857728--3/10/2009--I_FLOW_CORP

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{customer, product, revenue}

{stock, price, share}

{regulation, change, law}

{tax, income, asset}

{regulation, government, change}

{control, financial, internal}

{product, market, service}

{operation, international, foreign}

{product, candidate, development}

{property, intellectual, protect}

{acquisition, growth, future}

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. 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. 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. 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. 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. Our financial results could be adversely impacted by asset impairments or other charges. 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.

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857728--3/10/2009--I_FLOW_CORP_/DE/