<PAGE>


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

                                ________________

                                    Form 10-K


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

                   For the fiscal year ended December 31, 2001

                                       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                                     97-3170244
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
  incorporation or organization)

                               1021 HOWARD AVENUE
                              SAN CARLOS, CA 94070
                    (Address of principal executive offices)
       Registrant's telephone number, including area code: (650) 802-7240
                                ----------------

             Securities registered pursuant to Section 12(b) of the Act: None
          Securities registered pursuant to Section 12 (g) of the Act:
                    Common Stock, $0.003 par value per share
                                ----------------

     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 if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

         The aggregate market value of the voting and non-voting stock held by
nonaffiliates of the Registrant based on the closing sale price of the
Registrant's Common Stock on the Nasdaq National Market on February 28, 2002 was
approximately $ 243,060,000 as of such date. Shares of Common Stock held by each
officer and director and by each person who owns 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

         There were 16,505,223 shares of Registrant's Common Stock issued and
outstanding as of February 28, 2002.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 2002 Annual Meeting of
Stockholders are incorporated by reference in Part III of this Form 10-K.

<PAGE>





                                 CONCEPTUS, INC.

                                    FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS


                                                                          PAGE
PART I.
Item 1.        Business........................................................2
Item 2.        Properties ....................................................18
Item 3.        Legal Proceedings .............................................18
Item 4.        Submission of Matters to a Vote of Security Holders ...........18
PART II.
Item 5.        Market for Registrant's Common Stock and Related Stockholder
               Matters........................................................19
Item 6.        Selected Consolidated Financial Data...........................20
Item 7.        Management's Discussion and Analysis of Financial Condition and
               Results of Operations..........................................21
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.....34
Item 8.        Consolidated Financial Statements and Supplementary Data.......34
Item 9.        Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure...........................................34
PART III.
Item 10.       Directors and Executive Officers of the Registrant.............35
Item 11.       Executive Compensation.........................................35
Item 12.       Security Ownership of Certain Beneficial Owners and
               Management.....................................................35
Item 13.       Certain Relationships and Related Transactions.................35
PART IV.
Item 14.       Exhibits, Financial Statement Schedules and Reports on Form
               8-K............................................................36
               Index to Consolidated Financial Statements.....................39
               Signatures.....................................................56

                                       1


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         THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO. THIS ANNUAL REPORT ON
FORM 10-K, AND IN PARTICULAR THE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. IN THIS REPORT, THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS,"
"EXPECTS," "PLANS," "SEEKS" AND WORDS OF SIMILAR IMPORT IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS OF CONCEPTUS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE UNCERTAINTY
OF MARKET ACCEPTANCE OF OUR PRODUCT; OUR LIMITED OPERATING HISTORY; OUR ABILITY
TO DEVELOP AND MAINTAIN PROPRIETARY ASPECTS OF OUR TECHNOLOGY; OUR ABILITY TO
OBTAIN THE NECESSARY GOVERNMENTAL CLEARANCES OR APPROVALS TO MARKET OUR PRODUCT;
DEPENDENCE ON OBTAINING AND MAINTAINING REIMBURSEMENT; INTENSE COMPETITION IN
THE MEDICAL DEVICE INDUSTRY; THE INHERENT RISK OF EXPOSURE TO PRODUCT LIABILITY
CLAIMS AND PRODUCT RECALLS; AND OTHER FACTORS REFERENCED IN THIS FORM 10-K.
THESE FACTORS ARE DISCUSSED IN MORE DETAIL BELOW. GIVEN THESE UNCERTAINTIES,
PERSONS EVALUATING OUR BUSINESS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
SUCH FORWARD-LOOKING STATEMENTS. WE ASSUME NO OBLIGATION TO UPDATE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL RESULTS OR CHANGES IN FACTORS OR
ASSUMPTIONS AFFECTING SUCH FORWARD-LOOKING STATEMENTS.

PART I

ITEM 1.  BUSINESS

OVERVIEW

         We develop, manufacture and market an innovative and proprietary
non-incisional permanent birth control device for women. Our Essure(TM)
procedure, formerly known as STOP (Selective Tubal Occlusion Procedure),
delivers a soft and flexible micro-insert into a woman's fallopian tubes, which
is designed to provide permanent birth control by causing a benign tissue
in-growth that blocks the fallopian tubes. Essure is performed as an outpatient
procedure and is intended to be a less invasive and less costly alternative to
tubal ligation, the leading form of birth control in the U.S. and worldwide.
Essure is currently being marketed in Australia, Singapore, Canada and six
markets in the European Union. We anticipate filing a Premarket Approval (PMA)
application with the U.S. Food and Drug Administration, or FDA, in the second
quarter of 2002, and intend to begin marketing Essure in the U.S. following FDA
approval, which we expect to receive in 2003.

         Tubal ligation involves abdominal incisions, general anesthesia, four
to five days of recovery time and the risks associated with an incisional
procedure. The Essure procedure does not require cutting or penetrating the
abdomen, which is expected to lower the likelihood of post-operative pain due to
the incision, and is performed in an outpatient setting without general
anesthesia. The Essure procedure averaged 13 minutes in the Pivotal trial. A
patient could anticipate spending about 35 minutes pre-op to post-op and should
expect to be discharged about 45 minutes after the procedure. No overnight
hospital stay is required. Furthermore, reliance on Essure does not involve
taking drugs or hormones. For these reasons, we believe that Essure represents
an attractive alternative to tubal ligation for women seeking permanent birth
control. Among women from our Phase II clinical study and Pivotal trial who have
worn the micro-inserts for six months or more, 99% of them rate their comfort
with Essure as "good" to "excellent" at the follow-up visits conducted thus far.
Excluding the day of procedure, 92% of the patients who are employed returned to
work in one day or less.

         We believe that physicians will be receptive to Essure because it is a
less invasive permanent birth control option to offer their patients which has
unique benefits. We also believe physicians will find Essure procedures
relatively easy to perform, after completing a training program involving the
use of a hysteroscope. We believe hospitals will incur lower overhead costs with
the Essure procedure compared with tubal ligation. We expect payors to
experience cost reductions resulting from the elimination of overhead and
procedural costs related to general anesthesia and post-operative hospital stays
associated with tubal ligations. In addition, payors may also benefit from the
reduction of unwanted pregnancies associated with non-permanent methods of

                                       2

<PAGE>


birth  control in patients who may elect to have our  procedure but have avoided
currently available permanent methods due to their drawbacks.

         We commenced a multi-center, international Pivotal, or Phase III, trial
in May 2000. This trial was designed to obtain 12-month safety, effectiveness
and patient comfort data to support the filing of a PMA application with the
FDA. As of March 2002, we had accumulated more than 800 woman-years of
effectiveness data between our Phase II clinical study and Pivotal trial, and
statistical analysis based on interim data from these ongoing trials supports a
current estimate of a one-year effectiveness rate of 99.8%. Based on this high
effectiveness rate, we submitted a written proposal to the FDA requesting that
the PMA application be filed with one-year data on 350 women in the Pivotal
trial, instead of the previously agreed to 400 women. The FDA has accepted the
proposal and as a result, we plan to submit the final PMA application with the
one-year data on 350 women, and follow with an update on the one-year data on an
additional 50 women from the Pivotal trial in the second quarter of 2002.
Although we have not had reported pregnancies in our clinical trials to date
with Essure's current design, no method of birth control has proven 100%
effective and we expect women participating in our Pivotal trial and
Phase II clinical study to report pregnancies in the future.

         Essure is listed with Australia's  Therapeutic Goods Administration,
which allows us to market and sell Essure in Australia. We have a sales and
marketing group in Australia and began commercial sales there in the second
quarter of 2001. In February 2001, we received approval to affix the CE Mark to
Essure, indicating that Essure is certified for sale throughout the European
Union, subject to compliance with local regulations such as registration with
the Ministry of Health and/or particular requirements regarding labeling or
distribution. We have recently begun reimbursement studies in France and U.K. We
have established distribution partnerships in select European markets, including
U.K, Northern Ireland, Portugal, Spain, Holland and Finland, and made our first
commercial sales there in December 2001. We began selling Essure in Singapore in
2001 and are currently using a distributor to market and distribute our product.
In North America, we received clearance from Health Canada to market Essure in
Canada in November 2001. We intend to begin selling Essure in the U.S. following
FDA approval, which we expect to receive in 2003.

OUR MARKET

         A 1995 National Survey of Family Growth performed by the Centers for
Disease Control (CDC), the most current available statistic on U.S.
reproductive health, estimated that 64% of the 60.2 million U.S. women of
reproductive age (15-44) use some form of birth control. The most common forms
of birth control in the U.S. according to this 1995 study were tubal ligation
(18%), oral contraceptives (17%), condom (13%) and vasectomy (7%).

         Permanent birth control procedures such as tubal ligation and vasectomy
are used by 25% of U.S. reproductive couples. Prior to 1971, vasectomy, a male
sterilization procedure, outnumbered tubal ligation by more than 2:1. Since the
adoption of a less invasive laparoscopic procedure in 1971, tubal ligation
procedures have currently outnumbered vasectomies by 75% annually. The 1995 CDC
study estimated 700,000 tubal ligation procedures are performed each year, and
that the prevalence increases with age and number of children. 90% of U.S. women
who have had tubal ligation have two or more children and 65% of these women are
between ages 35-44. Despite the decrease in vasectomies, we estimate there are
still approximately 400,000 vasectomy procedures performed each year in the U.S.

         In addition to permanent birth control procedures, the CDC study
estimated 21 million U.S. women use temporary methods of birth control, such as
oral contraceptives, implants and injectables. Included in this group are
approximately 7 million women whom we believe are likely to consider a permanent
form of birth control because they have two or more children. Furthermore,
researchers in a 1999 article published in Family Planning Perspectives
theorized that women may not be completely satisfied with long-term use of
temporary methods of birth control. The study found that 44% of women using
temporary birth control change methods for a method-related cause within 12
months, which increases to 61% by 24 months. For these reasons, we believe our
market includes not only women who desire permanent birth control, but
potentially also women who have completed childbearing but are using temporary
birth control methods.

                                       3


<PAGE>



Based on data from the CDC's 1995 National Survey of Family Growth, the
following chart summarizes birth control methods used by women between the ages
of 30-44 in the U.S.:

________________________________________________________________________________
Method             Age 30-34             Age 35-39           Age 40-44
________________________________________________________________________________
Fertile women      8.044 million         8.173 million       7.314 million
________________________________________________________________________________
Tubal ligation     30%                   41%                 50%
________________________________________________________________________________
Pill               29%                   11%                 6%
________________________________________________________________________________
Condom             18%                   17%                 12%
________________________________________________________________________________
Vasectomy          --                    19%                 20%
________________________________________________________________________________
All others         13%                   12%                 12%
________________________________________________________________________________


         Worldwide, there is a larger market for permanent birth control.
According to the Population Council, there were more than 14 million tubal
ligation procedures performed worldwide in 2000. The most current and available
report on worldwide birth control statistics is a 1998 United Nations report on
birth control methods used in 1993 by reproductive couples. The report indicated
that tubal ligation, the leading form of permanent birth control method
worldwide, was used by 19% of reproductive couples, followed by intrauterine
devices at 13%, oral contraceptives at 8% and condom at 4%. In the European
Union, we estimate there are more than 10 million women who may be potential
candidates for this procedure. In Canada, according to a Statistic Canada report
published in March 2002 and a Family Planning Perspectives article in April
2000, it is estimated that there are approximately 2.0 million women between the
ages of 18-44 who are using reversible methods of birth control, a certain
percentage of whom may be potential candidates for Essure.

OTHER AVAILABLE PERMANENT BIRTH CONTROL METHODS

TUBAL LIGATION. Tubal ligation is the most common form of birth control because
it is the only method of female birth control that combines high effectiveness
with no required user compliance and a very low risk of long-term side effects.
However, the difficulty in accessing the fallopian tubes has made it necessary
to perform invasive surgery. There are many ways to perform the procedure, but
the most common interval method is laparoscopic tubal ligation. This procedure
requires one to two punctures to be made in the abdomen and carbon dioxide gas
to inflate the abdomen to improve visibility and access for the surgeon. The
fallopian tubes are then ligated by cutting or cauterizing, or by mechanical
occlusion using clips or rings. Because tubal ligation requires penetration of
the abdomen, 92% of these procedures are performed under general anesthesia. The
typical surgical procedure takes approximately 45 minutes and is followed by
three to four hours of recovery time in a hospital setting. Additionally, women
typically take four to five days off work after a tubal ligation. According to a
1982 American Journal of Obstetrics and Gynecology article which examined more
than 24,400 laparoscopic tubal ligations, surgical difficulties, such as
equipment problems, difficulties due to abdominal adhesions or interference by
the bowel or bladder, occur in 5.1% of laparoscopic procedures. More serious
surgical complications occur in 1.7% of laparoscopic procedures and include
unintended injury to the bowel, bladder, artery/vein, fallopian tubes, uterus
and electrical shock to the patient.


VASECTOMY. Vasectomy is a highly effective method of male birth control that is
performed in a doctor's office with local anesthesia and typically takes about
20 minutes. The vas deferens is ligated or resected and the cut ends are
typically cauterized or clipped. Patients are observed for about 20 minutes
before release and are encouraged to use an ice pack for about 24 hours to
reduce swelling. Support devices are recommended for two days. Before relying on
the vasectomy for birth control, men are encouraged to be tested 12 weeks after
the procedure for the presence of sperm. Side effects of vasectomy include
bleeding, infection and chronic pain syndrome.

                                       4

<PAGE>


OTHER AVAILABLE TEMPORARY BIRTH CONTROL METHODS

ORAL CONTRACEPTIVES AND PRESCRIPTION DRUGS. Birth control pills and drugs offer
temporary birth control to women. Birth control pills contain female hormones
and require a daily pill-taking regimen in order to stop the ovaries from
releasing eggs. According to the 1998 FDA guidelines, the birth control pill has
a "typical use" failure rate of 5.0% in the first year of use. This method has a
relatively high failure rate because of imperfect user compliance, an inherent
problem with many methods of non-permanent birth control. Many physicians may
not prescribe birth control pills to women over the age of 35 who smoke
cigarettes because of the potential for serious side effects. The pill may
contribute to cardiovascular disease, including high blood pressure, blood
clots, and blockage of the arteries. Depo-Provera is an injection that inhibits
ovulation and inhibits sperm from entering the uterus for up to 12 weeks.
Norplant consists of thin implants that are inserted under the skin of the upper
arm and release a constant small dose of a hormone which inhibits ovulation and
inhibits sperm from entering the uterus for up to five years. According to the
1998 FDA guidelines, injectables and implantables such as Depo-Provera and
Norplant have failure rates of 0.3% and 0.05%, respectively, but have
undesirable side effects such as menstrual cycle changes, weight gain, and
breast tenderness.


CONDOMS AND DIAPHRAGMS. Condoms are male contraceptives that may also protect
against sexually transmitted diseases. Diaphragms are soft, flexible, cup-shaped
products that are placed inside of a woman's vagina and over the cervix in order
to prevent the sperm from entering the uterus and fertilizing the egg. Although
condoms and diaphragms have very limited side effects, these methods have
relatively high first-year failure rates primarily due to imperfect user
compliance. According to the 1998 FDA guidelines, the first-year "typical use"
failure rates are 14% for condoms and 20% for diaphragms.

INTRAUTERINE DEVICES (IUDS). IUDs are small devices that are placed in a woman's
uterus to prevent fertilization of the egg. According to the 1998 FDA
guidelines, IUDs have a first year failure rate of 0.8% to 2%. However, the use
of IUDs among U.S. women is less than 1%. Potential side effects from IUDs
include uterine perforation, irregular menses and infection.


THE ESSURE PRODUCT

         We developed Essure in response to the market need for a permanent,
less invasive and less costly alternative to tubal ligation. We believe Essure
will also appeal to women who have completed childbearing but elect to use
non-permanent methods of birth control to avoid a surgical tubal ligation.

         The Essure micro-insert is designed to be placed into each fallopian
tube using standard hysteroscopic techniques and our minimally invasive tubal
access delivery system. The delivery system is a disposable plastic handle with
a thumb-wheel that is connected to our proprietary guidewire and catheter
system. The micro-insert is constructed of medical grade materials - a stainless
steel inner coil, a dynamic outer coil made from a nickel titanium alloy
(Nitinol(TM)), and a layer of polyethylene terephthlate (PET) fibers wound
between the inner and outer coils. All of these materials have been used in the
body for a variety of different applications, including cardiovascular surgery
for many years. Nitinol, a shape-memory metal, has been used in cardiovascular
and peripheral stents. PET fiber, proven to promote tissue in-growth, has been
used in a variety of other medical applications, including artificial heart
valves and vascular grafts. Stainless steel has been used in numerous long-term
medical applications.

         An Essure micro-insert is deployed into each of the woman's fallopian
tubes using a hysterocope, an instrument that allows visual examination of the
cervix and uterine cavity. Using the hysteroscope for guidance, the delivery
catheter is guided through the uterus and the opening of the fallopian tube.
Once the physician has properly positioned the delivery system in the fallopian
tube, the physician will release the micro-insert. When released, the
micro-insert will then automatically expand to the contours of the fallopian
tube. Over a three-month time frame, the polyester fibers within the
micro-insert will elicit a localized, benign tissue in-growth that will occlude
the fallopian tubes, thereby preventing pregnancy.

                                       5

<PAGE>


         Based on findings from our clinical trial results, we believe the
Essure procedure has key advantages over the current leading form of permanent
contraception, which is tubal ligation:

          ______________________________________________________________________
                                          Essure                    Tubal
                                         Procedure                 Ligation
          ______________________________________________________________________
          Procedure                    Transcervical ->         Incisional ->
                                       Non-incisional        Abdomenal incision
                                                                or puncture
          ______________________________________________________________________
          Typical anesthesia               Local                 General
          ______________________________________________________________________
          Procedure time                13-18 minutes        about 45 minutes
          ______________________________________________________________________
          Post-op recovery time          45 minutes              3-4 hours
          ______________________________________________________________________
          Where performed                Outpatient/             Inpatient/
                                       Surgi-center or          Hospital or
                                       Doctor's office         Surgi-center
          ______________________________________________________________________
          Average return to regular
          activities                      1-2 days                4.4 days
          ______________________________________________________________________

         There are, however, certain key factors that a woman must consider when
she selects the Essure procedure. First, the woman must be certain that
permanent birth control is desired, because Essure is not reversible. Second,
for three or more months after the Essure procedure, a temporary method of birth
control must be used in combination with Essure. Third, device placement will
not be successful in all patients. In our Pivotal trial, 90% of the women who
underwent a placement attempt received bilateral placement, 8% did not receive
micro-insert placement at all and 2% received unilateral placement and thus were
unable to rely on the placement for contraception. Fourth, not all women in whom
a device is implanted will be able to rely on the device for contraception. In
the Pivotal trial, 4% of women in whom at least one device was placed were not
subsequently able to rely on the device for contraception due to improper device
location, and due to unilateral placement. Also, 6% of women who were able to
rely on the device for contraception required more than one placement procedure.
Fifth, as with all medical procedures, there are risks to Essure. Risks
associated with the device placement procedure are typical of hysteroscopic
procedures and include fainting, nausea, vomiting, over-absorption of saline,
vaginal bleeding, cramping and pain. In addition, as with any hysteroscopic
procedure or sterilization procedure, pain, cramping and menstrual pattern
changes occur post-operatively. Also, as with any sterilization procedure, some
women have reported intermittent pain and/or menstrual pattern changes, but
persistent pain and/or menstrual pattern changes have been reported in less than
1% of women to date. By comparison, based on a published article in a 1982
American Journal of Obstetrics and Gynecology which examined more than 24,400
laparoscopic tubal ligations, surgical difficulties occurred in 5.1% of
laparoscopic procedures and include equipment problems, difficulties due to
abdominal adhesions and interference by the bowel or bladder. Based on the same
study, more serious surgical complications occur in 1.7% of laparoscopic
procedures and include unintended injury to the bowel, bladder, artery/vein,
fallopian tubes, uterus and electrical shock to the patient.


OUR CLINICAL PROGRESS

PIVOTAL TRIAL

         A Pivotal, or Phase III, trial of Essure was initiated in May 2000,
under an Investigational Device Exemption from the FDA. The pivotal study, being
conducted at 13 clinical sites in the U.S., Australia, United Kingdom, Spain and
Belgium, includes over 450 women in whom the Essure micro-inserts were placed.
The clinical endpoints of the study include safety and comfort during and after
the Essure procedure as well as pregnancy prevention.

         As of March 2002, 320 women had completed the one-year follow-up visit.
As of March 2002, there had been no pregnancies reported in women relying on
Essure for contraception, nor have there been reported requests for procedure
reversal in the Pivotal trial. 99% of the women have reported their comfort with
the wear of Essure as "good" to "excellent" at each of the subsequent follow-up
visits.

         Based on the > 99% effectiveness rate established in our Pivotal trial,
                      -
we submitted a proposal to FDA requesting our PMA application be filed with
one-year data on 350 women instead of the previously

                                       6

<PAGE>


agreed to 400 women.  The FDA  accepted  this  proposal in March 2002,  and as a
result,  we plan to file the PMA application for Essure in the second quarter of
2002. To date, we have submitted two modules of the Essure PMA  application  and
the FDA has accepted and closed the first module.

         The Pivotal trial is still ongoing, and the Pivotal trial statistics
presented may change as longer term follow-up data from the women participating
in the trial is gathered, audited and analyzed.

PHASE II CLINICAL STUDY

         We commenced the Phase II clinical study of safety and preliminary
effectiveness of the Essure device in November 1998 and a total of 227 women
underwent a placement attempt by June 30, 2000. Essure devices were placed in
both fallopian tubes of 200 women, or 88% of the women who underwent a placement
procedure. We have completed the first year follow-up of women in the Phase II
study, and over 100 women have completed the two-year follow-up. None of the
women in the trial have reported a pregnancy. During the past year, one woman
requested removal of her Essure devices due to persistent menstrual pain. These
were removed without incident. We had accumulated an aggregate of greater than
5,600 woman-months of patient safety and greater than 4,700 woman-months of
effectiveness data as of March 2002. 99% of the women described their
satisfaction with the wear of our device as "good" to "excellent" at all study
visits.

         Based on zero observed pregnancies in the two studies, the March 2002
estimate of the one-year effectiveness of Essure is greater than 99%.

         The following table summarizes data from our two clinical trials as of
February 28, 2002:

<TABLE>
<CAPTION>

                                                          __________________________________

                                                             Pivotal Trial    Phase II Study
____________________________________________________________________________________________
<S>                                                               <C>              <C>

Number of women undergoing a placement procedure                  518*             227
____________________________________________________________________________________________
% of women with devices placed in both fallopian tubes            90%              88%
____________________________________________________________________________________________
Average procedure time for placement of micro-inserts         13 minutes        18 minutes
____________________________________________________________________________________________
"Good" to  "Excellent"  rating  of  patient  tolerance  of        88%              89%
procedure
____________________________________________________________________________________________
Accumulated months of follow-up, all placements                 >7,000            >5,600
____________________________________________________________________________________________
Adverse event rates preventing reliance on Essure                2.5%              3.5%
____________________________________________________________________________________________
Accumulated  months of  effectiveness  testing  from women      >5,500            >4,700
with Essure devices in both tubes
____________________________________________________________________________________________
Reported pregnancies in women relying on Essure                  none              none
____________________________________________________________________________________________

 * Includes the 2% of women in whom a hysteroscope could not be placed or the fallopian
   tube osita could not be visualized.

</TABLE>


OTHER STUDIES

         We have also performed histology and peri-hysterectomy studies in women
who agreed to have Essure devices placed in their fallopian tubes prior to
surgical removal of their uterus and fallopian tubes for medical reasons. In our
histology study, high-powered microscopes were used to examine how the cells in
the fallopian tube react to the Essure device. Data obtained from the
histological analysis of the fallopian tubes in these patients supports the
theorized mechanism of action of the Essure device. Specifically, the polyester
fibers in the Essure device cause a local, benign tissue in-growth which blocks
the fallopian tube. This tissue in-growth is expected to result in both
long-term device retention and pregnancy prevention. Our peri-hysterectomy study
examined placement feasibility during the initial device development, and was
subsequently used for training and to evaluate device improvements.

                                       7

<PAGE>



         Currently, we are also conducting a peri-hysterectomy study to test an
internally developed new catheter design. The new catheter is being tested to
provide an alternative to our existing catheter, which is based on a third party
proprietary technology. Pending the outcome of the peri-hysterectomy study, the
new catheter will be tested in a safety and effectiveness study outside of the
U.S.


CLINICAL HISTORY OF DISCONTINUED DESIGN


         In 1997 and 1998, an earlier generation of the Essure device was
evaluated in 20 women, separate from the Phase II clinical study and Pivotal
trial discussed above. Device placement was achieved in 14 of the 20 patients,
but device expulsion occurred in 4 of the 14 patients. This unsatisfactory
device expulsion rate led to the discontinuation of this design. In June 2000, a
pregnancy was reported in one of the 10 remaining women wearing the discontinued
device and was believed to be due to a placement that was not as set forth in
the clinical protocol. This pregnancy was reported to the FDA and the FDA did
not raise any questions with respect to this pregnancy. The pregnancy also had
no effect on the FDA approval status of our current Pivotal trial since it
involved an earlier, discontinued design. This pregnancy was not included in the
calculation of the current effectiveness rate.


OUR MARKETING AND REGULATORY PROGRESS

         Essure is listed with Australia's Therapeutic Goods Administration,
which allows us to market and sell in Australia. A market launch of Essure in
Australia began during the second quarter of 2001. In the Australian health care
system, specialized procedures such as Essure require a referral from a primary
physician (a general practitioner) prior to seeing a gynecologist. Recognizing
that the general practitioner's role is key to a patient's referral to a
gynecologist, we developed and implemented awareness programs directed at
general practitioners regarding patient counseling and referral. At the same
time, we implemented physician training and preceptoring programs aimed at
educating and qualifying gynecologists for the procedure. Consumer awareness
campaigns were implemented to direct women to their general practitioners for
counseling and potential referral for an Essure procedure.

         The Australia market is small, as compared to larger markets such as
select Asian and European countries and the United States. Accordingly, the
Australia market is intended to be a pilot market for us to learn and refine our
marketing, sales, and distribution strategies and techniques.

         In addition to the Australia launch in the Pacific Rim region, we also
registered Essure in Singapore in 2001 and have contracted with a major hospital
in Singapore where our physicians perform the Essure procedure as well as train
gynecologists to perform the procedure. We are currently using a distributor in
Singapore to market and distribute our product in that country.

         In early 2001, we received approval to affix the CE Mark to Essure,
which permits us to sell Essure throughout the European Union, subject to
compliance with local regulations such as registration with the Ministry of
Health and/or particular requirements regarding labeling or distribution. We
have recently begun reimbursement studies in France and U.K. These studies are
intended to support approvals for physician and device reimbursement. We have
established and intend to use major distributors in select European Union
countries, including U.K, Northern Ireland, Portugal, Spain, Holland and
Finland, for initial and near-term commercialization. We established a sales and
marketing division in France in December 2001 to oversee our marketing and
distribution effort in Europe.

        In North America, we received clearance in November 2001 from Health
Canada to begin marketing Essure in Canada. In the U.S., we have submitted two
PMA modules to the FDA since November 2001, and the FDA has accepted and closed
the first module. Our goal is to complete our PMA submission to the FDA in the
second quarter of 2002. Based on recent FDA correspondence, we believe that if
the PMA application is deemed "fileable," it will be brought before the Advisory
Panel in July or October of 2002 for determination of approvability with the
FDA. We intend to begin selling Essure in the U.S. following FDA approval, which
we expect to receive in 2003.

                                       8

<PAGE>


 SALES AND MARKETING

         Our sales and marketing strategy is to primarily market Essure to
gynecologists while building interest and awareness among consumers and general
practitioners. We intend to identify, educate and train gynecologists in our
procedure through a combination of presentations at major medical conferences,
hands-on simulation and ultimately, proctored procedures with a clinician
experienced in our Essure procedure. In addition, we intend to build awareness
among consumers, general practitioners and the broader medical community through
the use of public relations and targeted advertising.

         In Australia, we have established a direct sales force to sell and
market our product. We have sales representatives and physician trainers who
work out of Essure centers affiliated with local hospitals. In these centers,
our physician trainers perform the procedure and train gynecologists to perform
the procedure. The physician trainers are responsible for the initial training
of gynecologists and will assist with continuing education. Additionally, we
have engaged a public relations firm to assist in our commercial marketing
campaign in Australia.

         In 2002, we have introduced Essure internationally in Canada and in
select countries in Europe through local and/or regional distributors.
Initially, we are targeting countries in Europe that have demonstrated favorable
acceptance and reimbursement of new technologies and will begin to target
similar countries in the Pacific Rim. Where possible, we will seek to establish
strategic distribution partnerships with companies or organizations with
resources to cover large regions and multiple markets. We intend to establish a
network of smaller distributors in areas where we are unable to establish a
regional strategic partnership.

         Upon receipt of FDA Premarket approval, we intend to sell, market and
distribute Essure in the U.S. through a direct sales force. We may affiliate
with local hospitals to establish clinics, or Essure centers, in strategic
regions of the U.S. to train and educate gynecologists in the Essure procedure.


REIMBURSEMENT

         We believe that obtaining physician fee and device reimbursement for
Essure will be an important step toward commercialization of Essure in the U.S.
and overseas. Regardless of the country and its type of reimbursement system,
physician advocacy of our products, together with studies demonstrating clinical
efficacy and cost, will be required to obtain adequate reimbursement.

U.S.

         Health care providers in the U.S. typically rely on third-party payors,
specifically Medicare, Medicaid and private health insurers, to reimburse all or
part of the cost of procedures in which medical devices are used. Access to
these funds is based on coding systems that are specific to procedure type and
typically separate physician fees and funding paid to the facility. In most
cases, facility fees include payment for the medical device and are generally
paid at rates negotiated between the providers (e.g., hospitals) and third-party
payors. We have hired consultants to survey the applicability of existing
reimbursement codes for Essure and to assist us in developing a strategic plan
to obtain reimbursement for both the physician fee and our device. Based on
analysis performed to date, we believe our Essure procedure may be reimbursed
under an existing reimbursement code. Our next step will be to test the analysis
with a procedure where reimbursement from a third-party payor is requested.
However, we cannot perform procedures in the U.S. at this time as we do not have
FDA approval. Therefore, the earliest opportunity to test our reimbursement code
will occur after we have obtained FDA approval on the Essure procedure. While we
may begin other clinical investigations in the U.S. prior to FDA approval, they
are not considered good vehicles for reimbursement testing as third-party payors
typically treat non-approved products and procedures differently in terms of
coverage.

                                       9

<PAGE>


INTERNATIONAL

         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 health care systems
that determine reimbursement for new devices and procedures. In most markets,
there are private insurance systems as well as government-managed systems.

         In Australia, we obtained approval from the appropriate government
agency to use the existing tubal ligation reimbursement code for our Essure
procedure in 1999, and numerous procedures were reimbursed in 2000 using this
code. In March 2001, however, we received notification from the government
agency that the continued applicability of this particular code for our Essure
procedure would be reviewed. The review commenced in September 2001 and includes
an examination of the clinical and economic outcomes data. The conclusion of
this review will determine the future level of reimbursement for our Essure
procedure in Australia. In the interim until the review is completed, we have
obtained clearance to use an existing reimbursement code, which provides
physicians with less reimbursement than a laparoscopic tubal ligation procedure.
The difference is approximately US$90 and the physician customarily charges the
patient an additional fee to cover this amount.

         In Europe, consultants are assisting us in developing a strategic plan
to obtain reimbursement in certain European countries, and we are conducting
clinical reimbursement studies in selected regional markets, including France
and the U.K.


MANUFACTURING

         Our manufacturing strategy is to conduct certain proprietary
manufacturing processes in-house. Currently, all manufacturing processes are
performed in our facility in San Carlos, California, with the exception of the
manufacturing of certain injection molded parts and catheter tubing, which are
manufactured by original equipment manufacturers according to our
specifications. After assembly and inspection, we package the Essure devices.
The packaged units are then sterilized by an external contractor. Over time, we
intend to move some aspects of our manufacturing processes to third party
manufacturers who meet our quality standards.

         We have limited experience manufacturing our products in the volumes
that will be necessary to achieve significant commercial sales. To achieve our
production volume objectives, we are planning to expand our existing facility,
hire additional personnel, and have certain subassemblies assembled by
third-party manufacturers. We also plan to improve our assembly processes to
increase efficiency.

         We purchase various materials and components from qualified suppliers
and inspect these materials and components in-house. We conduct periodic quality
audits of our key suppliers. Most components, including nickel titanium alloy,
guidewires, the inner release catheter tubing and stainless steel wires are
available from more than one source and we intend to qualify at least two
sources for certain components. One component, the delivery catheter tubing, is
available from only one supplier. This tubing is manufactured by our supplier
using their proprietary intellectual property. Finding a second supplier for
this tubing would require approval from our supplier to license their
intellectual property to a third party. We are clinically testing an internally
developed catheter that will not require a third party license. Another
component, the polyester fiber which causes the necessary tissue in-growth, is
made to our unique specifications and currently has only one qualified source.
However, we have accumulated a quantity of this material that is more than ten
times our anticipated production needs for the next five years. We are in the
process of qualifying a second source for this fiber.

         Our manufacturing facility is subject to periodic inspection by
regulatory authorities. Our quality assurance systems are subject to FDA
regulations. These regulations require that we conduct our product design,
testing, manufacturing and control activities in conformance with these
regulations and that we maintain our documentation of these activities in a
prescribed manner. Our manufacturing facility is licensed by the California
Department of Health Services, Food and Drug Branch and is registered with the
FDA. In addition our facility has received ISO 9001/EN46001 certification and
the European Union

                                       10

<PAGE>


Device Directive 93/42/EEC, allowing us to CE Mark our products after assembling
appropriate documentation.  ISO 9001/EN46001 certification standards for quality
operations  have been  developed to ensure that  companies know the standards of
quality on a worldwide  basis.  Failure to maintain the CE Mark will preclude us
from  selling  our  products  in  Europe.  We  cannot  be  sure  that we will be
successful in maintaining certification requirements in Europe or elsewhere.


RESEARCH AND DEVELOPMENT

         Our research and development activities are performed by a group of
product development, process engineering, regulatory and clinical research staff
of 35 employees. We intend to continue to focus our research and development
efforts on the development and improvement of Essure, manage the on-going
clinical trials, and explore options to improve manufacturing efficiency and
increase capacity for larger scale commercial production while at the same time
reducing costs and improving quality and production yields. Research and
development expenses were $8.0 million, $10.7 million and $4.2 million in 2001,
2000 and 1999, respectively.


INTELLECTUAL PROPERTY


         Our policy is to protect our proprietary position aggressively by,
among other things, filing U.S. and foreign patent applications to protect
technology, inventions and improvements that are important to the development of
our business. In addition to the patent protection we have obtained in our
license from Target Therapeutics, we have filed method patents for the use of
our products in new clinical applications and have pursued patents for several
of our other inventions and developments. As of March 1, 2002, we had eight
pending U.S. patent applications, 15 U.S. patents which have issued to us, and
28 foreign and/or international patent applications pending, with three issued
foreign patents. Our issued patents include claims relevant to guidewire
manipulation, a guidewire design, and a delivery mechanism for a tubal occlusion
device. The pending applications describe various aspects of our proprietary
tubal access platform technology, including claims specific to our Essure tubal
occlusion device. In January 2001, the U.S. Patent and Trademark Office issued a
patent to us granting a number of claims directed to intrafallopian devices,
including devices that are anchored by resilient coils. The patent describes a
variety of techniques to enhance the effectiveness of these devices, including
the use of polyester fibers attached to the device, and also discloses methods
for deployment of these devices using a transcervical (through the cervix)
delivery system.


         We obtained an exclusive license in the field of reproductive
physiology to technology developed by Target Therapeutics, a unit of Boston
Scientific Corporation. In addition, we have granted to Target an exclusive
license to our technology in certain fields of interventional medicine outside
of reproductive physiology. Our exclusive license of Target's technology
encompasses certain technology developed by Target as of February 1, 1996. We do
not have any preferential rights to technology developed by Target after that
date. The license from Target includes patents which relate to the design of its
micro-catheters (the initial patent for which expires in June 2006), certain
aspects of guidewire design and other important aspects of micro-catheter,
guidewire and micro-coil technologies. If these Target patents were invalidated,
our proprietary position in the marketplace would be severely compromised. In
addition, should any of our technology, including that licensed to us by Target,
be found to infringe upon a third party's patent rights, we may be unable to
sell our products. Finally, Target has the right to terminate our license if we
materially breach the terms of the license. If the Target license were
terminated, we might be unable to develop or sell the Essure tubal occlusion
system or other products covered by the licensed Target patents.

         We believe that we are free to make and sell our products, and that our
products and their intended use do not infringe any valid patent rights of any
other party. However, a third party has brought to our attention a patent and
certain claims from a pending patent application owned by the third party. This
third party has indicated that they believe that the claims of their patent and
application may cover our product and its use. Because we believe that some or
all of the third party's claims should be included within our own patents, we
have requested that the United States Patent and Trademark Office (PTO) declare
an interference. An interference is a proceeding within the PTO to determine
which party was the first to invent, and which party is thereby entitled to
ownership of the claims. We believe that we filed our patent

                                       11

<PAGE>


applications  for our products before the third party filed the application that
issued as the third party's  patent,  and that we are entitled to any patentable
claims now  appearing in the third party's  patent which cover our products.  We
cannot assure you, however,  that the PTO will declare an interference,  that we
invented our products  prior to the third party's date of invention,  or that we
will prevail in an interference  proceeding if it is declared by the PTO. If the
PTO refuses to declare an interference, or if third party's claims are upheld in
the interference proceeding,  the third party may be able to successfully assert
its patent  against us. We also cannot  predict with certainty the final outcome
if the  third  party  attempts  to  assert  the  claims  of its  pending  patent
application  against us, if those claims are  ultimately  contained in an issued
patent.


GOVERNMENT REGULATION

         The research, development, manufacture, labeling, distribution and
marketing of our products are subject to extensive and rigorous regulation by
the FDA and, to varying degrees, by state and foreign regulatory agencies.

U.S. REGULATION

         Under the Federal Food, Drug, and Cosmetic Act, the FDA regulates the
research, clinical testing, manufacturing, safety, labeling, storage, record
keeping, advertising, distribution, sale and promotion of medical devices in the
U.S. Our Essure device is regulated by the FDA and will require approval by the
FDA prior to commercialization. Conducting clinical testing in support of and
preparing FDA approval applications and subsequent FDA review of these
applications is an expensive, lengthy and uncertain process. If we do not comply
with applicable regulatory requirements, we may be subject to, among other
things, warning letters, fines, injunctions, civil penalties, recall or seizure
of products, total or partial suspension of production, refusal of the
government to grant pre-market clearance or pre-market approval for devices,
withdrawal of approvals and criminal prosecution.

         The FDA has the authority to require clinical testing of medical
devices, including Essure. An Investigational Device Exemption, or IDE
application must be approved prior to commencement of clinical trials. An IDE
application must be supported by data demonstrating safety for clinical use,
typically including the results of laboratory and animal testing. If the IDE
application is approved by the FDA, clinical trials may begin at a specific
number of investigational sites with a maximum number of patients, as approved
by the agency. Sponsors of clinical trials are permitted to sell those devices
distributed in the course of the study provided such costs do not exceed
recovery of the costs of manufacture, research, development and handling.
Clinical trials must be conducted in accordance with FDA regulations. We have
received an IDE for each of our clinical studies of our Essure device.

         The FDA has required that we obtain pre-market approval prior to
marketing our Essure device in the U.S. A PMA application must be supported by
extensive data, including laboratory, pre-clinical and clinical trial data to
prove the safety and effectiveness of the device as well as extensive
manufacturing information. Following receipt of a pre-market approval
application, if the FDA determines that the application is sufficiently complete
to permit a substantive review, the FDA will "file" the application. The
pre-market approval process can take over a year from initial filing and
requires the submission of extensive supporting data and clinical information.
We cannot assure you that we will be able to obtain necessary pre-market
approval or other approvals to market Essure or any other products we may
develop on a timely basis, if at all. Moreover, regulatory clearances, if
granted, may include significant limitations on the indicated uses for which a
product may be marketed. Delays in receipt of or failure to receive such
clearances or approvals, the loss of previously received clearances or
approvals, significant limitations on indicated uses or our failure to comply
with existing or future regulatory requirements will delay or prevent us from
generating product revenues.

         The FDA imposes numerous requirements with which medical device
manufacturers must comply in order to maintain regulatory approvals. FDA
enforcement policy strictly prohibits the promotion of approved medical devices
for uses other than those specifically cleared for marketing by the FDA. We will
be required to adhere to applicable FDA and other regulations regarding Quality
Systems, including testing,

                                       12

<PAGE>


control and  documentation  requirements.  Ongoing  compliance  with the Quality
System  Regulations  and  other  applicable  regulatory   requirements  will  be
monitored through periodic inspections by federal and state agencies,  including
the FDA and the  California  Department of Health  Services,  as well as foreign
health  authorities.  In July 1994, our San Carlos facility was inspected by the
California  Department  of Health  Services  with no  observations,  and we were
subsequently  granted a California  medical  device  manufacturing  license.  In
February  1997,  this  facility was  inspected by the  California  Department of
Health Services,  and granted a California drug manufacturing  license. In March
1997, we were  inspected by the FDA, with no action  indicated and we became ISO
9001 certified in December  2000. We are required to provide  information to the
FDA on death or serious injuries which our medical devices have allegedly caused
or with which they have associated,  as well as product  malfunctions that would
likely cause or contribute to death or serious injury if the malfunction were to
recur.  If the FDA believes that a company is not in compliance  with the law or
regulations,  it can institute proceedings to detain or seize products,  issue a
recall, enjoin future violations and assess civil and criminal penalties against
the company,  its officers and its employees.  We are also subject to regulation
by the  Occupational  Safety and Health  Administration  and by other government
entities.  Regulations  regarding the  manufacture  and sale of our products are
subject to change.  We cannot  predict what impact,  if any,  such changes might
have on our ability to manufacture, market and distribute Essure.

         Export sales to certain countries of investigational devices or devices
not cleared for commercial distribution in the U.S. are subject to FDA export
requirements. An investigational device may be exported under an IDE, or to 24
listed countries without FDA approval, or to other countries after FDA approval
for export.


INTERNATIONAL REGULATION

         Sales of medical devices outside of the U.S. are subject to
international regulatory requirements that vary widely from country to country.
The time required to obtain clearance required by foreign countries may be
longer or shorter than that required for FDA clearance, and requirements for
licensing may differ significantly from FDA requirements. Essure is listed with
Australia's Therapeutic Goods Agency. The European Union has promulgated rules
which require manufacturers of medical products to obtain the right to affix to
their products the CE Mark, an international symbol of adherence to quality
assurance standards and compliance with applicable European Union Medical Device
Directives. We received permission to affix the CE Mark to Essure in February
2001. Many countries in which we currently operate or intend to operate either
do not currently regulate medical devices or have minimal registration
requirements. However, these countries may develop more extensive regulations in
the future that could delay or prevent us from marketing Essure in these
countries.


COMPETITION

         As we commercialize our Essure device, we expect to compete against
other surgical procedures for permanent birth control, mechanical devices and
other contraceptive methods, including existing and future methods of reversible
birth control.

         We are aware of companies that are in the early stages of development
of non-incisional permanent birth control devices, and other companies may
develop products that could compete with Essure. We also compete with other
companies for clinical sites to conduct trials.

         The medical device industry is characterized by rapid and significant
technological change. The length of time required for product development and
regulatory approval plays an important role in a company's competitive position.
As a result, our success will depend in part on our ability to respond quickly
to medical and technological changes through the development and
commercialization of new products. Competitive factors may render Essure or
future products obsolete or noncompetitive or reduce demand for Essure.

                                       13

<PAGE>


PRODUCT LIABILITY AND INSURANCE

         The manufacture and sale of medical products involve an inherent risk
of exposure to product liability claims and product recalls. Although we have
not experienced any product liability claims to date, we cannot assure you that
we will be able to avoid significant product liability claims and potential
related adverse publicity. We currently maintain product liability insurance
with coverage limits of $10,000,000 per occurrence and an annual aggregate
maximum of $10,000,000, which we believe is comparable to that maintained by
other companies of similar size serving similar markets. However, there can be
no assurance that product liability claims in connection with clinical trials or
sale of our products will not exceed such insurance coverage limits, which could
have a material adverse effect on us, or that such insurance will continue to be
available on commercially reasonable terms or at all. In addition, we may
require increased product liability coverage as more of our products are
commercialized. Such insurance is expensive and in the future may not be
available on acceptable terms, if at all. A successful product liability claim
or series of claims brought against us in excess of our insurance coverage or a
recall of our products could have a material adverse effect on our business,
financial condition and results of operations.


EMPLOYEES

         As of February 28, 2002, we had 115 full-time employees, consisting of
20 in product development and process engineering, 47 in manufacturing, 23 in
sales and marketing, 15 in clinical/regulatory affairs/quality assurance and 10
in general and administrative functions. We believe that our future success will
depend in part on our ability to attract, hire and retain qualified individuals.
None of our employees is represented by a labor union or covered by a collective
bargaining agreement, and we believe our employee relations are good.

                                       14

<PAGE>


EXECUTIVE OFFICERS OF THE COMPANY

         The executive officers and other key members of the Company's
management team and their ages as of March 27, 2002 are as follows:

________________________________________________________________________________
Name                               Age    Position
________________________________________________________________________________

Steven Bacich..............         40    President, CEO and Director
________________________________________________________________________________

Susan Aloyan...............         50    Vice President, Regulatory Affairs
________________________________________________________________________________
Steven Bowman..............         57    Senior Vice President, Sales and
                                          Marketing
________________________________________________________________________________

Charles S. Carignan,M.D....         37    Vice President, Clinical Research and
                                          Medical Affairs
________________________________________________________________________________
                                    56    Vice President, Operations
William H. Dippel..........
________________________________________________________________________________

                                          Senior Vice President, Clinical
Cynthia M. Domecus.........         42    Research and Regulatory Affairs
________________________________________________________________________________

Glen K. Furuta.............         40    Vice President, Finance and
                                          Administration and CFO
________________________________________________________________________________

Yves Guillemain d'Echon....         46    President, Conceptus Europe
________________________________________________________________________________

Ashish Khera...............         32    Vice President, Research and
                                          Development
________________________________________________________________________________

Stan Van Gent..............         40    Vice President, Marketing
________________________________________________________________________________

         MR.  BACICH has served as President,  CEO and a director  since January
2000. Mr. Bacich joined Conceptus in March 1997 as Vice President,  Research and
Development.  Prior to joining  Conceptus,  Mr.  Bacich  spent  seven years as a
co-founder and Director of New Product  Development for Imagyn Medical,  Inc., a
medical  device  manufacturer  of  gynecological  products for  infertility  and
endoscopic procedures. From 1987 to 1989, Mr. Bacich held engineering positions
in research and development most recently as Senior Staff Engineer, Business
Development for the Edwards Less Invasive Surgery Division of Baxter. From 1985
to 1987, Mr. Bacich held research and development positions at Mentor
Corporation, a reconstructive surgery and urology company. From 1983 to 1985,
Mr. Bacich held research and development positions at American Medical Optics,
an ophthalmic medical device manufacturer and Division of American Hospital
Supply Corporation. Mr. Bacich holds a B.S. in Biomedical Engineering from the
University of California, San Diego.

         MS. ALOYAN joined Conceptus as Vice President of Regulatory  Affairs in
July  2001.  Prior  to  joining  the  Company,  she was  Corporate  Director  of
Regulatory  Affairs,  Quality  Assurance  and Clinical  Affairs  since 1996 with
Gynecare/Ethicon, a Johnson & Johnson company. From 1995 to 1996, Ms. Aloyan was
the  Associate  Director of  Regulatory  Affairs at  CardioGenesis  Corporation.
Between 1983 to 1995,  Ms. Aloyan held  progressively  responsible  positions in
regulatory affairs for Syntex  Pharmaceuticals and Barnes Hind Corporation.  Ms.
Aloyan holds a M.A. in Organization  Management from University of Phoenix and a
B.S. in Management from Golden Gate University.

         MR.  BOWMAN  joined  Conceptus  as Senior Vice  President  of Sales and
Marketing in February 2002.  Prior to joining  Conceptus,  Mr. Bowman was Senior
Vice President of Marketing and Sales for MiniMed,  Inc., a provider of external
programmable  insulin pumps and glucose  monitoring  systems,  from 1999 to 2000
until MiniMed was acquired by Medtronics,  Inc. Prior to MiniMed, Mr. Bowman was
Vice President of International  Sales and Marketing from 1992 to 1999 at Sulzer
Intermedics,  a  manufacturer  and  distributor  of  implantable  and disposable
medical devices. Prior to Sulzer, Mr. Bowman held senior-level

                                       15

<PAGE>


positions at Biotronik and Medtronics. Mr. Bowman holds a B.A. in Marketing from
California State University, San Diego.

         DR.  CARIGNAN joined  Conceptus as Vice President of Clinical  Research
and Medical Affairs in January 2001.  Prior to joining  Conceptus,  Dr. Carignan
has been an  advisor  to  Conceptus  since  1995  and has  been a member  of the
Company's  scientific  advisory board since 1996. Dr. Carignan has been a leader
in the field of reproductive  health and contraceptive  development for 15 years
as a research  associate for the  Population  Council and as Vice  President and
Medical Director of AVSC International (currently named EngenderHealth).  He has
been a consultant with many leading  organizations  in  reproductive  health and
family   planning,    including   Pathfinder   International,    Family   Health
International,  John Snow, Inc., JHPIEGO, the Institute for Reproductive Health,
ISTI,  International  Planned  Parenthood  Federation  (IPPF) in London  and the
Planned  Parenthood  Federation of America,  among others. Dr. Carignan received
his  undergraduate  degree from Yale  University,  his M.D.  from the College of
Physicians and Surgeons of Columbia University and trained in general surgery at
Columbia-Presbyterian Medical Center.

         MR.  DIPPEL  joined  Conceptus as Vice  President of  Operations in May
2001.  Mr. Dippel has nearly 30 years of operations  experience,  primarily with
medical device and diagnostic companies.  Prior to joining Conceptus, Mr. Dippel
was the Vice President of Operations for  PercuSurge,  a manufacturer of embolic
protection devices which was acquired by Medtronic Corporation. Previously, from
1997 to 2000  Mr.  Dippel  was  Vice  President  of  Operations  for the  Target
Therapeutics  division of Boston Scientific  Corporation.  From 1994 to 1997, he
worked for  Boehringer  Mannheim,  first as Vice  President  of  Operations  and
Product  Development,  and then as Vice  President  for U.S.  Operations  of the
Patient Care Group. Mr. Dippel holds a BS degree in Mechanical  Engineering from
California State Polytechnic University.

         MS. DOMECUS has served as Senior Vice President,  Clinical Research and
Regulatory  Affairs since May 1996. Ms. Domecus joined  Conceptus in May 1994 as
Vice President of Clinical Research, Regulatory Affairs and QA. From 1992 to
1994, she served as Senior Director and Director of Regulatory and Quality
Affairs for Systemix, a biotechnology firm. From 1986 to 1992, Ms. Domecus
served in varying regulatory affairs capacities with Collagen Corporation, a
biomedical device manufacturer, serving as Director of Regulatory Affairs from
January 1991 to March 1992. Ms. Domecus has been certified by the Regulatory
Affairs Certification Board of the Regulatory Affairs Professional Society. In
1995, Ms. Domecus was appointed by the FDA to its OB/GYN Advisory Panel as the
Industry Representative and served on the panel until January 2001. Ms. Domecus
holds a B.A. in Psychology from the University of the Pacific.

         MR.  FURUTA  joined   Conceptus  as  Vice   President  of  Finance  and
Administration  and Chief Financial Officer in February 2001. From 1998 to 2001,
he was Vice President of Finance and  Administration and Chief Financial Officer
of Solution Soft Systems,  Inc., a privately held software  company based in San
Jose,  CA.  Prior to that,  from 1996 to 1998,  he served as Vice  President  of
Finance  and   Administration   and  Chief  Financial   Officer  of  Progressive
Angioplasty  Systems,  Inc.  where he supported the company  through its private
financing and its  acquisition by United States  Surgical  Corporation.  He also
served as Controller and Officer of Heart  Technology,  Inc. through its initial
public offering and prior to its acquisition by Boston  Scientific  Corporation.
Mr.  Furuta  received  his MBA from The  Wharton  School  of the  University  of
Pennsylvania  and a B.A.  in  Business  Administration  from the  University  of
Washington and is a Certified Public Accountant.

         MR.  GUILLEMAIN  d'Echon  joined the  Company as a  consultant  and was
appointed  President of Conceptus Europe in November 2001 to oversee  marketing,
partnering and distributor  relations  throughout Europe. From 1995 to 2000, Mr.
Guillemain  d'Echon  served as European  President  and Chairman of the Board of
Sofamor  Danek  Medtronic  France.  From 1991 to 1995,  he  served  as  European
Business Director of the Interventional  Cardiovascular  Surgery Divisions.  Mr.
Guillemain d'Echon studied for the CEDEP at INSEAD, Fontainbleau, France.

         MR. KHERA joined  Conceptus in April 1995 as a Senior Project  Engineer
and was promoted to Vice  President,  Research and  Development in January 2000.
Mr. Khera was employed as a Project Engineer by Pfizer,  Inc. from 1992 to 1995,
where  he  developed  medical  devices  for  use in  cardiovascular  and  cancer

                                       16

<PAGE>


treatment applications.  Mr. Khera holds a B.S. degree in Mechanical Engineering
from Carnegie Mellon University.

         MR. VAN GENT joined  Conceptus  in February  2000 as Vice  President of
Marketing.  From  1996 to  2000,  Mr.  Van  Gent  served  in  varying  marketing
capacities with Valleylab and was Director of International  Marketing from 1998
to  2000  where  he  was  responsible  for  international  market  introduction,
reimbursement,  strategic  positioning,  and branding for $70 million of product
revenues. Mr. Van Gent has also held various positions in marketing,  sales, and
engineering over the past ten years for Allergan Medical Optics,  Imagyn Medical
and Cabot Medical.  Mr. Van Gent holds a B.S.  degree in Biomedical  Engineering
from the University of California, San Diego.

                                       17


<PAGE>


ITEM 2.  PROPERTIES

         We are headquartered in San Carlos, California where we lease two
buildings occupying approximately 36,400 square feet of office, research and
development, and manufacturing space under leases that expire on December 31,
2003. Additionally, we also have two sales and marketing offices in Australia
and France, which total no more than 1,000 square feet of combined office space.
We believe that our current facilities are adequate for our immediate needs and
that we will be able to renew our leases or obtain additional space as needed.


ITEM 3.  LEGAL PROCEEDINGS

         From time to time the Company is involved in legal proceedings arising
in the ordinary course of business. The Company believes there is no litigation
pending that could have, individually or in the aggregate, a material adverse
effect on its financial position, results of operations or cash flows.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of stockholders of the Company
during the fourth quarter of the fiscal year ended December 31, 2001.

                                       18


<PAGE>


                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

         Our common stock has been traded on the Nasdaq National Market under
the symbol CPTS since the effective date of our initial public offering on
February 1, 1996. The following table presents the high and low closing sale
prices for our common stock as reported on the Nasdaq National Market for the
period indicated.

                                                        HIGH               LOW

Year Ended December 31, 2001:
  Fourth Quarter                                       $25.23             $14.55
  Third Quarter                                        $18.19             $12.49
  Second Quarter                                       $15.20             $ 7.56
  First Quarter                                        $15.50             $ 8.94

Year Ended December 31, 2000:
  Fourth Quarter                                       $13.13             $ 7.50
  Third Quarter                                        $11.44             $ 7.00
  Second Quarter                                       $ 8.00             $ 3.06
  First Quarter                                        $ 9.06             $ 2.50


  As of February 28, 2002, there were approximately 176 stockholders of record.

         We have never paid cash dividends on our common stock and do not
anticipate paying cash dividends in the foreseeable future. We intend to retain
any future earnings for reinvestment in our business. Any future determination
to pay cash dividends will be at the discretion of the board of directors and
will be dependent upon our financial condition, results of operations, capital
requirements and such other factors as the board of directors deems relevant.

         On November 5, 2001 we completed a private placement under Regulation D
of the Securities Act of 1933, as amended, to select institutional and other
accredited investors of approximately 2.3 million shares of newly issued common
stock at $13.25 per share. The net proceeds to the Company, after fees and
expenses, were $28.7 million.

                                       19


<PAGE>


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following table presents selected consolidated financial data of
the Company. This historical data should be read in conjunction with the
attached consolidated financial statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in Item 7 of this Form 10-K.

<TABLE>
<CAPTION>


                                                                    Years Ended December 31,
                                              ________________________________________________________________________
                                                 2001            2000          1999           1998            1997
                                              ____________   ____________   ____________   ____________   ____________
<S>                                            <C>               <C>           <C>           <C>             <C>

STATEMENT OF OPERATIONS DATA:                                  (In thousands, except per share data)
Net sales                                         $ 401             $ -           $ 95          $ 449           $1,426
                                              ____________   ____________   ____________   ____________   ____________

Operating costs and expenses:
    Cost of sales and start-up
      manufacturing costs                         1,456              -              137          1,702           3,516
   Research and development                       7,983           10,739          4,251          4,317           5,429
   Selling, general and administrative            9,776            5,012          3,729          5,349           6,323
                                              ____________   ____________   ____________   ____________   ____________
    Total operating costs and expenses           19,215           15,751          8,117         11,368          15,268
                                              ____________   ____________   ____________   ____________   ____________
Operating loss                                  (18,814)         (15,751)        (8,022)       (10,919)        (13,842)
Recovery of legal defense costs                       -              586              -              -               -
Interest and other income, net                      740              712            723          1,254           1,784
                                              ____________   ____________   ____________   ____________   ____________
      Net loss                                 $(18,074)        $(14,453)       $(7,299)       $(9,665)       $(12,058)
                                              =============  ============   ============   ============   ============

Basic and diluted net loss per share             $(1.33)          $(1.37)        $(0.76)        $(1.01)         $(1.29)
                                              =============  ============   ============   ============   ============
Shares used in computing basic and
diluted net loss per share                       13,561           10,559          9,662          9,562           9,381
                                              =============  ============   ============   ============   ============


                                                                             December 31,
                                              ________________________________________________________________________
                                                  2001           2000           1999           1998           1997
                                              ____________   ____________   ____________   ____________   ____________
BALANCE SHEET DATA:                                                         (In thousands)
Cash, cash equivalents and short-term
   investments *..............................  $33,803         $12,493         $10,769        $17,071         $27,058
Working capital...............................   31,623           9,282          10,030         16,500          26,608
Total assets..................................   37,778          14,106          11,903         19,031          29,480
Long-term portion of debt and capital lease
   obligations                                        -               -              -              -                1
Accumulated deficit...........................  (85,222)        (67,148)        (52,695)       (45,396)        (35,731)
Total stockholders' equity....................   33,175           9,959          10,914         18,014          27,504

* INCLUDES RESTRICTED CASH OF $69,000 AT DECEMBER 31, 2001

</TABLE>


                                       20

<PAGE>


ITEM 7. 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 CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED NOTES THERETO. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. 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 "RISK FACTORS" AND ELSEWHERE IN
THIS FORM 10-K.

OVERVIEW



         We develop, manufacture and market an innovative and proprietary
non-incisional permanent birth control device for women. Our EssureTMprocedure,
previously known as STOP (Selective Tubal Occlusion Procedure), delivers a soft,
flexible micro-insert into a woman's fallopian tubes and is designed to provide
permanent birth control by causing a benign tissue in-growth into the device
that blocks the fallopian tubes. The Essure procedure is typically performed as
an outpatient procedure and is intended to be a less invasive alternative to
tubal ligation, the leading form of birth control in the U.S. and worldwide.

         Essure is listed with Australia's Therapeutic Goods Administration,
which allows us to market and sell in Australia. In the second quarter of 2001,
we began commercial sales in Australia, received marketing clearance in
Singapore and began to sell Essure to one of the largest public hospitals in
Singapore. In the first quarter of 2001, we obtained CE Mark to Essure, which
allowed us to sell Essure throughout the European Union, subject to compliance
with local regulations such as registration with the Ministry of Health and/or
particular requirements regarding labeling or distribution. We made our first
regular commercial sales of Essure in Europe during the fourth quarter of 2001.

         In North America, we recently received Canadian approval to market
Essure. In the U.S, we have successfully submitted and completed our first
Premarket Approval ("PMA") application module to the United States Food and Drug
Administration ("FDA"). In February 2002, we submitted our second module to FDA.
Our goal is to complete our PMA submission to the FDA in the second quarter of
2002. We intend to begin selling Essure in the U.S. following FDA approval,
which we expect to receive in 2003.

         Our future revenues and results of operations may fluctuate
significantly from quarter to quarter and will depend upon, among other factors,
the progress of clinical trials, actions relating to regulatory and
reimbursement matters, the rate at which we establish domestic and international
distributors or marketing partners, the extent to which Essure gains market
acceptance, the timing and size of distributor purchases, the introduction of
competitive products and other factors discussed in this Form 10-K.

         Due to minimal success of our former TTAC and STARRT reproductive
products and the ERA and FUTURA sleeves for hysteroscope procedures, a major
restructuring plan was implemented in mid-1998 to eliminate the manufacturing
operation of those products. We also eliminated associated sales and marketing
personnel and substantially reduced our administrative personnel. The purpose of
the restructuring plan was to redirect and focus our resources and research and
development efforts on our Essure device.


RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2001 AND 2000

         Net sales in 2001 were $401,000, of which 77% were from Australia, 14%
from Singapore and 9% from Europe. There were no sales in 2000. We do not
currently have revenues within the United States.

         Cost of sales and start-up manufacturing costs were $1.5 million in
2001 as compared to none in 2000. Our cost of sales in 2001 consists primarily
of start-up manufacturing costs related to the commercialization of Essure.

                                       21

<PAGE>


         Research and development expenses, which include product development,
clinical, regulatory, quality assurance, and process engineering decreased 25%
in 2001 to $8.0 million from $10.7 million in 2000. The decrease in 2001 is
primarily due to the completion of pivotal trial patient enrollment in early
2001. However, we expect research and development expenses to increase as we
continue to fund clinical trials in support of regulatory and reimbursement
approvals, improve manufacturing processes to support growing commercial needs,
continue investment in product development to improve our current product and
attain our strategic objectives.

         Selling, general and administrative expenses increased 96% in 2001 to
$9.8 million from $5.0 million in 2000, due primarily to addition of marketing
personnel, costs associated with advertising and promotions in support of the
commercial introduction of Essure in Australia and the set up of a European
subsidiary. Selling, general and administrative expenses are expected to
increase in 2002 as we continue to expand our marketing efforts in pursuit of
reimbursement approvals in the European Union and other countries, and possibly
prepare for U.S. market launch for Essure depending upon the timing of FDA
approval. Additionally, we will need to fund growth in administrative and sales
personnel and other general corporate activities necessary to support overall
corporate growth.

         Net interest and other income in 2001 was $740,000, which is comparable
with what we earned in 2000. We invest our excess cash in high quality,
short-term commercial paper and government securities.

         As a result of our net loss of $18.1 million, we incurred no income tax
expense in 2001. As of December 31, 2001, the Company had net operating loss
carry forwards for federal and state income tax purposes of approximately $78.0
million and $37.5 million, respectively. In addition, at December 31, 2001, the
Company had federal and state research credit carry forwards of approximately
$1.3 million and $1.2 million, respectively. The net operating loss and credit
carry forwards described above will expire at various dates beginning in the
years 2002 through 2021, if not utilized. Use of the net operating losses and
credits may be subject to a substantial annual limitation by the Internal
Revenue Service. The annual limitation may result in the expiration of net
operating losses and credits before we can use them to reduce future earnings,
if any.

         We have a limited history of operation and have experienced significant
losses since inception. We expect our operating losses to continue for at least
the next few years as we continue to expend substantial resources to fund
research and development activities, increase our manufacturing capabilities and
develop our sales and marketing strategies to market Essure.


YEARS ENDED DECEMBER 31, 2000 AND 1999

         In July 1998, we eliminated operations for our TTAC, STARRT, ERA and
FUTURA products. Thus, sales and cost of sales in 1999 consisted of residual
quantities of discontinued products.

         Research and development expenses, which include clinical, regulatory,
quality assurance and pilot manufacturing expenses increased 149% in 2000 to
$10.7 million compared with $4.3 million in 1999. The increase in 2000 is due
primarily to:

         - clinical and  recruiting  costs for our Essure Pivotal trial;
         - scale up of our pilot  manufacturing  and quality  operations;  and
         - ongoing products development costs for our Essure.

         Selling, general and administrative expenses were $5.0 million in 2000
as compared to $3.7 million in 1999. The increase of 35% is primarily due to
efforts related to our commercial introduction of Essure in Australia.

         In 2000, we received $586,000 from our Directors' and Officers'
liability insurance policy related to legal defense costs recovery related to a
1997 sexual harassment lawsuit. We and all other defendants

                                       22

<PAGE>


were found not guilty by unanimous  jury vote in December 1999. We do not expect
additional recovery in the future.

         Net interest and other income in 2000 was $712,000, which is comparable
with what we earned in 1999.

         Net loss increased 99% to $14.5 million in 2000 compared with $7.3
million in 1999 due primarily to clinical and patient recruiting costs for our
pivotal trial and increased effort to develop and market Essure.


CRITICAL ACCOUNTING POLICIES

            The consolidated financial statements include accounts of the
company and all wholly-owned subsidiaries. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
in certain circumstances that affect amounts reported in the accompanying
consolidated financial statements and related footnotes. 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. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies described
below. However, application of these accounting 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.

         INVENTORIES. Inventories are stated at the lower of cost or market,
cost being determined on the first-in, first-out method. Reserves for slow
moving and obsolete inventories are provided based on historical experience and
current product demand. In addition, reserves are established to write inventory
down to net realizable value. We evaluate the adequacy of these reserves
quarterly.

         REVENUE RECOGNITION. Revenue on product sales is recognized when
persuasive evidence of an arrangement exists, the price is fixed and final,
delivery has occurred and there is a reasonable assurance of collection of the
sales proceeds. We obtain written purchase authorizations from our customers for
a specified amount of product at a specified price and consider delivery to have
occurred at the time of shipment.

         USE OF ESTIMATES. The preparation of financial statements requires our
management to make estimates and assumptions that affect the reported amount of
assets and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Management analyzes historical returns, current economic
trends and changes in customer demand and acceptance of our products when
evaluating the adequacy of the sales return and other allowances. Management
specifically analyzes accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and
changes in our customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts.

         FOREIGN  CURRENCY  TRANSLATION.  Assets  and  liabilities  of  non-U.S.
subsidiaries  that operate where the local currency is the  functional  currency
are translated to U.S.  dollars at exchange rates in effect at the balance sheet
date with the resulting translation  adjustments recorded directly to a separate
component of accumulated other comprehensive income. Income and expense accounts
are translated at average  exchange rates during the year. Where the U.S. dollar
is the functional currency, translation adjustments are recorded in income.

         Under the relevant accounting guidance, the treatment of these
translation gains or losses is dependent upon management's determination of the
functional currency of each subsidiary. Generally, the currency in which the
subsidiary transacts a majority of its transactions would be considered the
functional currency but any dependency upon the parent and the nature of the
subsidiary's operation must also be considered. Based on our assessment of the
factors discussed above, we consider the U.S. dollar to be the functional
currency for each of our international subsidiaries. Accordingly, gains and
losses from foreign

                                       23

<PAGE>


currency  transactions,  which were not material for any of the years presented,
are included in interest and other  income,  net in the  Company's  consolidated
statements of operations.


RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001,  the Financial  Accounting  Standard  Board (FASB) issued
Statement  of  Financial   Accounting   Standard   (SFAS)  No.  141,   "Business
Combinations."  SFAS No. 141  requires  the purchase  method of  accounting  for
business  combinations   initiated  after  June  30,  2001  and  eliminates  the
pooling-of-interests  method.  SFAS  No.  141 was  effective  for  all  business
combinations  initiated after June 30, 2001. The adoption of SFAS No. 141 had no
impact on our financial statements.

         In July 2001, the FASB issued SFAS No.142, "Goodwill and Other
Intangible Assets", which is effective for fiscal years beginning after December
15, 2001. SFAS No. 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, SFAS No. 142 includes provisions upon
adoption for the reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles. We
believe that the adoption of SFAS No. 141 will not have a significant impact on
our financial statements.

         In August  2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
Retirement  Obligations,"  which is effective for us beginning fiscal 2003. SFAS
No. 143  requires  that the fair value of a  liability  for an asset  retirement
obligation  be  recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made, with the associated  asset  retirement costs
capitalized as part of the carrying  amount of the long-lived  asset. We believe
the  adoption of SFAS No. 143 will not have a material  impact on our  financial
statements.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses significant
issues relating to the implementation of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and develops a single accounting method under which long-lived assets that are
to be disposed of by sale are measured at the lower of book value or fair value
less cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and its provisions are to be applied prospectively. We believe
that the adoption of SFAS No. 144 will not have a significant impact on our
financial statements.

         In November 2001, the FASB's Emerging Task Force (EITF) reached a
consensus on EITF Issue 01-09, "Accounting for Consideration Given by a Vendor
to a Customer or a Reseller of the Vendor's Products," which is codification of
EITF 00-14, 00-22 and 00-25. This issue presumes that consideration from a
vendor to a customer or reseller of the vendor's products to be reduction of the
selling prices of the vendor's products to be a reduction of the selling prices
of the vendor's products and, therefore, should be characterized as a reduction
of revenue when recognized in the vendor's income statement and could lead to
negative revenue under certain circumstances. Revenue reduction is required
unless consideration relates to a separate identifiable benefit and the
benefit's fair value can be established. This issue is effective for periods
beginning after December 15, 2001. We are currently assessing the impact of the
adoption of these issues on our financial statements.


LIQUIDITY AND CAPITAL RESOURCES

         We have experienced significant operating losses since inception and,
as of December 31, 2001, had an accumulated deficit of $85.2 million.

         As of December 31, 2001, we had cash, cash equivalents, restricted cash
and short-term investments of approximately $33.8 million compared with $12.5
million at December 31, 2000. The

                                       24

<PAGE>


increase in cash  balances as of December 31, 2001 was primarily a result of net
cash  proceeds  from two  private  placements  of our common  stock in April and
November 2001.

         Net cash used in operating activities increased to $18.6 million in
2001 compared with $10.6 million in 2000. The increase in net cash used in 2001
was primarily related to funding net operating losses, a result of increased
sales and marketing efforts related to the commercialization of Essure in
Australia and Europe, payments related to our clinical trials, and scale up of
our manufacturing and quality operations in order to transition from pilot
manufacturing to commercialization. Net cash used in operating activities
increased to $10.6 million in 2000 compared with $6.3 million in 1999, due to
enrollment for the pivotal clinical trial and marketing campaign for the
commercialization of Essure in Australia.

         Net cash provided by investing activities was $6.6 million in 2001 and
consisted primarily of matured short-term investments partially offset by
purchases of investments and capital expenditures used to expand our
manufacturing operations and fund leasehold improvements for planned growth. Net
cash used in investing activities in 2000 of $1.5 million were primarily capital
expenditures used in anticipation of planned growth in employees, facilities and
corporate infrastructures, while net cash used by investing activities in 1999
of $1.8 million were primarily the result from timing differences in our
investment portfolio mix between cash equivalent and short-term investments.

         Net cash provided by financing activities was $41.1 million in 2001 and
consisted of net proceeds from the sale and issuance of a total of 4.0 million
shares of common stock in two rounds of private placement transactions in April
and November of 2001. In 2000, net cash provided by financing activities of
$13.1 million was from the sale and issuance of 1.9 million shares of common
stock in a private placement transaction in July 2000. There were no significant
financing activities in 1999.

         We have operating lease obligations on our current building facilities
and equipment leases. Estimated net lease payments due within a year and years
1-3 total $1.3 million and $1.5 million, respectively. We also have long-term
obligations related to our Phase II clinical study and Pivotal trial. Estimated
clinical trial liabilities due within a year and years 1-3 total $422,000 and
$486,000, respectively. Additionally, we have a $69,000 standby letter of credit
commitment representing a deposit held under an equipment lease. The letter of
credit is renewable every year over the next five years.

         We estimate that our existing capital resources will be sufficient to
meet our cash requirements into the first half of 2003. Accordingly, we will
require additional financing and therefore, will 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 research and development
programs or reduce our selling and marketing activities. We expect to have
negative cash flows from operations through at least 2003. Our future liquidity
and capital requirements will depend upon many factors, including, among others:

       o        timing of receipt of U.S. and international governmental
                clearances and approvals;
       o        resources devoted to establish sales and marketing and
                distribution capabilities;
       o        resources devoted to increasing our manufacturing capacity;
       o        the rate of product adoption by doctors and patients; and
       o        obtaining medical insurance coverage for our Essure.


                                       25


<PAGE>


RISK FACTORS

         IN ADDITION TO THE OTHER INFORMATION IN THIS FORM 10-K, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING CONCEPTUS AND OUR BUSINESS.
THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH BELOW AND ELSEWHERE IN THIS FORM 10-K.

         WE HAVE A HISTORY OF OPERATING LOSSES, WE EXPECT TO INCUR SIGNIFICANT
OPERATING LOSSES FOR THE FORESEEABLE FUTURE, AND WE MAY NEVER ACHIEVE OR
MAINTAIN PROFITABILITY.

         We have incurred significant operating losses since our inception in
1992, including operating losses of $18.8 million, $15.8 million and $8.0
million in the years ended December 31, 2001, 2000 and 1999, respectively. We
expect to continue to incur significant operating expenses as we complete the
pivotal trial of Essure for FDA approval and expand sales and marketing efforts.
We expect to continue to incur significant operating losses until sufficient
revenues can be generated to offset these expenses. We may not be able to
generate these revenues, and we may never achieve profitability. Our failure to
achieve and sustain profitability could negatively impact the market price of
our common stock.

         WE ARE A ONE-PRODUCT COMPANY. OUR EFFORTS TO DEVELOP ESSURE MAY BE
UNSUCCESSFUL, WHICH WOULD HARM OUR BUSINESS AND FORCE US TO CURTAIL OR CEASE
OPERATIONS.

         We are developing Essure, a medical device and procedure designed to
provide a non-incisional alternative to tubal ligation. The Essure device is a
proprietary micro-insert designed to be placed permanently into each fallopian
tube using our minimally invasive transcervical tubal access catheter system.
Essure is our only product and we are wholly dependent on it. Clinical trials of
Essure are still ongoing. Although we have completed enrollment in our Pivotal
trial and we have submitted two PMA modules to the FDA, we cannot assure you
that we will receive FDA approval within the time we anticipate, or at all.
Delay in or failure to obtain FDA approval would harm our business and force us
to curtail or cease operations.

         IF OUR PRODUCT FAILS TO GAIN MARKET ACCEPTANCE, OUR BUSINESS WILL
SUFFER.

         We are introducing a novel product into the contraception market. The
contraception market is dominated by procedures that are well established among
physicians and patients and are routinely taught to new physicians. As a result,
we cannot be certain that physicians and patients will accept our product. We
believe that recommendations and endorsements by physicians will be essential
for market acceptance of our product, and we may not be able to obtain these
recommendations or endorsements. We believe that physicians will not use
products unless they determine, based on clinical data and other factors, that
these systems are an attractive alternative to other means of contraception and
that the products offer clinical utility in a cost-effective manner. Physicians
are traditionally slow to adopt new products and treatment practices, partly
because of perceived liability risks. If Essure does not achieve significant
market acceptance among physicians, patients and healthcare payors, even if
reimbursement and necessary international and U.S. regulatory approvals are
obtained, we may never achieve significant revenues or profitability.

         WE MAY NOT RECEIVE REGULATORY APPROVALS FOR ESSURE.

         Numerous government authorities, both in the U.S. and internationally,
regulate the manufacture and sale of medical devices, including Essure. In the
U.S., the principal regulatory authorities are the FDA and corresponding state
agencies such as the California Department of Health Services. The process of
obtaining and maintaining required regulatory clearances is lengthy, expensive
and uncertain.

         The FDA requires companies that wish to market a new medical device or
an existing medical device for use for a new indication to obtain either FDA
clearance of a pre-market notification under Section 510(k) of the Federal Food,
Drug, and Cosmetic Act or FDA approval of a pre-market approval application
(referred to as a PMA) prior to the introduction of the product into the market.
We are

                                       26

<PAGE>


currently  in the  process of  preparing  for a final PMA  application.  The PMA
process can take over a year from initial  filing and requires the submission of
extensive supporting data and clinical information. We cannot assure you that we
will be able to obtain  necessary  PMA or other  approvals to market Essure on a
timely  basis,  if at all.  Moreover,  regulatory  clearances,  if granted,  may
include significant limitations on the indicated uses or product label for which
a product may be  marketed,  or  requirement  to collect  significant  amount of
clinical  data  post-approval.  Delays in receipt of or failure to receive  such
clearances  or  approvals,   the  loss  of  previously  received  clearances  or
approvals,  significant  limitations on indicated  uses or product  label,  or a
requirement to collect significant amount of clinical data post-approval, or our
failure to comply with existing or future regulatory  requirements will delay or
prevent us from generating product revenues.

         Sales of medical devices outside of the U.S. are subject to
international regulatory requirements that vary widely from country to country.
The time required to obtain clearance required by foreign countries may be
longer or shorter than that required for FDA clearance, and requirements for
licensing may differ significantly from FDA requirements. Many countries in
which we currently operate or intend to operate either do not currently regulate
medical devices or have minimal registration requirements; however, these
countries may develop more extensive regulations in the future which could delay
or prevent us from marketing Essure in these countries.

         The FDA and certain foreign regulatory authorities impose numerous
requirements with which medical device manufacturers must comply in order to
obtain and maintain regulatory approvals. FDA enforcement policy strictly
prohibits the promotion of approved medical devices for uses other than those
specifically cleared for marketing by the FDA. We will be required to adhere to
applicable FDA regulations such as the Quality System Regulation and similar
regulations in other countries, which include testing, control and documentation
requirements. Ongoing compliance with the Quality System Regulation and other
applicable regulatory requirements will be monitored through periodic
inspections by federal and state agencies, including the FDA and the California
Department of Health Services, and by comparable agencies in other countries. If
we fail to comply with applicable regulatory requirements, we may be subject to,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, refusal of
the government to grant pre-market clearance or pre-market approval for devices,
withdrawal of approvals and criminal prosecution.

         INADEQUATE OR LOSS OF REIMBURSEMENT FROM GOVERNMENT OR THIRD-PARTY
PAYORS MAY LIMIT OUR FUTURE PRODUCT REVENUES AND DELAY PROFITABILITY.

         Market acceptance of Essure in the U.S. and in international markets
will depend in part upon the availability of reimbursement within prevailing
healthcare payment systems. Reimbursement systems in international markets 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 health care systems that determine reimbursement for new
devices and procedures. In most markets, there are private insurance systems as
well as government-managed systems. Regardless of the type of reimbursement
system, we believe that physician advocacy of our products will be required to
obtain reimbursement. Availability of reimbursement will depend on the clinical
effectiveness and cost of our products. We cannot be certain that reimbursement
for our products will be available in the U.S. or in international markets under
either government or private reimbursement systems, or that physicians will
support and advocate reimbursement for use of our systems for all indications
intended by us. Large-scale market acceptance of Essure will depend on the
availability and level of reimbursement in targeted international markets. We
may be unable to obtain or maintain reimbursement in any country within a
particular time, for a particular amount, or at all, which may limit our future
product revenues and delay or prevent profitability.

         OUR CLINICAL TRIALS AND THE SUCCESSFUL COMMERCIAL INTRODUCTION OF OUR
PRODUCT COULD TAKE LONGER THAN WE EXPECT.

         Although for planning purposes we forecast the commencement and
completion of various milestones, including clinical trials and commercial
introduction of our product, the actual timing of these events can vary
dramatically due to factors which are outside of our control such as delays or
scheduling

                                       27

<PAGE>


conflicts with participating physicians and patients. We cannot assure you that
our clinical trials will be completed as planned or sales of our product will
meet our targets. Our failure to complete, or delays in, any of our planned
clinical trials or the commercial introduction of our product could negatively
impact investors' confidence in our ability to develop products, which would
likely cause our stock price to decrease.

         IF THE EFFECTIVENESS AND SAFETY OF OUR PRODUCT ARE NOT SUPPORTED BY
LONG-TERM DATA, WE MAY NOT ACHIEVE MARKET ACCEPTANCE AND WE COULD BE SUBJECT TO
LIABILITY.

         In 2000, we obtained approval from the FDA to commence a Pivotal trial
of Essure and we completed enrollment in February 2001. The Pivotal trial is
designed to obtain 12-month effectiveness data on Essure in 400 patients to
support an application for FDA PMA approval and to have four years of
post-market follow-up. One-year follow-up should be completed in June 2002;
however, long-term results will not be available for several years. If long-term
patient studies or clinical experience indicate that Essure is less effective or
less safe than our current data suggest, we may not achieve market acceptance
and/or we could be subject to significant liability.

         OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT PROVIDE MEANINGFUL COMMERCIAL
PROTECTION FOR OUR PRODUCTS, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD REDUCE OUR ABILITY TO COMPETE
IN THE MARKET.

         We rely on patent, copyright, trade secret and trademark laws to limit
the ability of others to compete with us using the same or similar technology in
the U.S. and other countries. However, as described below, these laws afford
only limited protection and may not adequately protect our rights to the extent
necessary to sustain any competitive advantage we may have. The laws of some
foreign countries do not protect proprietary rights to the same extent as the
laws of the U.S., and many companies have encountered significant problems in
protecting their proprietary rights abroad. These problems can be caused by the
absence of rules and methods for defending intellectual property rights.

         We will be able to protect our technology from unauthorized use by
third parties only to the extent that they are covered by valid and enforceable
patents or are effectively maintained as trade secrets. The patent positions of
companies developing medical devices, including our patent position, generally
are uncertain and involve complex legal and factual questions particularly as to
questions concerning the enforceability of such patents against alleged
infringement. Recent judicial decisions are prompting a reinterpretation of the
limited case law that exists in this area, and consequently we cannot assure you
that historical legal standards surrounding the questions of infringement and
validity will be applied in future cases. In addition, legislation is pending in
Congress that, if enacted in its present form, would limit the ability of
medical device manufacturers in the future to obtain patents on surgical and
medical procedures that are not performed by, or as a part of, devices or
compositions that are themselves patentable. Our ability to protect our
proprietary methods and procedures may be compromised by the enactment of this
legislation or any other limitation or reduction in the patentability of medical
and surgical methods and procedures. Changes in either the patent laws or in
interpretations of patent laws in the U.S. and other countries may therefore
diminish the value of our intellectual property.

         We own, or control through licenses, a variety of issued patents and
pending patent applications. However, the patents on which we rely may be
challenged and invalidated, and our patent applications may not result in issued
patents. Moreover our patents and patent applications may not be sufficiently
broad to prevent others from practicing our technologies or from developing
competing products. We also face the risk that others may independently develop
similar or alternative technologies or design around our patented technologies.

         We have taken security measures to protect our proprietary information,
especially proprietary information that is not covered by patents or patent
applications. These measures, however, may not provide adequate protection of
our trade secrets or other proprietary information. We seek to protect our
proprietary information by entering into confidentiality agreements with
employees, collaborators and consultants. Nevertheless, employees, collaborators
or consultants may still disclose our proprietary information and we may not be
able to protect our trade secrets in a meaningful way. If we lose any employees
we may not be able to prevent the unauthorized disclosure or use of our
technical knowledge or

                                       28

<PAGE>


other  trade  secrets by those  former  employees  despite  the  existence  of a
nondisclosure and confidentiality  agreement and other contractual  restrictions
to protect our proprietary  technology.  In addition,  others may  independently
develop  substantially  equivalent  proprietary  information  or  techniques  or
otherwise gain access to our trade secrets.

         Our ability to compete effectively will depend substantially on our
ability to develop and maintain proprietary aspects of our technology. Our
issued patents, any future patents that may be issued as a result of our United
States or foreign patent applications, or the patents under which we have
license rights may not offer any degree of protection against competitive
products. Any patents that may be issued or licensed to us or any of our patent
applications could be challenged, invalidated or circumvented in the future. Our
success will depend on our ability to operate without infringing or
misappropriating the proprietary rights of others.

         We may be exposed to future litigation by third parties based on claims
that our products infringe the intellectual property rights of others. There are
numerous issued patents in the medical device industry and as described in the
next risk factor, the validity and breadth of medical device patents involve
complex legal and factual questions for which important legal principles remain
unresolved. Our competitors may assert that our product and the methods we
employ may be covered by U.S. or foreign patents held by them. In addition,
because patent applications can take many years to issue, there may be currently
pending patent applications of which we are unaware which may later result in
issued patents that our products may infringe. There could also be existing
patents of which we are not aware, that our product may inadvertently infringe.
If we lose a patent infringement lawsuit, we could be prevented from selling our
product unless we can obtain a license to use technology or ideas covered by
that patent or are able to redesign the product to avoid infringement. A license
may not be available to us at all on terms acceptable to us or we may not be
able to redesign our products to avoid any infringement. If we are not
successful in obtaining a license or redesigning our products, we may be unable
to sell our products and our business could suffer.

         WE MAY BE A PARTY TO PATENT LITIGATION, WHICH COULD BE EXPENSIVE AND
DIVERT 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 (PTO) to determine the priority of inventions. The defense and
prosecution of these matters are both costly and time consuming. We 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 will result in substantial
expense to us and significant diversion of effort by our technical and
management personnel. A third party has brought to our attention a patent and
certain claims from a pending patent application owned by the third party. This
third party has indicated that they believe that the claims of their patent and
application may cover our product and its use. Because we believe that some or
all of the third party's claims should be included within our own patents, we
have requested that the PTO declare an interference. An interference is a
proceeding within the PTO to determine which party was the first to invent, and
which party is thereby entitled to ownership of the claims. We believe that we
filed our patent applications for our products before the third party filed the
application that issued as the third party's patent, and that we are entitled to
any patentable claims now appearing in the third party's patent which cover our
products. We cannot assure you, however, that the PTO will declare an
interference, that we invented our products prior to the third party's date of
invention, or that we will prevail in an interference proceeding if it is
declared by the PTO. If the PTO refuses to declare an interference, or if third
party's claims are upheld in the interference proceeding, the third party may be
able to successfully assert its patent against us. We also cannot predict with
certainty the final outcome if the third party attempts to assert the claims of
its pending patent application against us, if those claims are ultimately
contained in an issued patent. An adverse determination in litigation or
interference proceedings to which we 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

                                       29

<PAGE>


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 Essure.

         A patent issued to Target Therapeutics, a unit of Boston Scientific
Corporation, that contains claims relating to the design of our variable
softness micro-catheters and is subject to our license from Target has been the
subject of four reexamination proceedings in the PTO and an infringement lawsuit
by Target. Although the PTO reaffirmed the patentability of the claims of the
Target patent and the lawsuit was settled, the Target patent could be infringed,
otherwise challenged or invalidated in the future. If the Target patent is
invalidated, we may be unable to develop, market and sell Essure.

         WE HAVE LIMITED SALES AND MARKETING EXPERIENCE AND MINIMAL DISTRIBUTION
CAPABILITIES, AND IF WE ARE UNABLE TO DEVELOP OUR SALES AND MARKETING
CAPABILITIES OR ENTER INTO APPROPRIATE DISTRIBUTION AGREEMENTS, WE MAY BE
UNSUCCESSFUL IN COMMERCIALIZING ESSURE.

         In order to market, sell and distribute Essure upon receipt of
regulatory approvals, we will need to continue to develop a sales force and
marketing group with relevant experience and enter into additional arrangements
with third parties to distribute Essure. Developing a marketing and sales force
is expensive and time consuming and could delay our product launch. If we fail
to establish adequate marketing and sales capabilities or enter into successful
distribution arrangements with third parties, we may be unable to commercialize
Essure successfully.

         WE HAVE LIMITED EXPERIENCE IN MANUFACTURING ESSURE IN COMMERCIAL
QUANTITIES.

         If we are successful in marketing Essure, we plan to increase internal
manufacturing operations as well as to use third party manufacturers to
manufacture the products. We have identified candidates that we believe could
adequately produce Essure with the appropriate quality and sufficient volumes.
However, third party manufacturers often encounter difficulties in scaling up
production of new products, including problems involving production yields,
quality control and assurance, component supply and shortages of qualified
personnel, and compliance with FDA or other health authority requirements. We
and/or our third party manufacturers may encounter manufacturing difficulties,
which could prevent or delay commercialization of Essure.

         WE DEPEND UPON SOLE SOURCE SUPPLIERS AND HAVE NO CONTRACTUAL
ARRANGEMENTS.

         We purchase both raw materials used in our products and finished goods
from various suppliers, and we rely on single sources for some items, including
the delivery catheter tubing and polyester fiber. We do not have formal supply
contracts with several key vendors and, accordingly, these firms may not
continue to supply us with raw materials or finished goods in sufficient
quantities, or at all. Delays associated with any future raw materials or
finished goods shortages could delay commercialization of Essure, particularly
as we scale up our manufacturing activities in support of international
commercial sales of Essure and, to the extent that FDA approval is received,
U.S. commercial sales of Essure.

         HEALTH CARE REFORM MAY LIMIT OUR RETURN ON OUR PRODUCT.

         There are efforts by governmental and third party payors to contain or
reduce the costs of health care through various means. We expect that there will
continue to be a number of legislative proposals to implement government
controls. The announcement of proposals or reforms could impair our ability to
raise capital. The adoption of proposals or reforms could impair our business.

         WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS, AND WE HAVE ONLY LIMITED
INSURANCE COVERAGE.

         The manufacture and sale of medical products involve an inherent risk
of exposure to product liability claims and product recalls. Although we have
not experienced any product liability claims to date, we cannot assure you that
we will be able to avoid significant product liability claims and potential
related adverse publicity. We currently maintain product liability insurance
with coverage limits of $10,000,000 per occurrence and an annual aggregate
maximum of $10,000,000, which we believe is comparable to that

                                       30

<PAGE>


maintained by other companies of similar size serving similar markets.  However,
we cannot assure you that product  liability  claims in connection with clinical
trials or sales of Essure will not exceed such insurance coverage limits or that
such insurance will continue to be available on commercially  reasonable  terms,
or at all. In addition,  we may require increased product liability  coverage as
Essure is commercialized.  Such insurance is expensive and in the future may not
be available on  acceptable  terms,  if at all. A successful  product  liability
claim or  series  of  claims  brought  against  us in  excess  of our  insurance
coverage, or a recall of our products, could cause our stock price to fall.

         INABILITY TO ATTRACT AND RETAIN ADDITIONAL KEY MANAGEMENT, SALES AND
MARKETING AND TECHNICAL PERSONNEL OR LOSS OF EXISTING KEY MANAGEMENT, SALES AND
MARKETING OR TECHNICAL PERSONNEL MAY DELAY OUR DEVELOPMENT AND MARKETING
EFFORTS.

         Our number of employees has increased from 65 employees in February 28,
2001 to 115 employees in February 28, 2002. The growth that we have experienced,
and in the future may experience, provides challenges to our organization,
requiring us to rapidly expand our personnel and manufacturing operations.

         We depend on a number of key management, sales and marketing and
technical personnel. The loss of the services of one or more key employees could
delay the achievement of our development and marketing objectives. Our success
will also depend on our ability to attract and retain additional highly
qualified management, sales and marketing and technical personnel to meet our
growth goals. We face intense competition for qualified personnel, many of whom
are often subject to competing employment offers, and we cannot assure you that
we will be able to attract and retain such personnel.

         WE FACE INTENSE COMPETITION, AND IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, DEMAND FOR ESSURE MAY BE REDUCED.

         The medical device industry is highly competitive and is characterized
by rapid and significant technological change. The length of time required for
product development and regulatory approval plays an important role in a
company's competitive position. As we commercialize our Essure, we expect to
compete with:

         o    other methods of permanent contraception, in particular tubal
              ligation;

         o    other methods of long-term contraception, including devices such
              as IUDs and prescription drugs such as the birth control pill,
              injectable and implantable contraceptives and emergency
              contraception; and

         o    other companies that may develop permanent contraception devices
              that are similar to or otherwise compete with Essure.

         We are aware of companies that are in the early stages of development
of non-incisional permanent contraception device, and other companies may
develop products that could compete with Essure. We also compete with other
companies for clinical sites in which to conduct trials. Competitive factors may
render Essure obsolete or noncompetitive or reduce demand for Essure.

         IF WE EXPERIENCE DIFFICULTIES IN OUR FOREIGN SALES AND OPERATIONS, OUR
FINANCIAL CONDITION WILL BE HARMED.

         Our financial condition in the near term is highly dependent on the
sale of Essure in Australia, Europe and other countries outside of the U.S. If
we experience difficulties in our international sales and operations, our
business will suffer and our financial condition will be harmed. Our
international operations and sales are subject to a number of risks, including:

         o    currency fluctuations;

         o    difficulties in staffing and managing foreign operations;

         o    difficulties in accounts receivable collection;

                                       31

<PAGE>


         o    recessions in economies outside the U.S.;

         o    changes in regulatory requirements;

         o    potentially adverse tax consequences;

         o    reduced protection for intellectual property rights in some
              countries; and

         o    political and economic stability.


         OUR FUTURE LIQUIDITY AND CAPITAL REQUIREMENT ARE UNCERTAIN.

         We do not currently have sufficient capital resources to commercialize
the Essure on a wide-scale basis. We currently estimate that our existing
capital will be sufficient enough to fund our operations only into the first
half of 2003. Accordingly, we may require additional financing and therefore 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 research and development
programs or reduce our selling and marketing activities. We expect to have
negative cash flows from operations through at least 2003. Our future liquidity
and capital requirements will depend upon many factors, including, among others:

         o    the progress and cost of clinical research and product development
              programs;

         o    timing of receipt of U.S. and international governmental
              clearances and approvals;

         o    resources devoted to increasing our manufacturing capacity;

         o    resources devoted to establish sales and marketing and
              distribution capabilities;

         o    the rate of product adoption by doctors and patients; and

         o    obtaining insurance coverage for our Essure.


         OUR FUTURE QUARTERLY RESULTS MAY FLUCTUATE.

         Our future revenues and results of operations may fluctuate
significantly from quarter to quarter and will depend upon, among other factors:

         o    actions relating to regulatory and reimbursement matters;

         o    the extent to which Essure gains market acceptance; and

         o    introduction of competitive products.

         OUR STOCK PRICE WILL BE VOLATILE.

         Our stock price has in the past been, and will likely in the future be,
subject to significant volatility, particularly on a quarterly basis. Any
shortfall in revenue or earnings from levels expected by securities analysts
could have an immediate and significant adverse effect on the trading price of
our common stock in any given period. We participate in a highly dynamic
industry, which often results in significant stock price volatility. The market
prices of the common stock of many publicly held medical device companies have
in the past been, and may continue to be, especially volatile. Factors that may
have a significant influence on the market price of our common stock include:

         o    fluctuations in our operating results;

         o    announcements of technological innovations or new products by us
              or our competitors;

         o    FDA and international regulatory actions;

                                       32

<PAGE>


         o    changes in reimbursement levels;

         o    developments with respect to patents or proprietary rights;

         o    announcements of or changes in previously announced product
              effectiveness data;

         o    public concern as to the safety of products developed by us or
              others;

         o    changes in healthcare policy in the U.S. and internationally;

         o    potential product quality and recall issues;

         o    changes in stock market analyst recommendations regarding us, our
              competitors or the medical device industry generally; and

         o        changes in general market conditions.

                                       33


<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our cash balances in excess of short-term operating needs are invested
in highly liquid, short-term government securities and high quality commercial
paper. Due to the short-term and high quality nature of these instruments, we
believe these financial instruments are exposed to a low level of interest rate
risk.

         As of December 31, 2001, a fluctuation in exchange rates of 10% in the
foreign currencies to which we are exposed would not have a material impact on
our results of operations or financial condition. However, as we expand our
international operations, exposure to foreign currency fluctuations will
increase.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our consolidated financial statements are set forth in this Annual
Report on Form 10-K beginning on page 42.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Effective January 11, 2002, we have chosen not to extend the engagement
of Ernst & Young LLP as our independent accountants.

         The reports of Ernst & Young LLP on our consolidated financial
statements for the fiscal years ended December 31, 2000 and 1999 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.

         During our two most recent fiscal years and through the date of this
report, we have had no disagreements with Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused them to make reference thereto in their
report on the consolidated financial statements of Conceptus for such years.

         During our two most recent fiscal years and through the date of this
report, we have had no reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K.

         We engaged PricewaterhouseCoopers LLP as our new independent
accountants effective January 11, 2002.

         During our fiscal years ended December 31, 2000 and 1999 and through
the date of engagement of PricewaterhouseCoopers LLP, we have not consulted with
PricewaterhouseCoopers LLP on items which (1) related to the application of
accounting principles to a specified transaction (proposed or completed) by
Conceptus; or the type of audit opinion that might be rendered on Conceptus'
financial statements, and either a written report or oral advice has been
provided that the newly engaged accountant concluded was an important factor
considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (2) concerned the subject matter of a disagreement
or reportable event with the former auditor (as described in Item 304(a)(2) of
Regulation S-K).

                                       34


<PAGE>


                                    PART III

         Certain information required by Part III is incorporated by reference
from our proxy statement (the "Proxy Statement") for our annual meeting of
stockholders to be held May 30, 2002, which will be filed within 120 days after
the end of our fiscal year pursuant to Regulation 14A, and the information
included therein is incorporated by reference to the extent detailed below.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this item as to our executive officers is
set forth in "Item 1 - Business - Executive Officers of the Company" in this
Form 10-K. The information required by this item as to our directors is
incorporated by reference from the information under the caption "Proposal No. 1
Election of Directors" in the Proxy Statement. The information required by this
item as to compliance with Section 16 of the Securities Exchange Act of 1934 is
incorporated by reference from the information under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement.

ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference from
the information under the caption "Executive Compensation" in the Proxy
Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

         The information required by this item is incorporated by reference from
the information under the caption "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference from
the information under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement.

                                       35


<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

(a)      The following documents are filed as part of this Report:

         (1)      Report of PricewaterhouseCoopers LLP, Independent Accountants

                  Report of Ernst & Young LLP, Independent Auditors

                  Consolidated Balance Sheets at December 31, 2001 and 2000

                  Consolidated Statements of Operations for the Years Ended
                  December 31, 2001, 2000 and 1999

                  Consolidated Statements of Stockholders' Equity for the Years
                  Ended December 31, 2001, 2000 and 1999

                  Consolidated Statements of Cash Flows for the Years Ended
                  December 31, 2001, 2000 and 1999

                  Notes to Consolidated Financial Statements

(2)      Financial Statement Schedules

                  The following financial statement schedule of Conceptus, Inc.
                  for the years ended December 31, 2001, 2000, and 1999 is filed
                  as part of this Form 10-K and should be read in conjunction
                  with Conceptus, Inc.'s Consolidated Financial Statements.

                  Schedule II ---- Valuation and Qualifying Accounts

                  Schedules have been omitted because the information required
                  to be set forth therein is not applicable or is shown in the
                  financial statements or notes thereto.

         (3)      Exhibits (numbered in accordance with Item 601 of Regulation
                  S-K)

               EXHIBIT
               NUMBER                                               Description
              _________                                             ___________

                3.1(1)        Amended and Restated Certificate of Incorporation
                              of Registrant.
                3.2(1)        Bylaws of Registrant.
               10.1(1)        Form of Indemnification Agreement for directors
                              and officers.
               10.2(2)(12)    1993 Stock Plan and forms of agreements
                              thereunder.
               10.3(1)(2)     1995 Employee Stock Purchase Plan and form of
                              subscription agreement.
               10.4(2)(4)     1995 Directors' Stock Option Plan and form of
                              stock option agreement.
               10.6(1)(3)     Supplier Agreement dated March 29, 1995 between
                              the Registrant and Advanced
                               Cardiovascular Systems, Inc.
               10.7(1)(3)     License Agreement dated December 28, 1992 between
                              the Registrant and Target
                               Therapeutics, Inc.
               10.8(1)        Secured Note Purchase Agreement dated March 30,
                              1994 between the Registrant and
                               Target Therapeutics, Inc.
               10.10(1)       Second Amended and Restated Rights Agreement dated
                              May 26, 1995.
               10.13(6)       Lease Agreement with Dani Investment Partners.

                                       36

<PAGE>


               10.14(7)       Agreement and Plan of Reorganization dated October
                              29, 1996 between the Registrant, Microgyn, Inc.
                              and CPTS Acquisition Corporation  (a wholly-owned
                              subsidiary of the Registrant), as amended November
                              7, 1996.
               10.15(8)       Preferred Shares Rights Agreement, dated as of
                              February 27, 1997, between the Registrant and
                              ChaseMellon Shareholder Services, L.L.C.,
                              including the Certificate of Designation of
                              Rights, Preferences and Privileges of Series A
                              Participating Preferred Stock, the form of Rights
                              Certificate and the Summary of Rights attached
                              thereto as Exhibits A, B and C, respectively.
               10.16(9)       Third Addendum to Lease Agreement with Dani
                              Investment Partners.
               10.17(9)       Lease Agreement with Three Sisters Ranch
                              Enterprises dated April 15, 1997
               10.18(10) (2)  Change of Control Agreement dated as of May 13,
                              1997 by and between Registrant and
                               Kathryn A. Tunstall.
               10.20(10) (2)  Form of Senior Management Change of Control
                              Agreement.
               10.24(2)       Master Consulting Agreement with Florence Comite
                              dated September 10, 1997.
               10.28          Sublease Agreement with Avio Digital, Inc. dated
                              October 1, 1998.
               10.31(13) (2)  1993 Stock Plan, as amended April 27, 2000.
               10.32 (14)     Fourth Addendum to Lease Agreement with Dani
                              Investment Partners.
               10.33 (15)     Form of Stock Purchase Agreement, dated July 20,
                              2000, between the Registrant and the Purchasers
                              (as defined therein).
               10.34 (16)     Lease agreement dated November 14, 2000 with Dani
                              Investment Partners.
               10.35 (16)     Warrant agreement dated November 27, 2000 between
                              the Registrant and Dan Walldock.
               10.36 (17) (2) 2001 Equity Incentive Plan .
               10.37 (18)     Form of Stock Purchase Agreement, dated April 10,
                              2001, between the Registrant and the Purchasers
                              (as defined therein).
               10.38 (19)     Form of Stock Purchase Agreement, dated November
                              5, 2001, between the Registrant and the Purchasers
                              (as defined therein).
               10.39 (2)      Change of Control Agreement dated as of January 3,
                              2000 by and between the Registrant and Steven
                              Bacich.
               10.40          Fourth Amendment to Lease Agreement with Three
                              Sisters Ranch Enterprises.
               11.1           Statement of computation of net loss per share.
               16 (20)        Letter from Ernst & Young LLP regarding change in
                              certified accountant.
               23.1           Consent of PricewaterhouseCoopers, LLP Independent
                              Accountants.
               23.2           Consent of Ernst & Young LLP, Independent
                              Auditors.
               24.1           Power of Attorney (See Page 56 of this Report).

         ----------------

         (1)  Incorporated by reference to identically numbered exhibits filed
              in response to Item 16(a),"Exhibits," of the Registrant's
              Registration Statement on Form SB-2, as amended (File No
              33-99890-LA), which became effective on February 1, 1996.

         (2)  Management contract or compensatory plan or arrangement.

         (3)  Confidential treatment has been granted with respect to certain
              portions of this Exhibit by order from the Securities and Exchange
              Commission or requested.

         (4)  Incorporated by reference to an identically numbered exhibit filed
              in response to Item 14(a) of the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 1995.

         (5)  Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended June 30, 1996.

                                       37

<PAGE>


         (6)  Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended September 30, 1996.

         (7)  Incorporated by reference to Exhibit 2.1 filed in response to Item
              7(c) of the Registrant's Report on Form 8-K filed on December 10,
              1996.

         (8)  Incorporated by reference to Exhibit 1 filed in response to Item 2
              of the Registrant's Form 8-A filed on February 28, 1997.

         (9)  Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended April 30, 1997.

         (10) Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended June 30, 1997.

         (11) Incorporated by reference to Exhibit 10.16 filed in response to
              Item 6(a) of the Registrant's Quarterly Report on Form 10-Q for
              the quarter ended September 30, 1997.

         (12) Incorporated by reference to an identically numbered exhibit filed
              in response to item 14(a) of the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 1996.

         (13) Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended March 31, 2000.

         (14) Incorporated by reference to an identically numbered exhibit filed
              in response to Item 6(a) of the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended June 30, 2000.

         (15) Incorporated  by  reference  to the  Registrant's  Registration
              Statement  on Form  S-3  (file  no. 333-42798) filed on August 1,
              2000.

         (16) Incorporated by reference to an identically numbered exhibit filed
              in response to item 14(a) of the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 2000.

         (17) Incorporated by reference to Exhibit A of the  Registrant's
              Definitive  Proxy Statement on Schedule 14A (file no. 000-27596)
              filed on April 20, 2001.

         (18) Incorporated  by  reference  to the  Registrant's  Registration
              Statement  on Form S-3  (file  no. 333-59368) filed on April 23,
              2001.

         (19) Incorporated  by  reference  to the  Registrant's  Registration
              Statement  on Form S-3  (file  no. 333-73550) filed on November
              16, 2001.

         (20) Incorporated by reference to an identically numbered exhibit
              filed in response to Item 4 of the Registrant's Form 8-K filed on
              January 17, 2002.



(b)      Reports on Form 8-K


         (1)  On February 26, 2002, Conceptus announced the financial results
              for the three and twelve months ended December 31, 2001;

         (2)  On January 11, 2002, Conceptus announced a change in accountant
              from Ernst & Young LLP to PricewaterhouseCoopers LLP;

         (3)  On November 8, 2001, Conceptus reported the completion of a
              private placement of approximately 2.3 million shares of newly
              issued common stock to institutional and other accredited
              investors at $13.25 per share;

         (4)  On October 24, 2001, Conceptus announced the financial results for
              the third quarter ended September 30, 2001.

                                       38


<PAGE>


                                 CONCEPTUS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
Report of PricewaterhouseCoopers LLP, Independent Accountants.................40
Report of Ernst & Young LLP, Independent Auditors.............................41




AUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets ..................................................42
Consolidated Statements of Operations ........................................43
Consolidated Statements of Stockholders' Equity ..............................44
Consolidated Statements of Cash Flows ........................................45
Notes to Consolidated Financial Statements ...................................46

                                       39


<PAGE>


          REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
at Conceptus, Inc.:

         In our opinion, the accompanying consolidated balance sheet as of
December 31, 2001 and the related consolidated statements of operations, of
stockholders' equity and of cash flows present fairly, in all material respects,
the financial position of Conceptus, Inc. and its subsidiaries at December 31,
2001, and the results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion the financial statement schedule
appearing under Item 14(a) on page 36 presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
financial statements. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The financial statements of
the Company as of December 31, 2000 and for the two years in the period then
ended were audited by other independent accountants whose report dated February
1, 2001 expressed an unqualified opinion on those statements.


                                                  /S/ PRICEWATERHOUSECOOPERS LLP


San Jose, California
February 8, 2002

                                       40


<PAGE>


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Conceptus, Inc.

We have audited the accompanying consolidated balance sheet of Conceptus, Inc.
as of December 31, 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2000 and
1999. Our audits also included the financial statement schedule for the years
ended December 31, 2000 and 1999, listed in the index at item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Conceptus, Inc. at
December 31, 2000, and the consolidated results of its operations and its cash
flows for the years ended December 31, 2000 and 1999 in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.



                                                           /s/ Ernst & Young LLP

Palo Alto, California
February 1, 2001

                                       41



<PAGE>


                      PART I: FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                             CONCEPTUS, INC.

                       CONSOLIDATED BALANCE SHEETS
           (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                                                              DECEMBER 31,
                                                                                       -------------------------
                                                                                         2001             2000
                                                                                       --------         --------
<S>                                                                                    <C>              <C>
      Current assets:
           Cash and cash equivalents                                                   $ 33,734          $ 4,621
           Short-term investments                                                             -            7,872
           Restricted cash                                                                   69                -
           Accounts receivable, net of allowance for doubtful
            accounts of $14 and $596, respectively                                          247                -
           Inventories, net                                                               1,134               67
           Other current assets                                                             556               59
                                                                                       --------         --------

      Total current assets                                                               35,740           12,619

      Property and equipment, net                                                         1,658            1,153
      Other assets                                                                          380              334
                                                                                       --------         --------

TOTAL ASSETS                                                                           $ 37,778         $ 14,106
                                                                                       ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities:
           Accounts payable                                                             $ 1,809            $ 983
           Clinical trial accruals                                                          422            1,100
           Accrued compensation                                                           1,025              987
           Other accrued liabilities                                                        861              267
                                                                                       --------         --------
      Total current liabilities                                                           4,117            3,337

           Long-term clinical liabilities                                                   486              810
                                                                                       --------         --------
      Total liabilities                                                                   4,603            4,147
                                                                                       --------         --------

      Commitments and contingencies (Notes 5 and 10)

      Stockholders' equity:
           Common stock and additional paid-in capital:
              $0.003 par value, 30,000,000 shares authorized, 16,398,786 and
              11,701,733 shares issued and outstanding at December 31,
              2001 and 2000, respectively                                               118,397           77,107
           Accumulated deficit                                                          (85,222)         (67,148)
                                                                                       --------         --------

      Total stockholders' equity                                                         33,175            9,959
                                                                                       --------         --------

      Total liabilities and stockholders' equity                                       $ 37,778         $ 14,106
                                                                                       ========         ========
</TABLE>

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


                                       42

<PAGE>

<TABLE>
<CAPTION>

                      CONCEPTUS, INC.

           CONSOLIDATED STATEMENTS OF OPERATIONS

          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                           YEARS ENDED DECEMBER 31,
                                                                 -------------------------------------------
                                                                   2001             2000              1999
                                                                 --------         --------           -------

<S>                                                              <C>              <C>                <C>
Net sales                                                        $    401         $      -           $    95
                                                                 --------         --------           -------

Operating costs and expenses:
        Cost of sales and start-up manufacturing costs              1,456                -               137
        Research and development                                    7,983           10,739             4,251
        Selling, general and administrative                         9,776            5,012             3,729
                                                                 --------         --------           -------

Total operating costs and expenses                                 19,215           15,751             8,117
                                                                 --------         --------           -------

Operating loss                                                    (18,814)         (15,751)           (8,022)
Recovery of legal defense costs                                         -              586                 -
Interest and other income, net                                        740              712               723
                                                                 --------         --------           -------

Net loss                                                         $(18,074)        $(14,453)          $(7,299)
                                                                 ========         ========           =======

Basic and diluted net loss per share                             $  (1.33)        $  (1.37)          $ (0.76)
                                                                 ========         ========           =======

Shares used in computing basic and diluted
   net loss per share                                              13,561           10,559             9,662
                                                                 ========         ========           =======
</TABLE>

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


                                       43

<PAGE>


                                 CONCEPTUS, INC

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                       Common Stock &
                                                 Additional Paid-In Capital Stockholder                               Total
                                                 --------------------------    Note       Deferred     Accumulated  Stockholders'
                                                     Shares     Amount      Receivable  Compensation     Deficit       Equity
                                                 --------------------------------------------------------------------------------
<S>                 <C>                             <C>          <C>           <C>          <C>       <C>            <C>
Balances at January 1, 1999                         9,620,205    $ 63,570      $ (54)       $ (106)   $ (45,396)     $ 18,014
Issuance of common stock for cash upon
    exercise of options                                11,111           1          -             -            -             1
Issuance of common stock for cash from                                                                                      -
    employee stock purchase plan                       30,415          38          -             -            -            38
Amortization of deferred compensation,
    net of reversal of forfeited shares                     -           -          -           106            -           106
Repayment of notes receivable                               -           -         54             -            -            54
Net loss and comprehensive loss                             -           -          -             -       (7,299)       (7,299)
                                                 --------------------------------------------------------------------------------
Balances as of December 31, 1999                    9,661,731      63,609          -             -      (52,695)       10,914
Issuance of common stock for cash upon
    exercise of options                                76,895          66          -             -            -            66
Issuance of common stock for cash from
    employee stock purchase plan                       23,107          99          -             -            -            99
Issuance of common stock for cash pursuant to
    a private financing                             1,940,000      12,977          -             -            -        12,977
Warrant for common stock                                    -         206          -             -            -           206
Issuance of stock options to consultants for
    services                                                -         150          -             -            -           150
Net loss and comprehensive loss                             -           -          -             -      (14,453)      (14,453)
                                                 --------------------------------------------------------------------------------
Balances as of December 31, 2000                   11,701,733      77,107          -             -      (67,148)        9,959
Issuance of common stock for cash upon
    exercise of options                               697,144       1,507          -             -            -         1,507
Issuance of common stock for cash from
    employee stock purchase plan                       18,582         219          -             -            -           219
Issuance of common stock for cash pursuant to
    two private financings                          3,968,858      39,362          -             -            -        39,362
Issuance of stock options to consultants for
    services                                                          202                                                 202
Issuance of common stock for warrant exercise          12,469           -                                                   -
Net loss and comprehensive loss                             -           -          -             -      (18,074)      (18,074)
                                                 --------------------------------------------------------------------------------
Balances as of December 31, 2001                   16,398,786    $118,397      $   -        $    -    $ (85,222)     $ 33,175
                                                 ================================================================================
</TABLE>

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




                                       44

<PAGE>

<TABLE>
<CAPTION>

                                            CONCEPTUS, INC.

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                             (IN THOUSANDS)

                                                                       YEARS ENDED DECEMBER 31,
                                                                ----------------------------------------
                                                                  2001            2000            1999
                                                                --------        --------        --------
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                        $(18,074)       $(14,453)       $ (7,299)
Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation and amortization                                   670             551             604
     Stock compensation expense                                      202             150             106
     Provision for inventory                                         168               9              10
     Allowance for doubtful accounts                                  14              17               -
     Changes in operating assets and liabilities:
       Accounts receivable                                          (261)              1             121
       Inventories                                                (1,235)            (76)            (10)
       Other current assets                                         (497)             35             (29)
       Other assets                                                  (46)             49             188
       Accounts payable                                              826             853             (35)
       Clinical trial accruals                                      (678)            841             259
       Accrued compensation                                           38             752            (186)
       Other accrued liabilities                                     594              40              38
       Long term clinical liabilities                               (324)            810               -
       Other long term liabilities                                     -            (138)           (104)
                                                                --------        --------        --------
Net cash used in operating activities                            (18,603)        (10,559)         (6,337)
                                                                --------        --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of investments                                     (5,153)         (8,986)         (4,555)
     Maturities of investments                                    13,025           8,389           2,848
     Capital expenditures                                         (1,175)           (859)            (58)
     Restricted cash                                                 (69)              -               -
                                                                --------        --------        --------
Net cash provided by (used in) investing activities                6,628          (1,456)         (1,765)
                                                                --------        --------        --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock, net                  41,088          13,142              39
     Repayment of stockholders note                                    -               -              54
                                                                --------        --------        --------
Net cash provided by financing activities                         41,088          13,142              93
                                                                --------        --------        --------

Net increase (decrease) in cash and cash equivalents              29,113           1,127          (8,009)
Cash and cash equivalents at beginning of year                     4,621           3,494          11,503
                                                                --------        --------        --------
Cash and cash equivalents at end of year                        $ 33,734         $ 4,621         $ 3,494
                                                                ========        ========        ========

Supplemental disclosure:
   Warrants issued in connection with lease agreement                $ -           $ 206             $ -
                                                                --------        --------        --------
</TABLE>

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


                                       45

<PAGE>




                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    ORGANIZATION, OWNERSHIP AND BUSINESS

         Conceptus, Inc. ("Conceptus," the "Company") was incorporated in the
state of Delaware on September 18, 1992 to design, develop and market minimally
invasive devices for reproductive medical applications. The Company is
developing Essure(TM), previously known as STOP, an innovative medical device
and procedure designed to provide a non-incisional alternative to tubal
ligation, the leading form of contraception worldwide. The Essure device is a
unique and proprietary micro-insert designed to be deployed permanently into
each fallopian tube using the Company's minimally invasive transcervical tubal
access catheter system. Clinical studies have shown that the Essure device
induces an occlusive tissue response. The Company's catheter systems are based
on technology initially developed and used by Target Therapeutics, Inc.
("Target"), a business unit of Boston Scientific Corporation ("BSC"), and
licensed exclusively to Conceptus in the field of reproductive physiology.

         In December 2001, the Company established a wholly owned subsidiary,
Conceptus SAS ("Conceptus France"), in France for the distribution and
commercialization of Essure in Europe. In April 2000, the Company established a
wholly owned subsidiary, Conceptus (Australia) Pty Limited, in New South Wales,
Australia ("Conceptus Australia") for the distribution and commercialization of
Essure in that region.

    BASIS OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Conceptus Australia, Conceptus France
and Microgyn, Inc. ("Microgyn"). All intercompany accounts and transactions have
been eliminated.

     RECLASSIFICATION

         Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation. These
reclassifications had no effect on the prior year's stockholders' equity or
results of operations.

     USE OF ESTIMATES

         The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management 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
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

     CONCENTRATION OF CREDIT RISK AND OTHER RISKS AND UNCERTAINTIES

         The Company invests cash that is not required for immediate operating
needs principally in a diversified portfolio of financial instruments issued by
institutions with strong credit ratings. By policy, the amount of credit
exposure to any one institution, with the exception of U.S. government backed
securities, is limited.

         The Company's revenues to date consist of product revenues from
hospitals and distributors located in Australia, Singapore and Europe. The
Company does not require collateral and provides for estimated credit losses
based on customer credit assessment. During the year ended December 31, 2001,
one customer accounted for 23% and one distributor accounted for 15% of the
Company's revenues. At December 31, 2001, two distributors accounted for 25% and
22% of the outstanding accounts receivable.

                                       46

<PAGE>
                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


   The Company is a one-product company and its only product, Essure,
requires clearance or approval from the Unites States Food and Drug
Administration ("FDA") prior to the commencement of commercialized sales in the
United States of America. Internationally, the Company received CE Mark approval
to market its products from the European regulatory agency in February 2001. The
Company cannot be assured that necessary approvals or clearances will be
obtained in the United States or other countries. If the Company is denied
approval or clearance or if approval or clearance is delayed, it may have a
material adverse impact on the Company.

         The Company is subject to risks common to companies in the medical
device industry including, but not limited to dependence on key personnel,
protection of proprietary technology, compliance with government regulations,
uncertainty of market acceptance of products, product liability and the need to
obtain additional financing.

     TRANSLATION OF FOREIGN CURRENCIES

         Under the relevant accounting guidance, the treatment of translation
gains or losses is dependent upon management's determination of the functional
currency of each subsidiary. The functional currency is determined based on
management judgment and involves consideration of all relevant economic facts
and circumstances affecting the subsidiary. Based on our assessment of the
factors, we consider the U.S. dollar to be the functional currency for each of
our international subsidiaries as of December 31, 2001. Accordingly, gains and
losses from foreign currency transactions, which were not material for any of
the years presented, are included in interest and other income, net in the
Company's consolidated statements of operations.


     CASH, CASH EQUIVALENTS AND INVESTMENTS

         The Company considers all highly liquid investments with a maturity
from date of purchase of three months or less to be cash equivalents. The
Company maintains deposits with financial institutions in the U.S. and invests
its excess cash in money market funds and U.S. corporate notes, which bear
minimal risk.

         Management considers all of their investments as available-for-sale.
Available-for-sale securities are carried at estimated fair value, with the
unrealized gains and losses reported in stockholders' equity. The fair values
for marketable debt securities are based on quoted market prices. At December
31, 2001 and 2000, the fair value of investments approximates cost. Realized
gains and losses were immaterial for the periods presented. Interest and
dividends on securities classified as available-for-sale are included in
interest and other income.

         At December 31, 2001, the Company has restricted cash of $69,000, which
represents money held under a letter of credit related to an equipment lease.

     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.


     PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization of property and equipment are
calculated using the straight-line method over the estimated useful lives of the
respective assets, generally three years. Leasehold improvements are amortized
over the lesser of the lease term or the estimated useful lives of the related
assets.

                                       47

<PAGE>


                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


     IMPAIRMENT OF LONG-LIVED ASSETS

         The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset might not
be recoverable. When such an event occurs, management determines whether there
has been impairment by comparing the anticipated undiscounted future net cash
flow to the related asset's carrying value. If an asset is considered impaired,
the asset is written down to fair value, which is determined based either on
discounted cash flows or appraised value, depending on the nature of the asset.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

         For financial instruments consisting of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities included in the
Company's financial statements, the carrying amounts approximate fair value due
to their short maturities. Estimated fair values for marketable securities,
which are separately disclosed elsewhere, are based on quoted market prices for
the same or similar instruments.

     REVENUE RECOGNITION

         Revenue on product sales is recognized when persuasive evidence of an
arrangement exists, the price is fixed and final, delivery has occurred and
there is a reasonable assurance of collection of the sales proceeds. We obtain
written purchase authorizations from our customers for a specified amount of
product at a specified price and consider delivery to have occurred at the time
of shipment.

     RESEARCH AND DEVELOPMENT

         Research and development costs are expensed as incurred.

     ADVERTISING COSTS

         Advertising costs are expensed as incurred. Total advertising expenses
were $1.1 million in 2001 and $0.8 million in 2000. Advertising expense for 1999
was immaterial.

     SEGMENT INFORMATION

         The Company's operations are treated as one operating segment as it
only reports profit and loss information on an aggregate basis to the chief
operating decision makers of the Company.

         In 2001, net product sales by geographical segments are 77%, 14% and 9%
for Australia, Singapore and Europe, respectively. There were no sales in 2000
and net sales in 1999 were completely generated within the United States of
America.


     STOCK-BASED COMPENSATION

         As permitted by Statement of Financial Accounting Standard (SFAS) No.
123, "Accounting for Stock-Based Compensation," (SFAS 123) the Company accounts
for employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees", and
Financial Accounting Standard Board (FASB) Interpretation No. 44 (FIN 44),
"Accounting for Certain Transaction Involving Stock-based Compensation, an
interpretation of APB Opinion No. 25" and related interpretations in accounting
for its stock-based compensation plans. Accordingly, compensation costs for
stock options granted to employees and directors are measured as the excess, if
any, of the quoted market price of the Company's stock on the date of the grant
over the amount an employee must pay to acquire the stock. Stock based
compensation arrangements to non-employees are accounted for in accordance with
SFAS 123 and Emerging Issues Task Force Issue No. 96-18 (EITF 96-

                                       48

<PAGE>


                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


18),  "Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services" 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
periodic   adjustment  as  the  underlying   equity   instruments   vest.  Stock
compensation  expenses  relating to non-employees was $202,000 in 2001, of which
$106,000 was allocated to research and  development and $96,000 was allocated to
selling, general and administrative expense.

     INCOME TAXES

         The Company accounts for income taxes under SFAS No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using the enacted tax rates in effect for the year in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

     NET LOSS PER SHARE

         Basic earnings per share excludes any potential dilutive effects of
options, common stock shares subject to repurchase, warrants and convertible
securities. Diluted earnings per share includes the impact of potentially
dilutive securities. However, due to the Company's net loss position, basic and
diluted net loss per share are equivalent and are computed using the weighted
average number of common shares outstanding.

         During all periods presented, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share, as their effect
would have been anitidilutive. These outstanding securities consist of the
following (in thousands):

                                              December 31,
                                ________________________________________
                                    2001          2000          1999
                                    ____          ____          ____
        Outstanding options        2,459         2,211         2,034
        Warrants                       -            25             -


     COMPREHENSIVE INCOME (LOSS)

         Comprehensive income (loss) generally represents all changes in
stockholders' equity (deficit) except those resulting from investments or
contributions by stockholders. The Company's unrealized gains on
available-for-sale securities and cumulative translation adjustment represent
the components of comprehensive loss that are excluded from the net loss and are
not significant. Therefore no separate statement of comprehensive income (loss)
has been presented.

     NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001,  the FASB issued SFAS No. 141,  "Business  Combinations."
SFAS  No.  141  requires  the  purchase   method  of  accounting   for  business
combinations    initiated    after   June   30,   2001   and    eliminates   the
pooling-of-interests  method.  SFAS  No.  141 was  effective  for  all  business
combinations  initiated after June 30, 2001. The adoption of SFAS No. 141 had no
impact on the Company's financial statements.

         In July 2001, the FASB issued SFAS No.142, "Goodwill and Other
Intangible Assets", which is effective for fiscal years beginning after December
15, 2001. SFAS No. 142 requires, among other things, the discontinuance of
goodwill amortization. In addition, the standard includes provisions upon
adoption for the reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles. The
Company believes that the adoption of SFAS No. 141 will not have a significant
impact on its financial statements.

                                       49

<PAGE>


                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


            In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which is effective for the Company beginning fiscal
2003. SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made, with the associated asset
retirement costs capitalized as part of the carrying amount of the long-lived
asset. The Company does not expect the adoption of SFAS No. 143 to have a
material impact on its financial position or results of operations.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses significant
issues relating to the implementation of SFAS No. 121, " Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and develops a single accounting method under which long-lived assets that are
to be disposed of by sale are measured at the lower of book value or fair value
less cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and its provisions are to be applied prospectively. The
Company believes that the adoption of SFAS No. 144 will not have a significant
impact on its financial statements.

         In November  2001,  the FASB's  Emerging  Task Force  (EITF)  reached a
consensus on EITF Issue 01-09,  "Accounting for Consideration  Given by a Vendor
to a Customer or a Reseller of the Vendor's  Products," which is codification of
EITF 00-14,  00-22 and 00-25.  This issue  presumes  that  consideration  from a
vendor to a customer or reseller of the vendor's products to be reduction of the
selling prices of the vendor's  products to be a reduction of the selling prices
of the vendor's products and, therefore,  should be characterized as a reduction
of revenue when  recognized in the vendor's  income  statement and could lead to
negative  revenue under  certain  circumstances.  Revenue  reduction is required
unless  consideration  relates  to  a  separate  identifiable  benefit  and  the
benefit's  fair value can be  established.  This issue is effective  for periods
beginning after December 15, 2001. We are currently  assessing the impact of the
adoption of these issues on our financial statements.


2. INVESTMENTS

         The following is a summary of available-for-sale securities as of:

                                              Cost and Estimated Fair Value
                                         _______________________________________
                                                      DECEMBER 31,
                                         _______________________________________
                                                2001                2000
                                         _______________________________________
                                                    (In thousands)
 Cash equivalents:
               Money market funds             $32,187              $3,562
               Government debt securities       1,000               1,000
                                         _______________________________________
                                             $ 33,187              $4,562
                                         =======================================
    Short-term investments:
         Corporate notes                        $   -              $7,872
                                         =======================================

3.       Inventories, net
                                                       DECEMBER 31,
                                         _______________________________________
                                                2001                2000
                                         _______________________________________
                                                     (In thousands)
   Raw materials                               $  416                 $31
   Work-in-process                                664                   8
   Finished products                               54                  28
                                         _______________________________________
   Total                                      $ 1,134                 $67
                                         =======================================

                                       50


<PAGE>


                                CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


4. PROPERTY AND EQUIPMENT
                                                       December 31,
                                         _______________________________________
                                                2001               2000
                                         _______________________________________
                                                     (In thousands)
   Machinery and equipment                     $1,576             $1,185
   Office equipment and furniture and
   fixtures                                     2,438              1,977
   Leasehold improvements                       1,013                690
                                         _______________________________________
                                                5,027              3,852
   Less: accumulated depreciation and
   amortization                                (3,369)            (2,699)
                                         _______________________________________
   Property and equipment, net                $ 1,658            $ 1,153
                                         =======================================


5. COMMITMENTS

         In 2000, the Company renewed the lease on its current facility. The
extended lease term will expire on December 31, 2003. In conjunction with the
renewal, the Company granted the landlord a warrant to purchase 25,000 shares of
common stock at $9.00 per share. The fair value of the warrant, determined using
the Black-Scholes pricing model was capitalized and is being amortized to rent
expense over the term of the lease. In 2001, the landlord fully exercised the
warrant.

         In addition, the Company has an operating lease, effective May 1997, on
an additional facility, which was renewed and extended to December 31, 2003.
This facility has been subleased, since October 15, 1998, under a separate
sublease agreement which expires May 2002. In December 2001, the sublease tenant
and the Company have agreed to early termination of the sublease agreement upon
receipt of $150,000 from the subtenant to the Company as rent abatement. The
rent abatement is being amortized over the remaining period of the sublease. The
total minimum annual rental commitments, offset by sublease rental income, under
the leases as of December 31, 2001 are as follows:


                                     Minimum
                                      Lease         Sublease       Net Lease
                                     Payments        Income         Payments
                                ________________________________________________
                                                 (In thousands)
   2002                              $1,400          $115           $1,285
   2003                               1,492             -            1,492
                                ________________________________________________
Total minimum rental commitment      $2,892          $115           $2,777
                                ================================================


         Rent expense, net of sublease income of $496,000, $510,000 and
$505,000, was $947,000, $102,000 and $28,000 for the years ended December 31,
2001, 2000 and 1999, respectively.


6. INCENTIVE AND STOCK PLANS

   COMPANY STOCK OPTION PLANS

         In March 2001, the Board of Directors approved the 2001 Equity
Incentive Plan ("2001 Plan") allowing granting of stock options and restricted
stock to employees, directors and consultants. The 2001 Plan was approved by a
majority of our stockholders on May 16, 2001. The maximum aggregate number of
shares may be issued upon exercise of options or stock purchase rights is
1,000,000 shares.

         Under the terms of the 2001 Plan, incentive stock options may be
granted only to employees with exercise prices not less than the fair market
value of the common stock on the date of grant. Options may be granted with
different vesting terms from time to time but generally provide for vesting of
at least 20% of the total number of shares per year. All options under the 2001
Plan expire ten years after grant, and five

                                       51

<PAGE>

                                CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


years in the case of a grant  to a 10%  stockholder.  The  options  may  include
provisions  permitting  exercise  of the option  prior to full  vesting.  To the
extent that the aggregate  fair market value of the shares subject to a holder's
incentive stock options exceeds $100,000,  the excess options will be treated as
non-qualified stock options.

         The terms of the 2001 Plan are similar to our 1993 Stock Plan ("1993
Plan"), which was adopted in July 1993 allowing the granting of up to 3,075,000
shares, as amended and approved by stockholders in May 2000. The 2001 Plan was
initiated because the Board of Directors believed the available shares for
issuance under the 1993 Plan was going to be insufficient to cover grants to
employees and consultants after 2001, and furthermore, the 1993 Plan will
terminate in 2003. As of December 31, 2001, only 25,625 options under the 1993
Plan remain available for grant.

         On November 29, 1995, the Board of Directors approved the 1995
Director's Stock Option Plan ("Directors' Plan"), which allows the granting of
options for up to 100,000 shares of common stock to outside directors. Stock
options may be granted to outside directors with exercise prices of not less
than fair market value. The options expire ten years from date of grant. Options
granted under the Directors' Plan will vest over one or three years. The options
are only exercisable while the outside director remains a director.

         A summary of the activity of the Company's 1993 and 2001 Plans and the
1995 Directors' Plan is as follows:


                                                     OPTIONS OUTSTANDING
                                Options            ______________________
                               Available         Options           Weighted-Avg
                               for Grant       Outstanding        Exercise Price
                            ____________________________________________________
Balance at January 1, 1999      452,956         1,680,200           $3.22

   Options granted             (424,500)          424,500           $1.70
   Options exercised                  -           (11,111)          $0.49
   Options cancelled             59,768           (59,768)          $8.58
                            ____________________________________________________
Balance at December 31, 1999     88,224         2,033,821           $6.83
                            ____________________________________________________
   Additional authorized        500,000                 -              --
   Options granted             (369,500)          369,500           $7.13
   Options exercised                  -           (76,895)          $1.37
   Options cancelled            115,396          (115,396)          $6.02
                            ____________________________________________________
Balance at December 31, 2000    334,120         2,211,030           $3.30
                            ____________________________________________________

   Additional authorized      1,000,000                 -               -
   Options granted           (1,093,749)        1,093,749          $12.33
   Options exercised                  -          (697,144)          $2.20
   Options cancelled            148,710          (148,710)         $10.45
                            ____________________________________________________
Balance at December 31, 2001    389,081         2,458,925           $7.17
                            ====================================================

         The Company has reserved 2,848,006 shares of its common stock, which
may be issued with respect to outstanding options at December 31, 2001. The
weighted-average fair value per share of options granted was $9.99, $5.63 and
$1.27, respectively, for 2001, 2000 and 1999. Options to purchase 1,146,516,
1,473,195 and 1,233,227 common shares were exercisable at December 31, 2001,
2000 and 1999, respectively.

         The Company granted 8,750 and 25,000 common stock options to
consultants in exchange for services in 2001 and 2000, respectively. In
accordance with Statement 123 and EITF 96-18, "Accounting for Equity Instruments
that are Issued for Sales of Goods and Services to Other Than Employees," the
Company has recorded compensation expense related to these options and they are
periodically revalued as they vest.

                                       52

<PAGE>


                                 CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


The following table summarizes information about fixed stock options outstanding
at December 31, 2001:

<TABLE>
<CAPTION>



                                              Weighted-Avg.       Weighted                         Weighted
                                                Remaining         Average                           Average
Range of Exercise     Options Outstanding    Contractual Life     Exercise           Options       Exercise
Prices                                           (years)           Price           Exercisable       Price
_____________________________________________________________________________________________________________
<S>      <C>                   <C>                 <C>          <C>                   <C>          <C>
$  0.300-$0.480                60,831              2.90         $    0.470            60,831       $    0.470
$  0.510-$1.250               523,375              5.55         $    1.228           462,279       $    1.226
$  1.313-$4.625               454,079              7.48         $    2.372           271,191       $    2.780
$  4.969-$9.375               591,019              8.83         $    8.275           159,394       $    7.880
$ 9.625-$13.375               412,522              8.13         $   10.914           167,388       $   10.282
$13.438-$21.950               417,099              9.45         $   15.564            25,433       $   17.671
                        _________________                     _________________  _______________
$ 0.300-$21.950             2,458,925              7.72         $    7.171         1,146,516       $    4.165
                        ==================                                       ===============

</TABLE>



   PRO FORMA VALUATION OF OPTIONS

         The Company  applies APB 25 and related  Interpretations  in accounting
for its  plans  (see  Note  1).  Accordingly,  no  compensation  cost  has  been
recognized for its fixed stock option plans and its stock purchase plan.

         Pro  forma  information  regarding  net loss and net loss per  share is
required by SFAS 123 and has been determined as if the Company had accounted for
its employee  stock  options  granted  subsequent to December 31, 1994 under the
fair value  method of SFAS 123. The fair value of each option grant is estimated
on the date of grant  using  the  Black-Scholes  option-pricing  model  with the
following   weighted-average   assumptions:   no  expected  dividend,   expected
volatility  factor of 1.3,  1.2 and 1.0 for 2001,  2000 and 1999,  respectively,
risk-free  interest  rate of 4% for 2001,  6% for 2000 and 1999 and an  expected
life of 4 years for 2001 and 2000, and 5 years for 1999.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's opinion, the existing model does not necessarily provide a reliable
single measure of the fair value of its employee  stock options.  The effects of
applying SFAS 123 for recognizing  compensation  expense and providing pro forma
disclosures in 2001,  2000 and 1999 are not likely to be  representative  of the
effects on reported net loss in future years.


         For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information follows (in thousands except for the net loss per share
information):


                                                   Years Ended December 31,
                                             __________________________________
                                             2001           2000           1999
                                             ____           ____           ____

Proforma net loss                         $(20,539)      $(15,505)      $(7,970)
Proforma basic and diluted net loss per
share                                      $(1.51)        $(1.47)        $(0.82)

                                       53


<PAGE>


                                CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


RETIREMENT SAVINGS PLAN

         Under the Company's  retirement  savings plan ("401K Plan"),  employees
may elect to defer up to 15% of their  total  compensation,  not to  exceed  the
amount allowed by applicable Internal Revenue Service guidelines.  There were no
employer contributions to the plan as of December 31, 2001.


7. STOCKHOLDER'S EQUITY

         In April 2001, the Company completed a private placement of 1.6 million
shares of newly issued  common  stock at $7.00 per share,  pursuant to the Stock
Purchase Agreements.  The net proceeds to the Company,  after fees and expenses,
were approximately $10.6 million.

         In  November  2001,  the  Company  completed  a  private  placement  of
approximately  2.3 million  shares of newly  issued  common  stock at $13.25 per
share,  pursuant  to the Stock  Purchase  Agreements.  The net  proceeds  to the
Company, after fees and expenses, were approximately $28.7 million.


8. INCOME TAXES

         As  of  December  31,  2000,   the  Company  had  net  operating   loss
carryforwards  for federal and state income tax purposes of approximately  $78.0
million and $37.5 million,  respectively. In addition, at December 31, 2001, the
Company had federal and state research  credit  carryforwards  of  approximately
$1.3 million and $1.2 million,  respectively.  The net operating loss and credit
carryforwards  described  above will expire at various  dates  beginning  in the
years 2002 through  2021,  if not  utilized.  Utilization  of the net  operating
losses and credits may be subject to a substantial  annual limitation due to the
ownership  change  provisions of the Internal  Revenue Code of 1986, as amended.
The annual  limitation may result in the expiration of net operating  losses and
credits before utilization.

         Deferred income taxes reflect the net effects of tax  carryforward  and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amount used for income tax purposes.

         Significant  components  of the  Company's  deferred  tax  assets as of
December 31, 2001 and December 31, 2000 are as follows:


                                          2001                        2000
                                    ____________________________________________
                                                   (In thousands)
Net operating loss carryforwards        $28,700                    $20,800
Research credits                          2,200                      1,800
Capitalized research and development        500                      1,500
Other - net                                 400                        200
Less: valuation allowance               (31,800)                  (24,300)
                                    ____________________________________________
Net deferred tax assets                 $     -                   $     -
                                    ============================================

         Because of the Company's lack of earnings history, the deferred tax
assets have been fully offset by a valuation allowance. The increase in the
valuation allowance was approximately $7.5 million, $5.9 million and $2.8
million during 2001, 2000 and 1999, respectively.

                                       54


<PAGE>


                                CONCEPTUS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


9. LITIGATION COST RECOVERY

         During 2000,  the Company was  reimbursed  $586,000 from its Directors'
and Officers'  liability  insurance policy for legal defense costs in connection
with a sexual harassment lawsuit filed against the Company in December 1997. The
sum received  represents final reimbursement for legal defense fees. The Company
and all defendants were found not guilty on all charges in 1999.


10. LEGAL PROCEEDINGS

         From time to time the Company is involved in legal proceedings  arising
in the ordinary course of business.  The Company believes there is no litigation
pending that could have,  individually or in the aggregate,  a material  adverse
effect on its financial position, result of operations or cash flow.


11. RELATED PARTIES

         During 2001, the Company paid for consulting  services  provided by Dr.
Florence Comite, a member of the Board of Directors. The Company paid Dr. Comite
$2,500 per month in consulting  fees for services  rendered in 2001,  and $6,000
per month in 2000 and 1999.

                                       55


<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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 in the City of San
Carlos, California on this 29th day of March 2002.

                                            CONCEPTUS, INC.

                                        By:  /s/ Steven Bacich
                                        ________________________________________
                                        Steven Bacich,
                                        President and Chief Executive Officer



                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Bacich, his or her
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes may do or cause to be
done by virtue hereof. Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>



   SIGNATURE                                     TITLE                                   DATE

<S>                                <C>                                              <C>

/s/ Steven Bacich                  President, Chief Executive Officer and
-----------------                  Director (Principal Excutive Officer)           March 29, 2002
(Steven Bacich)

/s/ Glen Furuta                    Vice President, Finance and Administration
---------------                    and Chief Financial Officer                     March 29, 2002
(Glen K. Furuta)

/s/  Florence Comite               Director                                        March 29, 2002
--------------------
(Florence Comite)

/s/  Sanford Fitch                 Director                                        March 29, 2002
------------------
(Sanford Fitch)                    Director                                        March 29, 2002

/s/  Marie-Helene Plais-Cotre
-----------------------------
(Marie-Helene Plais-Cotrel)        Director                                        March 29, 2002

/s/  Richard Randall               Director                                        March 29, 2002
--------------------
(Richard D. Randall)

/s/  Kathryn Tunstall              Director                                        March 29, 2002
---------------------
(Kathryn Tunstall)

/s/  Peter Wilson                  Director                                        March 29, 2002
----------------------
(Peter L. Wilson)
</TABLE>

                                       56


<PAGE>


              Quarterly Results of Operations (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                  -------------------------------------------------------------------------------------------------
                                  December 31,  September 30,  June 30,  March 31,  December 31,  September 30,  June 30,  March 31,
                                      2001          2001         2001       2001        2000           2000         2000      2000
                                  -------------------------------------------------------------------------------------------------
                                  -------------------------------------------------------------------------------------------------
                                                                         (In thousands)

<S>                                  <C>          <C>         <C>            <C>        <C>         <C>         <C>       <C>

Net sales                             $    115    $    123    $    163       $-          $-          $-          $-       $-
                                      ---------------------------------------------------------------------------------------------
Operating costs and expenses:

  Cost of sales and start-up
    manufacturing costs                    273         537         646        --          --          --          --          --
  Research and development               2,165       1,953       1,676       2,189       4,709       2,644       1,818       1,568
  Selling, general and administrative    3,145       2,234       2,343       2,054       1,773       1,274       1,143         822
                                      ---------------------------------------------------------------------------------------------

Total operating
  costs and expenses                     5,583       4,724       4,665       4,243       6,482       3,918       2,961       2,390
                                      ---------------------------------------------------------------------------------------------
Operating loss                          (5,468)     (4,601)     (4,502)     (4,243)     (6,482)     (3,918)     (2,961)     (2,390)


Recovery of
  legal defense costs                      --          --          --          --           73        --            60         453

Interest and
  other income, net                        195         143         215         187         260         263          11         178
                                      ---------------------------------------------------------------------------------------------
Net loss                              $ (5,273)   $ (4,458)   $ (4,287)   $ (4,056)   $ (6,149)   $ (3,655)   $ (2,890)   $ (1,759)

                                      =============================================================================================
Basic and diluted net
  loss per share                      $  (0.34)   $  (0.33)   $  (0.32)   $  (0.35)   $  (0.53)   $  (0.33)   $  (0.30)   $  (0.18)
                                      =============================================================================================
Shares used in computing
  basic and diluted
  net loss per share                    15,443      13,712      13,300      11,723      11,681      11,163       9,692       9,680
                                      =============================================================================================
</TABLE>

                                       57

<PAGE>

<TABLE>
<CAPTION>



                                   Schedule II
                                 Conceptus, Inc.
                  Schedule of Valuation and Qualifying Accounts


                                 (In Thousands)
                                    Balance at       Chargese to
                                    Beginning of     Expenses or                       Balance at End
                                    Period           Other Accounts     Deductions     of Period
                                    __________________________________________________________________
<S>                                    <C>                 <C>             <C>            <C>

Year Ended December 31, 1999

Allowance for doubtful accounts        $ 661               -               82             $ 579
Provision for inventory                $ 832              10                -             $ 842

Year Ended December 31, 2000

Allowance for doubtful accounts        $ 579              17                -             $ 596
Provision for inventory                $ 842               9              851               $ -

Year Ended December 31, 2001

Allowance for doubtful accounts        $ 596              14              596             $ 14
Provision for inventory                $   -             168                -             $ 168

</TABLE>



                                       58


<PAGE>



                                INDEX TO EXHIBITS


Exhibit
Number                                      Description

 10.39         Change of Control Agreement dated as of January 3, 2000 by and
               between the Registrant and Steven Bacich.
 10.40         Fourth Amendment to Lease Agreement with Three Sisters Ranch
               Enterprise.
 23.1          Consent of PricewaterhouseCoopers, LLP Independent Accountants.
 23.2          Consent of Ernst & Young LLP, Independent Auditors.