<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A-1
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-18849
-------
The Female Health Company
-------------------------
(Exact Name of Registrant as Specified in Its Chapter)
WISCONSIN 39-1144397
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
919 N. Michigan Avenue, Suite 2208, Chicago, IL 60611
------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(312) 280-2281
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. YES [X] NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.01 Par Value -- 6,468,312 shares outstanding as of
May 13, 1996
<PAGE>
FORM 10-Q
THE FEMALE HEALTH COMPANY AND SUBSIDIARY
INDEX
Part I. FINANCIAL INFORMATION: PAGE
Unaudited Condensed Consolidated Balance Sheets -
March 31, 1996 and September 30, 1995.......... 3
Unaudited Condensed Consolidated
Statements of Operations -
Three Months Ended March 31, 1996
and March 31, 1995............................. 4
Unaudited Condensed Consolidated
Statements of Operations -
Six Months Ended March 31, 1996
and March 31, 1995............................. 5
Unaudited Condensed Consolidated
Statements of Cash Flows -
Six Months Ended March 31, 1996
and March 31, 1995............................. 6
Notes to Unaudited Condensed Consolidated
Financial Statements........................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 13
Part II. OTHER INFORMATION
Item 4. Legal Proceedings....................... 26
Item 6. Exhibits and Reports on Form 8-K........ 26
Signatures...................................................... 28
2
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,357,150 $ 1,521,344
Trade accounts receivable, net 657,475 415,089
Finished goods inventories, net of allowance for
obsolescence of $1,300,000 and $1,000,000 at March 31,
1996 and September 30, 1995, respectively 2,919,965 3,192,570
Prepaid expenses and other current assets 206,183 233,095
Net current assets of discontinued operations -- Note 3 --- 3,913,511
------------ ------------
Total Current Assets 5,140,773 9,275,609
Prepaid royalties --- 1,875,491
Intangibles and other assets 2,569,030 399,062
Furniture, fixtures and equipment 4,026,220 351,784
Less accumulated depreciation and amortization (217,972) (115,644)
------------ ------------
3,808,248 236,140
Net noncurrent assets of discontinued operations -- Note 3 --- 1,952,269
------------ ------------
$ 11,518,051 $ 13,738,571
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ --- $ 109,503
Notes payable to stockholders 2,160,000 ---
Trade accounts payable 1,080,042 1,121,549
Accrued royalty and exclusivity fees --- 4,761,198
Accrued expenses and other current liabilities 391,130 29,648
Due to stockholder --- 19,795
Current portion of long-term debt and capital lease
obligations 2,166,513 56,703
------------ ------------
Total Current Liabilities 5,797,685 6,098,396
Long-term debt and capital lease obligations, less current
maturities 633,144 89,017
Stockholders' Equity:
Convertible preferred stock --- ---
Common stock 63,928 63,928
Paid-in-capital 29,411,702 29,411,702
Translation (loss) (19,983) ---
Accumulated deficit (24,368,425) (21,924,472)
------------ ------------
Total Stockholders' Equity 5,087,222 7,551,158
------------ ------------
$ 11,518,051 $ 13,738,571
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1996 1995
------------- ------------
<S> <C> <C>
Net revenues $ 263,561 $ 426,434
Cost of products sold 870,857 293,681
------------ ------------
(607,296) 132,753
Expenses:
Selling 549,522 1,026,123
General and administrative 684,942 270,776
Research and new product
development 82,895 43,469
Reality exclusivity fees --- 869,746
------------ ------------
1,317,359 2,210,114
Operating loss (1,924,655) (2,077,361)
Non operating expense (51,955) (12,364)
------------ ------------
Loss from continuing operations (1,976,610) (2,089,725)
Discontinued operations (Note 3):
Loss from operations, net of
applicable income tax benefit
of $0 and $15,000 (4,461) (315,813)
------------ ------------
Net Loss $ (1,981,071) $ (2,405,538)
============ ============
Net loss per common and dilutive common
equivalent shares outstanding:
Continuing operations $ (0.31) $ (0.39)
Discontinued operations --- (0.06)
------------ ------------
$ (0.31) $ (0.45)
============ ============
Weighted average number of common and
dilutive common equivalent
shares outstanding 6,392,732 5,392,693
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Net revenues $ 730,508 $ 982,902
Cost of products sold 1,197,455 690,972
------------- -------------
(466,947) 291,930
Expenses:
Selling 797,334 3,092,224
General and administrative 930,918 603,575
Research and new product development 154,612 67,415
Reality exclusivity fees --- 1,727,390
------------- -------------
1,882,864 5,490,604
------------- -------------
Operating loss (2,349,811) (5,198,674)
Non operating expense (89,681) (16,066)
------------- -------------
Loss from continuing operations (2,439,492) (5,214,740)
Discontinued operations (Note 3):
Loss from operations, net of
applicable income tax benefit of
$0 and $15,000 (4,461) (619,747)
------------- -------------
Net Loss $ (2,443,953) $ (5,834,487)
============= =============
Net loss per common and dilutive
common equivalent shares outstanding:
Continuing operations $ (0.38) $ (0.92)
Discontinued operations --- (0.11)
------------- -------------
$ (0.38) $ (1.03)
============= =============
Weighted average number of common and
dilutive common equivalent shares
outstanding 6,392,732 5,666,522
============= =============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months ended March 31,
----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Operating Activities:
Net (loss) $ (2,443,953) $ (5,834,487)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Provision for Reality exclusivity fees --- 1,727,390
Depreciation and amortization 217,185 30,193
Provision for doubtful accounts and returns 83,168 46,857
Provision for inventory obsolescence 300,000 ---
Changes in operating assets and
liabilities of continuing operations (1,431,776) (907,517)
Discontinued operations --
noncash charges and working capital changes --- (334,590)
------------ ------------
Net cash provided by (used in) operating activities (3,275,376) (5,272,154)
Investing Activities:
Equipment purchases, net of disposals (268,803) (2,064)
Purchase of Chartex (5,191,565) ---
Other --- (8,448)
Investing activities of discontinued operations --- (176,687)
Sale of WPC Holdings 7,250,000 ---
Expenses incurred with sale of WPC Holdings (681,608) ---
------------ ------------
Net cash provided by (used in) investing activities 1,108,024 (187,199)
Financing Activities:
Proceeds from issuance of Common Stock and other --- 3,167,715
Costs of Common Stock issuance --- (25,200)
Proceeds from issuance of notes to stockholders 2,160,000 ---
Decrease in notes payable (109,503) ---
Payments of long-term capital lease obligations (27,544) (17,386)
Payment to shareholder (19,795)
Financing activities of discontinued operations --- (3,379)
------------ ------------
Net cash provided by financing activities 2,003,158 3,121,750
------------ ------------
Increase (decrease) in cash and cash equivalents (164,194) (2,337,603)
Cash and cash equivalents at beginning of period 1,521,344 3,525,145
------------ ------------
Cash and cash equivalents at end of period $ 1,357,150 $ 1,187,542
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended March 31, 1996
are not necessarily indicative of the results that may be expected for the
fiscal year ended September 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1995.
NOTE 2 - NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Income (loss) per Common and Common Equivalent share is based on the
weighted average number of shares of Common Stock and common stock equivalents,
if dilutive, outstanding during the period.
NOTE 3 - DISCONTINUED OPERATIONS
On March 10, 1995, the Company's Board of Directors approved a formal plan
to sell WPC Holdings, Inc. ("Holdings"). On June 20, 1995, the Company entered
into a definitive agreement with a third party to sell Holdings for total
consideration of $8.75 million, valued for accounting purposes at $8.285
million. The definitive agreement (as amended) required that the sale of
Holdings close in early 1996. The Company completed the sale of Holdings on
January 29, 1996. See Note 5.
As a result of adopting a formal plan of disposition of Holdings (which
contained the leisure time, institutional health care and other products
segments), the Company has accounted for Holdings as a discontinued operation,
using a March 10, 1995 measurement date and, accordingly, prior period financial
statements have been reclassified to reflect the discontinuation of these
segments. The Company has realized income from discontinued operations during
the period from the measurement date (March 10, 1995) through the date of
disposal (January 29, 1996) and ultimately realized a loss on the sale of
Holdings. Since the measurement date and through September 30, 1995, the
Company has recorded income from discontinued operations of $684,346. The
Company deferred recognition of its 100% share of Holdings loss of $(229,000)
7
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 3 - DISCONTINUED OPERATIONS - CONTINUED
-----------------------------------
for the period from October 1, 1995 through January 29, 1996. The deferred loss
has been included with other expenses incurred and in connection with the sale
of Holdings.
Net revenues of the discontinued operations were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net revenues $1,167,396 $2,933,238 $3,258,346 $4,445,412
</TABLE>
Net assets of Holdings have been segregated on the consolidated balance
sheets from their historic classifications to separately identify them. Details
of such amounts (exclusive of cash of $1,297,766 as of September 30, 1995) were
as follows:
<TABLE>
<CAPTION>
September 30
1995
------------
<S> <C>
Accounts receivable-net.............. $ 1,436,736
Inventory............................ 3,030,483
Prepaid expense and other............ 339,310
Trade accounts payable............... (439,640)
Accrued expenses..................... (328,715)
Current maturities of capital lease
obligations......................... (124,663)
------------
Net current assets of discontinued
operations.......................... $ 3,913,511
============
Property, plant and equipment-net.... $ 2,469,898
Intangibles-net...................... 890,843
Other assets......................... 75,340
Long-term portion of capital lease
obligations......................... (1,458,204)
Minority interest.................... (25,608)
------------
Net noncurrent assets of discontinued
operations.......................... $ 1,952,269
============
</TABLE>
8
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 4 - FINANCIAL CONDITION
-------------------
Historically, the Company has utilized capital to: a) fund losses from
continuing operations due principally to paying minimum royalties ("exclusivity
fees"), initiating the product launch of the female condom and obtaining FDA
approval; and b) purchase finished goods inventory related to the
licensing/royalty agreements with Chartex.
As discussed in Notes 3, 5 and 6, the Company has recently completed the
sale of Holdings and utilized the proceeds from the sale to purchase the
manufacturer and the Company's supplier of the female condom, Chartex
International, PLC and its parent, Chartex Resources Limited (collectively --
"Chartex"). The Company together with Chartex have fixed cash expenses of
approximately $400,000 per month before capital expenditures and debt repayment.
The Company had approximately $2.4 million of cash available for working capital
purposes immediately following the Chartex Acquisition on February 1, 1996. If
the Company meets its operating plans, it will need to source at least
approximately $2 million within the 4 months following March 31, 1996 and a
cumulative amount of approximately $8.1 million by March 31, 1997.
The Company intends to seek to source the foregoing amounts from one or
more of the following sources: refinance of the Chartex manufacturing facility
(including extraction of $1 million of cash from equity (appraised value in
excess of current loan value) totaling up to $2.7 million; up to $768,000 from
an economic development grant from the U.K. Regional Selective Assistance
Program (the "Program") which has been awarded to the Company. It is anticipated
that $300,000 will be received under this grant in 1996 and the remainder in
future years based on the achievement of certain employment, operational and
investment goals. The Company is required to utilize 50% of any amounts it
receives from this grant to prepay a portion of the (Pounds)520,000 note which
the Company issued as part of the consideration of the Chartex Acquisition; in
addition, the grant is repayable by the Company to the Program if certain
conditions to the grant are not satisfied; up to $0.6 million from a working
capital credit facility which would be based on eligible accounts receivable;
and approximately $6.0 million from sales of Common Stock. However, there can be
no assurance that the Company will be able to source all or any portion of this
required capital through these or other sources or that such amount, if raised,
will be sufficient to operate the Company until sales of the female condom
generate sufficient revenues to fund operations. In addition, any such funds
raised may be costly to the Company and/or dilutive to existing shareholders.
9
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 4 - FINANCIAL CONDITION - CONTINUED
-------------------------------
If the Company is not able to source the required funds or any future
capital which becomes required, the Company may be forced to sell certain of its
assets or rights or cease operations. The Company has had preliminary contacts
with two possible sources for a refinancing of the Chartex facility. Based on
these discussions, management believes that the Company will be able to complete
a refinancing before the end of 1996. The Company does not currently have in
place any accounts receivable financing or other line of credit financing.
NOTE 5 - SALE OF HOLDINGS
----------------
On June 20, 1995 the Company entered into a stock purchase agreement (the
"Purchase Agreement") with WPC Acquisition Corporation ("Buyer"), an affiliate
of JLS Investment Group, Inc. and M & I Ventures Corporation for the sale of
100% of the issued and outstanding common stock of its wholly-owned subsidiary,
Holdings.
The Company believed the Holdings and Female Health businesses were
disparate in nature and that selling Holdings and concentrating on the Female
Health business represented the best long term opportunity.
The sale of Holdings was approved by the Companys shareholders on January
18, 1996. The total consideration received was $8.75 million and the fair value
of the aggregate consideration to the Company in connection with the sale was
$8.285 million. On January 29, 1996 the sale was completed. The excess of the
Company's investment in Holdings at closing (adjusted for intercompany amounts
and the reimbursement to Holdings of certain expenses and after deducting the
net deferred operating losses of Holdings for the period October 1, 1995 through
the date of sale) over the fair value of the consideration received was $4,461.
The Company recorded the excess as a loss on sale of discontinued operations
during the quarter ended March 31, 1996.
In connection with the Sale and except as specifically indicated in the
Purchase Agreement, Buyer automatically assumed all of the liabilities of
Holdings. However, the Company remains contingently liable for any obligations
of the Company incurred in connection with Holdings if the Company is not able
to get a release of such liability from the third-party creditor (the
"Contingent Liabilities"). These Contingent Liabilities include the lease of
Holdings facilities (approximately $3.6 million of future payments) and
employment agreements (with future payments of approximately $1.1 million) for
10
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 5 - SALE OF HOLDINGS - CONTINUED
----------------------------
certain officers of Holdings. Accordingly, if Buyer fails to pay any of the
Contingent Liabilities, the Company would be required to pay them and then seek
to collect from Buyer the amount paid by the Company.
NOTE 6 - ACQUISITION OF CHARTEX
----------------------
On November 20, 1995 the Company entered into an agreement (the
"Agreement") to purchase all of the issued and outstanding share capital of
Chartex Resources Limited the parent company and sole owner of stock in Chartex
International, PLC from Stamina Investments Limited ("Stamina"), a company
incorporated in the British Virgin Islands. Completion of the acquisition of
Chartex was conditioned on the Company's completion of its sale of Holdings (see
Note 5). The acquisition of Chartex closed on February 1, 1996.
Chartex is based in London, England and owns certain world-wide
intellectual property and proprietary manufacturing technology for the female
condom. Chartex licenses the rights to sell the female condom to marketing
partners throughout the world, including the Company in the U.S., Canada and
Mexico and owns a manufacturing facility in London to supply the world-wide
needs of the female condom.
The Agreement provided for total consideration of (Pounds)4.0 million ($6.1
million) with a fair value of $5.9 million. Consideration included nonrefundable
payments to fund Chartex's operating losses (Pounds)0.7 million ($1.1 million),
(Pounds)2.45 million ($3.7 million) in cash at closing plus interest on
(Pounds)2.45 million at LIBOR plus 1% from December 1, 1995 through closing
($0.05 million). In addition, the Company agreed to issue notes payable of
(Pounds)312,500 ($0.5 million) due 6 months after closing with interest at LIBOR
plus 1 1/8%, and a non-interest bearing note payable of (Pounds)520,000 ($0.8
million) with a discounted present value of (Pounds)375,000 or $0.6 million due
three years after closing.
Prior to closing, Stamina and a nonprofit foundation which has provided
Stamina and Chartex with debt funding waived repayment of approximately
(Pounds)20 million ($30 million) in notes payable by Chartex to them and paid
(Pounds)10 million ($15 million) in outstanding notes payable from Chartex to a
third party bank which were guaranteed by this nonprofit foundation.
11
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 6 - ACQUISITION OF CHARTEX - CONTINUED
----------------------------------
The Company had the following recorded assets and (liabilities) at
September 30, 1995 which arose in connection with transactions with Chartex
before its purchase by the Company:
Prepaid royalty asset........................... $ 1,830,578
Capitalized option fee (included in other assets $ 150,000
Accrued minimum royalties....................... $(4,761,198)
-----------
Net liability $(2,780,620)
===========
These assets and liabilities were eliminated at the date of purchase of
Chartex (February 1, 1996) and effectively reduced the aggregate fair value of
consideration paid for Chartex (including expenses) from $6.3 million to $3.5
million. The fair value of the net assets purchased was $11.7 million.
The acquisition of Chartex is accounted for as a purchase. The fair value
of total consideration paid for Chartex (plus transaction expenses of $0.35
million) is less than the fair value of net assets purchased by $8.2 million
("bargain purchase"). The Company reduced the fair value of Chartex's long-term
assets by the amount of the bargain purchase on a pro-rata basis. Costs incurred
in connection with the acquisition of Chartex and payments for pre-close funding
of Chartex's operating losses have included as part of the total cost of the
Chartex acquisition.
At December 31, 1995, Chartex had tax losses of approximately (Pounds)39
million ($59.2 million) that may be available to be carried forward and set off
against future taxable profits.
The results of Resources and Chartex are combined with the Company after
the February 1, 1996 acquisition date.
12
<PAGE>
THE FEMALE HEALTH COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
Unaudited proforma consolidated results of operations for the three months
ended March 31, 1996 and 1995 and for the six months ended March 31, 1996 and
1995 as though Chartex had been acquired as of October 1, 1994 follow:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 287,000 $ 791,000 $ 786,000 $ 1,466,000
Net loss (2,522,000) (5,392,000) (3,828,000) (8,977,000)
Net loss per share $ (0.39) $ (1.00) $ (0.60) $ (1.58)
=========== =========== =========== ===========
Weighted average number of
common and dilutive common
equivalent shares outstanding 6,392,732 5,392,693 6,392,732 5,666,522
=========== =========== =========== ===========
</TABLE>
The above amounts reflect adjustments for amortization of intangibles, and
depreciation based upon revalued purchased assets, imputed interest on borrowed
funds, and elimination of intercompany transactions.
NOTE 7 - INVENTORIES
-----------
The components of inventory consist of the following:
<TABLE>
<CAPTION>
MARCH 31, September 30,
1996 1995
---------- -------------
<S> <C> <C>
Raw Material $ 617,590 $ ---
Finished Goods 2,302,375 3,192,570
---------- ----------
$2,919,965 $3,192,570
========== ==========
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
-------
On March 10, 1995 the Company's Board of Directors (the "Board") approved a
formal plan to dispose of the Company's Holdings subsidiary which included the
leisure-time, institutional health care and other products segments. As a result
of the Boards decision, the Company has reclassified financial information to
reflect Holdings' operations as a discontinued segment. The sale of Holdings
closed on January 29, 1996. See Note 5 to the Notes to Unaudited Condensed
Consolidated Financial Statements.
On November 20, 1995, the Company signed a definitive agreement to purchase
Chartex. Chartex is the owner of certain intellectual property and proprietary
manufacturing technology for the Company's sole continuing product, the female
condom. Prior to the acquisition of Chartex, the Company licensed its rights to
market and distribute Reality in its territories from Chartex. The acquisition
of Chartex closed on February 1, 1996. See Note 6 to the Notes to Unaudited
Condensed Consolidated Financial Statements.
Continuing operations reflect the corporate and Female Health Company
("FHC") operations and Chartex operations from February 1, 1996.
The purchase of Chartex provides the Company with certain worldwide
intellectual property relating to the female condom, including patents which
have been issued in the U.S., Japan and the European Union; proprietary
manufacturing technology; and a state-of-the-art manufacturing facility. The
purchase also resulted in the elimination of all previously booked and
contingent liabilities, including royalties, from the Company to Chartex, and
any prepaid royalties on the books of the Company. The acquisition enables the
Company to develop worldwide strategies for the production and marketing of the
female condom to consumers and the public sector. In addition, the acquisition
of Chartex permits the Company to consider U.S. and worldwide partners on an
unencumbered basis. The Company believes opportunity exists as the product has
yet to be launched in most major global markets including Germany, France,
Italy, Brazil, Mexico, Canada, India and China. The Company has an agreement
with a $1.0 billion distribution division of a $5.0 billion Japanese company to
launch the product in Japan. The launch will occur after Japanese regulatory
approval which is expected in late 1996 or early 1997.
As a result of the recent Chartex acquisition and sale of Holdings, the
Company does not believe that its historical results of operations are
necessarily indicative of future results.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL - CONTINUED
-------------------
The Company's only current product in continuing operations is the female
condom, which is sold in the United States under the tradename "Reality(R)".
As the only product commercially available which is controlled by the woman
and which offers protection against unintended pregnancy and sexually
transmitted disease, including AIDS, management believes the female condom
provides a significant global opportunity to the Company.
The female condom is a revolutionary new product which is in the early
stages of commercialization. The female condom has been on retailers shelves in
the United States since approximately September 1994 and has been launched in 14
other countries between 1992 and 1995 and since such time sales have been
substantially lower than management's expectations. Accordingly, the ultimate
level of consumer acceptance of the female condom is not yet known. Although
management believes that with additional marketing and consumer education, sales
will increase, if sales do not significantly increase, the Company will continue
to report operating losses and may experience significant inventory write downs
in the future and, ultimately, the Company's viability may be in jeopardy.
For the period beginning with the commercial launch of Reality in the
United States in the fourth quarter of fiscal 1994 and ending on March 31, 1996,
the Company sold approximately 3.4 million Reality devices. The Company's
average selling price during this period was $1.33 per device, including 250,000
devices sold to Family Health International for a clinical acceptability study
(supported by the United States Agency for International Development) at a
discounted price. From 1992 through March 31, 1996, Chartex sold approximately
5.4 million devices (exclusive of sales to the Company) at an average selling
price of less than $1.00 per device. Post acquisition, the Company estimates
that approximately 18.8 million female condoms would be required to be sold
worldwide at an average selling price of $1.00 each to break even on a cash
basis. This is equivalent to use of the female condom by approximately 525,000
women, world-wide, on an average of three times per month. The $1.00 per device
average selling price is based on the Company's estimate of projected mix in
sales of devices based on current prices.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL - CONTINUED
Reality devices sold by the Company were as follows for the periods indicated:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
March 31, March 31,
----------------------- ----------------------
1996 1996 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Number of Reality devices
sold 201,234 292,122 597,128 666,588
======= ======= ======= =======
</TABLE>
The Company is particularly dependent upon the services of Mary Ann Leeper,
Ph.D., President and Chief Operating Officer and O.B. Parrish, Chairman and
Chief Executive Officer. The Company has an employment agreement with Dr.
Leeper. The loss of the services of either Mr. Parrish or Dr. Leeper could
adversely impact the Company's operations. The manufacture, sale and
distribution of the Company's products is regulated by a number of governmental
agencies. The Company is not aware of any actions by these regulating agencies
which would adversely impact the Company's financial condition or results of
operations.
COMMERCIAL LAUNCH OF REALITY
The launch of Reality began in September 1994. The introductory promotion
was education based and included seminars, roundtable discussions, sales calls
and print promotion to physicians, nurse practitioners, and other appropriate
health care providers. Consumer advertising was directed to college age
students. Subsequent to January 1995, FHC's promotional efforts were reduced due
to limited capital availability. Efforts were focused primarily on print and
radio consumer advertising along with retail trade support. Marketing research
confirms that the target users are sexually active young adults who are
concerned about contracting sexually transmitted diseases and preventing
unintended pregnancy. A new marketing campaign was initiated in March 1996. The
program continues to be education based but is more specific regarding use of
the female condom. It is directed to the private and public sectors and includes
outreach programs, seminars, workshops, advertising in young adult magazines and
on urban music radio stations. The educational components answer the questions
of what the female condom is, how it is used, how it protects, why it's
important to practice
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMMERCIAL LAUNCH OF REALITY - CONTINUED
safer sex, who should try the female condom and that using the female condom
feels good.
The outreach program has been augmented in several cities and states by the
respective departments of health. Examples are ongoing programs in Philadelphia,
Pennsylvania and Chicago, Illinois. These cities have purchased large quantities
of the female condom and use them in on-the-street outreach programs in
communities at high risk to sexually transmitted diseases.
Currently Reality is distributed in all 50 states; it is available in over
35,000 pharmacies; is listed in 38 Medicaid or similar state programs and is
available free or at a significantly discounted price in over 1000 public
clinics.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
CONTINUING OPERATIONS
The Company recorded a $162,873 decrease in net revenues to $263,561 for
the three months ended March 31, 1996 compared to the same period in the
previous year. Net revenues pertain exclusively to sales of Reality, the female
condom. Current year net revenues were negatively impacted due to the Company's
inability to sustain marketing expenditures and management's focus on the
Company's reorganization that was achieved with the sale of Holdings and
acquisition of Chartex. Approximately 67% of the number of Reality devices sold
during the current year quarter were sold in the "private" sector and 33% were
sold to the "public" sector. This compares with approximately 53% to the
"private" sector and 47% to the "public" sector in the prior year quarter. Sales
in the "private" sector have been less than management's expectations.
Management believes that lower than expected sales are the result of reduced
marketing and promotion of Reality due to limited capital availablity.
The Company recorded a charge to cost of products sold of $300,000 for
inventory obsolescence reserve in the current year quarter. This charge,
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUING OPERATIONS - CONTINUED
along with the cost of excess capacity at Chartex and significantly higher trade
discounts and returns, resulted in a loss of $(607,296) at the gross margin
level for the three months ended March 31, 1996.
Sales and marketing expense decreased $476,601 from $1,026,123 in the prior
year quarter to $549,522 in the current year quarter. Beginning in March 1996,
the Company initiated a new advertising campaign in the United States offering
consumers the opportunity to call for a free sample of the female condom, a
manufacturer's coupon and various product information. Since beginning this
program, the Company has received approximately 1,200 calls per day in response
to the advertising. April net revenues increased 88% to $166,000, an increase of
$78,000 over net revenues of $88,000 for April 1995. The company believes this
sales increase reflects the renewed marketing initiative and that sustained
promotional programs will result in continued increases in sales. Prior year
quarter amounts included the continuation of the marketing and promotion
associated with the national commercial "launch" of Reality in the U.S. Sales
and marketing expense for the current year quarter were lower due to the
Company's limited working capital availability.
General and administrative expenses increased by $414,166 to $684,942 for
the current year period compared to $270,776 for the same period of the
preceding year. The addition of Chartex's general and administrative expenses
accounted for most of this increase.
Research and new product development expense increased $39,426 to $82,895
for the current year quarter compared to $43,469 for the same period of the
preceding year. Current year expense relates to costs incurred in connection
with on-going government-funded clinical trials and a study evaluating the use
of the female condom in preventing sexually - transmitted diseases (STDs). As a
condition of the FDA approval of Reality, the Company agreed to provide product
and assistance (but not funding) in conjunction with studies to be conducted and
funded by the National Institute of Health ("NIH"). The Company is providing
funding and product in connection with the on-going STD study.
The Company has not recorded any exclusivity fees for the current year
quarter. Prior year amounts totaled $869,746. The Company ceased accruing
further exclusivity fees under its licensing agreements with Chartex beginning
with the fourth quarter of fiscal 1995 due to events which occurred in the
fourth quarter which made payment of any exclusivity amounts unlikely. See Note
6 of the Notes to Unaudited Condensed Consolidated Financial Statements
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTINUING OPERATIONS - CONTINUED
for a discussion of the treatment of the remaining accrued exclusivity amounts.
Nonoperating expense increased $39,591 to $51,955 for the current year
quarter compared to the same period of the prior year. This increase is due to
interest on borrowings from shareholders incurred during the quarter in addition
to the interest on Chartex debt obligations of $35,252.
The Company recorded a $113,115 reduction in losses to a $1,991,071 loss
from continuing operations for the current year quarter compared to a $2,089,725
loss for the same period of the prior year. This reduced loss is generally due
to lower sales and marketing expense and the elimination of the accrual for
exclusivity expense associated with the Reality license agreement, both as
explained above.
DISCONTINUED OPERATIONS
During the second quarter the Company recognized a loss of $4,461 on the
sale of Holdings as a result of the January 1996 sale of Holdings (see Note 5 to
the Notes to Unaudited Condensed Consolidated Financial Statements).
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31, 1995
CONTINUING OPERATIONS
The Company reported a $252,394 decrease in net revenues to $730,508 for
the six months ended March 31, 1996 compared to the same period of the preceding
year. Net revenues pertain exclusively to sales of the female condom. The prior
period included a portion of the initial stocking for the national launch of the
female condom in the U.S. As previously indicated, current year net revenues
were negatively impacted due to reduced marketing and promotion of Reality due
to limited funds available to promote Reality. Approximately 63% of the female
condom sales dollars for the six months ended March 31, 1996 were sales to the
public sector and 37% were trade sales compared with 33% to the public sector
and 67% trade sales for the same period in the preceding year.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Costs of products sold of $1,197,455 for the six months ended March 31,
1996 include a $300,000 inventory writedown and a $209,291 charge for Chartex
factory overhead costs (depreciation of $123,460 and indirect production labor
of $85,831) resulting from idle production capacity. After adjustment for the
above, the Company reported a 6% gross margin for the six month period ended
March 31, 1996 compared to a 30% gross margin for the same period of the
preceding year. As mentioned above, margins were adversely impacted by a
significant change in the sales mix between the "public" sector and "trade"
sector. The average selling price per device decreased from $1.47 per device to
$1.22 per device. This is reflective of the lower "public" sector pricing
associated with bulk purchases of the product by governmental agencies.
Sales and marketing expenses decreased $2,294,890 from $3,092,224 for the
six month period ended March 31, 1995 to $797,334 for the six month period ended
March 31, 1996. Prior year amounts included the marketing and promotion
associated with the national launch of Reality in the U.S. Because of the
Company's limited working capital availability, marketing and promotion
activities were curtailed during the current period.
General and administrative expense totaled $930,918 for the six month
period ended March 31, 1996 compared to $603,575 for the same period of the
preceding year. As previously mentioned, the acquisition of Chartex and the
addition of Chartex's general and administrative expenses account for this
increase.
Research and development expense increased $87,197 to $154,612 for the
current six month period compared to $67,415 for the same period of the prior
year. The increase relates to costs incurred in connection with on-going
government-funded clinical trials as previously discussed.
The Company has not recorded any exclusivity fees for the current year.
Prior year amounts totaled $1,727,390. The Company ceased accruing further
exclusivity fees under its licensing agreements with Chartex beginning with the
fourth quarter of fiscal 1995 due to events which occurred in the fourth quarter
which made payment of any exclusivity amounts unlikely. See Note 6 of the notes
to Unaudited Condensed Consolidated Financial Statements for a discussion of the
treatment of the remaining accrued exclusivity amounts.
Nonoperating expenses increased $73,615 to $89,681 for the current six
month period compared to the same period of the prior year. This increase is due
to interest on borrowings from shareholders incurred during the current year in
addition to the interest on Chartex debt obligations since acquisition.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DISCONTINUED OPERATIONS
-----------------------
The loss from discontinued operations decreased from $619,747 for the six
month period ended March 31, 1995 to $4,461 for the six month period ended March
31, 1996. The Company has not included any of Holdings loss from operations for
the period from October 1, 1995 through January 29, 1996. The Company recognized
a loss of $4,461 on the sale of Holdings as a result of the January 1996 sale of
Holdings (see Note 5 to the Notes to Unaudited Condensed Consolidated Financial
Statements).
FINANCIAL CONDITION
-------------------
The following discussion covers significant changes in certain balance
sheet accounts between September 30, 1995 and March 31, 1996.
Cash used in operations totaled $3,275,376 and was offset as the result of
net proceeds from new borrowings of $2,003,158 and $1,108,024 of net cash
remaining after the sale of Holdings and acquisition of Chartex.
Trade accounts receivable increased $242,386 to $657,475 primarily as a
result of the acquisition of Chartex.
The Chartex acquisition added $626,034 of inventory at March 31, 1996. This
increase was offset by the additional reserve of $300,000 and the $598,639
reduction of U.S. inventory as the Company continues to sell on-hand product
resulting in a net inventory reduction of $272,605 at March 31, 1996.
Intangibles and other assets increased $2,169,968 to $2,569,030 at March
31, 1996 as a result of the acquisition of Chartex intellectual property rights
and patents of $1,488,060 and the receipt of a long-term note and warehousing
credit with a combined fair value of $1,035,000 as part of the Holdings sale.
Furniture, fixtures and equipment, net of accumulated depreciation
increased $3,572,108 primarily as a result of the Chartex acquisition.
Net current assets of discontinued operations of $3,913,511 and net
noncurrent assets of discontinued operations of $1,952,269 were eliminated in
conjunction with the sale of Holdings. See Note 3 and Note 5 to the Notes to
Unaudited Condensed Consolidated Financial Statements.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION - CONTINUED
-------------------------------
Notes payable to shareholders increased by $2,160,000 as a result of bridge
financing incurred during the current fiscal year. Proceeds were used to fund
pre-closing and on-going funding commitments to Chartex; to pay certain expenses
associated with the sale of Holdings and the purchase of Chartex; and to provide
working capital for current operations.
LIQUIDITY AND SOURCES OF CAPITAL
--------------------------------
Historically, the Company has incurred cash operating losses relating to
developmental expenses incurred and royalties paid in connection with the female
condom. Cash used in operations for the six month period ended March 31, 1995
reflect substantial sales and marketing expenses incurred in the commercial
launch of Reality in the U.S. combined with lower than expected sales during
this period. For the six month period ended March 31, 1996 the Company incurred
substantial operating expenses that include operating cash for Chartex since
February 1, 1996. Due to a shortage of available cash, the Company was able to
spend only nominal amounts on marketing Reality in the six months ended March
31, 1996.
Although female condom sales to date have been significantly lower than
management anticipated, management believes that with additional marketing and
consumer education, sales will increase. Accordingly, the Company expects that
it will need to incur a significant amount of marketing and promotion
expenditures related to the female condom in fiscal 1996. The Company's ability
to continue marketing and promoting the female condom is dependent upon the
Company sourcing additional cash to stimulate consumer sales. Initial marketing
efforts will be directed at encouraging consumer trial of the product. Because
the Company has a significant level of "paid-for" inventory, proceeds from
increased sales of the female condom are expected to be able to fund a
meaningful portion of the estimated $2 million marketing and promotion effort in
the U.S. in fiscal 1996. The ultimate level of marketing expenditures required
after fiscal 1996 will depend in large part on the results of the Company's
fiscal 1996 marketing effort. Management believes it will be able to reasonably
predict the probable ultimate potential level of future sales by the end of
fiscal 1996 or soon thereafter and will, accordingly, be able to make
appropriate adjustments to the Company's marketing budget thereafter. At
present, the Company believes that its sales and marketing budget in the U.S.
for fiscal years after 1996 will be
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND SOURCES OF CAPITAL - CONTINUED
--------------------------------------------
approximately $2.5 million to $3.5 million per year and will be primarily funded
through sales of its female condom.
In November 1995, the Company signed an agreement to purchase 100% of the
outstanding stock of Chartex for cash and notes payable. The Chartex Acquisition
was completed on February 1, 1996. See Note 6 of the Notes to Unaudited
Condensed Consolidated Financial Statements.
In October and November 1995, the Company received $1,160,000 in proceeds
from newly-issued notes payable. In March 1996 the Company received an
additional $1 million in proceeds from a one-year note payable from a
shareholder.
Due to the Company's January 1996 sale of Holdings and its February 1996
acquisition of Chartex, the Company does not believe that its historical
liquidity and capital structure are necessarily representative of future
structure or requirements.
On November 30, 1995 the Company's working capital credit facility with its
bank terminated. The Company did not have any borrowings outstanding under the
facility at termination. Until the Company sources additional working capital,
the Company's and Chartex's operations will be required to be funded from
operations and from cash generated from the sale of Holdings, less cash used to
purchase Chartex.
The Company realized approximately $6.1 million in cash from the sale of
Holdings (net of transaction expenses). The total cash cost of the Chartex
Acquisition (including expenses) was approximately $5.2 million. The Company had
paid transaction expenses and certain pre-closing funding commitments to Chartex
(which amounts have already been included in arriving at the above amounts)
totaling approximately $1.3 million. The $6.1 million in cash from the sale of
Holdings less the $5.2 million in cash used to acquire Chartex plus $1.3 million
of cash expenses paid results in approximately $2.2 million of net cash which
the Company generated during its second fiscal quarter as a result of these
transactions.
At March 31, 1996 the Company had current liabilities of $5.8 million. This
amount includes $1.16 million of notes payable to shareholders which are due in
November 1996, $1.0 million of notes payable to shareholders which are
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND SOURCES OF CAPITAL - CONTINUED
--------------------------------------------
due in March 1997, a mortgage loan of $1.7 million due in October 1996 and a
$0.5 million note payable to the former owner of Chartex due in July 1996.
The Company's operating plan for the 12 month-period ending March 31, 1997
calls for cash needs as follows:
Cash used in operations $2.8 million
Investing activities
--Chartex purchase of equipment from ring supplier 0.7 million
--other capital expenditures 0.2 million
Financing activities
--repay notes payable to shareholders and
capital lease amounts 2.2 million
--repay note from Chartex Acquisition 0.5 million
--repay mortgage on Chartex manufacturing plant 1.7 million
------------
EXPECTED CASH NEEDS $8.1 million
============
Management's plans call for raising additional working capital within the
next 12 months. The combined company (Chartex and the Company) post-acquisition
is expected to have negative cash flows until the third quarter of fiscal 1997.
The Company believes that it will need at least $0.4 million in cash per month
during the first year to fund the Company's operations and as a result will need
to source approximately $8.1 million within the next 12 months, with
approximately $2.0 million required within the first 4 months.
The Company intends to seek additional capital from the following sources:
refinance of the Chartex manufacturing facility (including extraction of up to
$1.0 million of cash from equity (appraised value in excess of current loan
value) totaling up to $2.7 million; up to $768,000 from a U.K. economic
development grant (which is subject to certain investment and employment
targets) and 50% of such amounts would be required to be utilized to prepay a
(Pounds)520,000 note which was issued in connection with the Chartex
Acquisition; up to $0.6 million from a working capital credit facility which
would be based on eligible accounts receivable; and approximately $6.0 million
from sales of Common Stock.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND SOURCES OF CAPITAL - CONTINUED
--------------------------------------------
However, there can be no assurance that the Company will be able to source
all or any portion of this required capital through these or other sources or
that such amount, if raised, will be sufficient to operate the Company until
sales of the female condom generate sufficient revenues to fund operations. In
addition, any such funds raised may be costly to the Company and/or dilutive to
existing shareholders. If the Company is not able to source the funds, the
future of the Company would be in substantial jeopardy. Depending on the level
of sales of the female condom and estimated operating losses, it may initially
be difficult to source accounts receivable financing.
Management is not aware of any material outstanding product liability
claims or lawsuits which would have a material effect on the Company's results
of operations, financial position or cashflow.
The Company's current level of expenditures has been established to support
a higher level of revenues associated with the female condom. The Company will
continue to report operating losses until such revenues significantly increase
or the Company significantly reduces its cost structure. If the Company is not
able to source additional capital, the lack of funds to promote the female
condom may significantly limit the Company's ability to realize value from its
existing female condom inventory and to capitalize on the existing investments
in the female condom's development, FDA approval and marketing to date in the
normal course of business.
IMPACT OF INFLATION AND CHANGING PRICES
---------------------------------------
Although the Company cannot accurately determine the precise effect of
inflation, the Company has experienced increased costs of product, supplies,
salaries and benefits, and increased general and administrative expenses. The
Company attempts to pass on increased costs and expenses by increasing selling
prices, when possible, and by improved efficiencies of operations.
25
<PAGE>
[PART II - INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
The Company held a special meeting of its shareholders on January 18, 1996. At
the special meeting shareholders were asked to approve the sale of the Company's
Holdings subsidiary and to approve an amendment to the Company's Articles of
Incorporation to change the Company's name to The Female Health Company. Both
such matters were approved by the Company's Shareholders. The Company's Form 8-K
filed on February 14, 1996 specifies the voting results of such meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
<TABLE>
<CAPTION>
a.) Exhibits
<S> <C> <C>
Exhibit
Number Description
------- -----------
3.1 Amended and Restated Articles of Incorporation, as
amended./1/
3.2 Amended and Restated By-Laws of Company, as amended.\1\
4.1 Articles of Incorporation, as amended (same as Exhibit
3.1)./1/
4.2 Articles II, VII, and XI of the By-Laws of the Company
(included in Exhibit 3.2)./1/
10.1 Consultant Warrant Agreement between the Company and
C.C.R.I. Corporation dated March 13, 1995, as amended on
April 22, 1996./2/
10.2 Company Promissory Note payable to Stephen M. Dearholt
for $1 million dated March 25, 1996 and related Note
Purchase and Warrant Agreement, Warrants and Stock
Issuance Agreement./2/
10.3 Outside Director Stock Option Plan./2/
</TABLE>
26
<PAGE>
PART II - OTHER INFORMATION
22 Form 8-K filed with the Securities and Exchange
Commission on February 14, 1996./3/
27 Financial Data Schedule
____________________
/1/ Incorporated herein by reference to the Company's December 31, 1995 Form
10-Q.
/2/ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange Commission ("SEC") on April
23, 1996.
/3/ Incorporated herein by reference to the Form 8-K filed by the Company with
the SEC on February 14, 1996.
b.) Reports on Form 8-K filed in the second quarter of fiscal 1996:
On February 14, 1996 the Company filed a Form 8_K with the SEC
reporting under Item 5, Other Events, that the Company's shareholders
voted and approved a sale of all of the stock of the Company's wholly-
owned subsidiary, WPC Holdings, Inc. and that the shareholders voted
and approved an amendment to the Company's Amended and Restated
Articles of Incorporation to change the Company's name from Wisconsin
Pharmacal Company, Inc. to The Female Health Company.
On March 5, 1996 the Company filed a Form 8-K with the SEC reporting
under Item 4, Changes in Registrant's Certifying Accountant, that
Ernst & Young LLP, the former independent auditors for the Company,
formally resigned as independent auditors of the Company on February
21, 1996.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FEMALE HEALTH COMPANY
DATE: July 31, 1996 /s/ O. B. Parrish
--------------------------
O. B. Parrish, Chairman, Chief
Executive Officer and
Principal Accounting Officer
28
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
27 Financial Data Schedule 30
29
