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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

[   ]

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

I-Flow Corporation

(949) 206-2700

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X]  Yes    [   ]  No

As of October 31, 2002 there were 15,452,638 shares outstanding of common stock.

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I-FLOW CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2002

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				Page
Part I: Financial Information
	Item 1. Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of September 30, 2002 and and December 31, 2001			1
		Condensed Consolidated Statements of Operations and Comprehensive Operations for the three and nine-month periods ended September 30, 2002 and 2001			2
		Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2002 and 2001			3
		Notes to Condensed Consolidated Financial Statements (Unaudited)			4
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				9
	Item 3. Quantitative and Qualitative Disclosures About Market Risk				16
	Item 4. Controls and Procedures				16
Part II: Other Information
	Item 1. Legal Proceedings				17
	Item 5. Other Information				17
	Item 6. Exhibits and Reports on Form 8-K				17
Signatures					20

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I-FLOW CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

					September 30,				December 31,
					2002				2001
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents			$	2,106,000			$	2,033,000
		Accounts receivable, net				9,987,000				10,010,000
		Inventories, net				6,932,000				6,984,000
		Prepaid expenses and other				555,000				353,000
		Deferred taxes				2,294,000				2,294,000
			Total current assets			21,874,000				21,674,000
		Property, net				5,333,000				4,805,000
		Goodwill, net				2,639,000				6,115,000
		Other long-term assets				1,228,000				1,068,000
		Deferred taxes				2,042,000				2,042,000
TOTAL					$	33,116,000			$	35,704,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
		Accounts payable			$	3,367,000			$	3,115,000
		Accrued payroll and related expenses				1,644,000				1,875,000
		Income taxes payable				760,000				576,000
		Current portion of long-term debt				110,000				221,000
		Other liabilities				38,000				65,000
			Total current liabilities			5,919,000				5,852,000
LONG-TERM DEBT, less current portion						9,000				83,000
STOCKHOLDERS’ EQUITY:
		Preferred stock — $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2002 (unaudited) and December 31, 2001, respectively				—				—
		Common stock — $0.001 par value; 40,000,000 shares authorized; 15,441,931 and 15,344,550 shares issued and outstanding at September 30, 2002 (unaudited) and December 31, 2001, respectively				42,898,000				42,274,000
		Accumulated other comprehensive income (loss)				(80,000	)			1,000
		Accumulated deficit				(15,630,000	)			(12,506,000	)
			Net stockholders’ equity			27,188,000				29,769,000
TOTAL					$	33,116,000			$	35,704,000

See accompanying notes to unaudited condensed consolidated financial statements.

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

					Three Months Ended								Nine Months Ended
					September 30,								September 30,
					2002				2001				2002				2001
Net revenues					$	9,639,000			$	7,991,000			$	27,694,000			$	24,462,000
Costs and expenses:
	Cost of sales					3,711,000				3,303,000				10,959,000				10,118,000
	Selling and marketing					3,103,000				1,199,000				8,409,000				3,860,000
	General and administrative					2,106,000				2,236,000				6,116,000				6,817,000
	Product development					542,000				493,000				1,633,000				1,575,000
		Total costs and expenses				9,462,000				7,231,000				27,117,000				22,370,000
Operating income						177,000				760,000				577,000				2,092,000
Interest expense (income), net						—				(28,000	)			(5,000	)			49,000
Income tax provision						70,000				377,000				233,000				917,000
Net income before effect of a change in accounting principle						107,000				411,000				349,000				1,126,000
Effect of a change in accounting principle:
	Goodwill impairment					—				—				(3,474,000	)			—
Net income (loss)					$	107,000			$	411,000			$	(3,125,000	)		$	1,126,000
Net income per share, before effect of change in accounting principle
			Basic		$	0.01			$	0.03			$	0.02			$	0.07
			Diluted		$	0.01			$	0.03			$	0.02			$	0.07
Loss per share from goodwill impairment
			Basic		$	—			$	—			$	(0.22	)		$	—
			Diluted		$	—			$	—			$	(0.22	)		$	—
Net income (loss) per share
			Basic		$	0.01			$	0.03			$	(0.20	)		$	0.07
			Diluted		$	0.01			$	0.03			$	(0.20	)		$	0.07
Comprehensive Operations:
			Net income (loss)		$	107,000			$	411,000			$	(3,125,000	)		$	1,126,000
			Foreign currency translation gain (loss)			(18,000	)			(26,000	)			(81,000	)			(62,000	)
			Comprehensive income (loss)		$	89,000			$	385,000			$	(3,206,000	)		$	1,064,000

See accompanying notes to unaudited condensed consolidated financial statements.

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

				Nine Months Ended
				September 30,
				2002				2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)				$	(3,125,000	)		$	1,126,000
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization				1,515,000				2,010,000
	Goodwill impairment				3,474,000				—
	Compensation expense related to stock option grants				577,000				465,000
	Change in allowance for doubtful accounts				(407,000	)			77,000
	Changes in operating assets and liabilities (net of acquisition assets and liabilities):
		Accounts receivable			431,000				3,416,000
		Inventories			53,000				(2,541,000	)
		Prepaid expenses and other current assets			(121,000	)			(93,000	)
		Accounts payable, accrued payroll and related expenses			(30,000	)			86,000
		Income taxes payable			184,000				612,000
		Other liabilities			(21,000	)			(72,000	)
Net cash provided by operating activities					2,530,000				5,086,000
CASH FLOWS FROM INVESTING ACTIVITIES:
	Property acquisitions				(1,865,000	)			(1,360,000	)
	Cash paid for acquisition				—				(165,000	)
	Change in other assets				(350,000	)			(347,000	)
Net cash used in investing activities					(2,215,000	)			(1,872,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds (repayments) from line of credit				—				(500,000	)
	Principal payments on notes payable				(186,000	)			(1,906,000	)
	Proceeds from exercise of stock options and warrants				48,000				99,000
Net cash used in financing activities					(138,000	)			(2,307,000	)
Effect of exchange rates on cash					(104,000	)			(66,000	)
NET INCREASE IN CASH AND CASH EQUIVALENTS					73,000				841,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					2,033,000				1,184,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	2,106,000			$	2,025,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid				$	11,000			$	92,000
Income tax payments				$	49,000			$	321,000
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 unaudited condensed consolidated financial statements.

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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, and a goodwill impairment charge related to a change in accounting principle) that, in the opinion of management, are necessary to present fairly the financial position of I-Flow Corporation and its subsidiaries (the “Company”) at September 30, 2002 and the results of its operations and its cash flows for the three and nine-month periods ended September 30, 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 September 30, 2002.
2.		Inventories
		Inventories consisted of the following:

3.		Earnings (Loss) Per Share
		Basic net income (loss) 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 in the event of early termination of employment.
		Diluted net income (loss) 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.

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

		Potential common shares of 4,571,000 and 4,317,000 have been excluded from diluted weighted average common shares for the three and nine-month periods ended September 30, 2002, respectively, as the effect would be anti-dilutive.
		Potential common shares of 3,574,000 and 3,739,000 have been excluded from diluted weighted average common shares for the three and nine-month periods ended September 30, 2001, respectively, as the effect would be anti-dilutive.
4.