$
14.96



150,442


$
15.05$17.58


540,500



1.01


$
17.58



540,500


$
17.58$17.59 - $19.81


12,000



3.04


$
18.63



5,288


$
18.74Total


2,000,506



0.96


$
11.79



1,904,574


$
11.63     weighted-average
    Restricted
    Stock and Restricted Stock Units
  i.e.
 F-14




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Restricted Stock


Restricted Stock UnitsWeighted-





Weighted-Average Grant





Average GrantNumber of


Date Fair Value


Number of


Date Fair ValueShares


Per Share


Shares


per Share(Amounts in thousands, except per share amounts)Nonvested shares outstanding at December 31, 2005





$




326


$
14.74Shares issued


522



13.89



449



13.69Shares vested or released










(109
)


14.98Shares forfeited










(118
)


14.20Nonvested shares outstanding at December 31, 2006


522



13.89



548



13.95Shares issued


141



16.43



477



16.35Shares vested or released


(102
)


14.04



(273
)


14.14Shares forfeited










(157
)


14.80Nonvested shares outstanding at December 31, 2007


561



14.50



595



15.57Shares issued


191



14.41



418



13.04Shares vested or released


(235
)


14.76



(206
)


13.27Shares forfeited










(131
)


15.27Nonvested shares outstanding at December 31, 2008


517


$
14.35



676


$
14.12     Earnings Per Share Earnings Per Share
     F-15




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2008


2007


2006(Amounts in thousands,except per share amounts)Numerator:Income (loss) from continuing operations, net of tax

$
(30,500
)

$
(8,993
)

$
10,630Income from discontinued operations, net of tax






4,825



3,044Gain on sale of discontinued operations, net of tax






45,396



Net income (loss)

$
(30,500
)

$
41,228


$
13,674Denominators:Denominator for basic earnings per share:Weighted-average number of common shares outstanding


24,275



23,889



22,887Effect of dilutive securities:Stock options, nonvested restricted stock and nonvested
    restricted stock units










1,184Denominator for diluted net income per share:Weighted-average number of common and common equivalent shares
    outstanding


24,275



23,889



24,071Basic earnings per share:Income (loss) from continuing operations

$
(1.26
)

$
(0.37
)

$
0.47Income from discontinued operations






0.20



0.13Gain on sale of discontinued operations






1.90



Net income (loss)

$
(1.26
)

$
1.73


$
0.60Diluted earnings per share:Income (loss) from continuing operations

$
(1.26
)

$
(0.37
)

$
0.44Income from discontinued operations






0.20



0.13Gain on sale of discontinued operations






1.90



Net income (loss)

$
(1.26
)

$
1.73


$
0.57     Comprehensive Income  Reporting Comprehensive Income
  Use of Estimates 
 F-16




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Foreign Currency 
  New Accounting Pronouncements  Fair
    Value Measurements ,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Business Combinations Business
    Combinations
  No. FAS 142-3, Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
  No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions Are Participating Securities (FSP 03-6-1). FSP 03-6-1
 F-17




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Earnings per Share FSP 03-6-1 FSP 03-6-1 FSP 03-6-1
  No. FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active (FSP 157-3). FSP 157-3 FSP 157-3 No. FAS 157-3
    2.
    Goodwill
    and Other Intangible Assets       F-18




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    As of December 31, 2008Carrying


AccumulatedAmount


Amortization


Net(Amounts in thousands)Purchased technology and patents

$
4,404


$
(1,784
)

$
2,620Licensing rights and agreements


1,402



(528
)


874Customer relationships


700



(123
)


577Other


150



(20
)


130Total

$
6,656


$
(2,455
)

$
4,201   As of December 31, 2007Carrying


AccumulatedAmount


Amortization


Net(Amounts in thousands)Patents

$
3,335


$
(1,471
)

$
1,864Licensing rights


1,102



(380
)


722Total

$
4,437


$
(1,851
)

$
2,586        F-19




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  3.
    Investments  available-for-sale.
  December 31, 2008GrossAmortized


UnrealizedCost


Gains


Fair Value(Amounts in thousands)Money market funds(1)

$
33,364


$



$
33,364Commercial paper


3,383



1



3,384Common stock(2)


5,965



(262
)


5,703Total

$
42,712


$
(261
)

$
42,451     (1)
    
    Represents money market securities that participate in the
    Department of Treasurys Temporary Guarantee Program for
    Money Market Funds.(2)
    
    Represents investment in HAPC common stock. An
    other-than-temporary
    impairment of approximately $4.6 million was recorded
    during the third quarter of 2008 to recognize the investment at
    the estimated fair value. No
    other-than-temporary
    impairments were recorded as of December 31, 2008.  (Amounts in thousands)Reported as:Cash equivalents

$
33,364Short-term investments


3,384Short-term investments  HAPC common stock


5,703Total

$
42,451   available-for-sale.
  December 31, 2007GrossAmortized


UnrealizedCost


Gains (Losses)


Fair Value(Amounts in thousands)Money market funds

$
31,777


$



$
31,777Certificates of deposits


2,400







2,400Corporate debentures and bonds


10,088



3



10,091Commercial paper


42,192



(1
)


42,191Common stock(1)


10,533







10,533Total

$
96,990


$
2


$
96,992     (1)
    
    Represents investment in HAPC common stock. An
    other-than-temporary
    impairment of approximately $6.1 million was recognized as
    of December 31, 2007 to recognize the investment at the
    estimated fair value.  F-20




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (Amounts in thousands)Reported as:Cash equivalents

$
72,080Short-term investments


14,379Short-term investments  HAPC common stock


10,533Total

$
96,992     (Amounts in thousands)Maturities of one year or less:Commercial paper

$
3,384Original maturities of three months or less:Money market funds


33,364Total

$
36,748   available-for-sale
  Fair
    Value
          FAS 157-3, Determining the Fair Value of a Financial Asset When the
    Market for That Asset Is Not Active
 F-21




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Quoted Prices in


Significant Other


SignificantBalance at


Active Markets for


Observable


UnobservableDecember 31,


Identical Assets


Inputs


Inputs2008


(Level 1)


(Level 2)


(Level 3)(Amounts in thousands)Reported as:Cash equivalents(1)

$
33,364


$
33,364


$



$
Short-term investments(2)


3,384







3,384



Short-term investments  HAPC common stock(3)


5,703











5,703Total

$
42,451


$
33,364


$
3,384


$
5,703     (1)
    
    Level 1 securities include money market securities that are
    valued based on quoted market prices in active markets. The
    money market securities participate in the Department of
    Treasurys Temporary Guarantee Program for Money Market
    Funds.(2)
    
    Level 2 securities include
    available-for-sale
    investments in commercial papers that are valued based on quoted
    prices in markets that are not active or for which all
    significant inputs are observable, either directly or indirectly.(3)
    
    Level 3 securities include
    available-for-sale
    investment in HAPC common stock purchased in October 2007 in
    connection with the sale of InfuSystem to HAPC. The value is
    based on quoted market prices for the
    exchange-traded
    equity security, adjusted to reflect the restriction on the sale
    of the security due to the Companys potential affiliate
    status with HAPC for purposes of federal securities laws
    resulting from the Companys position as a substantial
    stockholder and creditor on a secured promissory note.    Short-termInvestments(Amounts in thousands)Balance as of January 1, 2008

$
10,533Total gains (losses):Included in net loss


(4,569
)Included in other comprehensive income


(261
)Purchases, issuances and settlements


Transfers in and/or out of Level 3


Balance as of December 31, 2008

$
5,703Amount of total losses for the period included in earnings
    attributable to the change in unrealized losses relating to
    assets still held at the reporting date  Short-term
    investments  HAPC common stock

$
4,569    F-22




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  SFAS No. 115-1, The Meaning of
    Other-Than-Temporary
    Impairment and Its Application to Certain Investments Other Than Temporary
    Impairment of Certain Investments in Dept and Equity
    Securities other-than-temporary. other-than-temporary,
  other-than-temporary other-than-temporary other-than-temporary.
  4.
    Discontinued
    Operations         F-23




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
        (Amounts in thousands)Purchase price

$
100,000Termination fee


3,000Working capital adjustments


(798
)Costs of disposition


(3,035
)Net proceeds from the sale


99,167Less: Book value of net assets disposed of


(23,077
)Gain on sale of discontinued operations, before income taxes


76,090Provision for income taxes


(30,694
)Gain on sale of discontinued operations, net of income taxes

$
45,396     Years Ended December 31,2007(1)(2)


2006(2)(Amounts in thousands)Operating revenues

$
25,001


$
31,716Operating income

$
7,764


$
7,007Income taxes


2,939



3,963Income from discontinued operations

$
4,825


$
3,044     (1)
    
    Includes financial results for InfuSystem for the period
    January 1, 2007 through October 25, 2007, which was
    the date the sale of InfuSystem was consummated. F-24




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
   (2)
    
    InfuSystem recorded approximately $2,090,000 of divestiture
    expenses during the year ended December 31, 2006. In
    October 2007, at the closing of the sale of InfuSystem, the
    Company received reimbursement of approximately $946,000 by HAPC
    of certain divestiture expenses incurred in 2006 and 2007 by the
    Company directly resulting from the sale transaction, including
    legal, audit and other professional fees. Since the
    reimbursement of $946,000 included payments for services
    incurred for 2006, divestiture expenses recorded during the year
    ended December 31, 2007 resulted in a net credit of
    approximately $245,000.  5.
    Acquisition      (Amounts in thousands)Cash

$
66Accounts receivable


937Inventory


751Other current assets


246Property


506Intangible assets


1,950In-process research and development


11,600Goodwill


12,233Other long-term assets


233Total assets acquired


28,522Accounts payable


689Accrued payroll and related expenses


271Other current liabilities


76Deferred tax liability, long-term


757Total liabilities assumed


1,793Net assets acquired

$
26,729    F-25




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted-AverageAmount


Useful Life (in years)(In thousands)Purchased technology and patents

$
800



10.0
(1) (3)Customer relationships


700



10.0
(2)Licensing agreements


300



5.0
(1)Other


150



8.0
(1)Net assets acquired

$
1,950     (1)
    
    Amortization is based on a straight-line method.(2)
    
    Amortization is based on an accelerated method.(3)
    
    An impairment charge of $380,000 was subsequently recorded as of
    December 31, 2008.  6.
    Lines of
    Credit      7.
    Stockholders
    Equity  Preferred
    Stock
     F-26




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Stockholder
    Rights Plan
    Common
    Stock
  2001 Restricted Stock Plan
  2003 Restricted Stock Plan 
  1992 Director Plan 
 F-27




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  1996 Plan 
  2001 Plan 
      Private Placement and Warrants 
 F-28




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Public Offering  over-allotment
  Dr. Winters Stock Options 
  Stock Repurchase Program 
    weighted-average
 F-29




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  8.
    Income
    Taxes  ,
  and/or
    Years Ended December 31,2008


2007


2006(Amounts in thousands)Current:Federal

$
(1,075
)

$
(8,118
)

$
Foreign


(2
)


171



48State


70



(3,267
)


58Subtotal


(1,007
)


(11,214
)


106Deferred:Federal


1,455



5,035



(13,274
)State






3,679



(4,393
)Subtotal


1,455



8,714



(17,667
)Total income tax (benefit) provision

$
448


$
(2,500
)

$
(17,561
)    F-30




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2008


2007


2006Tax at federal statutory rate


(35.0
)%


(35.0
)%


(35.0
)%State income taxes, net of federal benefit






4.6
%


(40.7
)%Foreign operations


(0.6
)%


0.2
%


0.7
%Valuation allowance


23.6
%


1.6
%


(167.5
)%Nondeductible charges


(0.5
)%


5.4
%


2.6
%In-process R&D


13.5
%






Effect of change in tax rate










(8.9
)%162(m) limitation


0.8
%


0.4
%


Credits


(0.3
)%


(0.6
)%


(5.2
)%Other






1.6
%


0.6
%Total


1.5
%


(21.8
)%


(253.4
)%     December 31,


December 31,2008


2007(Amounts in thousands)Net operating losses

$
359


$
Amortization of goodwill and other intangibles


664



1,183Reserves not currently deductible


8,016



4,307Stock-based compensation


5,546



5,839Asset impairment


4,365



2,439Depreciation


59



Credits


1,517



Total deferred tax assets


20,526



13,768Valuation allowance


(10,655
)


(1,557
)Total net deferred income taxes


9,871



12,211State taxes






(622
)Deferred income


(1,089
)


(1,248
)Depreciation






(338
)Purchased intangibles


(544
)


Total deferred tax liabilities


(1,633
)


(2,208
)Net deferred income taxes

$
8,238


$
10,003    F-31




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Years Ended December 31,2008


2007(Amounts in thousands)Unrecognized tax benefits balance at December 31, 2007

$
1,485


$
2,042Gross increases for tax positions of prior years






317Gross decreases for tax positions of prior years


(173
)


Gross increases for tax positions of current year


113



2,839Gross decrease for tax positions related to discontinued
    operations(1)






(3,713
)Unrecognized tax benefits balance at December 31, 2008

$
1,425


$
1,485     (1)
    
    Pursuant to the sale of InfuSystem on October 25, 2007, the
    Company recorded a liability in accordance with FIN 45, in
    the amount of $3.7 million, which represents the estimated
    fair value of its indemnification to HAPC for all tax exposures
    arising prior to the closing of the sale of InfuSystem and is
    recorded net of a federal tax benefit in the amount of
    $2.7 million.     F-32




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    9.
    Commitments
    and Contingencies      month-to-month
    (Amounts in thousands)Year Ended December 31,2009

$
1,2872010


1,0512011


5632012


158Total

$
3,059      F-33




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Chondrolysis
    Litigation
  intra-articular e.g.
     F-34




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
  out-of-pocket
    Other
    Litigation and Matters
  ®
   F-35




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
      10.
    Employee
    Benefit Plan    Non-AcryMed Employees 
  AcryMed Employees 
    11.
    Related
    Party Transactions  10-year
  12.
    Operating
    Segments and Revenue Data  Disclosures about Segments of an
    Enterprise and Related Information
 F-36




---



##### Table of Contents



I-FLOW
    CORPORATION
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (Amounts in thousands)Infusion Pumps:Regional Anesthesia

$
99,374IV Infusion Therapy


28,444Subtotal


127,818Antimicrobial Materials


5,237Total

$
133,055     Infusion


AntimicrobialPumps


Materials


Consolidated(Amounts in thousands)Revenues(1)

$
127,818


$
5,237


$
133,055Operating loss(1)(2)


(18,156
)


(12,240
)


(30,396
)Assets


133,048



15,639



148,687Depreciation and amortization


1,817



400



2,217Property additions


1,515



185



1,700     (1)
    
    Intercompany sales and operating income between the Infusion
    Pumps and Antimicrobial Materials operating segments have been
    eliminated in the consolidation and have been excluded from the
    above numbers.(2)
    
    Operating loss for the Antimicrobial Materials operating segment
    for the year ended December 31, 2008 includes
    $11.6 million of in-process research and development
    write-off that was recorded in the third quarter of 2008 and
    $380,000 of impairment charge that was recorded in the fourth
    quarter of 2008 and which related to certain purchased
    technology intangible assets acquired in the AcryMed
    transaction. See Note 5 on Acquisition for additional
    information. Certain expenses incurred by the Company at the
    corporate level have not been allocated to the Antimicrobial
    Materials operating segment, such as employee stock
    administration, human resources, finance, information
    technology, investor relations, corporate governance, SEC
    compliance, general management, strategy development, taxes,
    audit fees, cash management, legal fees, regulatory compliance
    and budgeting.    Sales to Unaffiliated Customers:

2008


2007


2006(Amounts in thousands)United States

$
116,820


$
100,790


$
78,136Europe


13,069



12,371



12,840Asia/Pacific Rim


1,210



2,085



1,362Other


1,956



1,228



1,244Total

$
133,055


$
116,474


$
93,582  F-37




---



##### Table of Contents



SIGNATURES
       By:
    /s/  Donald
    M. Earhart       Signature

Title/s/  Donald
    M. EarhartDonald
    M. Earhart

Chairman, President and Chief
    Executive Officer (Principal
    Executive Officer)/s/  James
    J. Dal PortoJames
    J. Dal Porto

Executive Vice President, Chief
    Operating Officer, Director and
    Secretary/s/  James
    R. TalevichJames
    R. Talevich

Chief Financial Officer and
    Treasurer (Principal Financial and
    Accounting Officer)/s/  John
    H. AbelesJohn
    H. Abeles, M.D.

Director/s/  Jack
    H. HalperinJack
    H. Halperin

Director/s/  Joel
    S. KanterJoel
    S. Kanter

Director/s/  Erik
    H. LoudonErik
    H. Loudon

Director/s/  Henry
    Tsutomu TaiHenry
    Tsutomu Tai, Ph.D., M.D.

Director  F-38




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibit No.

Exhibit2
.1

Stock Purchase Agreement, dated October 28, 2004, by and
    between Integra LifeSciences Corporation and I-Flow
    Corporation(1)2
.2

Merger Agreement, dated July 27, 2001, by and between
    I-Flow Corporation, a Delaware corporation, and I-Flow
    Corporation, a California corporation(2)2
.3

Agreement and Plan of Merger, dated January 13, 2000, by
    and among I-Flow Corporation, Spinal Acquisition Corp., Spinal
    Specialties, Inc. and the Shareholders of Spinal Specialties,
    Inc.(3)2
.4

Agreement and Plan of Merger, dated February 9, 1998, by
    and among I-Flow Corporation, I-Flow Subsidiary, Inc., Venture
    Medical, Inc., InfuSystems II, Inc. and the Shareholders of
    Venture Medical, Inc. and InfuSystems II, Inc.(4)2
.5

Agreement for Purchase and Sale of Assets, dated July 3,
    1996, by and among I-Flow Corporation, Block Medical, Inc. and
    Hillenbrand Industries, Inc.(5)2
.6

Stock Purchase Agreement, dated as of September 29, 2006,
    by and among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc.
    and Iceland Acquisition Subsidiary, Inc. (including the Form of
    Services Agreement, attached thereto as Exhibit A, the Form
    of License Agreement attached thereto as Exhibit B and the
    Term Sheet attached thereto as Exhibit C)(27)2
.7

Amendment No. 1 dated as of April 30, 2007 to the
    Stock Purchase Agreement dated as of September 29, 2006 by
    and among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc. and
    Iceland Acquisition Subsidiary, Inc.(29)2
.8

Amendment No. 2 dated as of June 29, 2007 to the Stock
    Purchase Agreement dated as of September 29, 2006, as
    amended by an Amendment No. 1 dated as of April 30,
    2007, by and among I-Flow Corporation, InfuSystem, Inc., HAPC,
    Inc. and Iceland Acquisition Subsidiary, Inc.(31)2
.9

Amendment No. 3 dated as of July 31, 2007 to the Stock
    Purchase Agreement dated as of September 29, 2006, as
    amended by Amendment No. 1 dated as of April 30, 2007
    and an Amendment No. 2 dated as of June 29, 2007, by
    and among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc. and
    Iceland Acquisition Subsidiary, Inc.(33)2
.10

Memorandum of Intent dated as of September 12, 2007 by and
    among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc. and
    Iceland Acquisition Subsidiary, Inc.(34)2
.11

Amendment No. 4 dated as of September 18, 2007 to the
    Stock Purchase Agreement dated as of September 29, 2006, as
    amended by Amendment No. 1 dated as of April 30, 2007,
    an Amendment No. 2 dated as of June 29, 2007 and an
    Amendment No. 3 dated as of July 31, 2007, by and
    among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc. and
    Iceland Acquisition Subsidiary, Inc.(35)2
.12

Further Agreement Regarding Project Iceland dated as of
    October 17, 2007 by and among I-Flow Corporation,
    InfuSystem, Inc., HAPC, Inc. and Iceland Acquisition Subsidiary,
    Inc.(36)2
.13

Acknowledgement and Agreement dated as of October 8, 2007
    by and among I-Flow Corporation, InfuSystem, Inc., HAPC, Inc.,
    Iceland Acquisition Subsidiary, Inc., Sean D. McDevitt and
    Philip B. Harris(36)2
.14

Form of Share Purchase Agreement(36)2
.15

Second Form of Share Purchase Agreement(36)2
.16

Form of Irrevocable Proxy(36)2
.17

Binding Letter of Intent dated as of December 13, 2007 by
    and among I-Flow Corporation, AcryMed, Inc., Bruce L. Gibbins,
    Jack D. McMaken, John A. Calhoun and James P. Fee, Jr.(38)2
.18

Agreement and Plan of Merger dated as of February 2, 2008
    by and among I-Flow Corporation, Alaska Acquisition Subsidiary,
    Inc., AcryMed Incorporated, Bruce L. Gibbins, Jack D. McMaken,
    John A. Calhoun and James P. Fee, Jr., in their capacities as
    stockholders, and John A. Calhoun, in his capacity as the
    stockholder representative(39)3
.1

Amended and Restated Certificate of Incorporation of I-Flow
    Corporation, a Delaware Corporation(6)3
.2

Amended and Restated Bylaws of I-Flow Corporation(37)3
.3

Certificate of Designation Regarding Series A Junior
    Participating Cumulative Preferred Stock(7)4
.1

Specimen Common Stock Certificate(20)4
.2

Warrant Agreement, dated February 13, 1990, between the
    Company and American Stock Transfer &
    Trust Company, as warrant agent(9)




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##### Table of Contents



Exhibit No.

Exhibit4
.3

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 Rights Certificate, the Form of
    Assignment and the Form of Election to Purchase(7)4
.4

Warrant to Purchase Stock, dated May 8, 2003, between
    I-Flow Corporation and Silicon Valley Bank(10)4
.5

Registration Rights Agreement, dated May 8, 2003, between
    I-Flow Corporation and Silicon Valley Bank(10)4
.6

Form of Warrant, dated September 4, 2003(1)4
.7

Form of Registration Rights Agreement, dated September 4,
    2003(1)10
.1

Securities Purchase Agreement, dated September 2, 2003(41)10
.2

I-Flow Corporation Amended and Restated 2001 Equity Incentive
    Plan(11)*10
.3

2003 Restricted Stock Plan of I-Flow Corporation(10)*10
.4

2001 Restricted Stock Plan of I-Flow Corporation(12)*10
.5

1996 Stock Incentive Plan(13)*10
.6

1992 Non-Employee Director Stock Option Plan(14)*10
.7

1987-1988
    Incentive Stock Option Plan and Non-Statutory Stock Option Plan,
    restated as of March 23, 1992(15)*10
.8

License and Transfer Agreement with SoloPak Pharmaceuticals
    Inc., dated March 6, 1996(16)10
.9

Summary of the Terms of the COIP for 2005(23)*10
.10

Summary of the Terms of the COIP for 2006(25)*10
.11

Summary of the Terms of the COIP for 2007(28)*10
.12

Summary of the Terms of the 2008 Executive Performance Incentive
    Plan(40)*10
.13

Addendum to Manufacturing Plant Lease Agreement(23)10
.14

Lease Agreement between Industrial Developments International,
    Inc. as Landlord and I-Flow Corporation as Tenant dated
    April 14, 1997(17)10
.15

Block Medical de Mexico lease agreement dated December 7,
    1999(22)10
.16

Credit and Guaranty Agreement, dated as of October 25,
    2007, among Iceland Acquisition Subsidiary, Inc., HAPC, Inc. and
    I-Flow Corporation(43)10
.17

Security Agreement, dated as of October 25, 2007, among
    Iceland Acquisition Subsidiary, Inc., HAPC, Inc. and I-Flow
    Corporation(43)10
.18

Amended and Restated Loan and Security Agreement between Silicon
    Valley Bank and I-Flow Corporation dated May 8, 2003(10)10
.19

Amendment to Loan Agreement between Silicon Valley Bank and
    I-Flow Corporation dated January 30, 2004(22)10
.20

Amendment to Loan Agreement, dated as of April 30, 2005,
    between I-Flow Corporation and Silicon Valley Bank(24)10
.21

Amendment to Loan Agreement, dated as of April 29, 2006,
    between I-Flow Corporation and Silicon Valley Bank(26)10
.22

Amendment to Loan Agreement between Silicon Valley Bank and
    I-Flow Corporation, dated as of July 16, 2007(32)10
.23

Amendment to Loan Agreement between Silicon Valley Bank and
    I-Flow Corporation, dated as of August 6, 2008(42)10
.24

Amendment to Loan Agreement between Silicon Valley Bank and
    I-Flow Corporation, dated as of December 18, 2008(44)10
.25

Loan Agreement, dated March 31, 2000, by and among
    InfuSystem, Inc., I-Flow Corporation and Old Kent Bank(10)10
.26

First Amendment to Loan Agreement, dated April 1, 2002, by
    and among InfuSystem, Inc.,
    I-Flow
    Corporation and Fifth Third Bank (formerly Old Kent Bank)(10)10
.27

Second Amendment to Loan Agreement, dated April 1, 2003, by
    and among InfuSystem, Inc.,
    I-Flow
    Corporation and Fifth Third Bank (formerly Old Kent Bank)(10)




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##### Table of Contents



Exhibit No.

Exhibit10
.28

Second Amended and Restated Promissory Note, dated April 1,
    2004, between InfuSystem, Inc. and Fifth Third Bank (formerly
    Old Kent Bank)(10)10
.29

Promissory Note with Donald M. Earhart dated June 15,
    2001(8)*10
.30

Underwriting Agreement, dated April 13, 2004(21)10
.31

Employment Agreement with Donald M. Earhart, dated May 16,
    1990(18)*10
.32

Amendment No. 1 to Employment Agreement with Donald M.
    Earhart, dated June 21, 2001(8)*10
.33

Amendment No. 2 to Employment Agreement with Donald M.
    Earhart, dated February 23, 2006(25)*10
.34

Amendment No. 3 to Employment Agreement with Donald M.
    Earhart, dated February 21, 2008(40)*10
.35

Amended and Restated Employment Agreement with James J. Dal
    Porto, dated June 21, 2001(8)*10
.36

Amendment No. 1 to Employment Agreement with James J. Dal
    Porto, dated February 23, 2006(25)*10
.37

Amendment No. 2 to Employment Agreement with James J. Dal
    Porto, dated February 21, 2008(40)*10
.38

Employment Agreement with James R. Talevich, dated June 30,
    2000(19)*10
.39

Amended and Restated Employment Agreement for James R. Talevich,
    dated May 24, 2007(30)*10
.40

Amendment No. 1 to Employment Agreement with James R.
    Talevich, dated February 23, 2006(25)*10
.41

Amendment No. 2 to Employment Agreement with James R.
    Talevich, dated February 21, 2008(40)*10
.42

Agreement Re: Change in Control with Donald M. Earhart, dated
    June 21, 2001(8)*10
.43

Amendment No. 1 to Agreement Re: Change in Control with
    Donald M. Earhart, dated February 23, 2006(25)*10
.44

Amendment No. 2 to Agreement Re: Change in Control with
    Donald M. Earhart, dated February 21, 2008(40)*10
.45

Agreement Re: Change in Control with James J. Dal Porto dated
    June 21, 2001(8)*10
.46

Amendment No. 1 to Agreement Re: Change in Control with
    James J. Dal Porto, dated February 23, 2006(25)*10
.47

Amendment No. 2 to Agreement Re: Change in Control with
    James J. Dal Porto, dated February 21, 2008(40)*10
.48

Agreement Re: Change in Control with James R. Talevich, dated
    June 21, 2001(8)*10
.49

Amendment No. 1 to Agreement Re: Change in Control with
    James R. Talevich, dated February 23, 2006(25)*10
.50

Amendment No. 2 to Agreement Re: Change in Control with
    James R. Talevich, dated February 21, 2008(40)*10
.51

Form of Restricted Stock Agreement(25)*10
.52

Form of Indemnification Agreement(25)21
.1

List of Subsidiaries23
.1

Consent of Independent Registered Public Accounting Firm31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002     *
    
    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 Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2003.(2)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on August 3, 2001.(3)
    
    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.




---



##### Table of Contents



(4)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K/A
    filed on March 6, 1998.(5)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on August 7, 1996.(6)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed May 31, 2002.(7)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on March 13, 2002.(8)
    
    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.(9)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 1990.(10)
    
    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, 2003.(11)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on June 1, 2005.(12)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002.(13)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Definitive Proxy Statement filed on
    March 27, 1996.(14)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1991.(15)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Post-Effective Amendment to its Registration
    Statement (No.
    33-41207)
    filed on October 27, 1992.(16)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1995.(17)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on April 25, 1997.(18)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 1990.(19)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2000.(20)
    
    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, 2002.(21)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on April 14, 2004.(22)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003.(23)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004.(24)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on May 9, 2005.(25)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on March 1, 2006.(26)
    
    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, 2006.(27)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on October 4, 2006.




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##### Table of Contents



(28)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on February 28, 2007.(29)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on May 1, 2007.(30)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on May 29, 2007.(31)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on July 2, 2007.(32)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on July 19, 2007.(33)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on July 31, 2007.(34)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on September 13, 2007.(35)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on September 19, 2007.(36)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on October 19, 2007.(37)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on December 11, 2007.(38)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on December 17, 2007.(39)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on February 6, 2008.(40)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on February 26, 2008.(41)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on September 3, 2003.(42)
    
    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, 2008.(43)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on September 17, 2008.(44)
    
    Incorporated by reference to exhibit with this title filed with
    the Companys Current Report on
    Form 8-K
    filed on December 22, 2008.