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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-QSB

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(Mark One)

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

For the quarterly period ended July 31, 2001

OR

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

For the transition period from  to

Commission file number 0-25974

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R-B RUBBER PRODUCTS, INC.(Exact name of registrant as specified in its charter)

|Oregon                                                         |  | 93-0967413                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|904 E. 10th Avenue, McMinnville, Oregon                        |  | 97128                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Issuer's telephone number, including area code:503-472-4691

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Check
whether the issuer (1) 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
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

|Common stock without par value |  | 3,234,271                       
|------------------------------ |  | --------------------------------
|(Class)                        |  | (Outstanding at August 17, 2001)

Transitional
Small Business Disclosure Format (check one): Yes / /  No /x/

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R-B RUBBER PRODUCTS, INC.    FORM 10-QSB    INDEX

|                             |  |                                                                                 |  | Page
|---------------------------- |  | ------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION
|Item 1.                      |  | Consolidated Financial Statements                                               |  |     
|                             |  | Consolidated Balance SheetsJuly 31, 2001 and April 30, 2001                    |  | 2   
|                             |  | Consolidated Statements of OperationsThree Months Ended July 31, 2001 and 2000 |  | 3   
|                             |  | Consolidated Statements of Cash FlowsThree Months Ended July 31, 2001 and 2000 |  | 4   
|                             |  | Notes to Consolidated Financial Statements                                      |  | 5   
|Item 2.                      |  | Management's Discussion and Analysis or Plan of Operation                       |  | 6   
|PART IIOTHER INFORMATION   
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                |  | 9   
|Signatures                   |  | 10                                                                             

1

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R-B RUBBER PRODUCTS, INC.    CONSOLIDATED BALANCE SHEETS

|                                                                                            |                                                                                                   | July 31,
2001                              |           | April 30,
2001
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------------
|
|ASSETS                                                                                      |                                                                                                   |                                            |           |               
|Current assets:                                                                             |                                                                                                   |                                            |           |               
|                                                                                            | Cash and cash equivalents                                                                         |                                            | $         | 144,227       
|                                                                                            | Accounts receivable, net of allowance of $36,790 and $38,105                                      |                                            |           | 1,247,739     
|                                                                                            | Inventories, net                                                                                  |                                            |           | 1,578,476     
|                                                                                            | Prepaid expenses and other                                                                        |                                            |           | 252,349       
|                                                                                            | Deferred tax asset                                                                                |                                            |           | 62,000        
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total current assets                       |           |               
|Property, plant and equipment, net of accumulated depreciation of
$4,282,982 and $4,051,446 |                                                                                                   |                                            | 5,705,140 |               
|Deferred tax asset                                                                          |                                                                                                   |                                            |          |               
|Other assets                                                                                |                                                                                                   |                                            | 437,880   |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total assets                               |           | $             
|                                                                                            |                                                                                                   |                                            |           |               
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                        |                                                                                                   |                                            |           |               
|Current liabilities:                                                                        |                                                                                                   |                                            |           |               
|                                                                                            | Current portion of long-term debt                                                                 |                                            | $         | 121,373       
|                                                                                            | Current portion of capital lease obligations                                                      |                                            |           | 306,036       
|                                                                                            | Short-term line of credit                                                                         |                                            |           | 585,000       
|                                                                                            | Accounts payable                                                                                  |                                            |           | 235,336       
|                                                                                            | Accounts payable  related party                                                                  |                                            |           | 127,236       
|                                                                                            | Accrued expenses                                                                                  |                                            |           | 187,305       
|                                                                                            | Income taxes payable                                                                              |                                            |           | 36,842        
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total current liabilities                  |           |               
|Long-term debt, net of current portion                                                      |                                                                                                   |                                            | 1,054,403 |               
|Capital lease obligations, net of current portion                                           |                                                                                                   |                                            | 708,978   |               
|Deferred income taxes                                                                       |                                                                                                   |                                            | 37,000    |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total liabilities                          |           |               
|                                                                                            |                                                                                                   |                                            |           |               
|Commitments and contingencies                                                               |                                                                                                   |                                            |           |               
|Shareholders' equity:                                                                       |                                                                                                   |                                            |           |               
|                                                                                            | Common stock, no par value, 24,000,000 shares authorized; 3,234,271 shares issued and outstanding |                                            |           | 4,311,999     
|                                                                                            | Retained earnings                                                                                 |                                            |           | 1,716,303     
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total shareholders' equity                 |           |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total liabilities and shareholders' equity |           | $             
|                                                                                            |                                                                                                   |                                            |           |               

The
accompanying notes are an integral part of these statements.

2

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R-B RUBBER PRODUCTS, INC.    CONSOLIDATED STATEMENTS OF OPERATIONS

|                                            |                            | Three Months Ended July 31, |          
|------------------------------------------- | -------------------------- | --------------------------- | ---------
|
|
|Sales, net                                  |                            | $                           | 2,908,632
|Cost of sales                               |                            |                             | 2,046,048
|                                            |                            |                             |          
|                                            | Gross profit               |                             |          
|                                            |                            |                             |          
|Operating expenses:                         |                            |                             |          
|                                            | Selling                    |                             |          
|                                            | General and administrative |                             |          
|                                            |                            |                             |          
|                                            |                            |                             | 705,871  
|                                            |                            |                             |          
|Operating income                            |                            |                             | 156,713  
|Other income (expense):                     |                            |                             |          
|                                            | Interest income            |                             |          
|                                            | Other Income               |                             |          
|                                            | Interest expense           |                             |          
|                                            |                            |                             |          
|                                            | Other income, net          |                             |          
|                                            |                            |                             |          
|Income before income taxes                  |                            |                             | 104,340  
|Income tax expense                          |                            |                             | (39,974  
|                                            |                            |                             |          
|Net income                                  |                            | $                           | 64,366   
|                                            |                            |                             |          
|Basic net income per share                  |                            | $                           | 0.02     
|                                            |                            |                             |          
|Shares used in basic net income per share   |                            |                             | 3,234,271
|                                            |                            |                             |          
|Diluted net income per share                |                            | $                           | 0.02     
|                                            |                            |                             |          
|Shares used in diluted net income per share |                            |                             | 3,304,042
|                                            |                            |                             |          

The
accompanying notes are an integral part of these statements.

3

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R-B RUBBER PRODUCTS, INC.    CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                                   | Three Months Ended July 31,                |                           
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------ | --------------------------
|
|
|Cash flows from operating activities: |                                                                                   |                                            |                           
|                                      | Net Income                                                                        |                                            | $                         
|                                      | Adjustments to reconcile net income to net cash provided by operating activities: |                                            |                           
|                                      |                                                                                   | Depreciation and amortization              |                           
|                                      |                                                                                   | Changes in current assets and liabilities: |                           
|                                      |                                                                                   |                                            | Accounts receivable, net  
|                                      |                                                                                   |                                            | Inventories, net          
|                                      |                                                                                   |                                            | Prepaid expenses and other
|                                      |                                                                                   |                                            | Accounts payable          
|                                      |                                                                                   |                                            | Accrued expenses          
|                                      |                                                                                   |                                            | Income taxes payable      
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|Cash flows from investing activities: |                                                                                   |                                            |                           
|                                      | Additions to property, plant and equipment                                        |                                            |                           
|                                      | Other, net                                                                        |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|Cash flows from financing activities: |                                                                                   |                                            |                           
|                                      | Net borrowings (repayments) under short-term line of credit                       |                                            |                           
|                                      | Payments on long-term debt                                                        |                                            |                           
|                                      | Payments on capital lease obligations                                             |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      |                                                                                   |                                            |                           
|Decrease in cash and cash equivalents |                                                                                   |                                            | (454,956                  
|Cash and cash equivalents:            |                                                                                   |                                            |                           
|                                      | Beginning of period                                                               |                                            |                           
|                                      |                                                                                   |                                            |                           
|                                      | End of period                                                                     |                                            | $                         
|                                      |                                                                                   |                                            |                           

The
accompanying notes are an integral part of these statements.

4

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R-B RUBBER PRODUCTS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

Note 1. Basis of Presentation

The financial information included herein for the three months ended July 31, 2001 and 2000 and the financial information as of July 31, 2001 is
unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim periods. The interim financial statements should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's April 30, 2001 Form 10-KSB. The results of operations for the interim periods presented are not necessarily indicative of the results
to be expected for the full year.

Note 2. Inventories

Inventories are stated at the lower of average cost, which approximates the first-in, first-out method, or market (net realizable
value), and include materials, labor and manufacturing overhead. Unsalable or unusable items are carried at scrap value and reprocessed.

July 31, 2001

April 30, 2001Raw materials

$
168,437

$
130,969Finished goods


1,382,439


1,361,576Other


27,600


27,600$
1,578,476

$
1,520,145


Note 3. Line of Credit

In July 2001, the Company amended its $1,000,000 operating line of credit to extend the expiration date to October 1, 2001. The line of credit
bears interest at its lender's prime rate, which was 7.5 percent at July 31, 2001. The Company had $585,000 outstanding under this line of credit at July 31, 2001. Under terms of
this line of credit agreement, the Company is required to maintain certain financial covenants. At July 31, 2001, the Company was in compliance with all of its covenants.

Note 4. Earnings Per Share

Following is a reconciliation of basic earnings per share ("EPS") and diluted EPS:

|                                        |  | Three Months Ended July 31,
|--------------------------------------- |  | ---------------------------
|
|
|Basic EPS                               |  |                            
|Income available to Common Shareholders |  | $                          
|                                        |  |                            
|Diluted EPS                             |  |                            
|Effect of dilutive stock options        |  |                            
|                                        |  |                            
|Income available to Common Shareholders |  | $                          
|                                        |  |                            

5

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132,240
shares issuable pursuant to stock options have not been included in the above calculations for the three months ended July 31, 2001 and 2000, since they would have been
antidilutive.

Note 5. Segment Reporting

The Company has determined that it currently operates in two segments, manufactured products in McMinnville, and tire recovery and processing at RB
Recycling, Inc. ("RB Recycling"). RB Recycling had inter-company sales of $233,455 and $128,606 for the three months ended July 31, 2001 and 2000, respectively.

|Quarter ended July 31, 2001   |  | RB Rubber |           | RB Recycling |   | Elimination |   | Total
|----------------------------- |  | --------- | --------- | ------------ | - | ----------- | - | -----
|Sales, net                    |  | $         | 2,629,478 |              | $ | 512,609     |   | $    
|Depreciation and amortization |  |           | 216,127   |              |   | 22,872      |   |      
|Income (loss) before taxes    |  |           | 69,429    |              |   | 34,911      |   |      
|
|Total assets                  |  | $         | 8,525,286 |              | $ | 902,525     |   |      
|
|Sales, net                    |  | $         | 2,414,874 |              | $ | 352,729     |   | $    
|Depreciation and amortization |  |           | 216,732   |              |   | 8,425       |   |      
|Income (loss) before taxes    |  |           | 330,976   |              |   | (104,978    | ) |      
|
|Total assets                  |  | $         | 8,213,156 |              | $ | 941,796     |   |      

Item 2. Management's Discussion and Analysis or Plan of Operation

Forward Looking Statements

This Quarterly Report on Form 10-QSB, including Management's Discussion and Analysis or Plan of Operation, contains forward-looking
statements that involve a number of risks and uncertainties. Future market conditions are subject to supply and demand conditions and decisions of other market participants over which the Company has
no control and which are inherently very difficult to predict. Accordingly, there can be no assurance that the Company's revenues or gross margins will conform to management's expectations. In
addition, there are other factors that could cause actual results to differ materially, including competitive pressures, increased demand for the Company's raw materials, unanticipated difficulties in
integrating acquired technologies or businesses and the risk factors listed from time to time in the Company's Securities and Exchange Commission reports, including, but not limited to, the report on
Form 10-KSB for the year ended April 30, 2001. The Company cautions the reader that these forward looking statements, such as the statements concerning new product
introductions, future tire chip processing and mat making capabilities and the ability to obtain and utilize lower cost raw materials, are only predictions and are not statements of historical fact.

Results of Operations

Sales.Sales for the first quarter of fiscal 2002 were up $278,000 or 10.6 percent to $2.9 million from
$2.6 million in the first quarter of fiscal 2001. Sales growth resulted primarily from increased marketing efforts including increased personnel and travel expenses.

6

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Gross Profit.Although sales for the period increased, gross profit for the period was down $43,000, or
4.8 percent, to $863,000 (29.7 percent of net sales) for 2001 from $906,000 (34.4 percent of net sales) in 2000. The reduction in gross profit relates primarily to increased unit
costs. Unit costs were higher due to a cut back in production volume of 33 percent, which began in December of 2000 and has remained in effect until August of 2001. The reduction was prompted
by a need to reduce inventory levels of manufactured goods. This production cut back has had the effect of increasing unit costs due to the effect of fixed costs such as depreciation, which are not
changed by the reduced operating levels. Management has increased manufacturing volumes in August 2001; this move is expected to reduce average unit costs in the coming quarter. The return to
the higher rate of operations was prompted by the stronger sales in the first quarter of fiscal 2002.

The
Company's raw materials include tire chips, buffings and granulated rubber. Tire chips are processed from scrap tires, which are collected and processed at the Company's RB
Recycling facility in Portland, Oregon. These tire chips are then shipped to the McMinnville plant for further processing into crumb rubber, which is the main feedstock for the Company's mat
manufacturing process. Buffings and granulated rubber are purchased from outside vendors at a higher cost than processed tire chips. With improvements made to the Company's tire chip processing and
manufacturing plant in McMinnville, the Company has increased its consumption of tire chips. As a result, pounds of tire chips utilized, which were all processed at the Company's recycling facility,
increased from 59.3 percent of
total raw materials during the quarter ended July 31, 2000 to 70.6 percent during the quarter ended July 31, 2001.

Selling
expenses increased $51,000 or 21.9 percent to $284,000 (9.8 percent of net sales) for the quarter ended July 31, 2001, compared to $233,000
(8.9 percent of net sales) for the comparable period of 2000. The additional expenses are primarily a result of planned increases in sales and marketing personnel and related travel expenses to
continue to build the Company's sales.

General
and administrative expenses decreased 2.7 percent to $422,000 (14.5 percent of net sales) for the quarter ended July 31, 2001, from $434,000
(16.5 percent of net sales), for the comparable periods of 2000. The reduction was primarily a result of a decrease in accounting fees. The Company changed its accounting period in
April 2000, which resulted in additional auditing fees in the first quarter of fiscal 2001.

Income
tax expense was recorded at an effective rate of 38.5 percent for the three months ended July 31, 2001 compared to 39.0 percent in the comparable period of
2000. The estimated effective rate was evaluated based on prior year actual experience.

Net
income decreased to $64,000 (2.2 percent of net sales) for the quarter ended July 31, 2001 from $138,000 (5.2 percent of net sales) for the quarter ended
July 31, 2000. The decreases in net income in the first quarter of fiscal 2002 is primarily a result of the increased costs and expenses, partially offset by the increased sales as discussed
above.

Liquidity and Capital Resources

At July 31, 2001 working capital was $1,686,000 including $144,000 in cash and cash equivalents, $1,248,000 in accounts receivable and $1,578,000 in
inventory. In the three-month period ended July 31,
2001, working capital decreased by $241,000 and the current ratio decreased to 2.05:1 at July 31, 2001 from 2.17:1 at April 30, 2001.

7

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Cash and cash equivalents decreased $455,000 to $144,000 at July 31, 2001 from $599,000 at April 30, 2001. This decrease is a result of $111,000 used in operations, and
$403,000 used for the purchase of equipment, partially offset by $59,000 provided by net proceeds on short-term and long-term borrowings, including capital lease obligations.

Accounts
receivable increased $26,000 to $1,248,000 at July 31, 2001 compared to $1,221,000 at April 30, 2001, primarily as a result of increased sales in
July 2001 compared with April 2001.

Inventories
increased $58,000 to $1,578,000 at July 31, 2001 from $1,520,000 at April 30, 2001 as a result of increased stocking levels of ancillary products offset by
reduced levels of the Company's manufactured goods. Due to the lead-time for ordering ancillary products the Company has increased stocking levels to accommodate the increased sales
volume.

Prepaid
expenses and other assets increased $81,000 to $252,000 at July 31, 2001 from $172,000 at April 30, 2001 primarily as a result of payment of insurance premiums
in advance of their expense recognition.

Accounts
payable and accounts payable to related parties decreased $89,000 to $363,000 at July 31, 2001 from $452,000 at April 30, 2001 primarily as a result of timing
of payments made.

Accrued
expenses decreased $139,000 to $187,000 at July 31, 2001 from $326,000 at April 30, 2001, primarily due to the payment of income taxes.

Capital
expenditures of $404,000 during the three month period ended July 31, 2001 resulted from the addition of equipment to improve the Company's crumb rubber processing
facility to help increase tire chip utilization.

At
July 31, 2001, the Company had a $1,000,000 operating line of credit, which bears interest at its lender's prime rate, 7.5 percent at July 31, 2001. The
expiration date of the line of credit has been extended to October 1, 2001. The Company had an outstanding balance of $585,000 under this line of credit at July 31, 2001. Under terms of
this line of credit agreement, the Company is required to maintain certain financial covenants. At July 31, 2001, the Company was in compliance with all of its covenants.

New Accounting Pronouncements

In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities-an amendment of FASB Statement No. 133" ("SFAS 138"). In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 137"). SFAS 137 is an amendment to Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS 137 and 138 establish accounting and reporting standards for all derivative instruments. SFAS 137 and 138 are effective for fiscal
years beginning after June 15, 2000. The Company does not have any derivative instruments nor does it participate in hedging activities and therefore, the adoption of SFAS 137 and 138 in
the first quarter of fiscal 2002 did not have a material impact on its financial position or results of operations.

In
September 2000, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a final consensus on Issue No. 00-10,
"Accounting for Shipping and Handling
Fees and Costs" (EIFT 00-10). The EITF concluded that amounts billed to a customer in a sale transaction related to shipping and handling should be classified as revenue. The EITF further

8

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concluded that shipping and handling costs incurred by a seller should be reported as operating expenses. The Company has historically recorded certain shipping and handling expenses as a reduction of
related freight revenues, in accordance with common industry practice. To comply with the EITF consensus, the Company reclassified shipping and handling expenses to cost of sales for all periods
presented. The impact of the adoption of EITF 00-10 is to increase sales and cost of sales for the three months ended July 31, 2000 (unaudited) by $148,998. There was no other
effect on the Company's consolidated balance sheets, statements of operations, shareholders' equity or cash flows.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Tangible Assets." SFAS
No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests
method will be prohibited on a prospective basis only. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Thus,
amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of that Statement, which for the Company will be fiscal year 2003. The Company does not
expect that the adoption of either SFAS 141 or SFAS 142 to have a significant impact on the financial condition or results of operations of the Company.

PART IIOTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K



|Exhibit No. |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|10.1        |  | Amendment No. 3 (Modification and/or Extension Agreement) dated July 23, 2001 to Line of Credit Agreement dated July 31, 1998.





9

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SIGNATURES

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.

|                         |  | R-B RUBBER PRODUCTS, INC.
|------------------------ |  | -------------------------
|Date: September 12, 2001 |  | By:                      
|                         |  | By:                      

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