718924--12/27/2006--SPAN_AMERICA_MEDICAL_SYSTEMS

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The Secure I.V. product line has limited sales history and market exposure and therefore involves greater risks and uncertainties than our more established product lines. We currently have a sole source contract manufacturer for the Secure I.V. product line. The loss of a key distributor or customer in the Company s medical or custom products segments could cause a rapid and significant sales decline, which would likely result in a decline in earnings. Our earnings could be negatively affected by raw material cost increases that we are unable to recover through sales price increases or expense reductions. Our sales volume could decline as a result of competition from low-cost foreign imports. Our business is subject to the loss of existing sales or slower growth rates due to the impact of competitive products and pricing Our medical business could lose sales volume or could have lower sales growth rates as a result of government reimbursement changes in the medical market. Certain of our medical products and all of our Secure I.V. products are classified as medical devices and are regulated by the FDA.

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718924--12/27/2006--SPAN_AMERICA_MEDICAL_SYSTEMS_INC