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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2010

OR



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

For the transition period from  to
.

Commission File Number: 0-27596





CONCEPTUS, INC.

(Exact name of Registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 94-3170244                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

331 East Evelyn

Mountain View, CA 94041

(Address of Principal Executive Offices) (Zip Code)

(650) 962-4000

(Registrants Telephone Number, Including Area Code)



(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)





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.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of Exchange
Act).    Yes   ̈    No  x

There were 31,071,655 shares of Registrants Common Stock issued and outstanding as of August 1, 2010.









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CONCEPTUS, INC.

Form 10-Q for the Quarter Ended June 30, 2010



|                              |  |                                                                                                              |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                              |  | Page
|Part I. Financial Information
|                              |  |                                                                                                             
|Item 1.                       |  | Condensed Consolidated Financial Statements (Unaudited)                                                      |  |     
|                              |  |                                                                                                             
|                              |  | a) Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009                           |  | 3   
|                              |  |                                                                                                             
|                              |  | b) Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 |  | 4   
|                              |  |                                                                                                             
|                              |  | c) Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2010 and 2009 |  | 5   
|                              |  |                                                                                                             
|                              |  | d) Notes to Condensed Consolidated Financial Statements                                                      |  | 6   
|                              |  |                                                                                                             
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 20  
|                              |  |                                                                                                             
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 28  
|                              |  |                                                                                                             
|Item 4.                       |  | Controls and Procedures                                                                                      |  | 29  
|                             
|Part II. Other Information   
|                              |  |                                                                                                             
|Item 1.                       |  | Legal Proceedings                                                                                            |  | 30  
|                              |  |                                                                                                             
|Item 1A.                      |  | Risk Factors                                                                                                 |  | 30  
|                              |  |                                                                                                             
|Item 6.                       |  | Exhibits                                                                                                     |  | 33  



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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

Conceptus, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)



|                                            |  |              |          |   |                  |   |          |  
|------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                            |  | June 30,2010 |          |   | December 31,2009 |  
|Assets                                      |  |              |          |   |                  |   |          |  
|Current assets:                             |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                   |  | $            | 21,458   |   |                  | $ | 61,658   |  
|Short-term investments                      |  |              | 48,628   |   |                  |   | 40,626   |  
|Put option                                  |  |              | 1,984    |   |                  |   | 2,933    |  
|Accounts receivable, net                    |  |              | 19,344   |   |                  |   | 17,315   |  
|Inventories                                 |  |              | 4,598    |   |                  |   | 4,908    |  
|Prepaids                                    |  |              | 2,760    |   |                  |   | 1,897    |  
|Other current assets                        |  |              | 2,144    |   |                  |   | 1,540    |  
|                                            |  |              |          |   |                  |   |          |  
|Total current assets                        |  |              | 100,916  |   |                  |   | 130,877  |  
|Property and equipment, net                 |  |              | 10,601   |   |                  |   | 9,782    |  
|Debt issuance costs, net                    |  |              | 755      |   |                  |   | 987      |  
|Intangible assets, net                      |  |              | 25,513   |   |                  |   | 27,687   |  
|Long-term investments                       |  |              | 18,980   |   |                  |   |         |  
|Restricted cash                             |  |              | 365      |   |                  |   | 360      |  
|Goodwill                                    |  |              | 14,750   |   |                  |   | 17,318   |  
|Other assets                                |  |              | 140      |   |                  |   | 128      |  
|                                            |  |              |          |   |                  |   |          |  
|Total assets                                |  | $            | 172,020  |   |                  | $ | 187,139  |  
|                                            |  |              |          |   |                  |   |          |  
|Liabilities and stockholders equity        |  |              |          |   |                  |   |          |  
|Current liabilities:                        |  |              |          |   |                  |   |          |  
|Accounts payable                            |  | $            | 5,892    |   |                  | $ | 5,878    |  
|Accrued compensation                        |  |              | 6,090    |   |                  |   | 8,208    |  
|Line of credit                              |  |              | 14,176   |   |                  |   | 29,240   |  
|Other accrued liabilities                   |  |              | 3,779    |   |                  |   | 4,012    |  
|                                            |  |              |          |   |                  |   |          |  
|Total current liabilities                   |  |              | 29,937   |   |                  |   | 47,338   |  
|Deferred tax liability                      |  |              | 1,008    |   |                  |   | 1,277    |  
|Notes payable                               |  |              | 78,714   |   |                  |   | 76,531   |  
|Other accrued liabilities                   |  |              | 1,105    |   |                  |   | 1,135    |  
|                                            |  |              |          |   |                  |   |          |  
|Total liabilities                           |  |              | 110,764  |   |                  |   | 126,281  |  
|                                            |  |              |          |   |                  |   |          |  
|Stockholders equity:                       |  |              |          |   |                  |   |          |  
|Common stock and additional paid-in capital |  |              | 302,115  |   |                  |   | 296,191  |  
|Accumulated other comprehensive loss        |  |              | (3,877   | ) |                  |   | (993     | )
|Accumulated deficit                         |  |              | (236,982 | ) |                  |   | (234,340 | )
|Treasury stock, 77,863 shares, at cost      |  |              |         |   |                  |   |         |  
|                                            |  |              |          |   |                  |   |          |  
|Total stockholders equity                  |  |              | 61,256   |   |                  |   | 60,858   |  
|                                            |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders equity  |  | $            | 172,020  |   |                  | $ | 187,139  |  
|                                            |  |              |          |   |                  |   |          |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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Conceptus, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)



|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                               |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                                                               |  | 2010                       |        |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|Net sales                                                                      |  | $                          | 36,847 |   |                          | $ | 33,049 |      |  | $ | 70,205 |   |  | $ | 60,200 |  
|Cost of goods sold                                                             |  |                            | 7,285  |   |                          |   | 6,671  |      |  |   | 13,676 |   |  |   | 12,426 |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Gross profit                                                                   |  |                            | 29,562 |   |                          |   | 26,378 |      |  |   | 56,529 |   |  |   | 47,774 |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                               |  |                            |        |  
|Operating expenses:                                                            |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Research and development                                                       |  |                            | 1,815  |   |                          |   | 2,008  |      |  |   | 3,561  |   |  |   | 3,415  |  
|Selling, general and administrative                                            |  |                            | 26,330 |   |                          |   | 23,337 |      |  |   | 52,309 |   |  |   | 45,908 |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                       |  |                            | 28,145 |   |                          |   | 25,345 |      |  |   | 55,870 |   |  |   | 49,323 |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                               |  |                            |        |  
|Operating income (loss)                                                        |  |                            | 1,417  |   |                          |   | 1,033  |      |  |   | 659    |   |  |   | (1,549 | )
|                                                                               |  |                            |        |  
|Interest income                                                                |  |                            | 198    |   |                          |   | 179    |      |  |   | 472    |   |  |   | 535    |  
|Interest expense                                                               |  |                            | (1,770 | ) |                          |   | (1,753 | )    |  |   | (3,526 | ) |  |   | (3,472 | )
|Other income (expense), net                                                    |  |                            | (13    | ) |                          |   | 68     |      |  |   | 10     |   |  |   | (182   | )
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total interest income and expense and other expense, net                       |  |                            | (1,585 | ) |                          |   | (1,506 | )    |  |   | (3,044 | ) |  |   | (3,119 | )
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                               |  |                            |        |  
|Loss before provision for income taxes                                         |  |                            | (168   | ) |                          |   | (473   | )    |  |   | (2,385 | ) |  |   | (4,668 | )
|                                                                               |  |                            |        |  
|Provision for income taxes                                                     |  |                            | 123    |   |                          |   | 82     |      |  |   | 257    |   |  |   | 223    |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net loss                                                                       |  | $                          | (291   | ) |                          | $ | (555   | )    |  | $ | (2,642 | ) |  | $ | (4,891 | )
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                               |  |                            |        |  
|Basic and diluted net loss per share                                           |  | $                          | (0.01  | ) |                          | $ | (0.02  | )    |  | $ | (0.09  | ) |  | $ | (0.16  | )
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                               |  |                            |        |  
|Weighted-average shares used in computing basic and diluted net loss per share |  |                            | 31,032 |   |                          |   | 30,518 |      |  |   | 30,981 |   |  |   | 30,478 |  
|                                                                               |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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Conceptus, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                            |  |                          |         |   |      |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                                                            |  | Six months endedJune 30, |        
|                                                                            |  | 2010                     |         |   | 2009 |  
|Cash flows from operating activities                                        |  |                          |         |   |      |   |        |  
|Net loss                                                                    |  | $                        | (2,642  | ) |      | $ | (4,891 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                          |         |   |      |   |        |  
|Depreciation and amortization of property and equipment                     |  |                          | 2,241   |   |      |   | 2,052  |  
|Amortization of debt issuance costs                                         |  |                          | 232     |   |      |   | 233    |  
|Accretion of notes payable                                                  |  |                          | 2,183   |   |      |   | 2,064  |  
|Amortization of intangible assets                                           |  |                          | 1,627   |   |      |   | 366    |  
|Amortization and accretion of discount and premium on investments           |  |                          | 354     |   |      |   |       |  
|Loss on put option                                                          |  |                          | 949     |   |      |   | 1,414  |  
|Gain on trading securities                                                  |  |                          | (962    | ) |      |   | (1,479 | )
|Stock-based compensation expense                                            |  |                          | 3,531   |   |      |   | 2,930  |  
|Loss on disposal of property and equipment                                  |  |                          | 11      |   |      |   | 4      |  
|Changes in operating assets and liabilities:                                |  |                          |         |   |      |   |        |  
|Accounts receivable                                                         |  |                          | (2,922  | ) |      |   | (2,285 | )
|Inventories                                                                 |  |                          | 393     |   |      |   | 988    |  
|Other current assets                                                        |  |                          | (1,460  | ) |      |   | 4,747  |  
|Accounts payable                                                            |  |                          | 826     |   |      |   | 692    |  
|Accrued compensation                                                        |  |                          | (1,833  | ) |      |   | (394   | )
|Other accrued and long term liabilities                                     |  |                          | (237    | ) |      |   | 1,518  |  
|                                                                            |  |                          |         |   |      |   |        |  
|Net cash provided by operating activities                                   |  |                          | 2,292   |   |      |   | 7,959  |  
|                                                                            |  |                          |         |   |      |   |        |  
|                                                                            |  |                         
|Cash flows from investing activities                                        |  |                          |         |   |      |   |        |  
|Sales and maturities of investments                                         |  |                          | 29,935  |   |      |   | 125    |  
|Purchase of investments                                                     |  |                          | (56,510 | ) |      |   |       |  
|Restricted cash                                                             |  |                          | (5      | ) |      |   | (4     | )
|Capital expenditures                                                        |  |                          | (2,817  | ) |      |   | (2,402 | )
|                                                                            |  |                          |         |   |      |   |        |  
|Net cash used in investing activities                                       |  |                          | (29,397 | ) |      |   | (2,281 | )
|                                                                            |  |                          |         |   |      |   |        |  
|                                                                            |  |                         
|Cash flows from financing activities                                        |  |                          |         |   |      |   |        |  
|Proceeds from line of credit                                                |  |                          | 6,615   |   |      |   | 2,092  |  
|Repayment of line of credit                                                 |  |                          | (21,679 | ) |      |   | (97    | )
|Proceeds from issuance of common stock                                      |  |                          | 2,323   |   |      |   | 874    |  
|                                                                            |  |                          |         |   |      |   |        |  
|Net cash (used in) provided by financing activities                         |  |                          | (12,741 | ) |      |   | 2,869  |  
|                                                                            |  |                          |         |   |      |   |        |  
|                                                                            |  |                         
|Effect of exchange rate changes on cash and cash equivalents                |  |                          | (354    | ) |      |   | (9     | )
|                                                                            |  |                         
|Net increase (decrease) in cash and cash equivalents                        |  |                          | (40,200 | ) |      |   | 8,538  |  
|Cash and cash equivalents at beginning of the period                        |  |                          | 61,658  |   |      |   | 54,720 |  
|                                                                            |  |                          |         |   |      |   |        |  
|Cash and cash equivalents at end of the period                              |  | $                        | 21,458  |   |      | $ | 63,258 |  
|                                                                            |  |                          |         |   |      |   |        |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis
of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim financial information and pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement have been included.

The condensed consolidated balance sheet as of December 31, 2009 has
been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. This
financial data should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations for the three
and six months ended June 30, 2010 may not necessarily be indicative of the operating results for the full 2010 fiscal year or any other future interim periods.

We have a limited history of operations with the
Essure® system and since our inception in 1992, we have incurred cumulative operating losses until we
experienced our first operating profit in Fiscal 2009. In December 2006, we filed a Registration Statement on Form S-3, through which we may sell from time to time any combination of debt securities, common stock, preferred stock and
warrants, in one or more offerings, with an initial offering price not to exceed $150,000,000. In February 2007, we issued an aggregate principal amount of $86,250,000 of our 2.25% convertible senior notes due 2027. The notes can be convertible
into shares within certain time periods, without having to meet the other contingent convertibility conditions as outlined in Note 9  Convertible Senior Notes. The first period is the window between December 15, 2011 and February 15,
2012. The second period is anytime after February 15, 2025 up until maturity at February 15, 2027. If the notes are converted, then upon conversion (net shares settlement), holders will receive cash and in certain
circumstances, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of $27.89 per share). Upon conversion, a
holder would receive cash up to the principal amount of the note and our common stock in respect of such notes conversion value in excess of such principal amount. This net share settlement feature of the notes would reduce our liquidity, and
we may not have sufficient funds to pay in full the cash obligation upon such conversion. In the future, depending upon a variety of factors, we may need to raise additional funds through bank facilities, debt or equity offerings or other sources of
capital. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve covenants that restrict us. Additional funding may not be available when needed or on terms acceptable to us. If we are unable to
obtain additional capital, we may be required to delay, reduce the scope of or eliminate our research and development programs or reduce our sales and marketing activities.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06 Fair Value
Measurements and Disclosure Requirements, which updated guidance related to fair value measurements and disclosures, and requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2
fair value measurements and describe the reasons for the transfers. In addition, in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity should disclose separately information about
purchases, sales, issuances and settlements (that is, on a gross basis rather than one net number). The updated guidance also requires that and entity should provide fair value measurement disclosures for each class of assets and liabilities and
disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The updated guidance is effective for interim or annual
financial reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal years. We have adopted this guidance in the first quarter of 2010. See Note 4  Fair Value Measurement.



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Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



During the first half of 2010, the FASB has issued several ASUs  ASU
No. 2010-01 through ASU No. 2010-19. Except for ASU No. 2010-06 discussed above and ASU No. 2010-09 Amendments to Certain Recognition and Disclosure Requirements issued in February 2010, Codification Topic ASC 855 
Subsequent Events as presented in the Quarterly Report on Form 10Q for the quarter ended March 31, 2010, the ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and
therefore have minimal, if any, impact on us.

2. Summary of Significant Accounting Policies

Use of Estimates

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The primary estimates underlying our financial statements include the write-off of obsolete and
slow moving inventory, allowance for doubtful accounts receivable, product warranty, the fair value of our investment portfolio, assumptions regarding variables used in calculating the fair value of our equity awards, impairment of goodwill,
intangibles and other long-lived assets, income taxes and contingent liabilities. Actual results could differ from those estimates.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Functional Currency

On January 7, 2008, we acquired Conceptus SAS, which sells to customers throughout Europe. Sales by Conceptus SAS are denominated in
Euros. On December 15, 2008, we incorporated our subsidiary Conceptus Medical Limited (CML) to serve as our direct sales office in the United Kingdom. In preparing our condensed consolidated financial statements, we are required to
translate the financial statements of Conceptus SAS and CML from the currency in which they keep their accounting records into U.S. Dollars. Conceptus SAS and CML both maintain their accounting records in the functional currency which is also their
local currency. The functional currency of CML is the British Pound and the functional currency of Conceptus SAS is the Euro. The functional currency is determined based on managements judgment and involves consideration of all relevant
economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billing, financing, payroll and other expenditures would be considered the functional
currency, but any dependency upon the parent and the nature of the subsidiarys operations must also be considered. Since the functional currency of Conceptus SAS and CML has been determined to be their local currency, any gain or loss
associated with the translation of Conceptus SASs and CMLs financial statements into U.S. Dollars is included as a component of stockholders equity, in accumulated other comprehensive loss. If in the future we determine that there
has been a change in the functional currency of Conceptus SAS or CML from its local currency to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within our statement of operations.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price paid over the fair value of tangible and identifiable intangible net assets acquired
in business combinations. We will perform an annual assessment during the fourth quarter of 2010 of our goodwill at the reporting unit level or earlier if an event occurs or circumstances change that would reduce the fair value of the reporting unit
below its carrying amount. No impairment charges have been recorded for the six months ended June 30, 2010.

Other
intangible assets include patents, customer relationships, license agreements and non-compete agreements. They are amortized using the straight-line method over their respective estimated useful lives.

Impairment of Long-Lived Assets

We account for the impairment of long-lived assets in accordance with ASC 350, Goodwill and Other.We evaluate the carrying value
of our long-lived assets, consisting primarily of our property and equipment, the patents acquired in connection with our purchase of the intellectual property assets from Ovion Inc, and intangible assets acquired in connection with our acquisition
of Conceptus SAS, whenever certain events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable (see Note 5  Goodwill and Intangible Assets). Such events or circumstances include a prolonged
industry downturn, a significant decline in our market value or significant reductions in projected future cash flows.



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Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Significant judgments and assumptions are required in the forecast of future operating
results used in the preparation of the estimated future cash flows, including profit margins, long-term forecasts of the amounts and timing of overall market growth and our percentage of that market, groupings of assets, discount rates and terminal
growth rates. In addition, significant estimates and assumptions are required in the determination of the fair value of our tangible long-lived assets, including replacement cost, economic obsolescence, and the value that could be realized in
orderly liquidation. Changes in these estimates could have a material adverse effect on the assessment of our long-lived assets, thereby requiring us to write down the assets.

3. Investments

As of
June 30, 2010, we held $22.2 million (par value) in auction rate securities, or ARS, backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS
have a contractual maturity ranging from 2028 through 2047.

Our ARS are short-term debt instruments backed by student loans,
a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every
20-30 days, to provide liquidity at par. We have experienced failed auctions since 2008 on most of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive
interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

In November 2008,
we accepted an offer from UBS AG, providing us with rights related to our ARS (the Rights). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference
of the ARS plus accrued but unpaid dividends or interest, at any time during the period of July 2010 through July 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our ARS at any time until July 2012, so long as we
receive payment at par value upon any sale or disposition. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails. We had settlements of our
ARS in the three and six months ended June 30, 2010 of $16.2 million and $21.4 million at full par value. In addition, we recorded a gain of $1.2 million and $1.0 million, respectively which represents the increase in the fair value of the ARS.
The fair value of the ARS at June 30, 2010 is $20.2 million. In July 2010 we exercised our put option to require UBS to purchase the remaining underlying ARS of $22.2 million at full par value. See Note 16  Subsequent Events.

We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair
value option of ASC 825 Financial Instruments.As a result of our election to record the Rights at fair value, unrealized gains and losses have been included in earnings. We estimated the fair value of the Rights using the expected value
that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the
consideration of UBS credit risk. For the three and six months ended June 30, 2010, we recorded an additional loss of $1.2 million and $0.9 million, respectively which represent the decrease in the fair value of the put option.

Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on
our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

In connection with our acceptance of the UBS offer in November 2008, resulting in our put option to require UBS to purchase
our ARS at par value beginning in June 2010, we transferred our ARS from available-for-sale to trading securities in accordance with ASC 320 Investments  Debt and Equity Securities. The transfer to trading securities reflected our
intent to exercise our put option during the third quarter of 2010. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

In November 2008, we entered into a revolving credit line agreement with UBS, payable on demand, in an amount equal to 75% of fair value
of our auction rate securities at net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the ARS that we have pledged as security for the credit line. Additionally, under the terms of the
settlement agreement, if UBS is able to sell our ARS at par, proceeds would be utilized to first repay any outstanding balance under the revolving credit line. In July 2010, we exercised our put option to require UBS to purchase



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(Unaudited)



the remaining underlying ARS of $22.2 million at full par value. Subsequently, we used the proceeds to repay the remaining balance of $14.2 million on our line of credit and terminated the line
of credit. See Note 10  Credit Line and Note 16  Subsequent Events.

As of June 30, 2010 we had short and
long-term investments of $47.4 million recorded at fair value in addition to the $20.2 million of ARS. Our investments consist of time deposits, U.S. treasury bills, U.S. government bonds and corporate bonds. We will sell certain or all investments
as needed to meet the cash flow needs of our business. Hence our investments are classified as available-for-sale securities in accordance with ASC 320 Investments  Debt and Equity Securities. Investments are classified as short-term or
long-term based on the underlying investments maturity date.

The following table summarized our amortized cost, unrealized
gains and loss, and the fair value of our available-for-sales investments, as of June 30, 2010 (in thousands):



|                       |  |               |        |                |   |                |  |   |            |   |  |   |       
|---------------------- |  | ------------- | ------ | -------------- | - | -------------- |  | - | ---------- | - |  | - | ------
|                       |  | AmortizedCost |        | UnrealizedGain |   | UnrealizedLoss |  |   | Fair Value
|Investments:           |  |               |        |                |   |                |  |   |            |   |  |   |       
|Corporate bonds        |  | $             | 28,324 |                | $ | 12             |  | $ | (119       | ) |  | $ | 28,217
|U.S. government bonds  |  |               | 7,998  |                |   | 5              |  |   |           |   |  |   | 8,003 
|U.S. treasury bills    |  |               | 9,971  |                |   | 9              |  |   |           |   |  |   | 9,980 
|Time deposits          |  |               | 1,245  |                |   |               |  |   |           |   |  |   | 1,245 
|                       |  |               |        |                |   |                |  |   |            |   |  |   |       
|Total                  |  | $             | 47,538 |                | $ | 26             |  | $ | (119       | ) |  | $ | 47,445
|                       |  |               |        |                |   |                |  |   |            |   |  |   |       
|                       |  |               |        |               
|Reported as:           |  |               |        |                |   |                |  |   |            |   |  |   |       
|Short-term investments |  | $             | 28,510 |                | $ | 10             |  | $ | (55        | ) |  | $ | 28,465
|Long-term investments  |  |               | 19,028 |                |   | 16             |  |   | (64        | ) |  |   | 18,980
|                       |  |               |        |                |   |                |  |   |            |   |  |   |       
|Total                  |  | $             | 47,538 |                | $ | 26             |  | $ | (119       | ) |  | $ | 47,445
|                       |  |               |        |                |   |                |  |   |            |   |  |   |       

We had several investments that were in an unrealized
loss position as of June 30, 2010. We have determined that (i) we do not have the intent to sell any of these investments, and (ii) it is more likely than not that we will not be required to sell any of these investments before
recovery of the entire amortized cost basis. We review our investments to identify and evaluate investments that have an indication of possible impairment. As of June 30, 2010, we anticipate that we will recover the entire carrying value of
such investments and have determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and six months ended June 30, 2010.

As of June 30, 2010 weighted average days to maturity for our available for sales securities was 366 days, with the longest maturity
date being June 2012.

The following table presents our available-for-sale investments that are in an unrealized loss position
as of June 30, 2010 (in thousands):



|                |  |                     |        |                |                      |     |           |       |                |       |  |           |     |                |  |   |        |  |   |      |  
|--------------- |  | ------------------- | ------ | -------------- | -------------------- | --- | --------- | ----- | -------------- | ----- |  | --------- | --- | -------------- |  | - | ------ |  | - | ---- | -
|                |  | Less than 12 Months |        |                | 12 Months or Greater |     |           | Total |               
|                |  | FairValue           |        | UnrealizedLoss |                      |     | FairValue |       | UnrealizedLoss |       |  | FairValue |     | UnrealizedLoss | 
|Corporate bonds |  | $                   | 13,241 |                | $                    | (55 | )         |       | $              | 9,727 |  | $         | (64 | )              |  | $ | 22,968 |  | $ | (119 | )

4. Fair Value Measurements

On January 1, 2008, we adopted the methods of fair value as described in ASC 820 Fair Value Measurement and
Disclosure(ASC 820) to value our financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at



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(Unaudited)



the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs
used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices in active markets that
are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.

Fair value of Assets

Our cash and cash equivalents and investments, other than ARS, are classified within Level 1 of the fair value hierarchy because they are
valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with a reasonable level of price transparency. As of June 30, 2010, our Level 1 instruments were investments in money market funds, U.S. treasury
bills, U.S. government bonds and corporate bonds.

As a result of continued auction failures, quoted prices for our ARS did
not exist as of June 30, 2010 and, accordingly, we concluded that Level 1 inputs were not available for these assets. Brokerage statements received from our broker/dealer that held our ARS included their estimated market value as of
June 30, 2010. Our broker/dealer valued our ARS at 91% of par. We made inquiries relative to the measurements utilized to derive the estimated market values quoted on our brokerage statements, but the broker/dealer declined to provide detailed
information relating to their valuation methodologies.

We determined that use of a valuation model was the best available
technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. While our valuation model was based on
both Level 2 (credit quality and interest rates) and Level 3 inputs, we determined that the Level 3 inputs were the most significant to the overall fair value measurement of these assets, particularly the estimates of expected periods of
illiquidity. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable
securities, if any.

The put option is a free standing asset separate from the ARS, and represents our contractual right to
require our broker, UBS, to purchase our ARS at par value during the period of July 2010 through July 2012. The put option is classified as short-term because we intend to sell our ARS under the Rights at the inception of the Rights period in the
third quarter of 2010. In July 2010, we exercised our put option to require UBS to purchase the remaining underlying ARS of $22.2 million at full par value. Pursuant to this settlement we recorded an additional gain of $2.0 million and a
corresponding loss of $2.0 million associated with the exercised underlying put option.

Periodically, during the six months
ended June 30, 2010 we entered into forward contracts to buy U.S dollars at fixed intervals in the retail market in an over-the-counter environment. As of June 30, 2010, we had foreign currency forward contracts to sell 4.7 million
Euros in exchange for $6.1 million maturing in July 2010 through October 2010. As of June 30, 2010, these forward contracts are recorded at their fair value of $0.4 million in other current assets on our condensed consolidated balance sheet. We
have outstanding short-term intercompany receivables of $6.1 million as of June 30, 2010. We expect the changes in the fair value of the intercompany receivables to be materially offset by the changes in the fair value of the forward contracts.

The purpose of these forward contracts is to minimize the risk associated with foreign exchange rate fluctuations. We have
developed a foreign currency exchange policy to govern our forward contracts. These foreign currency contracts do not qualify as cash flow hedges and all changes in fair value are reported in earnings as part of other income and expenses. We have
not entered into any other types of derivative financial instruments for trading or speculative purpose. Our foreign currency forward contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data and do not
involve management judgment. Accordingly, we have classified our outstanding foreign currency forward contracts within Level 2 of the fair value hierarchy and have recorded the fair value of the contracts in other current assets on our condensed
consolidated balance sheet as of June 30, 2010.



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(Unaudited)



Assets measured at fair value on a recurring basis at June 30, 2010 are as follows
(in thousands):



|                                  |  |             |        |                                                              |   |                                         |  |                                      |     |  |   |       
|--------------------------------- |  | ----------- | ------ | ------------------------------------------------------------ | - | --------------------------------------- |  | ------------------------------------ | --- |  | - | ------
|                                  |  |             |        | Fair Value Measurements at Reporting Data                   
|                                  |  | June 302010 |        | Quoted Price inActive Marketsfor IdenticalInstrumentsLevel 1 |   | SignificantOtherObservableInputsLevel 2 |  | SignificantUnobservableInputsLevel 3
|Assets:                           |  |             |        |                                                              |   |                                         |  |                                      |     |  |   |       
|Auction rate securities           |  | $           | 20,163 |                                                              | $ |                                        |  | $                                    |    |  | $ | 20,163
|Money market funds                |  |             | 13,491 |                                                              |   | 13,491                                  |  |                                      |    |  |   |      
|Corporate bonds                   |  |             | 28,217 |                                                              |   | 28,217                                  |  |                                      |    |  |   |      
|U.S. government bonds             |  |             | 8,003  |                                                              |   | 8,003                                   |  |                                      |    |  |   |      
|U.S. treasury bills               |  |             | 9,980  |                                                              |   | 9,980                                   |  |                                      |    |  |   |      
|Put option                        |  |             | 1,984  |                                                              |   |                                        |  |                                      |    |  |   | 1,984 
|Time deposits                     |  |             | 1,245  |                                                              |   | 1,245                                   |  |                                      |    |  |   |      
|Foreign currency forward contract |  |             | 355    |                                                              |   |                                        |  |                                      | 355 |  |   |      
|                                  |  |             |        |                                                              |   |                                         |  |                                      |     |  |   |       
|Total assets                      |  | $           | 83,438 |                                                              | $ | 60,936                                  |  | $                                    | 355 |  | $ | 22,147
|                                  |  |             |        |                                                              |   |                                         |  |                                      |     |  |   |       

Assets measured at fair value on a recurring basis at
December 31, 2009 are as follows (in thousands):



|                                  |  |                 |        |                                                              |   |                                         |  |                                      |     |  |   |       
|--------------------------------- |  | --------------- | ------ | ------------------------------------------------------------ | - | --------------------------------------- |  | ------------------------------------ | --- |  | - | ------
|                                  |  |                 |        | Fair Value Measurements at Reporting Data                   
|                                  |  | December 312009 |        | Quoted Price inActive Marketsfor IdenticalInstrumentsLevel 1 |   | SignificantOtherObservableInputsLevel 2 |  | SignificantUnobservableInputsLevel 3
|Assets:                           |  |                 |        |                                                              |   |                                         |  |                                      |     |  |   |       
|Money market funds                |  | $               | 54,884 |                                                              | $ | 54,884                                  |  | $                                    |    |  | $ |      
|Auction rate securities           |  |                 | 40,626 |                                                              |   |                                        |  |                                      |    |  |   | 40,626
|Put option                        |  |                 | 2,933  |                                                              |   |                                        |  |                                      |    |  |   | 2,933 
|Foreign currency forward contract |  |                 | 145    |                                                              |   |                                        |  |                                      | 145 |  |   |      
|                                  |  |                 |        |                                                              |   |                                         |  |                                      |     |  |   |       
|Total assets                      |  | $               | 98,588 |                                                              | $ | 54,884                                  |  | $                                    | 145 |  | $ | 43,559
|                                  |  |                 |        |                                                              |   |                                         |  |                                      |     |  |   |       

The following table presents a reconciliation of all
assets and liabilities measured at fair value on a recurring basis, using significant unobservable inputs (Level 3) as of June 30, 2010 (in thousands):



|                                 |  |            |        |   |                        |   |         |       |  |   |         |  
|-------------------------------- |  | ---------- | ------ | - | ---------------------- | - | ------- | ----- |  | - | ------- | -
|                                 |  | Put Option |        |   | Auction RateSecurities |   |         | Total | 
|Balance at December 31, 2009     |  | $          | 2,933  |   |                        | $ | 40,626  |       |  | $ | 43,559  |  
|Sales of auction rate securities |  |            |       |   |                        |   | (5,175  | )     |  |   | (5,175  | )
|Loss on auction rate securities  |  |            |       |   |                        |   | (274    | )     |  |   | (274    | )
|Gain on put option               |  |            | 270    |   |                        |   |        |       |  |   | 270     |  
|                                 |  |            |        |   |                        |   |         |       |  |   |         |  
|                                 |  |            |       
|Balance at March 31, 2010        |  | $          | 3,203  |   |                        | $ | 35,177  |       |  | $ | 38,380  |  
|Sales of auction rate securities |  |            |       |   |                        |   | (16,250 | )     |  |   | (16,250 | )
|Gain on auction rate securities  |  |            |       |   |                        |   | 1,236   |       |  |   | 1,236   |  
|Loss on put option               |  |            | (1,219 | ) |                        |   |        |       |  |   | (1,219  | )
|                                 |  |            |        |   |                        |   |         |       |  |   |         |  
|                                 |  |            |       
|Balance at June 30, 2010         |  | $          | 1,984  |   |                        | $ | 20,163  |       |  | $ | 22,147  |  
|                                 |  |            |        |   |                        |   |         |       |  |   |         |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



Fair value of Liabilities

The fair value of the Convertible Senior Notes (see Note 9  Convertible Senior Notes) was estimated using quoted market prices.
Accordingly, we have classified our convertible senior notes within Level 1 of the fair value hierarchy and have recorded the carrying value of the notes in long-term liabilities on our condensed consolidated balance sheet as of June 30, 2010.

The following table summarizes the principal outstanding and estimated fair values of our debt (in thousands):



|                         |  |                |        |                   |   |                |  |            |        |  |   |       
|------------------------ |  | -------------- | ------ | ----------------- | - | -------------- |  | ---------- | ------ |  | - | ------
|                         |  | June 30, 2010  |        | December 31, 2009
|                         |  | Carrying Value |        | Fair Value        |   | Carrying Value |  | Fair Value
|Convertible senior notes |  | $              | 78,714 |                   | $ | 80,187         |  | $          | 76,531 |  | $ | 81,075

5. Goodwill and Intangible Assets

Goodwill is tested for impairment on an annual bases or more frequent upon the occurrence of circumstances that indicate
that goodwill assets might be impaired. We did not record any impairment of goodwill during the three and six months ended June 30, 2010.

The changes in carrying amount of goodwill for the six months ended June 30, 2010 is as follows (in thousands):



|                               |  |                              |        |  
|------------------------------ |  | ---------------------------- | ------ | -
|                               |  | Six MonthsEnded June 30,2010 |       
|Goodwill, beginning of period  |  | $                            | 17,318 |  
|Effect of currency translation |  |                              | (2,568 | )
|                               |  |                              |        |  
|Goodwill, end of period        |  | $                            | 14,750 |  
|                               |  |                              |        |  

The following table provides additional information concerning intangible assets (in thousands):



|                        |  |                                      |        |                     |        |                         |   |        |                                        |      |   |               |   |                |   |        |        |   |       
|----------------------- |  | ------------------------------------ | ------ | ------------------- | ------ | ----------------------- | - | ------ | -------------------------------------- | ---- | - | ------------- | - | -------------- | - | ------ | ------ | - | ------
|                        |  |                                      |        | June 30, 2010       |        | December 31,2009       
|                        |  | Weightedaverageremaining life(years) |        | Grosscarryingamount |        | Accumulatedamortization |   |        | Cumulativeeffect ofcurrencytranslation |      |   | Net bookvalue |   | Net book value
|Patent and Licenses     |  | 8.2                                  |        | $                   | 25,750 |                         | $ | (3,260 | )                                      |      | $ |              |   |                | $ | 22,490 |        | $ | 23,854
|Customer relationships  |  | 6.5                                  |        |                     | 5,024  |                         |   | (1,329 | )                                      |      |   | (682          | ) |                |   | 3,013  |        |   | 3,809 
|Covenant not to compete |  | 0.5                                  |        |                     | 71     |                         |   | (56    | )                                      |      |   | (5            | ) |                |   | 10     |        |   | 24    
|                        |  |                                      |        |                     |        |                         |   |        |                                        |      |   |               |   |                |   |        |        |   |       
|                        |  |                                      |        |                     |       
|Total intangibles       |  | $                                    | 30,845 |                     | $      | (4,645                  | ) |        | $                                      | (687 | ) |               | $ | 25,513         |   | $      | 27,687
|                        |  |                                      |        |                     |        |                         |   |        |                                        |      |   |               |   |                |   |        |        |   |       

Intangible assets are being amortized over
straight-line periods ranging from 3 to 9 years.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



6. Inventories

Inventories are stated at the lower of cost or market. Cost is based on actual costs computed on a first-in, first-out
basis. The components of inventories consist of the following (in thousands):



|                 |  |              |       |                  |   |      
|---------------- |  | ------------ | ----- | ---------------- | - | -----
|                 |  | June 30,2010 |       | December 31,2009
|Raw materials    |  | $            | 46    |                  | $ | 92   
|Work-in-progress |  |              | 1,084 |                  |   | 1,577
|Finished goods   |  |              | 3,468 |                  |   | 3,239
|                 |  |              |       |                  |   |      
|Total            |  | $            | 4,598 |                  | $ | 4,908
|                 |  |              |       |                  |   |      

7. Warranty

We offer warranties on our product and record a liability for the estimated future costs associated with warranty claims, which is based
upon our historical experience and our estimate of the level of future costs. Warranty costs are reflected in the statement of operations as a cost of goods sold. A reconciliation of the changes in warranty liability for the six months ended
June 30, 2010 and 2009 are as follows (in thousands):



|                                                 |  |                          |      |   |      |   |      |  
|------------------------------------------------ |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                                                 |  | Six months endedJune 30, |     
|                                                 |  | 2010                     |      |   | 2009 |  
|Balance at the beginning of the period           |  | $                        | 277  |   |      | $ | 272  |  
|Accruals for warranties issued during the period |  |                          | 364  |   |      |   | 207  |  
|Settlements made in kind during the period       |  |                          | (323 | ) |      |   | (215 | )
|                                                 |  |                          |      |   |      |   |      |  
|Balance at the end of the period                 |  | $                        | 318  |   |      | $ | 264  |  
|                                                 |  |                          |      |   |      |   |      |  

8. Stock-Based Compensation

Net loss for the three and six months ended June 30, 2010 included stock-based compensation expense under ASC 718, Compensation
 Stock Compensation (ASC 718), of approximately $1.8 million and $3.5 million, respectively, which consisted of stock-based compensation expense of approximately $1.5 million and $3.0 million respectively related to employee
stock options, employee stock purchase plan and stock appreciation rights and stock-based compensation expense of approximately $0.3 million and $0.5 million respectively related to employee restricted stock and restricted stock units.

Net loss for the three and six months ended June 30, 2009 included stock-based compensation expense under ASC 718 of
approximately $1.5 million and $2.9 million, respectively, which consisted of approximately $1.3 million and $2.5 million respectively related to employee stock options, employee stock purchase plan and stock appreciation rights and approximately
$0.2 million and $0.4 million respectively related to employee restricted stock and restricted stock units.

Stock-based
compensation arrangements to non-employees are accounted for in accordance with ASC 505-50 Equity Based Payments to Non-Employees, which requires that these equity instruments are recorded at their fair value on the measurement date. The
measurement of stock-based compensation is subject to adjustment as the underlying equity instruments vest. Stock-based compensation expense relating to non-employees was approximately $5,000 and $56,000 for the three months ended June 30, 2010
and 2009, respectively, and $37,000 and $48,000 for the six months ended June 30, 2010 and 2009, respectively.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



For the three and six months ended June 30, 2010 and 2009, we calculated the fair
value of each stock option and stock appreciation right on the date of grant using the Black-Scholes model as prescribed by ASC 718. The assumptions used were as follows:



|                                |  |                             |  |      |  
|------------------------------- |  | --------------------------- |  | ---- | -
|                                |  | Three Months Ended June 30, | 
|                                |  | 2010                        |  | 2009 |  
|Expected term (in years)        |  |                            |  | 4.39 |  
|Average risk-free interest rate |  |                            |  | 2.03 | %
|Average volatility factor       |  |                            |  | 51.9 | %
|Dividend yield                  |  |                            |  |     |  

During
the three months ended June 30, 2010 we granted no stock appreciation rights or stock options.



|                                |  |                           |   |  |      |  
|------------------------------- |  | ------------------------- | - |  | ---- | -
|                                |  | Six Months Ended June 30, |  
|                                |  | 2010                      |   |  | 2009 |  
|Expected term (in years)        |  | 4.15                      |   |  | 4.35 |  
|Average risk-free interest rate |  | 1.97                      | % |  | 1.65 | %
|Average volatility factor       |  | 51.4                      | % |  | 52.6 | %
|Dividend yield                  |  |                          |   |  |     |  

Stock
Options and Stock Appreciation Rights: During the three and six months ended June 30, 2010, we granted stock appreciation rights for zero and 457,500 shares of common stock, respectively, with an estimated total grant date fair value of
approximately $3.8 million and a grant date weighted-average fair value of $8.31 per share. During the three and six months ended June 30, 2009, we granted stock appreciation rights for 82,096 and 924,153 shares of common stock, respectively,
with an estimated total grant date fair value of approximately $0.6 million and $4.8 million, respectively and a grant date weighted-average fair value of $6.90 and $5.16 per share, respectively.

Restricted Stock Units: In connection with restricted stock units granted, we recorded stock compensation expense representing the
fair market value of our common shares on the dates the awards were granted. Compensation expense is being recorded on a straight-line basis over the vesting periods of the underlying stock awards. During the three and six months ended June 30,
2010, we granted 111,750 and 170,187 restricted stock units, respectively, with a grant-date fair value of approximately $1.9 million and $3.0 million , respectively, and a grant-date weighted-average fair value of $16.97 and $17.84, respectively.
During the three and six months ended June 30, 2009, we granted 58,250 and 82,739 restricted stock units, respectively, with a grant-date fair value of approximately $0.7 million and $1.0 million, respectively, and a grant-date weighted-average
fair value of $11.88 and $11.99, respectively.

9. Convertible Senior Notes

In February 2007, we issued an aggregate principal amount of $86.3 million of our 2.25% convertible senior notes due 2027. These
notes bear a 2.25% interest per annum on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2007.

The notes will mature on February 15, 2027, unless earlier redeemed, repurchased or purchased by us or converted, and are
convertible into cash and, if applicable, shares of our common stock based on an initial conversion rate, subject to adjustment, of 35.8616 shares per $1,000 principal amount of notes (which represents an initial conversion price of approximately
$27.89 per share), in certain circumstances. Upon conversion, a holder would receive cash up to the principal amount of the note and our common stock in respect of such notes conversion value in excess of such principal amount. The notes are
convertible only in the following circumstances: (1) if the closing sale price of our common stock exceeds 120% of the conversion price during a period as defined in the indenture; (2) if the average trading price per $1,000 principal
amount of the notes is less than or equal to 97% of the average conversion value of the notes during a period as defined in the indenture; (3) upon the occurrence of specified corporate transactions; (4) if we call the notes for redemption
and (5) at any time on or after December 15, 2011 up to and including February 15, 2012 and anytime on or after February 15, 2025. Upon a change in control or termination of trading, holders of the notes may require us to
repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount, plus any accrued and unpaid interest. We may not have sufficient funds to pay the interest, purchase price, repurchase price or
principal return when conversion is triggered or a note becomes payable under the above terms.



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##### Table of Contents

Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



On or after February 15, 2012 we may redeem the notes in whole or in part at a
redemption price in cash equal to 100% of the principal amount of the notes we redeem, plus any accrued and unpaid interest. On each of February 15, 2012, February 15, 2017 and February 15, 2022 holders may require us to purchase
all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest.

We concluded that the embedded stock conversion option is not considered a derivative under ASC 815 Derivative andHedging
(ASC 815), because the embedded stock conversion option would be recorded in stockholders equity if it were a freestanding instrument.

In connection with the offering, we entered into convertible note hedge transactions with affiliates of the initial purchasers. These
transactions are intended to reduce the potential dilution to our Companys stockholders upon any future conversion of the notes. The call options, which cost an aggregate $19.4 million, were recorded as a reduction of additional paid-in
capital. We also entered into warrant transactions concurrently with the offering, pursuant to which we sold warrants to purchase approximately 3.1 million shares of our common stock to the same counterparties that entered into the convertible
note hedge transactions. The convertible note hedge and warrant transactions effectively increased the conversion price of the convertible notes to approximately $36.47 per share of our common stock. Proceeds received from the issuance of the
warrants totaled approximately $10.7 million and were recorded as an addition to additional paid-in capital.

ASC 815 provides
that contracts are initially classified as equity if (1) the contract requires physical settlement or net-share settlement, or (2) the contract gives the company a choice of net-cash settlement or settlement in its own shares (physical
settlement or net-share settlement). The settlement terms of our purchased call options and sold warrant contracts require net-share settlement. Based on the guidance in ASC 815, the purchased call option contracts were recorded as a reduction of
equity and the warrants were recorded as an addition to equity as of the trade date. ASC 815 states that a reporting entity shall not consider contracts to be derivative instruments if the contract issued or held by the reporting entity is both
indexed to its own stock and classified in stockholders equity in its statement of financial position. We concluded the purchased call option contracts and the warrant contracts should be accounted for in stockholders equity.

Adoption of ASC 470-20

ASC 470-20 Debt with Conversion and Other Options(ASC 470-20) clarifies the accounting for convertible debt
instruments that may be settled in cash upon conversion, including partial cash settlement. ASC 470-20 specifies that an issuer of such instruments should separately account for the liability and equity components of the instruments in a manner that
reflect the issuers non-convertible debt borrowing rate which interest costs are recognized in subsequent periods. ASC 470-20 is effective for fiscal years beginning after December 15, 2008, and retrospective application is required for
all periods presented. We adopted ASC 470-20 in the first quarter of fiscal 2009.

The effect of the adoption of ASC 470-20
was to bifurcate the debt and equity components of our convertible notes. The note payable principal balance at the date of issuance of $86.3 million in February 2007 was bifurcated into the debt component of $65.1 million and the equity component
of $21.2 million. The difference between the note payable principal balance of $86.3 million and the $65.1 million value of the debt component is being accreted to interest expense over a period of 5 years, which is the expected term of our notes
payable. We reclassified $0.8 million of debt issuance costs to additional paid in capital. The debt component was recognized at the present value of its cash flows discounted using a 5.51% discount rate, our borrowing rate at the date of the
issuance of the Debenture for a similar debt instrument without the conversion feature.

Interest expense associated with the
Convertible Senior Notes consisted of the following (in thousands):



|                                            |  |                             |       |                           |   |       |  |      |       |  |   |      
|------------------------------------------- |  | --------------------------- | ----- | ------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                            |  | Three months ended June 30, |       | Six months ended June 30,
|                                            |  | 2010                        |       | 2009                      |   | 2010  |  | 2009
|Contractual coupon rate of interest         |  | $                           | 488   |                           | $ | 488   |  | $    | 966   |  | $ | 966  
|Accretion of notes payable                  |  |                             | 1,099 |                           |   | 1,039 |  |      | 2,183 |  |   | 2,064
|Amortization of debt issuance costs         |  |                             | 116   |                           |   | 116   |  |      | 232   |  |   | 233  
|                                            |  |                             |       |                           |   |       |  |      |       |  |   |      
|Interest expense - convertible senior notes |  | $                           | 1,703 |                           | $ | 1,643 |  | $    | 3,381 |  | $ | 3,263
|                                            |  |                             |       |                           |   |       |  |      |       |  |   |      



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##### Table of Contents

Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The carrying amounts of the Convertible Senior Notes are as follows (in thousands):



|                          |  |              |        |                  |   |       
|------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                          |  | June 30,2010 |        | December 31,2009
|Beginning carrying amount |  | $            | 76,531 |                  | $ | 72,344
|Accretion of note payable |  |              | 2,183  |                  |   | 4,187 
|                          |  |              |        |                  |   |       
|Carrying amount           |  | $            | 78,714 |                  | $ | 76,531
|                          |  |              |        |                  |   |       

10. Credit Line

In November 2008 we entered into a revolving credit line agreement with UBS, payable on demand, in an amount equal to 75% of the fair
value of our ARS at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the ARS that we have pledged as security for the credit line. Additionally, if UBS is able to sell our ARS at par
value, proceeds would be utilized to first repay any outstanding balance under the revolving credit line. We are still able to sell the ARS, but in such a circumstance, if we sold the ARS at less than par, we would not be entitled to recover the par
value support from UBS. During the six months ended June 30, 2010 we borrowed an additional $6.6 million, and repaid $21.6 million under this line of credit. Our loan balance as of June 30, 2010 was $14.2 million and $29.2 million as of
December 31, 2009, respectively. In July 2010, we exercised our put option to require UBS to purchase the underlying ARS at full par value, used the proceeds to repay the remaining balance of $14.2 million and terminated the line of credit. See
Note 16  Subsequent Events.

11. Income Taxes

We adopted the provisions of ASC 740 Income Taxes or (ASC 740) on January 1, 2007. The adoption of the provisions
did not have a material impact on our financial position and results of operations. We have not been audited by the Internal Revenue Service or any state income or franchise tax agency. As of June 30, 2010, our federal returns for the
years ended 2006 through the current period and most state returns for the years ended 2005 through the current period are still open to examination. In addition, all of the net operating losses and research and development credit carryforwards that
may be used in future years are still subject to inquiry given that the statute of limitation for these items would be from the year of the utilization. The tax returns for Conceptus SAS for the years ended 2005 to 2007 were examined and closed by
the French tax authorities in 2008.

For the three and six months ended June 30, 2010, we recorded approximately $0.1
million and $0.3 million of income tax expense, respectively. For the three and six months ended June 30, 2009, we recorded approximately $0.1 million and $0.2 million of income tax expense, respectively.

The amount of unrecognized tax benefits at June 30, 2010 was approximately $2.4 million, of which, if ultimately recognized,
approximately $0.7 million would decrease the effective tax rate in the period in which the benefit is recognized. The remaining amount would be offset by the reversal of related deferred tax assets on which a valuation allowance is placed.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months. In connection with the
adoption of ASC 740 we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

In preparing our condensed consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our condensed consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent to which we believe that
recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations. Due to
experiencing only a short period of fiscal profitability and a loss for the three and six months ended June 30, 2010, management believes that there is sufficient uncertainty regarding the realization of deferred tax assets and a full valuation
allowance is appropriate. Management reviews its assumptions regarding the realization of deferred tax assets on an ongoing basis. Continued profitability and future changes in managements assumptions may result in a partial or full release of
the deferred tax valuation allowance. A release of the valuation allowance would have a favorable impact on the tax provision within the statement of operations.



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##### Table of Contents

Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



12. Computation of Net Loss Per Share

Basic net loss per share excludes any potential dilutive effects of options, unvested restricted shares and restricted stock units and
common stock shares subject to repurchase. Diluted net loss per share includes the impact of potentially dilutive securities. In net loss periods presented, basic and diluted net loss per share are both computed using the weighted average
number of common shares outstanding.

The following table provides a reconciliation of weighted-average number of common
shares outstanding to the weighted-average number common shares outstanding used in computing basic and diluted net loss per common share (in thousands):



|                                                                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                                                                                                |  | 2010                       |        |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|Numerator:                                                                                                      |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Numerator for diluted earning per share -                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Loss available to common stockholders                                                                           |  | $                          | (291   | ) |                          | $ | (555   | )    |  | $ | (2,642 | ) |  | $ | (4,891 | )
|                                                                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                                                |  |                            |        |  
|Denominator:                                                                                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted-average number of common shares outstanding                                                            |  |                            | 31,032 |   |                          |   | 30,521 |      |  |   | 30,981 |   |  |   | 30,481 |  
|Less: Weighted-average unvested and restricted common shares                                                    |  |                            |       |   |                          |   | (3     | )    |  |   |       |   |  |   | (3     | )
|                                                                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted-average number common shares outstanding used in computing basic and diluted net loss per common share |  |                            | 31,032 |   |                          |   | 30,518 |      |  |   | 30,981 |   |  |   | 30,478 |  
|                                                                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

The following outstanding options, potential employee stock purchase plan shares, warrants, stock
appreciation rights, restricted stock units and shares were excluded from the computation of diluted net loss per share, as their effect would have been antidilutive (in thousands):



|                                                         |  |             |  |      
|-------------------------------------------------------- |  | ----------- |  | -----
|                                                         |  | At June 30,
|                                                         |  | 2010        |  | 2009 
|Outstanding options and stock appreciation rights        |  | 5,186       |  | 4,810
|Restricted stock units                                   |  | 265         |  | 150  
|Warrants issued in connection with our convertible notes |  | 3,093       |  | 3,093
|                                                         |  |             |  |      
|Total                                                    |  | 8,544       |  | 8,053
|                                                         |  |             |  |      

In February 2007, we issued an aggregate
principal amount of $86.3 million of our 2.25% convertible senior notes due 2027. The convertible senior notes are not included in the calculation of net loss per share because their effect is anti-dilutive. In addition, our convertible senior notes
were excluded from the diluted net income per share calculation because the conversion price was greater than the average market price of our stock during the period.

13. Comprehensive Loss

Comprehensive loss represents all changes in stockholders equity except those resulting from investments or contributions by
stockholders. Our comprehensive loss consists of cumulative translation adjustments and unrealized gain or loss on available-for-sale securities. A summary of the comprehensive loss for the periods indicated is as follows (in thousands):



|                                                           |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  
|---------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                           |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                           |  | 2010                       |        |   | 2009                     |   |       | 2010 |  |   | 2009   |  
|Net loss                                                   |  | $                          | (291   | ) |                          | $ | (555  | )    |  | $ | (2,642 | ) |  | $ | (4,891 | )
|Other comprehensive loss                                   |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Foreign currency translation adjustment, net of tax        |  |                            | (1,722 | ) |                          |   | 1,151 |      |  |   | (2,791 | ) |  |   | (332   | )
|Change to unrealized loss on available-for-sale securities |  |                            | (49    | ) |                          |   |      |      |  |   | (93    | ) |  |   |       |  
|                                                           |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Comprehensive loss                                         |  | $                          | (2,062 | ) |                          | $ | 596   |      |  | $ | (5,526 | ) |  | $ | (5,223 | )
|                                                           |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  



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##### Table of Contents

Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



The balance of each component of accumulated other comprehensive loss, net of taxes, as
of June 30, 2010 and December 31, 2009 consist of the following (in thousands):



|                                       |  |                             |        |   |                                                       |   |     |                                   |  |   |        |  
|-------------------------------------- |  | --------------------------- | ------ | - | ----------------------------------------------------- | - | --- | --------------------------------- |  | - | ------ | -
|                                       |  | Foreign CurrencyTranslation |        |   | Unrealized Gains(Loss) onAvailable-For-SaleSecurities |   |     | AccumulatedOtherComprehensiveLoss | 
|Balance as of December 31, 2009        |  | $                           | (993   | ) |                                                       | $ |    |                                   |  | $ | (993   | )
|Net change during the six month period |  |                             | (2,791 | ) |                                                       |   | (93 | )                                 |  |   | (2,884 | )
|                                       |  |                             |        |   |                                                       |   |     |                                   |  |   |        |  
|Balance as of June 30, 2010            |  | $                           | (3,784 | ) |                                                       | $ | (93 | )                                 |  | $ | (3,877 | )
|                                       |  |                             |        |   |                                                       |   |     |                                   |  |   |        |  

14. Segment Information

We operate in one business segment, which encompasses all geographical regions. We use one measurement of profitability and do not
segregate our business for internal reporting.

Net sales by geographic region, based on shipping location of our customer,
are as follows (in thousands, except percentages):



|                         |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|------------------------ |  | --------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                         |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                         |  | 2010                        |        |   | 2009                      |   |        | 2010 |  |   | 2009   |  
|Net sales (in thousands) |  | $                           | 36,847 |   |                           | $ | 33,049 |      |  | $ | 70,205 |   |  | $ | 60,200 |  
|United States of America |  |                             | 76     | % |                           |   | 78     | %    |  |   | 76     | % |  |   | 79     | %
|France                   |  |                             | 15     | % |                           |   | 13     | %    |  |   | 15     | % |  |   | 14     | %
|Rest of Europe           |  |                             | 7      | % |                           |   | 7      | %    |  |   | 7      | % |  |   | 6      | %
|Other                    |  |                             | 2      | % |                           |   | 2      | %    |  |   | 2      | % |  |   | 1      | %

No customer accounted for
more than 10% of total net sales for the three and six months ended June 30, 2010 and 2009. No customer accounted for more than 10% of our total gross accounts receivable at June 30, 2010. One customer accounted for 11% of our total gross
accounts receivable as of December 31, 2009.

15. Legal Proceedings

On May 22, 2009, we filed a lawsuit in the United States District Court, Northern District of California against Hologic, Inc.,
(Hologic) seeking declaratory judgment by the Court that Hologics planned importation, use, sale or offer to sell of its forthcoming Adiana Permanent Contraception system will infringe several U.S. patents owned by us including
U.S. Patent Nos. 6,634,361, 6,709,667, 7,237,552, 7,428,904 and 7,506,650, and an injunction prohibiting Hologic from importing, using, selling or offering to sell its Adiana system in the United States. Upon FDA approval of the Adiana
Permanent Contraception system, we filed an Amended Complaint in July 2009 seeking a judgment that Hologics importation, use, sale and/or offer to sell the system infringes the same patents mentioned above and requested an injunction against
such activity. On August 13, 2009, the Company filed a motion for preliminary injunction, requesting the Court to enjoin the Adiana system in the United States pending final judgment in the action. On August 25, 2009, Hologic
filed its answer and asserted counterclaims against the Company that it was violating the Lanham Act and the California Statutory Unfair Competition Law. On October 14, 2009, the Company answered with its own counterclaims asserting that
Hologic was violating the Lanham Act and the California Statutory Unfair Competition Law through its selling practices. A hearing was held on that motion on November 4, 2009 and an order denying the motion was issued on November 6,
2009, upon stipulation of the parties, on January 19, 2010, all claims relating to three of the five asserted patents were dismissed with prejudice. A claim construction hearing was held on March 10, 2010. The Claim Construction Order was
issued on March 24, 2010 with all but one of five terms favorably construed to the Company. On April 21, 2010 the court issued an order denying the Companys Motion to Compel and granted the Companys Motion to Amend its
Complaint to assert counterclaims against Defendant that the Defendant had engaged in unfair competition against the Company and had violated the Lanham Act. Motions for summary judgment are scheduled for December 9, 2010. A trial date on the
patent claims and unfair competition claims is scheduled for February 28, 2011.



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##### Table of Contents

Conceptus, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



From time to time, we are involved in legal proceedings arising in the ordinary course
of business. We believe there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, result of operations or cash flows.

16. Subsequent Events

In July 2010 we exercised our put option to require UBS to purchase the remaining underlying ARS of $22.2 million at full par value.
Pursuant to this settlement we recorded an additional gain of $2.0 million on the settlement of the ARS and a corresponding loss of $2.0 million associated with the underlying put option. Subsequently, we used the proceeds from the put of the ARS to
repay the remaining balance of $14.2 million and terminated the line of credit.



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

The following discussion of our financial condition and results of operations
should be read in conjunction with our condensed consolidated financial statements and related notes thereto. This discussion contains forward-looking statements, including references to 2010 net sales and gross margins, increased product adoption,
product improvements, expanded sales force and other forecasted items that involve risks and uncertainties such as our limited operating and sales history; the uncertainty of market acceptance of our product; dependence on obtaining and maintaining
reimbursement; effectiveness and safety of our product over the long-term; our ability to obtain and maintain the necessary governmental clearances or approvals to market our product; our ability to develop and maintain proprietary aspects of our
technology; our ability to manage our expansion; our limited history of manufacturing our product; our dependence on single source suppliers, third party manufacturers and co-marketers; intense competition in the medical device industry and in
the contraception market; the inherent risk of exposure to product liability claims and product recalls; litigation risks and other factors referenced in this Form 10-Q. Our actual results could differ materially from those expressed or
implied in these forward-looking statements as a result of various factors, including those discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on
March 15, 2010 and those included elsewhere in this Form 10-Q.

Overview

We develop, manufacture and market theEssure® permanent birth control system, an innovative and proprietary medical device for women. The
Essure system delivers a soft and flexible insert into a womans fallopian tubes, causing benign tissue in-growth which blocks the fallopian tubes. A successfully placedEssure micro-insert and the subsequent tissue growth
prohibits the egg from traveling through the fallopian tubes, preventing conception. The effectiveness rate of theEssure procedure determined in our clinical study is 99.8% after four years of follow-up. We obtained approval to market
Essure in the European Union in February 2001 and obtained the U.S. Food and Drug Administration, or FDA, approval for Essure in November 2002. Approximately 370,000 women worldwide have undergone the Essureprocedure.

On January 7, 2008, we acquired all of the outstanding shares of Conceptus SAS, based in Versailles, France. As a result
of this transaction, Conceptus SAS became a wholly-owned subsidiary, and through it we sell Essuredirectly in France and through a network of distributors throughout the rest of Europe. This acquisition expanded our presence in international
markets and has increased our net sales as we now recognize sales at end-user pricing.

On December 15, 2008, we
incorporated Conceptus Medical Limited (CML) as a wholly owned subsidiary in the United Kingdom to serve as our direct sales office in the United Kingdom after terminating our distributor relationship with our previous distributor during
the fourth quarter of 2008. This incorporation further expanded our presence in the United Kingdom markets and has increased our net sales as we now recognize sales at end-user pricing in United Kingdom.

During 2009 we received a National Institute for Health and Clinical Excellence (NICE) positive recommendation in the United
Kingdom and an approval for the Essure procedure from the Brazilian National Health Service. For financial information about geographic areas and segment information with respect to net sales, refer to the information set forth in Note 14
 Summary of Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements.

We were
incorporated in the state of Delaware on September 18, 1992. We maintain three websites located at www.conceptus.com, www.essuremd.com and www.essure.com. We make available free of charge on or through our www.conceptus.com
website, our annual report on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission (SEC).

The
Essure® Procedure

TheEssure micro-insert is designed to be placed into each fallopian tube during a single procedure using a hysteroscope, an
instrument that allows visual examination of the cervix and uterine cavity, and our minimally invasive delivery system. The delivery system is a disposable plastic handle that is connected to our proprietary guidewire and catheter system. The
micro-insert is constructed of a stainless steel inner coil, a dynamic outer coil made from a nickel titanium alloy, called Nitinol, and a layer of polyethylene terephthalate, or polyester fibers, wound between the inner coils. Using the
hysteroscope for guidance, the delivery catheter is guided through the uterus and into the opening of the fallopian tube. Once the physician has properly positioned the delivery system in the fallopian tube, the physician releases the micro-insert.
When released, the micro-insert automatically expands to the contours of the fallopian tube and anchors itself in place. Over a three-month time frame, the polyester fibers within the micro-insert elicit a localized, benign tissue in-growth that
occludes, or blocks, the fallopian tubes, thereby preventing conception.



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##### Table of Contents

Currently, local anesthesia is used as the predominate method of controlling discomfort
during the Essureprocedure.General anesthesia is not typically used unless required by hospital protocol, if requested by the patient, or based on the experience and comfort level of the physician. The Essure procedure can be
performed in the comfort of a physicians office in less than ten minutes (average hysteroscopic time) without hormones, cutting, burning or the risks associated with general anesthesia or tubal ligation. A patient is typically discharged
approximately 45 minutes after the Essure procedure. No overnight hospital stay is required. Furthermore, the Essureprocedure is effective without drugs or hormones. There is a three-month waiting period after the Essureprocedure is completed during which the patient must continue to use her current form of birth control or an alternative form while tissue in-growth occurs. After three months, U.S. patients complete a confirmation test called a
hysterosalpingogram, or HSG, which provides confirmation to both the doctor and the patient of the placement of the inserts and the occlusion of the fallopian tubes. Outside of the United States, the confirmation test is a standard flat plate pelvic
X-ray conducted three months after completion of the procedure, with a subsequent HSG if device location on the initial radiographic image is in question.

The
Essure® Procedure Benefits

With 99.8% effectiveness based on four years of follow up, the Essure procedure is the most effective form of permanent
contraception on the market based on a comparison of four-year clinical trial data. We developed theEssure procedure in response to the market need for a less invasive and more cost effective solution for women whose families are complete.
The Essure procedure is typically performed in an office setting without general anesthesia and women typically can return to their daily activities within one day. Other permanent birth control procedures, such as tubal ligation or
vasectomy, are done in a hospital setting, entail general anesthesia and require additional recovery time.

Benefits for the
patients:



| |  |  | Proven: four-year effectiveness rate of 99.8%;
| | - |  | ----------------------------------------------



| |  |  | Performed in the comfort of the doctors office in less than 10 minutes;
| | - |  | ------------------------------------------------------------------------



| |  |  | No risks associated with incisions, general anesthesia, glycine or RF energy (common in other permanent birth control procedures);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | No hormones;
| | - |  | ------------



| |  |  | Short recovery time: Most women are discharged within 45 minutes after the Essure procedure is completed and they return to normal activities
within 24 hours;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Confirmation: A confirmation test provides women with certainty that they are protected against unplanned pregnancy because the Essure
micro-insert is radio opaque and its placement can be seen when the confirmation test is performed; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Convenience: No recurring management of contraception usage after the confirmation test, which is performed 90 days after the initial procedure.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

Benefits to the physician and healthcare system:



| |  |  | Cost and time savings result in a more effective and efficient solutions:
| | - |  | -------------------------------------------------------------------------



| |  |  | Elimination of overhead costs,
| | - |  | ------------------------------



| |  |  | Indirect and procedural costs related to anesthesia,
| | - |  | ----------------------------------------------------



| |  |  | Post-operative care and hospital stays associated with tubal ligations;
| | - |  | -----------------------------------------------------------------------



| |  |  | Short procedure time and relative ease of performing the procedure;
| | - |  | -------------------------------------------------------------------



| |  |  | Ability to visually confirm proper placement of micro-insert during the procedure;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | No risks associated with incisions, thermal injuries, bowel injuries or dilutional hyponatremia, glycine, or general anesthesia;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Less resource-intensive environment: While Essure procedures may be performed in various settings including the physician office, hospital
operating room and an ambulatory surgery center, the majority of Essure procedures now take place in physicians offices; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Confirmation test verifies procedure success and efficacy.
| | - |  | ----------------------------------------------------------

Benefits to the payers:



| |  |  | Lower cost procedure due to reduced use of general or regional anesthesia and reduced number of post-operative hospital stays;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | Elimination of operating room expenses because the procedure can be performed in the physicians office;
| | - |  | --------------------------------------------------------------------------------------------------------



21



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##### Table of Contents

| |  |  | Cost savings resulting from the potential reduction of unplanned pregnancies and;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Most effective form of permanent birth control based on four years of clinical studies.
| | - |  | ---------------------------------------------------------------------------------------

Physician Penetration

We require physicians to be preceptored for between 3 and 5 cases by a certified trainer before performing the procedure independently. We
continue to see an increase in the number of physicians becoming trained or who are in the process of training to perform the Essure procedure. The level of sales for theEssure system is highly dependent on the number of physicians
trained to perform the procedure. However, we understand that a strong base of trained physicians does not necessarily correlate to an increase in net sales proportionately. Furthermore, there are no net sales associated with the training
activities. We do not charge a fee for the activity and no commitment arises for the physician from the preceptorship.

Reimbursement of the
Essure® Procedure

Market acceptance of theEssure system depends in part upon the availability of reimbursement within prevailing healthcare payment
systems. We believe that physician advocacy of our product will be required to continue to obtain reimbursement. As of June 30, 2010 we have received positive coverage decisions for the Essure procedure from most private insurers
and from all of the 51 Medicaid programs and favorable office reimbursements in 26 states (defined as $1,800 or more) within the United States. We continue to receive positive responses relating to reimbursement, which we believe will help increase
the adoption of the Essuredevice by doctors and patients. We intend to continue our effort to educate payers of the cost-effectiveness of our product and to establish further programs to help physicians navigate reimbursement issues. As with
all healthcare plans, coverage will vary and is dependent upon the individuals specific benefit plan.

Effective
January 1, 2010, the Centers for Medicare and Medicaid Service (CMS), the Medicare Physician Fee Schedule national average payment for hysteroscopic sterilization (CPT code) is $423 when performed in a hospital
(facility) and $1,822 (non-facility) when performed in a physicians office. In addition, in the CMS Final Rule for the 2010 Outpatient Prospective Payment System, or OPPS, which assigns hospital outpatient reimbursement amounts, CPT 58565 maps
to APC 202 which is assigned a Medicare National Average of $3,033, which under Medicare includes the cost of the implant. In 2010, the Medicare national average payment for hysteroscopic sterilization in the Ambulatory Surgery Center
(ASC) is $1,672, which includes the cost of the implant. We believe these values are favorable for the Essure procedure and will help establish increased utilization of the device amongst doctors.

Reimbursement systems vary significantly by country and sometimes by region, and reimbursement approvals must be obtained on a
country-by-country basis. Many international markets have government-managed healthcare systems that determine reimbursement for new devices and procedures. In most markets, there are private insurance systems as well as government-managed systems.

During the last several years, we received several positive responses from government and private agencies relating to
reimbursement, which we believe will help us to speed up the acceptance of theEssureprocedure by doctors and patients. In Europe, we are developing a strategic plan to obtain reimbursement in a number of European countries. In France, we
have obtained official reimbursement with the Haute Autorité de Santé (HAS). The Essure procedure is covered in France for all age-appropriate women, regardless of their medical status. The Economic Committee for
Healthcare Devices in France ruled in November 2007 that the reimbursement for the Essure device will remain at the then current levels of 663 Euros, net of value added tax, for the next five years.

We have experienced significant cumulative operating losses since inception and, as of June 30, 2010, had an accumulated deficit of
$237.0 million. Although we were profitable in 2009, we experienced a net loss in the first half of 2010 and there is a risk that we may not return to profitability. We will continue to expend substantial resources in the selling and marketing of
theEssure system in the United States and abroad. We will be in a net loss position unless sufficient net sales can be generated to offset expenses.



22



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##### Table of Contents

Results of Operations - Three and Six Months Ended June 30, 2010 and 2009

(in thousands, except percentages)



|                                                         |  |                             |        |   |                           |     |   |                  |   |        |       |  |     |      |        |     |                  |       |   |        |        |  |     |       |  |   |        |   |  |     |   |  |     |  
|-------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | --- | - | ---------------- | - | ------ | ----- |  | --- | ---- | ------ | --- | ---------------- | ----- | - | ------ | ------ |  | --- | ----- |  | - | ------ | - |  | --- | - |  | --- | -
|                                                         |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |    
|                                                         |  | 2010                        |        |   | 2009                      |     |   | 2010-2009%Change |   |        | 2010  |  |     | 2009 |        |     | 2010-2009%Change |      
|                                                         |  | Amount                      |        |   | % (a)                     |     |   | Amount           |   |        | % (a) |  |     |      | Amount |     |                  | % (a) |   |        | Amount |  |     | % (a) |  |  
|Net sales                                                |  | $                           | 36,847 |   |                           | 100 | % |                  | $ | 33,049 |       |  | 100 | %    |        | 11  | %                |       | $ | 70,205 |        |  | 100 | %     |  | $ | 60,200 |   |  | 100 | % |  | 17  | %
|Gross profit                                             |  | $                           | 29,562 |   |                           | 80  | % |                  |   | 26,378 |       |  | 80  | %    |        | 12  | %                |       |   | 56,529 |        |  | 81  | %     |  |   | 47,774 |   |  | 79  | % |  | 18  | %
|Research and development expenses                        |  | $                           | 1,815  |   |                           | 5   | % |                  |   | 2,008  |       |  | 6   | %    |        | -10 | %                |       |   | 3,561  |        |  | 5   | %     |  |   | 3,415  |   |  | 6   | % |  | 4   | %
|Selling, general and administrative expenses             |  | $                           | 26,330 |   |                           | 71  | % |                  |   | 23,337 |       |  | 71  | %    |        | 13  | %                |       |   | 52,309 |        |  | 75  | %     |  |   | 45,908 |   |  | 76  | % |  | 14  | %
|Total interest income and expense and other expense, net |  | $                           | (1,585 | ) |                           | -4  | % |                  |   | (1,506 | )     |  | -5  | %    |        | 5   | %                |       |   | (3,044 | )      |  | -4  | %     |  |   | (3,119 | ) |  | -5  | % |  | -2  | %
|Provision for income taxes                               |  | $                           | 123    |   |                           | 0   | % |                  |   | 82     |       |  | 0   | %    |        | 50  | %                |       |   | 257    |        |  | 0   | %     |  |   | 223    |   |  | 0   | % |  | 15  | %
|Net loss                                                 |  | $                           | (291   | ) |                           | -1  | % |                  |   | (555   | )     |  | -2  | %    |        | -48 | %                |       |   | (2,642 | )      |  | -4  | %     |  |   | (4,891 | ) |  | -8  | % |  | -46 | %



|(a) | Expressed as a percentage of total net sales.
|--- | ---------------------------------------------

Net Sales

Net sales
were $36.8 million for the three months ended June 30, 2010 as compared to $33.0 million for the three months ended June 30, 2009, representing an increase of approximately $3.8 million or 11%. Net sales were $70.2 million for the six
months ended June 30, 2010 as compared to $60.2 million for the six months ended June 30, 2009, representing an increase of approximately $10.0 million or 17%. The increases in both periods are the result of continued
commercialization and marketing of theEssure system worldwide and reflect the increasing numbers of physicians entering and completing training in the use of the procedure. The increases also reflect continuation of our programs aimed at
raising consumer and physician awareness of the Essure procedure.

International sales comprised 24% of our net sales
in each of the three and six months ended June 30, 2010, respectively. International sales increased 27% and 30% compared to the three and six months ended June 30, 2009, respectively. The increases in international sales reflect our
continued focus on growing our current markets such as France and the expansion into new markets. International sales were negatively impacted by the weakening of the Euro compared to the U.S. dollar in the three and six months ended June 30,
2010 as compared to similar period in 2009. The net sales increase also reflects a domestic net sales increase of 7% and 13% respectively in the three and six months ended June 30, 2010, respectively as compared to similar periods in 2009.

Net sales by geographic region, based on shipping location of our customers, are as follows (in thousands, except
percentages):



|                         |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|------------------------ |  | --------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                         |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                         |  | 2010                        |        |   | 2009                      |   |        | 2010 |  |   | 2009   |  
|Net sales (in thousands) |  | $                           | 36,847 |   |                           | $ | 33,049 |      |  | $ | 70,205 |   |  | $ | 60,200 |  
|                         |  |                             |        |  
|United States of America |  |                             | 76     | % |                           |   | 78     | %    |  |   | 76     | % |  |   | 79     | %
|France                   |  |                             | 15     | % |                           |   | 13     | %    |  |   | 15     | % |  |   | 14     | %
|Rest of Europe           |  |                             | 7      | % |                           |   | 7      | %    |  |   | 7      | % |  |   | 6      | %
|Other                    |  |                             | 2      | % |                           |   | 2      | %    |  |   | 2      | % |  |   | 1      | %

No customer accounted for
more than 10% of total net sales for the three and six months ended June 30, 2010 and 2009. No customer accounted for more than 10% of our total gross accounts receivable at June 30, 2010. One customer accounted for 11% of our total gross
accounts receivable as of December 31, 2009.

We expect our net sales for 2010 to be in the range of approximately $143.0
million to $145.0 million, which would represent 9% to 10% growth from net sales in 2009 as we continue to increase the number of physicians performing theEssure procedure. Additionally, we will continue to increase our direct sales force
domestically. We believe our net sales growth in 2010 and beyond will be significantly influenced by how successful we are in achieving our patient awareness objectives and physicians entering and completing training. However, as we have noted
elsewhere in this Form 10-Q and risk factors from our Form 10-K, our expected net sales growth involves many risk factors, some of which are not entirely within our control.



23



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##### Table of Contents

Gross Profit

Cost of goods sold for the three months ended June 30, 2010 was $7.3 million as compared to $6.7 million for the three months ended
June 30, 2009, which represents an increase of $0.6 million, or 9%. Cost of goods sold for the six months ended June 30, 2010 was $13.7 million as compared to $12.4 million for the six months ended June 30, 2009, which represents an
increase of $1.3 million, or 10%. Gross margin for the three months ended June 30, 2010 was 80%, which is consistent with the gross margin of 80% for the three months ended June 30, 2009. For the six months ended June 30, 2010, gross
margin was 81%, which represents an improvement from a gross margin of 79% for the six months ended June 30, 2009. The six-month year-over-year increase in gross margin is related to lower manufacturing costs associated with higher unit volume
and a domestic price increase implemented during the first quarter of 2010. Our gross profit margin will vary as our geographic mix changes. Increases in sales of our devices through distributors in international markets will tend to reduce our
overall gross profit margin.

Research and Development Expenses

Research and development expenses, which include expenditures related to product development, clinical research and regulatory affairs,
were $1.8 million and $2.0 million for the three months ended June 30, 2010 and 2009, respectively, which represents a decrease of $0.2 million, or 10%. As a percentage of net sales research and development expenses for the three months ended
June 30, 2010 and 2009 represented 5% and 6% respectively. The primary reason for this decrease is lower expense related to clinical trials.

Research and development expenses were $3.6 million and $3.4 million for the six months ended June 30, 2010 and 2009, respectively,
which represents an increase of $0.2 million, or 4%. As a percentage of net sales, research and development expenses for the six months ended June 30, 2010 and 2009 represented 5% and 6%, respectively. The increase was primarily the result of
(i) increased payroll, stock compensation and recruiting expenses of approximately $0.2 million, (ii) increased consulting expenses of approximately $0.2 million for the next generation of Essure device, and (iii) an increased
approximately $0.1 million due to expensed materials, offset by lower expense related to clinical trials of approximately $0.3 million.

Research and development expenses, which include expenditures related to product development, clinical research and regulatory affairs,
are substantially related to the ongoing development and associated regulatory approvals of our technology. Our goal is to continue our product enhancements over the coming years, which are intended to result in improved ease of use and clinical
performance. We expect to identify and hire additional research and development personnel in the future to staff our planned research and development activities, and we expect that these expenses will increase as we seek to maintain our leading
position in the market for permanent female birth control.

Selling, General and Administrative Expenses

Selling, general and administrative spending for the three months ended June 30, 2010 was $26.3 million as compared to $23.3 million
for the three months ended June 30, 2009, which represents an increase of $3.0 million, or 13%. As a percentage of net sales, selling, general and administrative expenses for the three months ended June 30, 2010 and 2009 represented 71%,
respectively.

The increase was primarily the result of (i) increased legal fees of approximately $1.4 million due to the
litigation associated with our patents, (ii) an increase of approximately $1.1 million in advertising expenses primarily for our consumer-awareness campaign, (iii) an increase of approximately $0.3 million in payroll expenses primarily due
to the expansion of the U.S. field sales force, and (iv) an increase of approximately $0.2 million in travel related expenses.

Selling, general and administrative spending for the six months ended June 30, 2010 were $52.3 million as compared to $45.9 million
for the six months ended June 30, 2009, which represents an increase of $6.4 million, or 14%. As a percentage of net sales, selling, general and administrative expenses for the six months ended June 30, 2010 and 2009 represented 74% and
76%, respectively.

The increase was the result of (i) payroll, stock compensation and recruiting related expenses of
approximately $2.0 million, primarily due to the expansion of the U.S. field sales force, (ii) an increase of approximately $2.0 million in legal fees due to the litigation associated with our patents, (iii) an increase of approximately
$1.6 million in advertising expenditures primarily for our consumer-awareness campaign, (iv) an increase of approximately $0.4 million in travel related expenses, and (v) an increase of approximately $0.4 million in insurance, rent and
business taxes. We expect selling, general and administrative expenses to continue to increase in the third quarter of 2010 as we expect to hire additional sales professionals.



24



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##### Table of Contents

Total interest income and expenses and other income and expenses, net

Total interest income and expenses and other income and expenses, net for the three months ended June 30, 2010 was a net expense of
$1.6 million as compared to a net expense of $1.5 million for the three months ended June 30, 2009, which represents an increase of $0.1 million or 5%. Total interest income and expenses and other expenses, net for the six months ended
June 30, 2010 was a net expense of $3.0 million as compared to a net expense of $3.1 million for the six months ended June 30, 2009, which represents a decrease of $0.1 million or 2% primarily due to lower yields on invested cash.

Provision for income taxes

We adopted the provisions of ASC 740 Income Taxes or (ASC 740) on January 1, 2007. The adoption of the provisions
did not have a material impact on our financial position and results of operations. We have not been audited by the Internal Revenue Service or any state income or franchise tax agency. As of June 30, 2010, our federal returns for the
years ended 2006 through the current period and most state returns for the years ended 2005 through the current period are still open to examination. In addition, all of the net operating losses and research and development credit carryforwards that
may be used in future years are still subject to inquiry given that the statute of limitation for these items would be from the year of the utilization. The tax returns for Conceptus SAS for the years ended 2005 to 2007 were examined and closed by
the French tax authorities in 2008.

For the three and six months ended June 30, 2010, we recorded approximately $0.1
million and $0.3 million of income tax expense, respectively. For the three and six months ended June 30, 2009, we recorded approximately $0.1 million and $0.2 million of income tax expense, respectively.

The amount of unrecognized tax benefits at June 30, 2010 was approximately $2.4 million, of which, if ultimately recognized,
approximately $0.7 million would decrease the effective tax rate in the period in which the benefit is recognized. The remaining amount would be offset by the reversal of related deferred tax assets on which a valuation allowance is placed.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months. In connection with the
adoption of ASC 740 we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

In preparing our condensed consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our condensed consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and the extent we believe that recovery is not
likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations. Due to experiencing only a
short period of fiscal profitability and a loss for the three and six months ended June 30, 2010, management believes that there is sufficient uncertainty regarding the realization of deferred tax assets and a full valuation allowance is
appropriate. Management reviews its assumptions regarding the realization of deferred tax assets on an ongoing basis. Continued profitability and future changes in managements assumptions may result in a partial or full release of the deferred
tax valuation allowance. A release of the valuation allowance would have a favorable impact on the tax provision within the statement of operations.

Liquidity and Capital Resources

We have experienced significant cumulative operating losses since inception and, as of June 30, 2010, had an accumulated deficit of
$237.0 million. Although we were profitable in 2009, we experienced a net loss in the first half of 2010 and there is a risk that we may not sustain profitability. We will continue to expend substantial resources in the selling and marketing of the
Essure system worldwide. We will remain in an accumulated deficit position unless sufficient net sales can be generated to offset expenses.

As of June 30, 2010, we also held $22.2 million (par value) in auction rate securities (ARS) backed by federal and state
student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. The fair value of ARS as of June 30, 2010 is $20.2 million.



25



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##### Table of Contents

We had settlements of our ARS in the three and six months ended June 30, 2010 of $16.3
million and $21.4 million at full par value. In July 2010, we exercised our put option with UBS to purchase the underlying ARS of $22.2 million at full par value. See Note 16  Subsequent Events, in the Notes to Condensed Consolidated Financial
Statements.

During the six months ended June 30, 2010, we had invested $56.5 million in time deposits, U.S. treasury
bills, U.S. government bonds and corporate bonds. We will sell certain or all investments as needed to meet the cash flow needs of our business. Hence our investments in time deposits, U.S. treasury bills, U.S. government bonds and corporate bonds
are classified as available-for-sale securities in accordance with ASC 320 Investments  Debt and Equity Securities. Investments are classified as short-term or long-term based on the underlying investments maturity date. As of
June 30, 2010 we had $28.5 million classified as short-term investments and $19.0 million classified as long-term investments in addition to the $20.2 million of ARS at fair value. See Note 3  Investments, in the Notes to Condensed
Consolidated Financial Statements.

The successful achievement of our business objectives may require additional financing and
therefore, we may in the future seek to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may
involve restrictive covenants. Additional funding may not be available when needed or on terms acceptable to us. If we are unable to obtain additional capital, we may be required to delay, reduce the scope of or eliminate our sales and marketing
activities. Our future liquidity and capital requirements will depend upon many factors, including, among others:



| |  |  | Resources devoted to establish sales, marketing and distribution capabilities;
| | - |  | ------------------------------------------------------------------------------



| |  |  | The rate of product adoption by doctors and patients;
| | - |  | -----------------------------------------------------



| |  |  | Our determination to acquire or invest in other products, technologies and businesses;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | The market price of our common stock as it affects the exercise of stock options and the conversion terms of our convertible debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | The insurance payer communitys acceptance of and reimbursement for theEssuresystem; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | The effect on our business due to a new competitor with a hysteroscopic permanent birth control device.
| | - |  | -------------------------------------------------------------------------------------------------------

As of June 30, 2010, we had cash and cash equivalents of $21.5 million, compared to $61.7 million at December 31, 2009. In
addition we had short-term and long-term investments of $67.6 million as of June 30, 2010, compared to $40.6 million of short-term investments at December 31, 2009. The decrease of $40.2 million of cash and cash equivalents is primarily
due to cash used in investing activities to purchase and sell investments and cash used in financing activities for the net repayment of the line of credit.

We believe that our existing cash and cash equivalents will be sufficient to meet our cash requirements for at least the next twelve
months.

Sources and Uses of Cash

Our cash flows for the six months ended June 30, 2010 and 2009 are summarized as follows:



|                                                             |  |                           |         |   |      |   |        |  
|------------------------------------------------------------ |  | ------------------------- | ------- | - | ---- | - | ------ | -
|                                                             |  | Six months ended June 30, |        
|                                                             |  | 2010                      |         |   | 2009 |  
|Net cash provided by operating activities                    |  | $                         | 2,292   |   |      | $ | 7,959  |  
|Net cash used in investing activities                        |  |                           | (29,397 | ) |      |   | (2,281 | )
|Net cash (used in) provided by financing activities          |  |                           | (12,741 | ) |      |   | 2,869  |  
|Effect of exchange rate changes on cash and cash equivalents |  |                           | (354    | ) |      |   | (9     | )
|                                                             |  |                           |         |   |      |   |        |  
|Net increase (decrease) in cash and cash equivalents         |  | $                         | (40,200 | ) |      | $ | 8,538  |  
|                                                             |  |                           |         |   |      |   |        |  



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##### Table of Contents

Operating Activities

Net cash provided by operating activities was $2.3 million in the six months ended June 30, 2010, as compared to $8.0 million
provided for the six months ended June 30, 2009. Net cash provided by operating activities in the six months ended June 30, 2010 was primarily related to:



| |  |  | net loss of $2.6 million;
| | - |  | -------------------------



| |  |  | $9.8 million increase corresponding to the accretion of notes payable, stock based compensation, depreciation and amortization of fixed assets, debt
issuance costs and intangible amortization;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increase in accounts receivable of $2.9 million as a result of our increase in sales;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Increase of other current assets of $1.5 million primarily due to interest receivable from available-for-sale investments, a rebate received from our
contract manufacturer, lower deposit balances and a higher prepaid balance due to timing; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A decrease in other accrued compensation of $1.8 million primarily for the payment of the 2009 incentive plans.
| | - |  | ---------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities in the six months ended June 30, 2009 was primarily related to:



| |  |  | net loss of $4.9 million;
| | - |  | -------------------------



| |  |  | $7.6 million increase corresponding to the accretion of notes payable, stock based compensation, depreciation and amortization of fixed assets, debt
issuance costs and intangible amortization;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increase in accounts receivable of $2.3 million as a result of our increase in sales;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Net decrease of other assets and other current assets of $4.7 million primarily due to utilization of prepayments for our advertising, primarily in the
United States;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A decrease in inventories of $1.0 million; and
| | - |  | ----------------------------------------------



| |  |  | An increase in other accrued and long term liabilities of $1.5 million primarily for 2009 incentive plans.
| | - |  | ----------------------------------------------------------------------------------------------------------

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2010 was $29.4 million, primarily due to investments
purchases of $56.5 million and capital expenditures primarily related to purchases of additional hysteroscopy equipment of $2.8 million. These were offset by the settlements of our ARS for $21.4 million at full par value and additional sales of
short-term and long-term investments for additional $8.5 million during the six months ended June 30, 2010.

Net cash
used in investing activities for the six months ended June 30, 2009 was $2.3 million, primarily due to capital expenditures primarily related to purchases of additional hysteroscopy equipment.

Financing Activities

Net cash used in financing activities in the six months ended June 30, 2010 was $12.7 million. This was due to $2.3 million from the
issuance of common stock from our stock programs, $6.6 million from proceeds from our UBS line of credit, offset by repayment of our UBS line of credit of $21.6 million. In July 2010, we exercised our put option requiring UBS to purchase the
underlying ARS at full par value and used the proceeds to repay the remaining balance of $14.2 million and terminated the line of credit. See Note 10  Credit Line and Note 16  Subsequent Events, in the Notes to Condensed Consolidated
Financial Statements

Net cash provided by financing activities in the six months ended June 30, 2009 was $2.9 million
from the issuance of common stock for our stock option programs and net proceeds from the UBS line of credit.

CRITICAL ACCOUNTING
ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying condensed consolidated financial statements and related footnotes. A description of our critical
accounting estimates and policies is included in our Annual Report on Form 10-K for the year ended December 31, 2009. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. The primary estimates underlying our financial statements include reserves for obsolete and slow moving inventory, allowance for doubtful accounts receivable, product warranty,



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impairment for long-lived assets, income taxes, stock-based compensation and contingent liabilities. Other accounting policies are described in section Critical Accounting Estimates and
Policies in our Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. Application of these policies involves the exercise of judgment and use of assumptions as to future uncertainties
and, as a result, actual results could differ from these estimates.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06 Fair Value
Measurements and Disclosure Requirements, which updated guidance related to fair value measurements and disclosures, and requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2
fair value measurements and describe the reasons for the transfers. In addition, in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity should disclose separately information about
purchases, sales, issuances and settlements (that is, on a gross basis rather than one net number). The updated guidance also requires that and entity should provide fair value measurement disclosures for each class of assets and liabilities and
disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The updated guidance is effective for interim or annual
financial reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal years. We have adopted this guidance in the first quarter of 2010. See Note 4  Fair Value Measurement.

During the first half of 2010, the FASB has issued several ASUs  ASU No. 2010-01 through ASU No. 2010-19. Except for ASU
No. 2010-06 discussed above and ASU No. 2010-09 Amendments to Certain Recognition and Disclosure Requirements issued in February 2010, Codification Topic ASC 855  Subsequent Events as presented in the Quarterly Report
on Form 10Q for the quarter ended March 31, 2010, the ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on us.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a material adverse impact on our financial results.

Interest Rate Risk: We maintain an investment portfolio of various holdings, types, and maturities. The values of our
investments are subject to market price volatility. Our primary objective for holding investments is to achieve an appropriate investment return consistent with preserving principal and managing risk. As of June 30, 2010 we had short and
long-term available-for-sale investments of $47.4 million recorded at fair value, in addition to the $20.2 million of ARS at fair value or $22.2 million at par value. In July 2010 we exercised our put option to require UBS to purchase the underlying
ARS of $22.2 million at full par value. See Note 16  Subsequent Events, in the Notes to Condensed Consolidated Financial Statements.

At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our investment portfolio,
specifically investments in corporate bonds and U.S. government bonds. We had no outstanding hedging instruments for our investments as of June 30, 2010. We monitor our interest rate and credit risks, including our credit exposures to specific
rating categories and to individual issuers. We monitor our investment portfolio to ensure it is compliant with our internal investments policy. We believe the overall credit quality of our portfolio is strong. There were no impairment charges on
our investments for the six months ended June 30, 2010. A hypothetical 100 based point change in interest rates will not have a material impact on the fair value of our available-for-sale investments. See Note 3  Investments, in the Notes
to Condensed Consolidated Financial Statements.

Foreign Currency Exchange Risk: A portion of our net sales are
denominated in the Euro and the British Pound. To date the foreign currency exchange risk related to British Pounds has been minimal due to the size of Conceptus Medical Limited.

We are exposed to foreign exchange rate fluctuations as we translate the financial statements of our foreign subsidiaries into U.S.
Dollars in consolidation. If there is a change in foreign currency exchange rates, the translation of the foreign subsidiaries financial statements into U.S. Dollars will lead to translation gains or losses which are recorded net as a
component of accumulated other comprehensive loss. We seek to manage our foreign exchange risk through operational means, including managing same currency revenues in relation to same currency expenses, and same currency assets in



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relation to same currency liabilities. Periodically, during 2010 we entered into forward contracts to buy U.S dollars at fixed intervals in the retail market in an over-the-counter environment.
As of June 30, 2010, we had foreign currency forward contracts to sell 4.7 million Euros in exchange for $6.1 million maturing in July 2010 through October 2010. As of June 30, 2010 these forward contracts are recorded at their fair
value of $0.4 million in other current assets on our condensed consolidated balance sheet. We have outstanding short-term intercompany receivables of $6.1 million as of June 30, 2010. We expect the changes in the fair value of the intercompany
receivables to be materially offset by the changes in the fair value of the forward contracts. A potential loss in fair value resulting from a hypothetical 10 percent strengthening in the value of the U.S. dollar/local currency exchange rate
would be approximately $0.6 million.

The purpose of these forward contracts is to minimize the risk associated with foreign
exchange rate fluctuations. We have developed a foreign exchange policy to govern our forward contracts. These foreign currency contracts do not qualify as cash flow hedges and all changes in fair value are reported in earnings as part of other
income and expenses. We have not entered into any other types of derivative financial instruments for trading or speculative purpose. Our foreign currency forward contract valuation inputs are based on quoted prices and quoted pricing intervals from
public data and do not involve management judgment.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures:

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and that such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

As of June 30, 2010, the end of our most recent fiscal
quarter, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting:

There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On May 22, 2009, we filed a lawsuit in the United States District Court, Northern District of California against Hologic, Inc.,
(Hologic) seeking declaratory judgment by the Court that Hologics planned importation, use, sale or offer to sell of its forthcoming Adiana Permanent Contraception system will infringe several U.S. patents owned by us including
U.S. Patent Nos. 6,634,361, 6,709,667, 7,237,552, 7,428,904 and 7,506,650, and an injunction prohibiting Hologic from importing, using, selling or offering to sell its Adiana system in the United States. Upon FDA approval of the Adiana
Permanent Contraception system, we filed an Amended Complaint in July 2009 seeking a judgment that Hologics importation, use, sale and/or offer to sell the system infringes the same patents mentioned above and requested an injunction against
such activity. On August 13, 2009, the Company filed a motion for preliminary injunction, requesting the Court to enjoin the Adiana system in the United States pending final judgment in the action. On August 25, 2009, Hologic
filed its answer and asserted counterclaims against the Company that it was violating the Lanham Act and the California Statutory Unfair Competition Law. On October 14, 2009, the Company answered with its own counterclaims asserting that
Hologic was violating the Lanham Act and the California Statutory Unfair Competition Law through its selling practices. A hearing was held on that motion on November 4, 2009 and an order denying the motion was issued on November 6,
2009, upon stipulation of the parties, on January 19, 2010, all claims relating to three of the five asserted patents were dismissed with prejudice. A claim construction hearing was held on March 10, 2010. The Claim Construction Order was
issued on March 24, 2010 with all but one of five terms favorably construed to the Company. On April 21, 2010, the court issued an order denying the Companys Motion to Compel and granted the Companys Motion to Amend its
Complaint to assert counterclaims against Defendant that the Defendant had engaged in unfair competition against the Company and had violated the Lanham Act. Motions for summary judgment are scheduled for December 9, 2010. A trial date on the
patent claims and unfair competition claims is scheduled for February 28, 2011.

From time to time, we are involved in
legal proceedings arising in the ordinary course of business. We believe there is no litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, result of operations or cash flows.

Item 1A. Risk Factors

The risk factors included in our Annual Report as of December 31, 2009 on Form 10-K filed with the Securities and Exchange Commission on
June 30, 2010 should be considered while evaluating Conceptus and our business. In addition to those factors and to other information in this Form 10-Q, the following updates to the risk factors as of June 30, 2010 should be
considered carefully while evaluating the Company and our business.

We face competition, and if we are unable to
compete effectively, demand for the Essure system may be reduced.

The medical device industry is highly competitive
and is characterized by rapid and significant technological change. To compete successfully, we will need to continue to demonstrate the advantages of our Essureprocedures over well-established alternative procedures, products and
technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technology. As we market theEssure system, we compete with:



| |  |  | other methods of permanent contraception, in particular tubal ligation;
| | - |  | -----------------------------------------------------------------------



| |  |  | other companies that have developed or may be developing permanent contraception devices that are similar to or otherwise compete with theEssure system;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other methods of non-permanent contraception, including devices such as intrauterine devices, or IUDs, vaginal rings, condoms and prescription drugs
such as the birth control pill, injectable and implantable contraceptives and patches; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We compete
against other surgical procedures for permanent birth control, mechanical devices and other contraceptive methods, including existing methods of reversible birth control for both women and men.

The Essure procedure faces direct competition from Adiana, a hysteroscopic sterilization method that is manufactured and sold by
Hologic, Inc. in Europe and the United States. We believe theEssure procedure has significant advantages over its competitor such as its higher effectiveness rate, no risks from the use of RF energy and the fact that the micro-inserts are
radio-opaque, which enables the physician to visually confirm that the micro-inserts have been properly placed in the fallopian tubes.



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Many of our competitors possess a larger womens health focused sales force and have
access to the greater resources required to develop and market a competitive product than we do. In addition, new competition and products may arise due to consolidation within the industry and other companies may develop products that could compete
with the Essure system. Our competitive position also depends on:



| |  |  | widespread awareness, acceptance and adoption of our Essureproduct;
| | - |  | -------------------------------------------------------------------



| |  |  | our ability to respond promptly to medical and technological changes through the development and commercialization of new products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | availability of coverage and reimbursement from third-party payers, insurance companies and others for the Essureprocedure;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the manufacture and delivery of our products in sufficient volumes on time, and accurately predicting and controlling costs associated with
manufacturing, installation, warranty and maintenance of the products;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to attract and retain qualified personnel;
| | - |  | ------------------------------------------------------



| |  |  | the extent of our patent protection or our ability to otherwise develop proprietary products and processes; and
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | securing sufficient capital resources to expand our sales and marketing efforts.
| | - |  | --------------------------------------------------------------------------------

These and other competitive factors may render the Essure system obsolete or noncompetitive or reduce demand for the Essure
system.

Our liquidity could be adversely impacted by adverse conditions in the financial markets.

At June 30, 2010, we had cash and cash equivalents of $21.5 million (excluding our investments in auction rate securities discussed
below). This available cash and cash equivalents are held in accounts at financial institutions and consist of invested cash and cash in our operating accounts. The invested cash is invested in interest bearing money market funds managed by third
party financial institutions. These funds invest in direct obligations of the government of the United States and traditional money market funds. We can provide no assurances that access to our invested cash and cash equivalents will not be impacted
by adverse conditions in the financial markets.

We maintain an investment portfolio of various holdings, types, and
maturities. These securities are classified as available-for-sale. As of June 30, 2010 we had short and long-term investments of $47.4 million recorded at fair value. Our portfolio includes time deposits, U.S. treasury bills, U.S. government
bonds and corporate bonds, the values of which are subject to market price volatility to the extent unhedged. If such investments suffer market significant price declines, we may recognize in earnings the decline in the fair value of our investments
below their cost basis when the decline is judged to be other than temporary. For information regarding the sensitivity of and risks associated with the market value of portfolio investments and interest rates refer to the section titled
Quantitative and Qualitative Disclosures About Market Risk.

All of our cash and cash equivalents in our operating
accounts are with third party financial institutions. These balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these
cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts.

Our business, financial condition, results of operations and cash flows could be significantly and adversely affected if certain
types of healthcare reform programs are adopted in our key markets and other administration and legislative proposals are enacted into law.

The Patient Protection and Affordable Care Act was signed into law on March 23, 2010 and, among its numerous provisions, enacts an
excise tax on medical device manufacturers on sales beginning January 1, 2013. As a result, our effective tax rate and results of operations would be adversely affected and our ability to innovate and conduct necessary research and development
to remain competitive with large, global companies could be negatively impacted. There are



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numerous other provisions in the new law that may have an adverse impact on our business. In addition, we cannot predict what other healthcare initiatives, if any, will be implemented at the
Federal or State level, or the effect any future legislation or regulation will have on us. However, an expansion in governments role in the U.S. healthcare industry may lower reimbursements for our products, reduce medical procedure
volumes and adversely affect our business and results of operations, possibly materially.

We are a party to patent
litigation, which is expensive and diverts our managements attention.

The medical device industry has been
characterized by extensive litigation regarding patents and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. We may become a party to patent infringement
claims and litigation or interference proceedings declared by the U.S. Patent and Trademark Office, or PTO, to determine the priority of inventions. The defense and prosecution of these matters are both costly and time consuming. We have commenced
and may need to commence proceedings against others to enforce our patents, to protect our trade secrets or know-how or to determine the enforceability, scope and validity of the proprietary rights of others. These proceedings have and would result
in substantial expense to us and significant diversion of effort by our technical and management personnel.

An adverse
determination in existing or new litigation or interference proceedings to which may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties. Although patent and intellectual
property disputes in the medical device area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary
licenses on satisfactory terms, if at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling the Essure system.

One of the patents included in our license from Target Therapeutics, a division of Boston Scientific Corporation, has been the subject of
reexamination proceedings in the PTO and an infringement lawsuit by Target Therapeutics. We are not a party to this lawsuit. The patent is directed to variable stiffness catheters for use with guidewires, as might be used in our future products.
Although the PTO reaffirmed the patent with amended claims and the lawsuit was settled, the patent could be challenged or invalidated in the future. If this patent is invalidated, our ability to prevent others from using this proprietary technology
would be compromised.

On May 22, 2009, we filed a lawsuit in the United States District Court, Northern District of
California against Hologic, Inc., (Hologic) seeking declaratory judgment by the Court that Hologics planned importation, use, sale or offer to sell of its forthcoming Adiana Permanent Contraception system will infringe several U.S.
patents owned by us including U.S. Patent Nos. 6,634,361, 6,709,667, 7,237,552, 7,428,904 and 7,506,650, and an injunction prohibiting Hologic from importing, using, selling or offering to sell its Adiana system in the United States. Upon FDA
approval of the Adiana Permanent Contraception system, we filed an Amended Complaint in July 2009 seeking a judgment that Hologics importation, use, sale and/or offer to sell the system infringes the same patents mentioned above and requested
an injunction against such activity. On August 13, 2009, the Company filed a motion for preliminary injunction, requesting the Court to enjoin the Adiana system in the United States pending final judgment in the action. On
August 25, 2009, Hologic filed its answer and asserted counterclaims against the Company that it was violating the Lanham Act and the California Statutory Unfair Competition Law. On October 14, 2009, the Company answered with its own
counterclaims asserting that Hologic was violating the Lanham Act and the California Statutory Unfair Competition Law through its selling practices. A hearing was held on that motion on November 4, 2009 and an order denying the motion was
issued on November 6, 2009, upon stipulation of the parties, on January 19, 2010, all claims relating to three of the five asserted patents were dismissed with prejudice. A claim construction hearing was held on March 10, 2010. The
Claim Construction Order was issued on March 24, 2010 with all but one of five terms favorably construed to the Company. On April 21, 2010, the court issued an order denying the Companys Motion to Compel and granted the
Companys Motion to Amend its Complaint to assert counterclaims against Defendant that the Defendant had engaged in unfair competition against the Company and had violated the Lanham Act. Motions for summary judgment are scheduled for
December 9, 2010. A trial date on the patent claims and unfair competition claims is scheduled for February 28, 2011.



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Item 6. Exhibits



|       |  |                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                        
|       | 
|10.1   |  | Conceptus, Inc. 2010 Equity Incentive Award Plan.                                                  
|       | 
|31.1   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|       | 
|31.2   |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.1   |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.2   |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: August 6, 2010



|                                                               
|---------------------------------------------------------------
|Conceptus, Inc.                                                
|                                                               
|/S/    GREGORY E.
LICHTWARDT                                   
|Gregory E. Lichtwardt                                          
|Executive Vice President, Treasurer and Chief Financial Officer



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