FEMALE HEALTH CO, SB-2/A, 2000-01-12

FEMALE HEALTH CO
SB-2/A, 2000-01-12
FABRICATED RUBBER PRODUCTS, NEC

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<PAGE> 1

As filed with the Securities and Exchange Commission on January 11, 2000

Registration No. 333-89273
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------

PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
---------------

THE FEMALE HEALTH COMPANY
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
---------------

<TABLE>
<S> <C> <C>
WISCONSIN 3069 39-1144397
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>

O.B. PARRISH, CHAIRMAN
875 NORTH MICHIGAN AVENUE OF THE BOARD AND CHIEF
SUITE 3660 EXECUTIVE OFFICER
CHICAGO, ILLINOIS 60611 875 NORTH MICHIGAN AVENUE
(312) 280-1119 SUITE 3660
(ADDRESS AND TELEPHONE NUMBER CHICAGO, ILLINOIS 60611
OF PRINCIPAL EXECUTIVE OFFICES AND (312) 280-1119
PRINCIPAL PLACE OF BUSINESS) (NAME, ADDRESS AND TELEPHONE
NUMBER OF AGENT FOR SERVICE)

COPIES TO:

JAMES M. BEDORE, ESQ.
REINHART, BOERNER, VAN DEUREN
NORRIS & RIESELBACH, S.C.
1000 NORTH WATER STREET, SUITE 2100
MILWAUKEE, WI 53202
(414) 298-1000

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. |X|

IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. | |
<PAGE> 2

IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. | |

IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. | |

<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=======================================================================================================================

TITLE OF EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.01 1,500,000 $ 1.00(2) $1,500,000 $ 417(3)
PER SHARE ISSUABLE UPON
CONVERSION OF CONVERTIBLE
DEBENTURES

- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE $.01 2,587,500 $ 1.00(2) $2,587,500 $ 719(3)
PER SHARE, ISSUABLE UPON
EXERCISE OF WARRANTS

- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE $.01 841,671 $ 1.00(2) $ 841,671 $ 234(3)
PER SHARE TO BE SOLD BY
CERTAIN SELLING STOCKHOLDERS

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

COMMON STOCK, PAR VALUE $.01 416,672 $ 0.99(4) $ 412,506 $ 109
PER SHARE TO BE SOLD BY
CERTAIN SELLING STOCKHOLDERS
=======================================================================================================================
</TABLE>

(1) In the event of a stock split, stock dividend or similar transaction
involving the registrant's common stock, in order to prevent dilution,
the number of shares registered shall automatically be increased to
cover the additional shares in accordance with Rule 416(a) under the
Securities Act.

(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act, on the basis of the
average of the bid and asked prices of the registrant's common stock on
October 14, 1999, as reported on the Over the Counter Bulletin Board.

(3) Previously paid.

(4) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act, on the basis of the
average of the bid and asked prices of the registrant's common stock on
January 5, 2000, as reported on the Over the Counter Bulletin Board.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE> 3

PROSPECTUS PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION - DATED JANUARY 11, 2000

THE FEMALE HEALTH COMPANY

5,345,843 SHARES OF COMMON STOCK

This prospectus may be used only by the stockholders listed under the
section entitled "selling stockholders" in this prospectus for their resale of
up to 5,345,843 shares of our common stock. The 5,345,843 shares are shares of
our common stock which these stockholders currently own or will receive upon
conversion of convertible debentures and exercise of warrants which they
currently own. We will not receive any proceeds from the sale of the shares by
the selling stockholders.

Our common stock is quoted on the Over the Counter Bulletin Board under the
symbol "FHCO." On January 5, 2000, the closing sale price of the common stock
was $1-3/32.

YOU SHOULD CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 6 BEFORE PURCHASING OUR
COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

January __, 2000

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................................ 3
Risk Factors.................................................. 6
Forward-Looking Statements May Prove to be Inaccurate......... 11
Use of Proceeds............................................... 11
Price Range of Common Stock................................... 11
Dividend Policy............................................... 11
Determination of Offering Price............................... 12
Capitalization................................................ 13
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
Business...................................................... 19
Management.................................................... 24
Principal Shareholders........................................ 29
Related Party Transactions.................................... 30
Description of Capital Stock.................................. 31
Selling Stockholders.......................................... 35
Plan of Distribution.......................................... 40
Legal Matters................................................. 41
Experts....................................................... 41
The Female Health Company Index to Consolidated Financial
Statements.................................................. 42

</TABLE>

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<PAGE> 5

PROSPECTUS SUMMARY

THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION YOU
SHOULD CONSIDER. THEREFORE, YOU SHOULD ALSO READ THE MORE DETAILED INFORMATION
IN THIS PROSPECTUS AND OUR FINANCIAL STATEMENTS.

OUR BUSINESS

The Female Health Company is essentially a global start-up company. Our
business consists solely of the manufacture and sale of the female condom, known
in the United States as REALITY(R) and under various other trade names in
foreign countries. We were incorporated in Wisconsin in 1971 and established in
our current form as The Female Health Company on February 1, 1996.

Initially, we expended significant time and resources in the development of
the female condom and securing FDA approval to market the female condom in the
United States. During this time, we also operated our original recreational
products business. After considering various alternatives, in 1995 our Board of
Directors selected the female condom as the central focus for our strategic
direction. As a result, in January 1996, we sold our recreational products
business, changed our name to The Female Health Company and devoted ourselves
solely to the commercialization of the female condom.

As part of this restructuring, on February 1, 1996, we acquired the stock of
Chartex Resources Limited, the manufacturer and owner of worldwide rights to,
and our then sole supplier of, the female condom. As a result of these
transactions, our sole business now consists of the manufacture, marketing and
sale of the female condom. We own global intellectual property rights for the
female condom, including:

- patents in the United States, the European Union, Japan and
various other countries;

- a Pre-Market Approval granted by the United States Food and Drug
Administration (FDA) approving and permitting marketing of the
female condom in the United States;

- a CE mark in the European Union representing that the product, as
a medical device, has been approved by the European Union for
marketing in the member countries of the European Union;

- regulatory approvals in various other countries, including Japan;
and

- proprietary manufacturing technology.

We also lease a state of the art manufacturing facility in London, England,
capable of producing 60 million female condoms per year. The facility has been
inspected and approved by the FDA and the European Union.

Our principal executive offices are located at 875 North Michigan Avenue,
Suite 3660, Chicago, Illinois 60611, and our telephone number is 312-280-1119.

3
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THE OFFERING

<TABLE>
<S> <C>
Common stock offered by the selling stockholders................... 5,345,843 shares (1)

Common stock outstanding as of December 16, 1999................... 12,291,206 shares (2)

Over the Counter Bulletin Board symbol............................ FHCO
</TABLE>

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

(1) Includes:

- 1,500,000 total shares which may be received by five selling
stockholders upon conversion of convertible debentures in the principal
amount of $1,500,000;

- 2,312,500 total shares which will be received upon exercise of warrants
currently owned by seven selling stockholders;

- 375,000 total shares which will be received by five selling stockholders
upon exercise of warrants to purchase 375,000 shares which will be
issued to six selling stockholders if we elect to extend the repayment
date for the $1,500,000 convertible debentures for one year; and

- 1,158,343 total shares currently owned by 13 selling stockholders.

(2) Does not include:

- 3,820,833 shares of common stock issuable upon exercise of warrants
outstanding as of December 16, 1999, including the warrants referenced
in footnote 1 above;

- 2,953,300 shares of common stock issuable upon exercise of stock options
outstanding as of December 16, 1999;

- 660,000 shares of common stock issuable upon conversion of outstanding
preferred stock; and

- shares issuable upon conversion of the $1.5 million convertible
debentures outstanding.

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<PAGE> 7

SUMMARY FINANCIAL INFORMATION

The summary financial information below is derived from our financial
statements appearing elsewhere in this prospectus. You should read this
information in conjunction with those financial statements, including the notes
to the financial statements.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1998 1999
----------------- ----------------- ---------------
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C>
Net revenues.......................... $ 2,916,408 $ 5,451,399 $ 4,715,477
Cost of products sold................. 3,475,709 5,273,369 4,598,747
Net loss.............................. (6,251,149) (3,357,316) (3,750,309)
Net loss attributable to common
stockholders...................... (6,266,114) (4,306,985) (3,884,228)
Net loss per common share
outstanding....................... $ (0.74) $ (0.43) $ (0.36)

</TABLE>

SEPTEMBER 30, 1999
------------------
CONSOLIDATED BALANCE SHEET
DATA:
<S> <C>
Working capital................... $ 522,081
Total assets...................... 6,507,143
Long-term debt and capital lease
obligations...................... -
Stockholders' equity.............. 1,722,970
</TABLE>

5
<PAGE> 8

RISK FACTORS

You should carefully consider the following risk factors, as well as the
other information contained in this prospectus, before purchasing our common
stock.

WE NEED ADDITIONAL CAPITAL TO SUPPORT OUR OPERATIONS. WE MAY NOT BE ABLE TO
RAISE SUFFICIENT AMOUNTS OF ADDITIONAL CAPITAL WHEN NEEDED AND, IF WE DO RAISE
ADDITIONAL CAPITAL, IT COULD DILUTE THE HOLDINGS OF OUR SHAREHOLDERS.

Sales of our sole product, the female condom, are currently insufficient to
cover our fixed manufacturing overhead, advertising and general and
administrative costs. Consequently, we must secure additional capital to fund
operating losses. We may not be successful in raising sufficient amounts of
additional capital when needed and, even if we are able to raise additional
capital, the terms of our financing activities may be costly and/or dilute the
holdings of our shareholders.

We have an Equity Line Agreement to sell up to $6 million of our common
stock to Kingsbridge Capital Limited, a private investor. We have sold $485,000
to Kingsbridge under this agreement through the date of this prospectus. Our
future use of the Equity Line Agreement is subject to a number of significant
conditions which we have summarized on page 16 of this prospectus.

We expect to raise additional capital through one or more of the following
means:

- the sale of debt or equity securities, including under the Equity Line
Agreement with Kingsbridge if we meet the conditions to use the
agreement;

- the sale of assets or rights; or

- by discounting receivables and/or letters of credit to facilitate
collection.

We can make no assurance that we will be successful in raising additional
capital. Further, we can make no assurance that any amount, if raised, will be
sufficient to continue our operations until sales of the female condom generate
sufficient revenues to fund operations. We may also find it difficult to raise
funds from any debt financing because our existing creditors hold a first
security interest in all of our assets.

WE EXPECT TO RELY ON OUR EQUITY LINE AGREEMENT TO RAISE NEEDED CAPITAL, BUT WE
MAY NOT BE ABLE TO SATISFY ALL OF THE CONDITIONS TO USE IT WHEN NEEDED. ALSO, IF
WE DO USE OUR EQUITY LINE AGREEMENT, IT COULD DILUTE THE HOLDINGS OF OUR
SHAREHOLDERS.

Our Equity Line Agreement with Kingsbridge Capital Limited, a private
investor, gives us the right, subject to various conditions, to sell to
Kingsbridge shares of our common stock for cash consideration up to $6 million.
We have sold a total of $485,000 of common stock to Kingsbridge through the date
of this prospectus. We may sell additional shares to Kingsbridge at any time on
or before February 12, 2001 only if we comply with the conditions in the Equity
Line Agreement or Kingsbridge waives the conditions. The conditions to our
ability to sell our common stock under the Equity Line Agreement include the
following:

- the registration statement we filed with the SEC for resales of stock by
Kingsbridge must remain in effect;

- the sale must not cause Kingsbridge's ownership of our common stock to
exceed 9.9% of the outstanding shares of our common stock;

- the trading price of our common stock over a five trading day period
preceding the date of the sale must equal or exceed $1.00 per share; and

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- the average daily trading volume of our common stock for a 20 trading
day period preceding the date of the sale must equal or exceed 17,000
shares.

We may not be able to meet the conditions to use the Equity Line Agreement
when needed. For example, between September 30, 1999 and December 23, 1999, our
common stock trading price closed below $1 per share on 20 of 60 trading days.
Kingsbridge may waive any of the conditions for our use of the Equity Line
Agreement, but we can make no assurance that they will choose to do so. If we
are unable to use the Equity Line Agreement when needed, we may be forced to
seek other sources of capital which may not be available to use on acceptable
terms, if at all.

Any stock which we sell to Kingsbridge under the Equity Line Agreement will
be sold at a discount to the stock's then market price as provided in the
agreement. The discount is 12% of the market price of a share of our common
stock at the time if the sale is $2.00 or more and 18% if the market price is
less than $2.00. As a result, any sales of common stock by us under the Equity
Line Agreement could significantly increase our net loss per share or decrease
our net income per share and cause the market price of our common stock to
decrease.

We have also agreed to pay Hartinvest-Medical Ventures, the entity that
solicited Kingsbridge, a commission of 7% on all amounts received from
Kingsbridge under the agreement. This commission may, at the option of
Hartinvest-Medical Ventures, be paid in shares of our common stock valued at the
same price at which we sell shares to Kingsbridge under the agreement. If
Hartinvest-Medical Ventures elects to receive payment of its commissions in
common stock, the issuance of the shares would further dilute our shareholders
and could cause our stock price to decrease.

OUR SUCCESS IS COMPLETELY DEPENDENT UPON THE SUCCESS OF THE FEMALE CONDOM.

We expect to derive our future revenues from sales of the female condom, our
sole current product. Our current level of expenditures has been established to
support a higher level of revenues. For us to begin generating cash from
operations, sales of the female condom will have to increase to approximately 22
million per year based upon the current average selling price per unit, which
would represent approximately 37% of our manufacturing capacity compared to
approximately 11% of our manufacturing capacity that we used in fiscal 1999. If
sales do not increase from current levels to this degree or if the cost to
obtain this level of sales is prohibitive, we will continue to experience
operating losses and, ultimately, our viability will be in jeopardy. Our ability
to achieve a higher level of revenues is uncertain because the product is in the
early stages of its commercialization. Accordingly, the ultimate level of
acceptance of the female condom by public health advocates as well as users
around the world, which includes the decision to use the female condom versus
other available products, is not yet known.

SINCE OUR COMMON STOCK IS NO LONGER LISTED ON THE AMERICAN STOCK EXCHANGE, YOU
MAY HAVE GREATER DIFFICULTY BUYING AND SELLING OUR COMMON STOCK.

On February 5, 1999, our common stock was delisted from the American Stock
Exchange since it did not meet all of the criteria for continued listing.
Commencing on approximately February 10, 1999, the common stock has been quoted
on the OTC Bulletin Board under the symbol "FHCO." You may find it more
difficult to obtain accurate quotations of the price of the our common stock and
to sell the common stock on the open market than was the case when the common
stock was listed on the American Stock Exchange. In addition, companies whose
stock is listed on the American Stock Exchange must adhere to the rules of that
exchange. These rules include various corporate governance procedures which,
among other items, require a company to obtain shareholder approval prior to
completing various types of important transactions including issuances of common
stock equal to 20% or more of the company's then outstanding common stock for
less than the greater of book or market value or most issuances of stock
options. Since our stock is quoted on the OTC Bulletin Board, we are not subject
to those or any comparable rules.

WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND, DUE TO THAT AND OTHER FACTORS, OUR
INDEPENDENT AUDITOR HAS ISSUED A QUALIFIED OPINION ON OUR FINANCIAL STATEMENTS.

We had a net loss attributable to common stockholders of $3.9 million for
fiscal 1999, $4.3 million for fiscal 1998 and $6.3 million for fiscal 1997. As
of September 30, 1999, we had an accumulated deficit of $45.2 million, working
capital of $0.5 million and stockholders' equity of $1.7 million. Historically,
we have experienced cash operating losses relating to expenses to develop,
manufacture and promote the female condom. Consistent with the availability of
resources, we expect to make substantial expenditures in fiscal 2000 in an
effort to support our manufacturing operations and increase awareness and
distribution of the female condom around the globe. Until our internally
generated funds are sufficient to meet cash requirements, we will remain
dependent

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upon our ability to generate sufficient capital from outside sources. We can
make no assurance that we will achieve a profitable level of operations in the
near term or at all.

Our independent auditor's reports on our consolidated financial statements
for the fiscal years ended September 30, 1999, 1998 and 1997 were qualified as
to our ability to continue as a going concern. While many factors are considered
by the auditor in reaching its opinion, the primary reason for the going concern
opinion was due to our continued deficit cash flows from operations, driven
largely by continued operating losses. Our net cash used in operations was $2.8
million for fiscal 1999, $2.8 million for fiscal 1998 and $5.0 million for
fiscal 1997.

In the near term, we expect operating costs to continue to exceed funds
generated from operations due principally to our fixed manufacturing costs
relative to our current production volumes. We can make no assurance that we
will achieve positive cash flows from our operations in the near term or at all.
We believe we must first achieve, on a continuing basis, positive cash flow from
operations and net operating profits in order for our independent auditors to
re-evaluate their going concern opinion.

BECAUSE OUR PRODUCT FACES SIGNIFICANT COMPETITION FROM OTHER PRODUCTS, SUCH AS
THE MALE CONDOM, WE MAY NOT BE ABLE TO ACHIEVE ANTICIPATED GROWTH LEVELS OR
PROFIT MARGINS.

We may be unable to compete successfully against current and future
competitors, and competitive pressures could have a negative effect on our
revenues, cash flows and profit margins. Although we believe that there is
currently no other female condom sold in the world, other parties may seek to
develop an intravaginal pouch which does not infringe our patents. These
products, if developed, could be distributed by companies with greater financial
resources and customer contacts than us. In addition, there are a number of
other products currently marketed which have a higher degree of accepted
efficacy for preventing pregnancy than does the female condom. These products
include male condoms, birth control pills, Norplant and Depo Provera. However,
other than the female condom, only the latex male condom is generally recognized
as being efficacious in preventing unintended pregnancies and sexually
transmitted diseases. Companies manufacturing these competing products are
generally much larger than we are and have access to significantly greater
resources than we do. In addition, the female condom is generally sold at prices
comparatively greater than the price of the latex male condom. Accordingly, the
female condom will not be able to compete with the latex male condom solely on
the basis of price.

FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY REDUCE THE STOCK'S
TRADING PRICE.

A large number of our shares of common stock which are currently outstanding
or which we may issue in the near future may be immediately resold in the public
market. Sales of our common stock in the public market or the perception that
sales may occur, could cause the market price of our common stock to decline
even if our business is doing well. Virtually all of our 12,291,206 shares of
common stock and 660,000 shares of our convertible preferred stock outstanding
as of December 16, 1999 may be immediately resold in the public market, although
sales of our shares by our directors, executive officers or other persons who
may control us may be subject to restrictions under Rule 144, including
limitations on the number of shares that may be sold. We may also issue up to $6
million of common stock under our Equity Line Agreement with Kingsbridge Capital
Limited. The shares of common stock which we may sell to Kingsbridge under the
Equity Line Agreement will be available for immediate resale to the public
because we previously filed a registration statement with the Securities and
Exchange Commission to register the resale by Kingsbridge of these shares.
Further, as of December 16, 1999, we have issued options and warrants to
purchase 6,774,133 shares of common stock. We have filed or intend to file
registration statements under the Securities Act to register the sale of the
shares underlying these options and warrants and, accordingly, any shares
received upon exercise of these options or warrants will also be freely
tradable, except for shares received by our directors, executive officers or
other persons who may control us which are subject to the restrictions under
Rule 144.

OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE AND, AS A RESULT, THE PRICE COULD BE
DOWN AT A TIME WHEN YOU DESIRE TO SELL YOUR SHARES.

The market price of our common stock has been and may continue to be
affected by quarter-to-quarter variations in our operating results,
announcements by our competitors and other factors. In addition, the stock
market has from time to time experienced extreme price and volume fluctuations,
particularly among the stock of emerging growth companies, which have often been
unrelated to the operating performance of particular companies. Factors not
directly related to our performance, such as governmental regulation or negative
industry reports, may also have a significant adverse impact on the market price
of our common stock.

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BECAUSE OUR COMMON STOCK IS A "PENNY STOCK," TRADING IN IT IS SUBJECT TO THE
PENNY STOCK RULES WHICH COULD AFFECT YOUR ABILITY TO RESELL THE STOCK IN THE
MARKET.

The Securities Enforcement and Penny Stock Reform Act of 1990 imposes
restrictions when making trades in any stock such as our common stock which is
defined as a "penny stock." The SEC's regulations generally define a penny stock
as an equity security that has a price of less than $5.00 per share, other than
securities which are traded on markets such as the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market. As a result of being a penny
stock, the market liquidity for our common stock may be adversely affected since
the regulations on penny stocks could limit the ability of broker-dealers to
sell our common stock and thus your ability to sell our common stock in the
secondary market. The regulations restricting trades in penny stock include:

- a requirement that stock brokers deliver to their customers, prior to
any transaction involving a penny stock, a disclosure schedule
explaining the penny stock market and the risks associated with the
penny stock market; and

- a requirement that broker-dealers who recommend penny stocks to persons
other than their established customers and a limited class of accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to the
transaction prior to the sale of the securities.

AS A MANUFACTURER AND MARKETER OF A CONSUMER PRODUCT, WE COULD EXPERIENCE
PRODUCT LIABILITY CLAIMS.

The nature of our product may expose us to significant product liability
risks. We maintain product liability insurance with coverage limits of $5
million per year on the female condom. We can make no assurance that we will be
able to maintain this insurance on acceptable terms or that the insurance will
provide adequate coverage against product liability claims. While no product
liability claims on the female condom have been brought against us to date, a
successful product liability claim against us in excess of our insurance
coverage could be extremely damaging to us.

SINCE WE SELL PRODUCT IN FOREIGN MARKETS, WE ARE SUBJECT TO FOREIGN CURRENCY AND
OTHER INTERNATIONAL BUSINESS RISKS THAT COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.

We manufacture the female condom in a leased facility located in London,
England. In addition, a material portion of our future sales are likely to be in
foreign markets. Manufacturing costs and sales to foreign markets are subject to
inherent risks and challenges that could adversely affect our revenues, cash
flows and profit margins, including:

- normal currency risks associated with changes in the exchange rate of
foreign currencies relative to the United States dollar;

- unexpected changes in international regulatory requirements and tariffs;

- difficulties in staffing and managing foreign operations;

- greater difficulty in accounts receivable collection;

- political or economic changes, especially in developing nations; and

- price controls and other restrictions on foreign currency.

To date, we have not used currency hedging strategies to manage our currency
risks. On an ongoing basis, we will continue to evaluate our commercial
transactions and will consider employing currency hedging strategies if
appropriate.

OUR PRODUCT IS SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION WHICH EXPOSES US TO
RISKS THAT WE WILL BE FINED OR EXPOSED TO CIVIL OR CRIMINAL LIABILITY, RECEIVE
NEGATIVE PUBLICITY OR BE PREVENTED FROM SELLING OUR PRODUCT.

The female condom is subject to regulation by the FDA under the Food, Drug
and Cosmetic Act, and by other state and foreign regulatory agencies. Under the
Food, Drug and Cosmetic Act, medical devices must receive FDA clearance before
they can be sold. FDA regulations also require us to adhere to "Good
Manufacturing Practices," which include testing, quality control and

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documentation procedures. Our compliance with applicable regulatory requirements
is monitored through periodic inspections by the FDA and other foreign
regulatory agencies. If we fail to comply with applicable regulations, we could:

- be fined or exposed to civil or criminal liability;

- face suspensions of clearances, seizures or recalls of products or
operating restrictions;

- receive negative publicity; or

- be prevented from selling our product in the United States or in foreign
markets.

WE MAY SUFFER LOSSES OR BUSINESS INTERRUPTIONS DUE TO THE YEAR 2000 ISSUE
BECAUSE OUR SYSTEMS OR OUR SUPPLIERS' OR CUSTOMERS' SYSTEMS MAY FAIL.

We believe that our internal computer systems are Year 2000 compliant and we
do not anticipate that we will incur significant expenditures to ensure that
such systems will function properly with respect to dates in the Year 2000 and
beyond. However, the systems and software of third parties on which we rely,
including our major suppliers or customers may contain errors or faults with
respect to the Year 2000. Known or unknown errors or defects that affect the
operation of our software and systems and those of third parties could result in
delay or loss of revenue, interruption of services, cancellation of customer
contracts, diversion of development resources, damage to our reputation, and
litigation costs. A more detailed description of our Year 2000 compliance is in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."

10
<PAGE> 13

FORWARD-LOOKING STATEMENTS MAY PROVE TO BE INACCURATE

We have made forward-looking statements in this prospectus that are subject
to risks and uncertainties. When we use the words "believes," "expects,"
"anticipates or similar expressions, we are making forward-looking statements.
Because many factors can materially affect results, including those listed under
"Risk Factors," you should not regard our inclusion of forward-looking
information as a representation by us or any other person that the our
objectives or plans will be achieved. Our assumptions relating to budgeting,
research, sales, results and market penetration and other management decisions
are subjective in many respects and thus are susceptible to interpretations and
periodic revisions based on actual experience and business developments. The
impact of any of which may cause us to alter our capital expenditures or other
budgets, which may in turn affect our business, financial position, results of
operations and cash flows. Therefore, you should not place undue reliance on
forward-looking statements contained in this prospectus, which speak only as of
the date of this prospectus. Factors that might cause actual results to differ
from those anticipated in the forward-looking statements include, but are not
limited to, those described in "Risk Factors."

USE OF PROCEEDS

The proceeds from the sale of the shares offered by this prospectus will be
received directly by the selling stockholders. We will not receive any proceeds
from the sale of the shares. We will, however, receive the exercise price for
any warrants which are exercised by the selling stockholders. We will use any
funds we receive for general working capital purposes.

PRICE RANGE OF COMMON STOCK

Our common stock is currently quoted on the OTC Bulletin Board under the
symbol "FHCO." As of December 14, 1999, there were approximately 487 holders of
record of our common stock.

Prior to February 5, 1999, our common stock was listed on the American Stock
Exchange. The following table lists the historical high and low sale prices of a
share of our common stock on the American Stock Exchange for periods prior to
February 5, 1999 and on the OTC Bulletin Board for periods on or after February
9, 1999:

<TABLE>
<CAPTION>
COMMON STOCK SALE PRICE
-----------------------
HIGH LOW
---- ---
<S> <C> <C>
1997 Fiscal Year:
Quarter ended:
December 31, 1996 6-1/4 3-5/8
March 31, 1997 4-3/16 1-13/16
June 30, 1997 3-5/8 1-11/16
September 30, 1997 4-1/4 2-3/4
1998 Fiscal Year:
Quarter ended:
December 31, 1997 4-3/8 3
March 31, 1998 3-9/16 2
June 30, 1998 3-5/8 2-3/8
September 30, 1998 3-9/16 1-3/8
1999 Fiscal Year:
Quarter ended:
December 31, 1998 2 1-1/8
March 31, 1999 2-1/16 1-1/16
June 30, 1999 2 7/8
September 30, 1999 1-11/16 11/16
</TABLE>

The sale price quotations above reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions.

DIVIDEND POLICY

We have not paid a dividend on our common stock and do not anticipate paying
any dividends in the foreseeable future.

11
<PAGE> 14

DETERMINATION OF OFFERING PRICE

The common stock offered by this prospectus may be offered for sale by the
selling stockholders from time to time in transactions on the OTC Bulletin
Board, in negotiated transactions, or otherwise, or by a combination of these
methods, at fixed prices which may be changed, at market prices at the time of
sale, at prices related to market prices or at negotiated prices. As such, the
offering price is indeterminate as of the date of this prospectus. See "Plan of
Distribution."

12
<PAGE> 15

CAPITALIZATION

The following table includes information regarding our unaudited short-term
indebtedness and stockholders' equity as of September 30, 1999.

SEPTEMBER 30, 1999
------------------
<S> <C>
Short-term indebtedness:
Notes payable, related party, net
of unamortized discount............................ 1,184,623
Convertible debentures, net of
unamortized discount*.............................. 819,355
------------
Total short-term indebtedness.................. $ 2,003,978
============

Stockholders' equity:
Class A Convertible Preferred Stock--Series 1, par value $.01 per
share, 5,000,000 shares authorized, 660,000 shares issued and
outstanding as of September 30, 1999............... $ 6,600
Common stock, par value $.01 per share, 22,000,000 shares
authorized, 11,929,580 shares issued and outstanding as of
September 30, 1999................................. 119,297
Additional paid-in capital............................. 46,820,778
Unearned consulting fees............................... (201,374)
Accumulated other comprehensive income................. 189,847
Accumulated deficit.................................... (45,180,102)
Treasury stock, at cost................................ (32,076)
-------------
Total stockholders' equity..................... $ 1,722,970
============
</TABLE>

* On June 1, 1999, we completed a private placement of convertible
debentures in the principal amount of $1.5 million and warrants to purchase
1,875,000 shares of common stock. These warrants are exercisable at any time
within five years after the date of their issuance at an exercise price per
share equal to the lesser of:

- 70% of the market price of our common stock on the date of
exercise; or

- $1.00.

The convertible debentures are payable one year after issuance or, if we elect,
two years after issuance. If the term is extended for the extra one year, we
must issue to the investors at the time of the extension, additional warrants to
purchase 375,000 shares of common stock upon the same terms as the other
warrants. Interest on the convertible debentures is payable quarterly at a rate
of 8% annually in cash or, at the investors' option, common stock at its then
current fair market value. From December 2, 1999 until this registration
statement is declared effective, interest on the convertible debentures will be
at the rate of 10% annually, and then will return to 8% annually. Repayment of
the convertible debentures is secured by a first security interest in all our
assets. The original principal balance plus any accrued but unpaid interest of
the convertible debentures may be converted into common stock at the investor's
election at any time after one year based on a per share price equal to the
lesser of:

- 70% of the market price of our common stock at the time of
conversion; or

- $1.00.

Additionally, warrants to purchase 337,500 shares of common stock were issued to
our placement agent in the offering in which the convertible debentures were
sold. The convertible debentures' beneficial conversion feature is valued at
$336,400 and the warrants to purchase 1,875,000 shares of common stock are
valued at $715,100. We recorded the $1,051,000 value of the beneficial
conversion feature and warrants as additional paid in capital. The corresponding
amount of $1,051,500 was recorded as a discount on convertible debentures and is
amortized over one year using the interest rate method.

<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to provide an analysis of our financial
condition and results of operations and should be read in conjunction with our
financial statements and the notes to our financial statements contained
elsewhere in this prospectus. The discussion also includes forward-looking
statements. As indicated in "FORWARD-LOOKING STATEMENTS MAY PROVE TO BE
INACCURATE," you should not place undue reliance on forward looking statements.

OVERVIEW

Over the past few years, we have completed significant aspects of the
development and commercialization of the female condom. These initiatives have
resulted in our attainment of proprietary manufacturing technology and product
design patents, necessary regulatory approvals, endorsements from various
organizations within the world medical community and the development of
significant manufacturing capacity. These steps, taken as part of our plan to
develop and sell a product with global commercial and humanitarian value, have
required the expenditure of significant amounts of capital and resulted in
significant operating losses including the period 1996 through the present.

We have begun the process of developing the market for the female condom
around the world. As part of this plan, we have entered into a number of
distribution agreements and are pursuing other arrangements for the marketing
and sale of the female condom. We believe that as the number of markets in which
the female condom is sold increases, sales will grow and, if our sales increase
significantly, we will become profitable. However, we can make no assurance that
we will achieve profitability in the near term or at all.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1998

We had net revenues of $4.7 million and a net loss attributable to common
stockholders of $(3.9) million, or ($0.36) per share, in 1999 compared to net
revenues of $5.5 million and a net loss attributable to common stockholders of
$(4.3) million, or ($0.43) per share, in 1998.

Without a one-time $817,000 charge for dividend accretion in 1998, we would
have experienced an increase in net loss principally related to an increase in
non-operating expenses rather than the $0.4 million, or 10%, reduction in the
net loss attributable to stockholders from $(4.3) million in 1998 to $(3.9)
million in 1999. Net losses for both 1999 and 1998 are attributable to fixed
manufacturing overhead and administrative costs associated with operating the
manufacturing facility configured to support significantly greater volume
levels.

Net revenues decreased $0.7 million, or 13%, in 1999 over the prior year.
Declining sales in both the global public sector and city and state agencies
within the United States accounted for all of the decrease. We believe the
decrease reflects variation in the timing of receipt of significant public
sector orders. This variation should decrease as more countries order and
reorder the female condom. Net sales to commercial accounts increased as a
result of the reinstatement of a major drug store chain and other promotional
chain activity.

Our strategy is to act as a manufacturer supplying the public sector and
commercial partners throughout the world. Our partners pay for all marketing and
shipping costs. Consequently, as our sales volume increases, our operating
expenses will not increase significantly.

In 1999, the cost of products sold of $4.6 million was 98% of net sales
compared with 1998 cost of products sold of $5.3 million which was 97% of net
sales. The reduction of cost of products sold was a result of lower sales
volume, offset, in part, by a change between years in our reserve for inventory
obsolescence. In 1998, the obsolescence reserve decreased cost by $0.9 million.
The FDA's decision to extend the useful life of the female condom to five years
from three years was a primary reason for this favorable adjustment. During
1999, no material inventory obsolescence reserve adjustment was required. Our
manufacturing facility in the United Kingdom utilized approximately 11% of its
capacity in 1999 compared with approximately 12% of its capacity in 1998. Our
reserve for inventory obsolescence was $34,340 at September 30, 1999 and $40,734
at September 30, 1998.

14
<PAGE> 17

Advertising and promotion expenditures decreased 42% to $0.3 million in 1999
compared to $0.4 million in 1998. Advertising and promotion relates exclusively
to the US market and includes the costs of print advertising, trade and consumer
promotions, product samples and other marketing costs incurred to increase
consumer awareness and purchases of the female condom. Through expenditures
since the product launch, we have established that demand for the female condom
is responsive to promotion; but due to our size, we do not possess the resources
to conduct a significant consumer marketing program. Accordingly we are seeking
potential partners for the United States that have the resources to conduct a
marketing program for the female condom.

Selling, general and administrative expenses were $2.9 million in each of
1999 and 1998. As a percentage of net revenues, selling, general and
administrative expenses were 61% in 1999 compared with 53% in 1998. The increase
as a percentage of net revenues was due to the decline in net revenues in 1999
as compared to 1998. Selling, general and administrative expenses did not
proportionately decline with the decline in net revenues because the reduction
in compensation expenses was offset by higher costs from consulting, investor
relations, sales and legal.

Net interest and non-operating expenses for 1999 increased $0.5 million, or
251%, to $0.7 million from $0.2 million in 1998. As a result of our higher
levels of debt in 1999, principally due to the issuance of convertible
debentures and two notes payable, we experienced an increase in interest
expenses.

We were able to cover fixed manufacturing overhead costs and reached above
the break-even at the gross profit level. However, based on the current average
selling price per unit, we must achieve cumulative annual unit sales of
approximately 22 million female condoms, or 37% of manufacturing capacity, to
cover operating and non-operating expenses. Non-operating expense includes
interest and non-cash charges reflecting discounts on warrants and convertible
debentures related to financing. We anticipate that non-operating expense will
decrease as unit sales volume increases, fixed overhead costs are covered and
our need for funding decreases. Excluding non-operating expense relating to our
funding requirements, we believe our cash flows would achieve a break-even level
at approximately 15.9 million units.

LIQUIDITY AND SOURCES OF CAPITAL

Historically, we have had significant operating losses. Cash used in
continuing operations was $2.8 million for each of 1999 and 1998. Historically,
we have funded operating losses and capital requirements, in large part, through
the sale of common stock or debt securities convertible into common stock.

During 1999, we received the following from financing activities:

- approximately $1.3 million in proceeds from newly-issued notes payable;

- $1.5 million, net of transaction costs, from the sale of convertible
debentures and warrants;

- $1.0 million from the issuance of common stock; and

- $0.1 million from the issuance of common stock upon exercise of
options.

We used these amounts to fund our current operations and to repay existing
liabilities.

In the near term, we expect operating losses and capital requirements to
continue to exceed funds generated from operations due principally to our fixed
manufacturing costs relative to current production volumes and the ongoing need
to commercialize the female condom around the world.

On September 29, 1997, we entered into an agreement with Vector Securities
International, Inc., an investment banking firm specializing in providing advice
to healthcare and life-science companies. Under this agreement, Vector will act
as our exclusive financial advisor for the purposes of identifying and
evaluating opportunities available to us for increasing shareholder value. These
opportunities may include selling all or a portion of our business, assets or
stock or entering into one or more distribution arrangements relating to our
product. We can make no assurance that any opportunities will be available to us
or, if any opportunities are available, that we will ultimately elect or be able
to complete a transaction.

On November 19, 1998, we executed a private equity line agreement with
Kingsbridge Capital Limited, a private investor. This agreement gives us the
right, subject to the conditions described below, to sell to Kingsbridge up to
$6.0 million of our common stock.

15
<PAGE> 18

The agreement expires on February 12, 2001. The agreement provides for minimum
and maximum stock sales ranging from $100,000 to $1,000,000 depending on our
stock price and trading volume. Stock sales cannot occur more frequently than
every 20 trading days. Any stock sold by us to Kingsbridge under the agreement
will be sold at a discount to the stock's then trading price as provided in the
agreement. The discount is 12% from the then current average market price of our
common stock if the average market price is at least $2 and 18% from the then
current average market price if the average market price is less than $2. In
addition, we are required to pay our placement agent sales commissions in common
stock or cash, at the placement agent's option, equal to 7% of the funds we
raise under the agreement and issue warrants to the placement agent to purchase
shares of common stock at an exercise price of $2.17 per share, equal to 10% of
the shares of common stock we sell under the agreement. We also issued
Kingsbridge a warrant to purchase 200,000 shares of our common stock at $2.17
per share.

We are required to sell at least $1 million of common stock to Kingsbridge
during the term of the agreement. If we do not sell the minimum amount of common
stock, we will be required to pay Kingsbridge a 12% fee on that portion of the
$1 million minimum not sold during the term of the agreement. As of September
30, 1999, we have completed three sales to Kingsbridge of a total of 482,964
shares of our common stock for the combined cash proceeds of $485,000. Each sale
was made while our common stock price was below $2.00 per share and, therefore,
the common stock was sold at the 18% discount. The timing and amount of the
stock sales under the agreement are totally at our discretion, subject to our
compliance with each of the following conditions at the time we request a stock
sale under the agreement:

- the registration statement we filed with the SEC for resales of stock by
Kingsbridge must remain in effect;

- all of our representations and warranties in the agreement must be
accurate and we must have complied with all of our obligations in
agreement;

- there may not be any injunction, legal proceeding or law prohibiting our
sale of the stock to Kingsbridge;

- our counsel must issue a legal opinion to Kingsbridge;

- the sale must not cause Kingsbridge's ownership our common stock to
exceed 9.9% of the outstanding shares of our common stock;

- the trading price of our common stock over a five trading day preceding
the date of the sale must equal or exceed $1.00 per share; and

- the average daily trading volume of our common stock for a 20 trading
day period preceding the date of the sale must equal or exceed 17,000
shares.

We have a $1 million note due March 25, 2000 and a $250,000 note payable due
February 12, 2000 to Mr. Stephen Dearholt, one of our directors. We also have a
$50,000 note payable due February 18, 2000 to Mr. O.B. Parrish, our Chairman of
the Board and Chief Executive Officer.

We estimate that we may need up to $2.0 million before the end of 2000 to
fund our anticipated cash needs for working capital, capital expenditures and
debt obligations, depending on the level of sales of the female condom. However,
at this stage in our development, the amount and timing of our future capital
requirements cannot be precisely determined. Many of the factors affecting our
capital requirements, including new market launches by our international
partners and sales orders from existing customers, are outside of our control.
While the we believe that our existing capital resources, including expected
proceeds from sales of common stock under our agreement with Kingsbridge if we
are able to satisfy the conditions for its use, will be adequate to fund our
currently anticipated capital needs, if they are not, we may need to raise
additional capital until our sales increase sufficiently to cover operating
expenses. In addition, we may not be able to satisfy the conditions required
sell stock under our agreement with Kingsbridge when needed. For example,
between September 30, 1999 and December 23, 1999, our common stock trading price
closed below $1 per share on 20 of 60 trading days.

Until internally generated funds are sufficient to meet cash requirements,
we will remain dependent upon our ability to generate sufficient capital from
outside sources. While we believe that revenue from sales of the female condom
will eventually exceed operating costs and that ultimately operations will
generate sufficient funds to meet capital requirements, we can make no assurance
that we will achieve positive cash flows from our operations in the near term,
or ever. We also can make no assurance that we will be

16
<PAGE> 19

able to source all or any portion of our required capital through the sale of
debt or equity or, if raised, the amount will be sufficient to fund our
operations until sales of the female condom generate sufficient revenues to fund
operations. Any funds raised may be costly to us and/or dilutive to
stockholders. We may also find it difficult to raise funds from any debt
financing because our existing creditors hold a first security interest in all
of our assets. If the we are not able to source the required funds or any future
capital which becomes required, we may be forced to sell assets or rights or
cease operations.

As of December 15, 1999, we had approximately $1.0 million in cash, net
trade accounts receivable of $0.5 million and current trade accounts payable of
$0.7 million. We estimate that our cash burn rate, without revenues, is
approximately $0.6 million per month.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the potential for system and processing failures of
date related data and is the result of the computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the Year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability manufacture our product, send invoices or engage
in similar normal business activities.

Our State of Readiness. We may be affected by the Year 2000 issue related to
non-compliant information technology ("IT") systems or non-IT systems operated
by us or by third parties. We have completed our assessment of internal IT
systems and non-IT systems. Our internal systems are located at our
manufacturing facility in the United Kingdom and at our headquarters in Chicago,
Illinois.

Our Year 2000 compliance project for our manufacturing facility was divided
into four areas:

- Manufacturing Process. We have assessed the Year 2000
compliance of each individual piece of equipment. For most of
our equipment, we have received assurances from the
manufacturer or supplier that the equipment is Year 2000
compliant. For other equipment, we have been able to test the
equipment for compliance. Based on these tests and the
assurances of the manufacturers or suppliers, we believe that
our manufacturing equipment is Year 2000 compliant.

- Building and Site Facilities. We have tested the central
computers which control building and site services such as
heating and air conditioning, chilled water and vacuum systems
supporting manufacturing, fire alarms and intruder alarms. We
believe that these systems are Year 2000 compliant. Also, even
if these systems do fail, the central controls can be manually
overridden to ensure that they continue to function.

- Site Administration. We have completed an upgrade of our
accounting system for Year 2000 compliance. We also have
received assurances of Year 2000 compliance from the
manufacturers or suppliers of equipment such as photocopiers,
personal computers, facsimile machines and other office
equipment. In addition, we believe that a failure of these
systems would cause minimal disruption to our manufacturing
operations.

- Suppliers. We have obtained Year 2000 compliance assurances
from most of our key suppliers, including single source
suppliers of raw materials.

Our U.S. headquarters is not directly involved in the manufacturing of our
product. The Year 2000 compliance assessment for our U.S. operations is as
follows:

- We have completed a compliance assessment with the outside
vendor of our software package for personal computer and
desktop applications. We have made necessary upgrades for our
accounting software to be Year 2000 compliant.

- We have received assurances from the lessor of our
headquarters building that the significant building systems
are Year 2000 compliant.

17
<PAGE> 20

Costs to Address Our Year 2000 Issues. The majority of our Year 2000 issues
were corrected either through systems upgrades or normal maintenance contracts.
The costs associated with remediating our non-compliant IT systems and non-IT
systems have not been material.

Risks to Us for Year 2000 Issues. With regard to systems under our control,
we know of no significant exposure that we have to the Year 2000 issue since, if
necessary, our systems are capable of accepting manually entered data. The worst
case scenario is that we would have to revert back to manual systems. We believe
that our customers and vendors are at various stages of compliance but we have
not been made aware of significant Year 2000 issues that would materially affect
our business with them. We will continue to monitor Year 2000 compliance with
our customers and vendors but will not be able to achieve the same degree of
certainty that we can with our own internal systems.

Our Contingency Plan. We are not aware of any significant Year 2000 issues
since January 1, 2000. We will continue to monitor Year 2000 compliance of our
internal systems and of the systems of our customers and vendors. To the extent
that unanticipated compliance issues arise with respect to our internal systems,
we believe that we will be able to implement alternative IT systems or manual
systems. Our ability to respond to non-compliance by our key suppliers will be
limited, and therefore could significantly harm our business.

<PAGE> 21

BUSINESS

GENERAL

We manufacture, market and sell the female condom, the only FDA-approved
product under a woman's control which can prevent unintended pregnancy and
sexually transmitted diseases ("STDs"), including HIV/AIDS.

The female condom has undergone extensive testing for efficacy, safety and
acceptability, not only in the United States but also in over 40 additional
countries. Studies show that having the female condom available provides women
with more options, resulting in an approximately 25% increase in protected sex
acts. Furthermore, studies show that when the female condom is available as a
choice in addition to the male condom, there is an approximately 34% decrease in
STDs, including HIV/AIDS.

The product is currently sold or available in either or both commercial
sector and public sector markets in over 31 countries. It is commercially
marketed directly by us in the United States and the United Kingdom and through
marketing partners in Canada, Holland, Brazil, Venezuela, South Korea, Denmark
and France. We have signed distribution agreements in Japan and Bangladesh, and
we anticipate that the product will be marketed in these countries in the coming
months. Our partner in Japan, Taiho Pharmaceutical Co., Ltd., received
regulatory approval from Koseisho, the Japanese regulatory agency, in November
1999. Taiho plans to introduce the female condom as "My Femy" in the first half
of calendar year 2000. We are currently in discussions with potential
distributors for key European countries, India, The People's Republic of China
and other countries.

As noted above, the female condom is sold to the global public sector. In
the U.S., the product is marketed to city and state public health clinics as
well as not-for-profit organizations such as Planned Parenthood. Following
several years of testing the efficacy and acceptability of the female condom, in
1996 we entered into a three-year agreement with the Joint United Nations
Programme on AIDS ("UNAIDS"), which has subsequently been renewed. Under this
agreement, UNAIDS facilitates the availability and distribution of the female
condom in the developing world and we sell the product to developing countries
at a reduced price. The current price is 38 pence sterling, or approximately
$0.64 per unit. Under this agreement, the product is currently being marketed in
Zambia, Zimbabwe, Tanzania, Cote d' Ivoire, Bolivia, Haiti, South Africa and
other countries. We anticipate multiple launches will occur during the next two
years under this agreement, including launches in Kenya, Nigeria, Ghana,
Cambodia, Bangladesh, Columbia and Central American countries.

PRODUCT

The female condom is made of polyurethane, a thin but strong material which
is resistant to rips and tears during use. The female condom consists of a soft,
loose fitting sheath and two flexible rings. One of the rings is used to insert
the device and hold it in place. The other ring remains outside the vagina after
insertion. The female condom lines the vagina, preventing skin from touching
skin during intercourse. The female condom is prelubricated and disposable and
is intended for use during only one sex act.

GLOBAL MARKET POTENTIAL

The World Health Organization estimates there are more than 300 million new
cases of STDs worldwide each year, excluding HIV, and most of those diseases are
more easily transmitted to women than to men. UNAIDS estimates that there are
currently approximately 33 million people worldwide who are infected with
HIV/AIDS and there are approximately 15,000 people per day who are newly
infected. In the United States, the Center for Disease Control noted that in
1995, five of the ten most frequently reported diseases were STDs. The Center
also has noted that one in five Americans over the age of 12 has Herpes and one
in every three sexually active people will get an STD by age 24. Women are
currently the fastest growing group infected with HIV and are expected to
comprise the majority of new cases by the year 2000.

Currently, there are only two products that prevent the transmission of
HIV/AIDS through sexual intercourse--the latex male condom and the female
condom.

MALE CONDOM MARKET

It is estimated the global annual market for male condoms is 4.7 billion
units. However, the majority of all acts of sexual intercourse, excluding those
intended to result in pregnancy, are completed without protection. As a result,
it is estimated the potential market for barrier contraceptives is much larger
than the identified male condom market.

<PAGE> 22

ADVANTAGES VERSUS THE MALE CONDOM

The female condom is currently the only available barrier contraceptive
method which is controlled by the woman and allows her to protect herself
against STDs, including HIV/AIDS, and unintended pregnancy. The most important
advantage is that a woman can control whether or not she is protected. Many men
do not like to wear male condoms and may refuse to do so.

The polyurethane material that is used for the female condom offers a number
of benefits over latex, the material that is most commonly used in male condoms.
Polyurethane is 40% stronger than latex, reducing the probability that the
female condom sheath will tear during use. Clinical studies and everyday use
have shown that latex male condoms can tear as much as 4% to 8% of the times
they are used. Unlike latex, polyurethane quickly transfers heat, so the female
condom immediately warms to body temperature when it is inserted, which may
result in increased pleasure and sensation during use. The product offers an
additional benefit to the 7% to 20% of the population that is allergic to latex
and who, as a result, may be irritated by latex male condoms. To our knowledge,
there is no reported allergy to date to polyurethane. The female condom is also
more convenient, providing the option of insertion hours before sexual arousal
and as a result is less disruptive during sexual intimacy than the male condom
which requires sexual arousal for application.

COST EFFECTIVENESS

At the 1998 World AIDS Conference held in Geneva, Switzerland, UNAIDS
presented the results from its cost-effectiveness study which indicated that
making the female condom available is highly cost effective in reducing public
health costs in developing countries.

WORLDWIDE REGULATORY APPROVALS

The female condom received PMA approval as a Class III Medical Device from
the FDA in 1993. The extensive clinical testing and scientific data required for
FDA approval laid the foundation for approvals throughout the rest of the world,
including receipt of a CE Mark in 1997 which allows us to market the female
condom throughout the European Union. In addition to the United States and the
European Union, several other countries have approved the female condom for
sale, including Canada, Russia, Australia, South Korea and Taiwan. Taiho, our
partner in Japan, received regulatory approval from the Japanese regulatory
agency in November 1999. We believe the female condom's PMA approval and FDA
classification as a Class III Medical Device create a significant barrier to
entry. We estimate that it would take a minimum of four to six years to
implement, execute and receive FDA approval or a PMA to market another type of
female condom.

We believe there are no material issues or material costs associated with
our compliance with environmental laws related to the manufacture and
distribution of the female condom.

STRATEGY

Our strategy is to act as a manufacturer, selling the female condom to the
global public sector, United States public sector and commercial partners for
country-specific marketing. The public sector and commercial partners assume the
cost of shipping and marketing the product. As a result, as volume increases,
our operating expenses will not increase significantly.

COMMERCIAL MARKETS

We market the product directly in the United States and United Kingdom. We
have commercial partners which have recently launched the product in Canada,
Brazil, Venezuela, Denmark, South Korea, Holland and France. We have also signed
agreements with partners in Japan and Bangladesh where launches are expected
during the coming year.

JAPANESE MARKET

In Japan, the market for male condoms exceeds 600 million units. Oral
contraceptives have only recently been approved in Japan and, as a result, 85%
of Japanese couples seeking protection use condoms. Our partner in Japan is
Taiho, a $1 billion Japanese health care company. Taiho has more than 600
salespersons and distribution in 40,000 drug stores. Our agreement with Taiho
required Taiho to perform clinical testing of the product in Japan and obtain
the necessary regulatory approvals. Approval was received in November 1999. We
will manufacture the product and supply it to Taiho, which will have
responsibility for marketing and

<PAGE> 23

distributing the female condom in Japan. Taiho plans to market the female condom
under the name "My Femy" during the first half of calendar year 2000.

RELATIONSHIPS AND AGREEMENTS WITH PUBLIC SECTOR ORGANIZATIONS

Currently, it is estimated that more than 1.5 billion male condoms are
distributed worldwide by the public sector each year. The female condom is seen
as an important addition to prevention strategies by the public sector because
studies show that the availability of the female condom decreases the incidence
of unprotected sex by as much as 25% over male condoms alone. Currently, the
female condom is promoted by the World Health Organization, UNAIDS, the United
States Agency for International Development, many nongovernment organizations
around the world and a number of city and state public health departments in the
United States.

We have an agreement with UNAIDS to supply the female condom to developing
countries at a reduced price which is negotiated each year to be equal to our
production costs directly attributable to the production of the female condom in
the prior year, subject to a cap of 38 pence sterling, or approximately $0.63,
per unit prior to December 31, 1999. The current price is 38 pence sterling per
unit. This agreement has been automatically renewed for a term expiring on
December 31, 2000, and will continue to automatically renew for additional
one-year periods unless we or UNAIDS give prior notice of termination. During
the last year, the female condom has been launched in the countries of Zimbabwe,
Tanzania, Bolivia, Haiti, South Africa and Zambia. It is anticipated that
multiple product launches will occur in several countries during the next two
years, including in the countries of Kenya, Nigeria, Uganda, Ghana, Cambodia,
Bangladesh, Columbia and Central America. We also are supplying Brazil's
Ministry of Health with two million female condoms under our agreement with
UNAIDS.

In the United States, the product is marketed to city and state public
health clinics, as well as not-for-profit organizations such as Planned
Parenthood. Currently, 10 major cities and 15 state governments, including the
states of New York, Pennsylvania, Florida, Connecticut, Hawaii, Louisiana,
Maryland, New Jersey, South Carolina and Illinois, and the cities of Chicago,
Philadelphia, New York and Houston, have purchased the product for distribution
with a number of others expressing interest. All major cities and states have
re-ordered product since their initial shipments.

STATE-OF-ART MANUFACTURING FACILITY

We manufacture the female condom in a 40,000 square foot leased facility in
London, England. The facility is currently capable of producing 60 million units
per year. With additional equipment, this capacity can be significantly
increased.

GOVERNMENT REGULATION

In the U.S., the female condom is regulated by the FDA. Section 515(a)(3) of
the Safe Medical Amendments Act of 1990 authorizes the FDA to temporarily
suspend approval and initiate withdrawal of the PMA if the FDA finds that the
female condom is unsafe or ineffective, or on the basis of new information with
respect to the device, which, when evaluated together with information available
at the time of approval, indicates a lack of reasonable assurance that the
device is safe or effective under the condition of use prescribed, recommended
or suggested in the labeling. Failure to comply with the conditions of FDA
approval invalidates the approval order. Commercial distribution of a device
that is not in compliance with these conditions is a violation of the Safe
Medical Amendments Act of 1990.

COMPETITION

The female condom competes in part with male condoms. Latex male condoms
cost less and have brand names that are more widely recognized than the female
condom. In addition, male condoms are generally manufactured and marketed by
companies with significantly greater financial resources than we. It is also
possible that other parties may develop a female condom. Competing products
could be manufactured, marketed and sold by companies with significantly greater
financial resources than we have.

EMPLOYEES

As of December 16, 1999, we had 82 full-time employees within the
U.S. and the U.K. and one part-time employee. None of our employees are
represented by a labor union. We believe that our employee relations are good.

<PAGE> 24

BACKLOG

At December 16, 1999, we had unfilled orders of $2.5 million. The comparable
amount as of the same date of the prior year was $0.5 million. All of these
unfilled orders are expected to be filled during fiscal 2000. The unfilled
orders are a result of requested shipping dates from our customers rather than
delays in manufacturing.

PATENTS AND TRADEMARKS

We currently hold product and technology patents in the United States,
Japan, the United Kingdom, France, Italy, Germany, Spain, the European Patent
Convention, Canada, The People's Republic of China, New Zealand, Singapore, Hong
Kong and Australia. These patents expire between 2005 and 2113. Additional
product and technology patents are pending in Brazil, South Korea, Germany,
Japan and several other countries. The patents cover the key aspects of the
female condom, including its overall design and manufacturing process. We
license the trademark "Realty" in the United States and have trademarks on the
names "femidom" and "femy" in a number of foreign countries. We have also
secured, or applied for, 27 trademarks in 14 countries to protect the various
names and symbols used in marketing the product around the world. In addition,
the experience that has been gained through years of manufacturing the female
condom has allowed us to develop trade secrets and know-how, including
proprietary production technologies, that further secure our competitive
position.

RESEARCH AND DEVELOPMENT

We had research and development costs from continuing operations of $122,196
in fiscal 1999 and $2,500 in fiscal 1998. These expenditures were primarily
related to conducting acceptability studies and analyzing second generation
products.

INDUSTRY SEGMENTS AND FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS

See Note 10 to Notes to Consolidated Financial Statements, included
elsewhere in this prospectus.

HISTORY

The female condom was invented by a Danish physician who obtained a U.S.
patent for the product in 1988. The physician subsequently sold rights to the
condom to Chartex Resources Limited. In the years that followed, Chartex, with
resources provided by a nonprofit Danish foundation, developed the manufacturing
processes and completed other activities associated with bringing the female
condom to market in a number of non-U.S. countries. Wisconsin Pharmacal Company,
Inc., which then had a license from Chartex to the female condom in the U.S.,
Canada and Mexico, pursued the pre-clinical and clinical studies and overall
development of the product for worldwide use and U.S. FDA approval of the
product.

We are the successor to Wisconsin Pharmacal Company, Inc., a company which
previously manufactured and marketed a wide variety of disparate specialty
chemical and branded consumer products in addition to licensing rights to the
female condom described above.

In fiscal 1995, our Board of Directors approved a plan to complete a series
of actions designed, in part, to maximize the potential of the female condom.
First, we restructured and transferred all of our assets and liabilities, other
than those related primarily to the female condom, to a newly-formed,
wholly-owned subsidiary, WPC Holdings, Inc. In January 1996, we sold WPC
Holdings to an unrelated third party. Then, in February 1996, we acquired
Chartex, renamed The Female Health Company - UK in 1997, the manufacturer and
owner of worldwide rights to, and our then sole supplier of, the female condom.
As a result of the sale of WPC Holdings and the acquisition of Chartex, we
evolved to our current state with our sole business consisting of the
manufacture, marketing and sale of the female condom.

The FDA approved the female condom for distribution in 1993 and our
manufacturing facility in 1994. Since that time, we have sold over 29 million
female condoms around the world.

PROPERTIES

We lease approximately 4,500 square feet of office space at 875 North
Michigan Avenue, Suite 3660, Chicago, Illinois 60611 under a lease that expires
in 2001. We also lease approximately 1,900 square feet for corporate offices at
919 North Michigan Avenue, Suite 2208, Chicago, Illinois 60611 under a lease
that expires January 31, 2001. However, we have subleased these premises to a
third

<PAGE> 25

party. We utilize warehouse space and sales fulfillment services of an
independent public warehouse located near Minneapolis, Minnesota, for storage
and distribution of the female condom. We manufacture the female condom in a
40,000 square foot leased facility located in London, England under a lease that
expires in 2015. The FDA-approved manufacturing process is subject to periodic
inspections by the FDA as well as the European Union quality group. Current
capacity at the manufacturing facility is approximately 60 million female
condoms per year. We believe the properties are adequately insured.

LEGAL PROCEEDINGS

We are not currently involved in any material pending legal proceedings.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy any reports, proxy statements or
other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. or at the SEC's public reference rooms in Los
Angeles, California, New York, New York and Chicago, Illinois. You can obtain
information concerning the operation of the public reference rooms by calling
the SEC at 1-800-SEC-0330. In addition, we have filed the registration statement
of which this prospectus is a part and other filings with the SEC through its
Electronic Data Gathering, Analysis and Retrieval system, and our filings are
publicly available through the SEC's site on the World Wide Web on the Internet
located at www.sec.gov.

This prospectus does not contain all of the information in the registration
statement of which this prospectus is a part and which we have filed with the
SEC. For further information about us and the securities offered by this
prospectus, you should review the registration statement, including the exhibits
filed as a part of the registration statement, at the public reference rooms. We
may update information about us by filing appendices or supplements to this
prospectus.

<PAGE> 26

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:

NAME TITLE AGE
<S> <C> <C>
O.B. Parrish Chairman of the Board, Chief Executive Officer 66
and Director

Mary Ann Leeper, Ph.D. President, Chief Operating Officer and Director 59

Jack Weissman Vice President-Trade Sales 52

Michael Pope Vice President, Director of Charter 43
Resources Limited, Director and General Manager
of Charter International Plc

Robert R. Zic Chief Financial Officer 36

William R. Gargiulo, Jr. Secretary and Director 71

David R. Bethune Director 59

Stephen M. Dearholt Director 53

Michael R. Walton Director 61

James R. Kerber Director 67
</TABLE>

Mr. Parrish has served as our Chief Executive Officer since 1994, and
as our Chairman of the Board and a Director since 1987. Mr. Parish also served
as our acting Chief Financial Officer and Accounting Officer from February 1996
to March 1999. Mr. Parrish is a shareholder and has served as the President and
as a Director of Phoenix Health Care of Illinois, Inc. since 1987. Phoenix
Health Care of Illinois owns approximately 295,000 shares of our common stock.
Mr. Parrish also was the Co-Chairman and a Director of Inhalon Pharmaceuticals,
Inc. until its sale to Medeva, Plc. and is Chairman and a Director of ViatiCare
Financial Services, LLC, Chairman and a Director of MIICRO Inc. and a Director
of Amerimmune Pharmaceuticals, Inc. Mr. Parrish is also a trustee of Lawrence
University. From 1977 until 1986, Mr. Parrish was the President of the Global
Pharmaceutical Group of G.D. Searle & Co. and a director of Microbyx. From 1974
until 1977, Mr. Parrish was the President of Searle International, the foreign
sales operation of Searle. Prior to that, Mr. Parrish was Executive Vice
President of Pfizer's International Division.

Dr. Leeper has served as our President and Chief Operating Officer since
1996, as a Director since 1987, as President and Chief Executive Officer of The
Female Health Company Division from May 1994 until January 1996, and as our
Senior Vice President - Development from 1989 until January 1996. Dr. Leeper is
a shareholder and has served as a Vice President and Director of Phoenix Health
Care of Illinois since 1987. Previously, Dr. Leeper served as Vice President -
Market Development for Searle's Pharmaceutical Group and in various Searle
research and development management positions. As Vice President - Market
Development, Dr. Leeper was responsible for worldwide licensing and acquisition,
marketing and market research. In earlier positions, she was responsible for
preparation of new drug applications and was a liaison with the FDA.

Mr. Weissman has served as our Vice President - Trade Sales since June 1995.
From 1992 until 1994, Mr. Weissman was Vice President - Sales for Capital
Spouts, Inc., a manufacturer of pouring spouts for gable paper cartons. During
the period from 1989 to 1992, Mr. Weissman acted as General Manager - HTV Group,
an investment group involved in the development of retail stores. Mr. Weissman
joined Searle's consumer products group in 1979 and held positions of increasing
responsibility, including National Account Manager and Military Sales Manager
from 1985 to 1989. Mr. Weissman was Account Manager - Retail Business
Development, for the NutraSweet Company, a Searle subsidiary. Prior to Searle,
Mr. Weissman worked in the consumer field as Account Manager and Territory
Manager for Norfolk Thayer & Whitehall Laboratories.

24
<PAGE> 27

Mr. Pope has served as our Vice President since 1996 and as General Manager
of The Female Health Company, Plc, formerly Chartex International, Plc, since
our 1996 acquisition of Chartex. Mr. Pope has also served as a Director of
Chartex Resources Limited and Chartex International, Plc since 1995. Previously,
Mr. Pope was Director of Technical Operations for Chartex which included
responsibility for manufacturing, engineering, process development and quality
assurance. Mr. Pope was responsible for the development of the high speed
proprietary manufacturing technology for the female condom and securing the
necessary approvals of the manufacturing process by regulatory organizations,
including the FDA. Mr. Pope was also instrumental in developing and securing
Chartex's relationship with its Japanese marketing partner. Prior to joining
Chartex, from 1986 to 1990, Mr. Pope was Production Manager and Technical
Manager for Franklin Medical, a manufacturer of disposable medical devices.
Prior to joining us, from 1982 to 1986, Mr. Pope was Site Manager, Engineering
and Production Manager, Development Manager and Silicon Manager for Warne
Surgical Products.

Mr. Zic has served as our Chief Financial Officer since March 1999. From
1998 to 1999, Mr. Zic held the dual positions of Acting Controller and Acting
Chief Financial Officer at Ladbroke's Pacific Racing Association. From 1995 to
1998, Mr. Zic served as the Chief Accounting Manager and Assistant Controller at
Argonaut Insurance Company. In this capacity, he was responsible for the
financial and accounting operations at Argonaut's ten divisions and the external
and internal financial reporting of Argonaut and its four subsidiaries. From
1990 to 1994, Mr. Zic was the Assistant Controller of CalFarm Insurance Company,
where he was responsible for the company's external financial reporting duties.
Mr. Zic's career began in 1986 as an auditor with Arthur Andersen & Co.

Mr. Gargiulo has served as a Director since 1987, as our Secretary since
1996, as our Vice President from 1996 to September 30, 1998, as our Assistant
Secretary from 1989 to 1996, as Vice President International of The Female
Health Company Division from 1994 until 1996, as our Chief Operating Officer
from 1989 to 1994, and as our General Manager from 1988 to 1994. Mr. Gargiulo is
a Trustee of a trust which is a shareholder of Phoenix Health Care of Illinois.
From 1984 until 1986, Mr. Gargiulo was the Executive Vice-President of Searle's
European operations. From 1976 until 1984, Mr. Gargiulo was the Vice President
of Searle's Latin American operations.

Mr. Bethune has served as a Director since January 1996. Mr. Bethune has
been Vice Chairman and interim Chief Executive Officer of Atrix Laboratories
since 1999. From 1997 to 1998, Mr. Bethune held the position of President and
Chief Operating Officer of the IVAX Corporation. From 1996 to 1997, Mr. Bethune
was a consultant to the pharmaceutical industry. From 1995 to 1996, Mr. Bethune
was President and Chief Executive Officer of Aesgen, Inc. a generic
pharmaceutical company. From 1992 to 1995, Mr. Bethune was Group Vice President
of American Cyanamid Company and a member of its Executive Committee until the
sale of the company to American Home Products. He had global executive authority
for human biologicals, consumer health products, pharmaceuticals and opthalmics,
as well as medical research. Mr. Bethune is on the Board of Directors of the
Southern Research Institute, Atrix Pharmaceuticals and the American Foundation
for Pharmaceutical Education, Partnership for Prevention. He is a founding
trustee of the American Cancer Society Foundation and an associate member of the
National Wholesale Druggists' Association and the National Association of Chain
Drug Stores. He is the founding chairman of the Corporate Council of the
Children's Health Fund in New York City and served on the Arthritis Foundation
Corporate Advisory Council.

Mr. Dearholt has served as a Director since April 1996. Mr. Dearholt is a
co-founder of and has been a partner in Response Marketing, one of the largest
privately owned life insurance marketing organizations in the United States,
since 1972. He has over 23 years of experience in direct response advertising
and data based marketing of niche products. Since 1985, he has been a 50% owner
of R.T. of Milwaukee, a private investment holding company which operates a
stock brokerage business in Milwaukee, Wisconsin. In late 1995, Mr. Dearholt
arranged, on very short notice, a $1 million bridge loan which assisted us in
our purchase of Chartex.

Mr. Walton has served as a Director since April 1999. Mr. Walton is
President and owner of Sheboygan County Broadcasting Co., Inc., a company he
founded in 1972. In addition to its financial assets, Sheboygan County
Broadcasting Co. currently owns four radio stations. The company has focused on
start-up situations, and growing value in underperforming, and undervalued
business situations. It has purchased and sold properties in Wisconsin, Illinois
and Michigan, and has grown to a multi-million dollar asset base from a start-up
capital contribution of less than $100,000. Prior to 1972, Mr. Walton was owner
and President of Walton Co., an advertising representative firm which he founded
in New York City. He has held sales and management positions with Forbes
Magazine, The Chicago Sun Times and Gorman Publishing Co., a trade magazine
publisher specializing in new magazines which was subsequently sold to a large
international publishing concern. Mr. Walton has served on the Boards of the
American Red Cross, the Salvation Army and the Chamber of Commerce.

Mr. Kerber has served as a Director since April 1999. Mr. Kerber has been a
business consultant to the insurance industry since January 1996. He has over 40
years of experience in operating insurance companies, predominantly those
associated with life and

<PAGE> 28

health. From October 1994 until January 1996, he was Chairman, President, Chief
Executive Officer and director of the 22 life and health insurance companies
which comprise the ICH Group. In 1990, Mr. Kerber was founding partner in the
Life Partners Group where he was Senior Executive Vice President and a director.
Prior to that, he was involved with operating and consolidating over 200 life
and health companies for ICH Corporation, HCA Corporation and US Life
Corporation.

Our Board of Directors has an Audit Committee and a Compensation
Committee. The Board's Audit Committee is comprised of Messrs. Bethune and
Dearholt. The responsibilities of the Audit Committee, in addition to other
duties which may be specified by the Board of Directors, include the following:

- recommendation to the Board of Directors of independent auditors;

- review of the timing, scope and results of the independent auditors'
audit examination;

- review of periodic comments and recommendations by the auditors and
of our response to the auditors' periodic comments and
recommendations; and

- review of the scope and adequacy of internal accounting controls.

The Audit Committee met two times during the fiscal year ended September 30,
1999.

The Board's Compensation Committee is comprised of Messrs. Gargiulo and
Bethune. The responsibility of the Compensation Committee, in addition to other
duties which may be specified by the Board of Directors, is to make
recommendations to the Board of Directors regarding compensation for the
executive officers and to administer the 1989, 1990, 1994 and Outside Director
Stock Option Plans. The Compensation Committee did not meet during the fiscal
year ended September 30, 1999.

Our Board of Directors met 20 times during the fiscal year ended September
30, 1999.

The Board of Directors approves grants of options under the 1989, 1990 and
1994 Stock Option Plans. Any employee who is a member of the Board abstains from
voting on grants of options to him or her. Outside directors receive one-time
automatic grants of options under the Outside Director Stock Option Plan.

There is no standing nominating or similar committee of the Board of
Directors.

Directors who are not also our employees receive a one-time grant of options
to purchase 30,000 shares of our common stock upon their initial election to the
Board of Directors. The options are granted at an exercise price equal to the
last sale price of our common stock on the date of grant. We also pay each
outside director $1,000 for each meeting of the Board of Directors attended by
the director and reimburse the outside director for his expenses in attending
the meeting.

All directors serve until the next annual meeting of our shareholders and
until his or her successor has been elected or until his or her prior death,
resignation or removal. Each executive officer holds office until his or her
successor has been appointed or until his or her prior death, resignation or
removal.

<PAGE> 29
EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below gives information regarding all annual, long-term and other
compensation paid by us to each of our executive officers whose total annual
salary and bonus exceeded $100,000 for services rendered during any of the years
indicated below. The individuals listed in this table are referred to elsewhere
in this prospectus as the "named executive officers."

ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
------------- -------------------------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING
PRINCIPAL FISCAL SALARY AWARDS(1) OPTIONS/SARS
POSITION YEAR ($) ($) (#)
-------------------- ------ ------------- --------------- --------------
<S> <C> <C> <C> <C>
O.B. Parrish 1999 90,000 -- --
Chairman and 1998 90,000 117,955(2) 264,000
Chief Executive 1997 90,000 -- 164,000(3)
Officer

Mary Ann Leeper, 1999 225,000 -- --
Ph.D. President and 1998 225,000 84,210(2) 290,000
Chief Operating 1997 225,000 -- 200,000(3)
Officer
</TABLE>

(1) Represents fair market value of restricted common stock on the date of grant
based on the $2.88 closing price of our common stock on the date of grant.

(2) At September 30, 1998, the named executive officer owned 25,000 shares of
restricted common stock, having a fair market value of $71,875 on that date,
based on the closing price of our common stock on that date, and a fair market
value of $40,625 on September 30, 1999, based on the closing price of our common
stock on that date. For Mr. Parrish, also includes his pro rata portion of
25,000 shares of restricted stock granted to Phoenix Health Care of Illinois,
based on his 64% ownership of Phoenix Health Care of Illinois. For Dr. Leeper,
also includes her pro rata portion of the restricted stock based on her
approximately 16.7% ownership of Phoenix Health Care of Illinois. All of these
shares were granted on May 5, 1998 and vested in full on the first anniversary
of the grant date. The owner is entitled to receive any dividends declared on
these shares of restricted stock.

(3) Includes 164,000 and 200,000 options for Mr. Parrish and Dr. Leeper,
respectively, which were granted in 1995 and 1996 fiscal years but repriced in
1997.

FISCAL YEAR-END OPTION/SAR VALUES

The following table sets forth the number and value of unexercised options
held by the named executive officers at September 30, 1999:

NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
FISCAL YEAR END SEPTEMBER 30, 1999 IN-THE-MONEY OPTIONS AT YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------------------- ------------------------- -------------------------
<S> <C> <C>
O.B. Parrish 88,000/376,000 $ 0

Mary Ann Leeper, Ph.D. 96,667/693,333 $ 0
</TABLE>

EMPLOYMENT AGREEMENTS

We entered into an employment agreement with Dr. Leeper effective May 1,
1994. The original term of Dr. Leeper's employment extended to April 30, 1997
and after April 30, 1997 her employment term renews automatically for additional
three-year terms unless

<PAGE> 30

notice of termination is given. The employment agreement has automatically
renewed for a term ending on April 30, 2000. We may terminate the employment
agreement at any time for cause. If Dr. Leeper is terminated without cause, we
are obligated to continue to pay Dr. Leeper her base salary and any bonus to
which she would otherwise have been entitled for a period equal to the longer of
two years from date of termination or the remainder of the then applicable term
of the employment agreement. In addition, we are obligated to continue Dr.
Leeper's participation in any of our health, life insurance or disability plans
in which Dr. Leeper participated prior to her termination of employment. Dr.
Leeper's employment agreement provided for a base salary of $175,000 for the
first year of her employment term, $195,000 for the second year of her
employment term and $225,000 for the third year of her employment term, subject
to the achievement of performance goals established by Dr. Leeper and the Board
of Directors. If the employment agreement is renewed beyond the initial
three-year term, it requires her base salary to be increased annually by the
Board of Directors based upon her performance and any other factors that the
Board of Directors considers appropriate. For fiscal 1998 and 1999, Dr. Leeper's
base salary was $225,000 per year. The employment agreement also provides Dr.
Leeper with various fringe benefits including an annual cash bonus of up to 100%
of her base salary. The Board of Directors may award the cash bonus to Dr.
Leeper in its discretion. To date, Dr. Leeper has not been awarded a cash bonus.

CHANGE OF CONTROL AGREEMENTS

In fiscal 1999, we entered into Change of Control Agreements with each of
O.B. Parrish, our Chairman and Chief Executive Officer, Mary Ann Leeper, our
President and Chief Operating Officer, and Michael Pope, our Vice President.
These agreements essentially act as springing employment agreements which
provide that, upon a change of control, as defined in the agreement, we will
continue to employ the executive for a period of three years in the same
capacities and with the same compensation and benefits as the executive was
receiving prior to the change of control, in each case as specified in the
agreements. If the executive is terminated without cause or if he or she quits
for good reason, in each case as defined in the agreements, after the change of
control, the executive is generally entitled to receive a severance payment from
us equal to the amount of compensation remaining to be paid to the executive
under the agreement for the balance of the three-year term.

28
<PAGE> 31

PRINCIPAL SHAREHOLDERS

The following table provides information regarding the beneficial ownership
of our common stock as of December 16, 1999 by:

- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;

- each director;

- each named executive officer; and

- all directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the persons and
entities included in the table have sole voting and investment power with
respect to all shares beneficially owned, subject to applicable community
property laws. Shares of common stock subject to options that are either
currently exercisable or exercisable within 60 days of December 16, 1999 are
treated as outstanding and beneficially owned by the option holder for the
purpose of computing the percentage ownership of the option holder. However,
these shares are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.

SHARES
BENEFICIALLY OWNED
------------------
NAME NUMBER PERCENT
------------------------- ------ -------
<S> <C> <C>
O.B. Parrish (1) 484,001 3.9%
William R. Gargiulo, Jr. (1) 351,668 2.9
Mary Ann Leeper, Ph.D. (1) 460,668 3.7
David R. Bethune (2) 50,000 *
Michael R. Walton 527,810 4.3
James R. Kerber 343,710 2.8
Stephen M. Dearholt (3) 1,714,451 12.7
Gary Benson (4) 1,430,450 10.6
All directors and executive
officers as a group (ten persons) (1)(3)(5) 3,327,696 23.9
</TABLE>

- ----------

* Less than 1%.

(1) Includes 294,501 shares owned by Phoenix Health Care of Illinois and 30,000
shares under option to Phoenix Health Care of Illinois. Under the rules of
the Securities and Exchange Commission, Messrs. Parrish and Gargiulo and
Dr. Leeper may share voting and dispositive power as to these shares since
Mr. Gargiulo is a trustee of a trust which is a shareholder, and Mr.
Parrish and Dr. Leeper are officers, directors and shareholders, of Phoenix
Health Care of Illinois. For Dr. Leeper, also includes 38,900 shares owned
by and 96,667 shares under option to her; for Mr. Parrish, also includes
71,500 shares owned by and 88,000 shares under option to him; and for Mr.
Gargiulo, also includes 10,500 shares owned by and 16,667 shares under
option to him.

(2) Represents options which are currently exercisable.

(3) Includes 544,511 shares owned directly by Mr. Dearholt. Also includes
69,500 shares held by the Dearholt, Inc. Profit Sharing Plan, 9,680 shares
held by Response Marketing Money Purchase Plan, 153,129 shares held by
trusts of which Mr. Dearholt is a trustee and 42,400 shares held by Mr.
Dearholt's minor children. Also includes warrants to purchase 860,000
shares of common stock and options to purchase 30,000 shares.
(4) Includes warrants to purchase 1,250,000 shares of common stock. Mr.
Benson's address is 2925 Dean Parkway, Minneapolis, Minnesota 55416.
(5) Includes 50,000 shares under option held by Mr. Bethune.

29
<PAGE> 32

RELATED PARTY TRANSACTIONS

On February 18, 1999, we borrowed $50,000 from O.B. Parrish, our Chairman
and Chief Executive Officer. The borrowing was completed through the execution
of a $50,000, one-year promissory note payable by us to Mr. Parrish and a Note
Purchase and Warrant Agreement and Stock Issuance Agreement. Mr. Parrish was
granted warrants to purchase 10,000 shares of our common stock at an exercise
price of $1.35 per share. The exercise price of the warrants equaled 80% of the
average market price of our common stock for the five trading days prior to the
date of issuance. The warrants expire upon the earlier of their exercise or five
years after the date of their issuance. Under the Stock Issuance Agreement, if
we fail to pay the $50,000 promissory note when due, we must issue 10,000 shares
of our common stock to Mr. Parrish. The issuance will not, however, alleviate
our liability under the note. We also granted Mr. Parrish securities
registration rights for any common stock he receives from us under these
warrants or the Stock Issuance Agreement.

On February 12, 1999, we borrowed $250,000 from Mr. Dearholt. The borrowing
was effectuated in the form of a $250,000, one-year promissory note payable by
us to Mr. Dearholt. As part of this transaction, we entered into a Note Purchase
and Warrant Agreement and a Stock Issuance Agreement. Mr. Dearholt received a
warrant to purchase 50,000 shares of our common stock at an exercise price of
$1.248 per share. The exercise price of the warrants equaled 80% of the average
market price of our common stock for the five trading days prior to the date of
issuance. The warrants expire upon the earlier of their exercise or five years
after the date of their issuance. Under the Stock Issuance Agreement, if we fail
to pay the $250,000 under the note when due, we must issue 50,000 shares of our
common stock to Mr. Dearholt. This issuance will not, however, alleviate our
liability under the note. We also granted Mr. Dearholt securities registration
rights for any common stock he receives from us under these warrants or the
Stock Issuance Agreement.

During 1998, as compensation for consulting services, we awarded Phoenix
Health Care of Illinois, Inc., a corporation which is owned in part and
controlled by O.B. Parrish, Mary Ann Leeper and William R. Gargiulo, Jr.,
25,000 shares of restricted stock with a market value of approximately $93,750.

On March 25, 1997, 1998 and 1999, we extended a $1 million, one-year
promissory note payable by us to Mr. Dearholt for a previous loan Mr. Dearholt
made to us. The promissory note is now payable in full on March 25, 2000 and
bears interest at 12% annually, payable monthly. We used $0.2 million of the
note proceeds to provide working capital needed to fund the initial stages of
our U.S. marketing campaign and $0.8 million of the note proceeds to fund
operating losses. The borrowing transactions were effected in the form of a
promissory note from us to Mr. Dearholt and related Note Purchase and Warrant
Agreements and a Stock Issuance Agreement. Under the 1997, 1998 and 1999 Note
Purchase and Warrant Agreements, we issued to Mr. Dearholt warrants to purchase
200,000 shares of common stock in 1997 at an exercise price of $1.848 per share,
200,000 shares of common stock in 1998 at an exercise price of $2.25 per share
and 200,000 shares of common stock in 1999 at an exercise price of $1.16 per
share. In each case, the exercise price of the warrants equaled 80% of the
market price of our common stock on the date of issuance. The warrants expire
upon the earlier of their exercise or five years after the date of their
issuance. Under the Stock Issuance Agreement, if we fail to pay the $1 million
under the note when due, we must issue 200,000 shares of our common stock to Mr.
Dearholt. This issuance will not, however, alleviate our liability under the
note. We also granted Mr. Dearholt securities registration rights for any common
stock he receives from us under these warrants or the Stock Issuance Agreement.
In consideration of Mr. Dearholt's agreement to extend the note's due date to
March 25, 2000, we extended the expiration date of warrants held by Mr. Dearholt
to purchase 200,000 shares of our common stock which from March 25, 2001 to
March 25, 2002.

On September 24, 1999, we completed a private placement of 666,671 shares
of our common stock to various investors at a purchase price of $0.75 per share,
representing a discount of 12% from the closing price of a share of our common
stock on the Over the Counter Bulletin Board on that date. Stephen M. Dearholt,
one of our directors, purchased 266,667 shares for $200,000 in this private
placement. The terms of Mr. Dearholt's purchase were identical to the terms
offered to the other, unrelated investors. As part of this private placement, we
granted all of the investors, including Mr. Dearholt, registration rights which
require that we register the investors' resale of these shares. The registration
statement, of which this prospectus is a part, registers these investors' resale
from time to time of those shares.

It has been and currently is our policy that transactions between us and
our officers, directors, principal shareholders or affiliates are to be on terms
no less favorable to us than could be obtained from unaffiliated parties. We
intend that any future transactions between us and our officers, directors,
principal shareholders or affiliates will be approved by a majority of the
directors who are not financially interested in the transaction.

30
<PAGE> 33

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 22 million shares of common stock,
$.01 par value per share and 5 million shares of Class A Preferred Stock, $.01
par value per share. The Class A Preferred Stock may be issued in series, at any
times and with any terms, that the Board of Directors considers appropriate. To
date, the Board of Directors has authorized for issuance 1,040,000 shares of
Class A Preferred Stock--Series 1, of which 660,000 shares are currently
outstanding and 1,500,000 shares of Class A Preferred Stock--Series 2, of which
no shares are currently issued and outstanding since the 729,927 shares of Class
A Preferred Stock--Series 2 which were previously issued have all converted into
a like number of shares of common stock. Our Amended and Restated Articles of
Incorporation provide that any shares of Class A Preferred Stock which are
issued and subsequently converted into common stock may not be reissued.
Accordingly, we currently have 2,460,000 shares of Class A Preferred Stock
authorized and available for issuance in series designated by the Board.

COMMON STOCK

Holders of common stock are entitled to one vote for each share held of
record on all matters to be voted on by the shareholders. Subject to the prior
rights of the holders of Class A Preferred Stock, as described below, holders of
common stock are entitled to receive dividends when and as declared by the Board
of Directors out of funds legally available for the payment of dividends. Upon
liquidation or dissolution, holders of common stock are entitled to share, based
on the number of shares owned, in our remaining assets which may be available
for distribution after payment of our creditors and satisfaction of any accrued
but unpaid dividends on the Class Preferred Stock and the liquidation
preferences, if any, of the Class A Preferred Stock. Holders of common stock
have no preemptive, subscription or redemption rights. The common stock has no
cumulative voting rights. As a result, holders of more than 50% of the
outstanding shares of common stock can elect all of our directors.

All outstanding shares of common stock, currently outstanding, are fully
paid and nonassessable. Wisconsin law, however, may make our shareholders
personally liable for unpaid wages due employees for up to six months' services,
but not in an amount greater than the par value of the shares.

CLASS A PREFERRED STOCK

The Board of Directors is authorized, subject to the limitations described
below, to issue from time to time, without shareholder authorization, in one or
more designated series, shares of Class A Preferred Stock and to determine the
dividend, redemption, liquidation, sinking fund and conversion rights of each
particular series. No dividends or other distributions will be payable on the
common stock unless dividends are paid in full on the Class A Preferred Stock
and all sinking fund obligations for the Class A Preferred Stock, if any, are
fully funded. Dividends on the Class A Preferred Stock will be cumulative from
the date of issuance. In the event of a liquidation or dissolution, the Class A
Preferred Stock would have priority over the common stock to receive the amount
of the liquidation preference as specified in each particular series, together
with any accrued but unpaid dividends out of our remaining assets. Holders of
shares of Class A Preferred Stock will have the right, at any time on or before
the redemption of the shares, to surrender the certificate evidencing the shares
of Class A Preferred Stock and receive upon conversion of the shares of Class A
Preferred Stock, a certificate evidencing one share of common stock for each
share of Class A Preferred Stock so surrendered. The holders of Class A
Preferred Stock are entitled to cast one vote per share held of record by them
at all meetings of our shareholders.

Class A Preferred Stock--Series 1

As authorized by our Articles of Incorporation, on August 15, 1997, the
Board of Directors by resolution designated the relative rights and preferences
of the first series of Class A Preferred Stock which was designated "Class A
Preferred Stock--Series 1." The Board authorized for issuance 1,040,000 shares
of this Series 1 Preferred Stock and 680,000 shares were issued, 660,000 of
which are currently outstanding. We have no present intention of issuing any
additional shares of Series 1 Preferred Stock. The Series 1 Preferred Stock
accrues dividends on a daily basis at the rate of 8% per year on the
"liquidation value" of the Series 1 Preferred Stock, which currently is $2.50
per share and is subject to adjustment and increase for accrued dividends. The
dividends will accrue through the earliest of the date of repurchase of the
Series 1 Preferred Stock, its conversion into common stock or liquidation.
Dividends on the Series 1 Preferred Stock must be paid in full before dividends
may be paid on any other class of our stock or before any sums may be set aside
for the redemption or purchase of any of the Preferred Stock. Dividends will
accrue whether or not they have been declared and whether or not there are funds
legally available for the payment of dividends. Dividends are payable on October
1 of each year. Dividends which are not paid on the dividend reference date will
accrue and be added to the liquidation value of each share of Series 1 Preferred
Stock. No dividends can be declared and set aside for any shares of common stock
unless the Board declares a dividend payable on the outstanding shares of Series
1 Preferred Stock, in addition to the dividends which the Series 1 Preferred
Stock is

31
<PAGE> 34

otherwise entitled as described above. Additional dividends on the Series 1
Preferred Stock must be declared in the same amount per share of Series 1
Preferred Stock as would be declared payable on the shares of common stock into
which each share of Series 1 Preferred Stock could be converted.

On or after August 1, 1998, each share of Series 1 Preferred Stock is
convertible into one share of common stock. Upon conversion, certificates for
shares of common stock will be issued together with, to the extent legally
available, an amount of cash equal to the remaining accrued but unpaid dividends
on the shares of Series 1 Preferred Stock so converted. We may redeem the Series
1 Preferred Stock on or after August 1, 2000, unless the holder converts the
shares before our redemption is effective, at a price of $2.50 per share plus
all accrued but unpaid dividends. Upon a liquidation, the Series 1 Preferred
Stock is entitled to a liquidation preference equal to $2.50 per share plus any
accrued but unpaid dividends. This amount must be paid prior to any distribution
on shares of common stock. Except as provided above, the Series 1 Preferred
Stock will have the same rights, preferences and limitations as any other series
of Preferred Stock to be issued in the future, whenever designated and issued.

Class A Preferred Stock--Series 2

On December 30, 1997, the Board of Directors by resolution designated the
relative rights and preferences of the second series of Class A Preferred Stock
which is designated "Class A Preferred Stock--Series 2." The Board authorized
for issuance 1,500,000 shares of this Series 2 Preferred Stock and 729,927
shares were issued. However, as of the date of this prospectus, no shares of
Series 2 Preferred Stock are issued and outstanding since they all converted
into shares of common stock on a one-for-one basis on April 3, 1998. The Series
2 Preferred Stock does not carry any dividend preference. Upon a liquidation,
each share of the Series 2 Preferred Stock outstanding at the time of
liquidation is entitled to a liquidation preference equal to the purchase price
paid for each share. This amount must be paid prior to any distribution on
shares of common stock, however, the liquidation preference on the Series 1
Preferred Stock must be paid before the liquidation preference on the Series 2
Preferred Stock is paid.

The issuance of one or more series of Class A Preferred Stock could have an
adverse effect on the rights of the holders of common stock, including dividend
rights, rights upon liquidation and voting rights. The Preferred Stock could
also be issued by us to defend against the threat of a takeover, if the Board of
Directors determines that the takeover is not in our best interests or the best
interests of our shareholders. This could occur even if a takeover was favored
by a majority of shareholders and was at a premium to the market price of the
common stock. We have no current plans or intention to issue additional shares
of Class A Preferred Stock.

CONVERTIBLE DEBENTURES

We issued convertible debentures to five of the selling stockholders in the
principal amount of $1,500,000. The convertible debentures bear interest at 8%
annually and have a one-year term, However, we may elect to extend the repayment
term for an additional one year if, upon the extension, we issue to the selling
stockholders warrants to purchase 375,000 shares of our common stock having the
same terms and conditions as the warrants issued to the selling stockholders
described below. One million dollars of the convertible debentures is payable on
May 19, 2000, subject to the one year extension, with the remaining $500,000
payable on June 3, 2000, also subject to the one-year extension. Interest on the
convertible debentures is payable quarterly either in cash or, at the selling
stockholders' option, common stock based on the stock's then fair market value.

The selling stockholders may elect to convert the original principal
balance of convertible debentures plus any accrued but unpaid interest into
common stock at any time after one year from the date they were issued based on
a per share price equal to the lesser of:

- 70% of the market price of the common stock at the time of conversion;
or

- $1.00.

Payment of the convertible debentures is secured by a first priority
security interest in all of our assets. In addition, if we default in payment of
principal or interest on the convertible debentures, we must immediately issue
1,500,000 shares of our common stock to the investors at no cost and that
issuance will not in any way impair the other rights the selling stockholders
possess, including the right to demand payment of the convertible debentures.

32
<PAGE> 35

WARRANTS

We also issued to the purchasers of the convertible debentures warrants to
purchase 1,875,000 shares of our common stock. These warrants are exercisable by
the selling stockholders at any time within five years after the date of their
issuance at an exercise price per share equal to the lesser of:

- 70% of the market price of our common stock on the date of exercise; or

- $1.00.

In addition, as part of the consideration that we paid R.J. Steichen &
Company, our placement agent in the offering of the convertible debentures and
warrants, we also issued warrants to purchase a total of 337,500 shares of our
common stock to R.J. Steichen. The warrants issued to R.J. Steichen are
exercisable at any time during a period of four years commencing one year after
the date of the private placement at an exercise price of $1.00 per share.

The warrants issued to the selling stockholders and R.J. Steichen contain
provisions that protect the holder against dilution by adjustment of the
exercise price and number of shares to be received upon exercise. Adjustments
will occur in the event, among others, of a merger, stock split or reverse stock
split, stock dividend or recapitalization. We are not required to issue
fractional shares upon the exercise of the warrants. The holder of the warrants
will not possess any rights as a stockholder until the holder exercises the
warrants.

The warrants may be exercised upon surrender on or before the expiration
date of the warrants at our offices, with an exercise form completed and
executed as indicated, accompanied by payment of the exercise price for the
number of shares for which the warrant is being exercised. The exercise price is
payable by check or bank draft payable to our order or by wire transfer or, in
the case of the R.J. Steichen, by a "cashless exercise," in which the number of
shares of common stock underlying the warrant having a fair market value equal
to the total exercise price are cancelled as payment of the exercise price.

For the life of the warrants and the convertible debentures, the holder has
the opportunity to profit from a rise in the market price of the common stock
without assuming the risk of ownership of the shares of common stock issuable
upon the exercise of the warrant or conversion of the convertible debentures.
The warrant or convertible debenture holder should be expected to exercise the
warrant or convertible debenture at a time when we would likely be able to
obtain any needed capital by an offering of common stock on terms more favorable
than those provided for by the warrant or convertible debenture. Furthermore,
the terms on which we could obtain additional capital during the life of the
warrant or convertible debenture may be adversely affected.

TRANSFER AGENT

The transfer agent and registrar for the common stock is Firstar Trust
Company, Milwaukee, Wisconsin.

WISCONSIN ANTI-TAKEOVER PROVISIONS

Section 180.1150 of the Wisconsin Business Corporation Law provides that
the voting power of shares of public corporations, such as us, which are held by
any person holding in excess of 20% of the voting power of our stock shall be
limited to 10% of the full voting power of the shares. This statutory voting
restriction does not apply to shares acquired directly from us, acquired in a
transaction incident to which our shareholders vote to restore the full voting
power of the shares and under other circumstances more fully described in
section 180.1150. In addition, this statutory voting restriction is not
applicable to shares of common stock acquired before April 22, 1986.

Section 180.1141 of the Wisconsin Business Corporation Law provides that a
"resident domestic corporation," such as us, may not engage in a "business
combination" with a person beneficially owning 10% or more of the voting power
of our outstanding stock for three years after the date the interested
shareholder acquired his 10% or greater interest, unless the business
combination or the acquisition of the 10% or greater interest was approved
before the stock acquisition date by our Board of Directors. After the
three-year period, a business combination that was not so approved can be
completed only if it is approved by a majority of the outstanding voting shares
not held by the interested shareholder or is made at a specified price intended
to provide a fair price for the shares held by noninterested shareholders.
Section 180.1141 is not applicable to shares of common stock acquired by a
shareholder prior to the registration of the common stock under the Securities
Exchange Act of 1934 and shares acquired before September 10, 1987.

<PAGE> 36

INDEMNIFICATION

Our directors and officers are entitled to statutory rights to be
indemnified by us against litigation-related liabilities and expenses if the
director or officer is either successful in the defense of litigation or is
otherwise determined not to have engaged in willful misconduct, knowingly
violated the law, failed to deal fairly with us or our shareholders or derived
an improper personal benefit in the performance of his duties to us. These
rights are incorporated in our By-Laws. To the extent that indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons, we have been advised that in the opinion of
the Securities and Exchange Commission, the indemnification provisions are
against public policy as expressed in the Securities Act and are, therefore,
unenforceable.

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<PAGE> 37

SELLING STOCKHOLDERS

Information regarding beneficial ownership of our common stock by the
selling stockholders as of December 16, 1999 follows. The table assumes that the
selling stockholders sell all shares offered under this prospectus. We can make
no assurance as to how many of the shares offered that the selling stockholders
will in fact sell.

SHARES OWNED SHARES BEING SHARES OWNED
SELLING STOCKHOLDER BEFORE OFFERING OFFERED AFTER OFFERING
------------------- ------------------------ ------- ------------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Gary Benson 2,680,450(1) 18.1% 2,500,000(2) 180,450 1.5%
2925 Dean Parkway
Minneapolis, MN 55416

Daniel Bishop 310,800(3) 2.5% 250,000(2) 60,800 *%
17235 Two Mile Road
Franksville, WI 53126

Mike Snow 588,800(4) 4.6% 500,000(2) 88,800 *%
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

Robert Johander 250,000(5) 2.0% 250,000(2) 0 0%
8480 Montgomery Court
Eden Prairie, MN 55347

W.G. Securities Limited 250,000(5) 2.0% 250,000(2) 0 0%
Partnership
PMB 452
774 Mays Boulevard, No. 10
Incline Village, NV 89451

R.J. Steichen & Company 33,750(6) *% 33,750(7) 0 0%
Suite 100
120 South Sixth Street
Minneapolis, MN 55402

Chip Rice
c/o R. J. Steichen & Company 168,750(8) 1.4% 168,750(7) 0 0%
Suite 100
120 South Sixth Street
Minneapolis, MN 55402

John E. Feltl
c/o R. J. Steichen & Company 101,250(9) *% 101,250(7) 0 0%
Suite 100
120 South Sixth Street
Minneapolis, MN 55402

Wayne Mills
c/o R. J. Steichen & Company 33,750(10) *% 33,750(7) 0 0%
Suite 100
120 South Sixth Street
Minneapolis, MN 55402

Stephen M. Dearholt 1,714,451(11) 12.7% 266,671(12) 1,447,780 11.0%
741 North Milwaukee Street
Suite 500
Milwaukee, WI 53202

Thomas W. Bodine and 138,000(13) 1.1% 80,000(14) 58,000 *%
Peggy L. Bodine as
Joint owners with right
of survivorship
c/o PaineWebber, Inc.
Suite 1500
8000 Maryland Avenue
St. Louis, MO 63105

Leo B. Schmid Trust 20,000(15) *% 20,000(15) 0 0%
</TABLE>

35
<PAGE> 38

SHARES OWNED SHARES BEING SHARES OWNED
SELLING STOCKHOLDER BEFORE OFFERING OFFERED AFTER OFFERING
------------------- ------------------------ ------------ ------------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
c/o PaineWebber, Inc.
Suite 1500
8000 Maryland Avenue
St. Louis, MO 63105

Jerome F. Martin and 33,334(16) *% 33,334(16) 0 0%
Diane M. Martin as
Joint Tenants
c/o PaineWebber, Inc.
Suite 1500
8000 Maryland Avenue
St. Louis, MO 63105

John H. Biggs Revocable 133,334(17) *% 133,334(17) 0 0%
Trust
Apt. 23D
240 East 47th Street
New York, NY 10097

Love Family Charitable 36,334(18) *% 33,334(18) 3,000 *%
Foundation
Suite 201
212 South Central
St. Louis, MO 63105

Andrew Sproule Love 33,334(18) *% 33,334(18) 0 0%
Suite 201
212 South Central
St. Louis, MO 63105

Love Group Joint Venture 80,934(18) *% 33,334(18) 47,600 *%
Suite 201
212 South Central
St. Louis, MO 63105

Love Real Estate Company 33,334(18) *% 33,334(18) 0 0%
Profit Sharing Plan (1994)
Suite 201
212 South Central
St. Louis, MO 63105

James Chase 210,000 1.8% 175,000(19) 35,000 *%
7815 North River Road
Milwaukee, WI 53217

William Witcroft 143,334(20) 1.2% 133,334(21) 10,000 *%
7160 N. Barnett Lane
Milwaukee, WI 53217

Gregory P. DiCresce and 150,334(22) 1.3% 133,334(23) 17,000 *%
Nancy L.P. DiCresce
Joint owners with right
of survivorship
12 Myrtle Street
Saratoga Springs, NY

John Burke 50,000(24) *% 50,000(24) 0 0%
622 Water Street
Suite 200
Milwaukee, WI 53202

Kingsbridge Capital Limited 303,000(25) 2.4% 100,000(26) 203,000 1.6%
P.O. Box 3340
Dawson Building
Main Street
Tortola
British Virgin Islands
----------
Total 5,345,843
============
</TABLE>

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

<PAGE> 39

* less than 1%

(1) Represents 180,450 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, 1 million shares receivable
by the selling stockholder upon conversion of the $1 million convertible
debenture owned by him assuming a conversion price of $1.00 per share and
1,500,000 shares receivable upon exercise of warrants owned by the selling
stockholder, including warrants to purchase 250,000 shares which will be
issued to the selling stockholder if we elect to extend the repayment term
of the convertible debenture for an additional year after its initial
term.

(2) The shares being offered by the selling stockholder represent the shares
which will be received by the selling stockholder upon exercise of the
convertible debenture and warrants held by the selling stockholder.

(3) Represents 60,800 shares of common stock beneficially owned by the selling
stockholder as of December 16, 1999, 100,000 shares receivable by the
selling stockholder upon conversion of the $100,000 convertible debenture
owned by him assuming a conversion price of $1.00 per share and 150,000
shares receivable upon exercise of warrants owned by the selling
stockholder, including warrants to purchase 25,000 shares which will be
issued to the selling stockholder if we elect to extend the repayment term
of the convertible debenture for an additional year after its initial
term.

(4) Represents 88,800 shares of common stock beneficially owned by the selling
stockholder as of December 16, 1999, 200,000 shares receivable by the
selling stockholder upon conversion of the $200,000 convertible debenture
owned by him assuming a conversion price of $1.00 per share and 300,000
shares receivable upon exercise of warrants owned by the selling
stockholder, including warrants to purchase 50,000 shares which will be
issued to the selling stockholder if we elect to extend the repayment term
of the convertible debenture for an additional year after its initial
term.

(5) Represents 100,000 shares receivable by the selling stockholder upon
conversion of the $100,000 convertible debenture owned by him assuming a
conversion price of $1.00 per share and 150,000 shares receivable upon
exercise of warrants owned by the selling stockholder, including warrants
to purchase 25,000 shares which will be issued to the selling stockholder
if we elect to extend the repayment term of the convertible debenture for
an additional year after its initial term. William Deters and Graceanne
K. Deters are the general partners of the selling stockholder and share
beneficial ownership of these shares.

(6) Represents 33,750 shares which will be received by the selling stockholder
upon exercise of warrants currently owned by the selling stockholder. The
warrants are not exercisable until June 1, 2000. John E.
Feltl is the sole beneficial owner of these shares.

(7) The shares being offered by the selling stockholder represent the shares
which will be received by the selling stockholder upon exercise of the
warrants held by the selling stockholder.

(8) Represents 168,750 shares which will be received by the selling
stockholder upon exercise of warrants currently owned by the selling
stockholder. The warrants are not exercisable until June 1, 2000.

(9) Represents 101,250 shares which will be received by the selling
stockholder upon exercise of warrants currently owned by the selling
stockholder. The warrants are not exercisable until June 1, 2000.

(10) Represents 33,750 shares which will be received by the selling stockholder
upon exercise of warrants currently owned by the selling stockholder. The
warrants are not exercisable until June 1, 2000.

(11) Represents 1,714,451 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, including the 266,667 shares
purchased from us on September 24, 1999 and offered for sale by the
selling stockholder by this prospectus.

(12) Represents 266,671 shares of common stock which the selling stockholder
purchased from us on September 24, 1999.

(13) Represents 138,000 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, including the 80,000 shares
purchased from us on September 24, 1999 and offered for sale by the
selling stockholder by this prospectus.

(14) Represents the 80,000 shares of common stock which the selling
stockholder purchased from us on September 24, 1999.

(15) Represents 20,000 shares purchased from us on September 24, 1999 and
offered for sale by the selling stockholder by this prospectus. Leo B.
Schmid is the sole beneficial owner of these shares.

37
<PAGE> 40

(16) Represents 33,334 shares purchased from us on September 24, 1999 and
offered for sale by the selling stockholder by this prospectus.

(17) Represents 133,334 shares purchased from us on September 24, 1999 and
offered for sale by the selling stockholder by this prospectus. John H.
Biggs is the sole beneficial owner of these shares.

(18) Represents 36,334 shares of common stock beneficially owned by the selling
stockholder as of December 16, 1999, including the 33,334 shares purchased
from us on September 24, 1999 and offered for sale by the selling
stockholder by this prospectus. Also includes the shares owned by Love
Family Charitable Foundation, Andrew Sproule Love, Love Group Joint
Venture and Love Real Estate Company Profit Sharing Plan (1994).
Andrew Sproule Love is the sole beneficial owner of these shares.

(19) Represents shares which the selling stockholder received as compensation
for investor relations and other consulting services which the selling
stockholder performed for us.

(20) Represents 143,334 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, including the 133,334 shares
purchased from us on November 4, 1999 and offered for sale by the selling
stockholder by this prospectus.

(21) Represents 133,334 shares purchased from us on November 4, 1999 and
offered for sale by the selling stockholder by this prospectus.

(22) Represents 150,334 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, including the 133,334 shares
purchased from us on November 22, 1999 and offered for sale by the selling
stockholder by this prospectus.

(23) Represents 133,334 shares purchased from us on November 22, 1999 and
offered for sale by the selling stockholder by this prospectus.

(24) Represents 50,000 shares purchased from us on November 23, 1999 and
offered for sale by the selling stockholder by this prospectus.

(25) Represents 303,000 shares of common stock beneficially owned by the
selling stockholder as of December 16, 1999, including 300,000 shares
which will be received by the selling stockholder upon exercise of
warrants currently owned by the selling stockholder. Valentine
O'Donoghue is the sole beneficial owner of these shares.

(26) Represents 100,000 shares which will be received by the selling
stockholder upon exercise of warrants currently owned by the selling
stockholder and offered for sale by the selling stockholder by this
prospectus.

None of the selling stockholders, except R.J. Steichen & Company, James
Chase, Stephen M. Dearholt and Kingsbridge Capital Limited, has had any material
relationship with us or any of our affiliates within the past three years other
than as a result of the ownership of common stock. R.J. Steichen & Company has
acted as our placement agent in the offering of the convertible debentures and
warrants to Messrs. Benson, Bishop, Snow and Johander and to W.G. Securities
Limited. In addition, in 1997, R.J. Steichen & Company also acted as our
placement agent in our private placement of Class A Preferred Stock--Series 1.
R.J. Steichen received customary compensation for its services as placement
agent in those private placements. James Chase has served as an investor
relations consultant to us for the past three years and has assisted us in
various private placements of securities. Stephen M. Dearholt has been one of
our directors since April 1996.

We have entered into an equity line agreement with Kingsbridge Capital
Limited. For additional information about this agreement, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Sources of Capital." On February 12, 1999, we entered into a
consulting agreement with Kingsbridge. Under this agreement, Kingsbridge is
available on a standby basis to serve as our consultant for a consulting term of
15 months. We pay a monthly consulting fee of $10,000 during the term of the
consulting agreement and issued warrants to purchase 100,000 shares of our
common stock at an exercise price of $1.625 per share. We agreed to register the
resale by Kingsbridge of these shares.

The shares offered by Messrs. Benson, Bishop, Snow, Johander and by W.G.
Securities Limited Partnership, R.J. Steichen & Company and Kingsbridge Capital
Limited will be acquired by conversion of the convertible debentures and/or
exercise of warrants owned by them. As part of the private placements to the
selling stockholders, we agreed to register the shares for resale by the selling

38
<PAGE> 41

stockholders to permit the resale of the shares from time to time by the selling
stockholders in the market or in privately-negotiated transactions. We will
prepare and file any amendments and supplements to the registration statement as
may be necessary to keep it effective for a period of approximately 24 months.

We have agreed to bear reasonable expenses (other than broker discounts and
commissions, if any) in completing the registration statement.

39
<PAGE> 42

PLAN OF DISTRIBUTION

We have been advised by the selling stockholders that the selling
stockholders may sell the shares from time to time in transactions on the OTC
Bulletin Board, in negotiated transactions, or otherwise, or by a combination of
these methods, at fixed prices which may be changed, at market prices at the
time of sale, at prices related to market prices or at negotiated prices. The
selling stockholders may effect these transactions by selling the shares to or
through broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or the purchasers of
the shares for whom the broker-dealer may act as an agent or to whom they may
sell the shares as a principal, or both. The compensation to a particular
broker-dealer may be in excess of customary commissions.

Broker-dealers who act in connection with the sale of the shares may be
underwriters. Profits on any resale of the shares as a principal by such
broker-dealers and any commissions received by such broker-dealers may be
underwriting discounts and commissions under the Securities Act.

Any broker-dealer participating in transactions as agent may receive
commissions from a selling stockholder and, if they act as agent for the
purchaser of the shares, from the purchaser. Broker-dealers may agree with a
selling stockholder to sell a specified number of shares at a stipulated price
per share and, to the extent a broker-dealer is unable to do so acting as agent
for the selling stockholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the selling
stockholder. Broker-dealers who acquire shares as principal may resell the
shares from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, in negotiated transactions or otherwise at market prices prevailing at
the time of sale or at negotiated prices, and may pay to or receive from the
purchasers of the shares commissions computed as described above. To the extent
required under the Securities Act, a supplemental prospectus will be filed,
disclosing:

- the name of the broker-dealers;

- the number of shares involved;

- the price at which the shares are to be sold;

- the commissions paid or discounts or concessions allowed to the
broker-dealers, where applicable;

- that broker-dealers did not conduct any investigation to verify the
information in this prospectus, as supplemented; and

- other facts material to the transaction.

Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares may not simultaneously engage in market
making activities with the common stock for a period beginning when the person
becomes a distribution participant and ending upon the person's completion of
participation in a distribution, including stabilization activities in the
common stock to effect covering transactions, to impose penalty bids or to
effect passive market making bids. In addition, we and the selling stockholders
will be subject to applicable provisions of the Exchange Act, including Rule
10b-5 and to the extent we and the selling stockholders are distribution
participants, Regulation M. These rules and regulations may affect the
marketability of the shares.

The selling stockholders, other than Mr. Dearholt who is one of our
directors, may enter into short sale or other hedging arrangements.

The selling stockholders will pay all commissions associated with the sale
of the shares. The shares offered by this prospectus are being registered to
comply with contractual obligations, and the we have paid the expenses of the
preparation of this prospectus. We have also agreed to indemnify the selling
stockholders against liabilities, including liabilities under the Securities
Act, or, if the indemnity is unavailable, to contribute toward amounts required
to be paid the liabilities.

<PAGE> 43

LEGAL MATTERS

The validity of the securities offered by this prospectus will be passed
upon for us by Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.,
Milwaukee, Wisconsin.

EXPERTS

The consolidated financial statements of The Female Health Company at
September 30, 1999 and for the two years in the period ended September 30, 1999
included in this prospectus have been audited by McGladrey & Pullen LLP,
independent auditors, as set forth in their report (which contains an
explanatory paragraph with respect to conditions which raise substantial doubt
about our ability to continue as a going concern), in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
amounts and classification of liabilities that might result from the outcome of
that uncertainty.

41
<PAGE> 44

THE FEMALE HEALTH COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Document Page No.
- -------- --------
<S> <C>
Audited Consolidated Financial Statements.

Report of McGladrey & Pullen, LLP, Independent Auditors. F-1

Consolidated Balance Sheet as of September 30, 1999. F-2

Consolidated Statements of Operations for the years ended
September 30, 1999 and 1998. F-3

Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1999 and 1998. F-4 and F-5

Consolidated Statements of Cash Flows for the years ended
September 30, 1999 and 1998. F-6 and F-7

Notes to Consolidated Financial Statements. F-8 through F-23
</TABLE>

42
<PAGE> 45

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
The Female Health Company
Chicago, Illinois

We have audited the accompanying consolidated balance sheet of The Female Health
Company and subsidiaries, as of September 30, 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended September 30, 1999 and 1998. 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Female Health
Company and subsidiaries as of September 30, 1999, and the results of their
operations and their cash flows for the years ended September 30, 1999 and 1998,
in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been presented assuming
that The Female Health Company will continue as a going concern. As more fully
described in Note 13, the Company has experienced slower than expected growth in
revenues from its sole product, which has adversely affected the Company's
current results of operations and liquidity. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 13. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
of classification of liabilities that may result from the outcome of this
uncertainty.

/s/ McGladrey & Pullen, LLP

Schaumburg, Illinois
November 11, 1999

F-1
<PAGE> 46

THE FEMALE HEALTH COMPANY

CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 570,709
Accounts receivable, net of allowance for doubtful accounts
of $108,000 and allowance for product returns of $227,000 1,572,455
Inventories 1,015,202
Prepaid expenses and other current assets 477,482
--------------

TOTAL CURRENT ASSETS 3,635,848
--------------

Other Assets
Intellectual property, net of accumulated amortization of
$455,600 756,902
Other assets 157,111
--------------
914,013
--------------

Property, Plant and Equipment
Equipment, furniture and fixtures 3,943,710
Less accumulated depreciation 1,986,428
--------------
1,957,282
--------------

$ 6,507,143
==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Notes payable, related party, net of unamortized discount of
$115,377 $ 1,184,623
Convertible debentures, net of unamortized discount of $680,645 819,355
Accounts payable 612,043
Accrued expenses and other current liabilities 424,193
Preferred dividends payable 73,553
--------------

Total current liabilities 3,113,767
--------------

Long-Term Liabilities
Deferred gain on sale of facility 1,583,260
Other long term liabilities 87,146
--------------
1,670,406
--------------

Stockholders' Equity
Convertible Preferred Stock, Series 1, par value $.01 per share.
Authorized 5,000,000 shares; issued and outstanding 660,000
shares. 6,600
Common Stock, par value $.01 per share. Authorized 22,000,000
shares; issued and outstanding 11,929,580 shares. 119,297
Additional paid-in capital 46,820,778
Unearned consulting fees (201,374)
Accumulated other comprehensive income 189,847
Accumulated deficit (45,180,102)
--------------
1,755,046
Treasury Stock, at cost, 20,000 shares of common stock (32,076)
--------------
1,722,970
--------------
$ 6,507,143
==============

</TABLE>

See Notes to Financial Statements.

F-2

<PAGE> 47

THE FEMALE HEALTH COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------

1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net revenues $ 4,715,477 $ 5,451,399
---------------------------------------
Cost of products sold:
Cost of goods sold 4,605,141 6,130,819
Change in obsolescence allowance (6,394) (857,450)
---------------------------------------
Total cost of products sold 4,598,747 5,273,369
---------------------------------------

GROSS PROFIT 116,730 178,030
---------------------------------------

Operating expenses:
Advertising and promotion 251,867 433,821
Selling, general and administrative 2,890,860 2,895,108
---------------------------------------
Total operating expenses 3,142,727 3,328,929
---------------------------------------

OPERATING (LOSS) (3,025,997) (3,150,899)
---------------------------------------
Nonoperating income (expense):
Interest expense (860,523) (456,662)
Interest income 36,030 133,104
Nonoperating income 100,181 117,141
---------------------------------------
(724,312) (206,417)
---------------------------------------

NET (LOSS) (3,750,309) (3,357,316)

Preferred dividends accreted, Series 2 -- 817,000
Preferred dividends, Series 1 133,919 132,669
---------------------------------------

Net (loss) attributable to common stockholders $ (3,884,228) $ (4,306,985)
=======================================

Net (loss) per common share outstanding (0.36) (0.43)

Weighted average common shares outstanding 10,890,173 9,971,493

</TABLE>

See Notes to Financial Statements.

F-3

<PAGE> 48

THE FEMALE HEALTH COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
Unearned
Preferred Common Additional Paid- Consulting
Stock Stock in Capital Fees
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1997 $ 6,800 $ 95,145 $40,238,387 --
Issuance of 729,927 shares of Preferred Stock 7,299 -- 1,836,085 --
(net of offering costs of $156,616)
Issuance of 729,927 shares of Common Stock (7,299) 7,299 -- --
upon conversion of Preferred Stock
Issuance of 29,400 shares of Common Stock upon -- 294 58,506 --
exercise of stock options
Issuance of 25,000 shares of Common Stock for -- 250 93,500 --
consulting services
Issuance of 107,000 shares of Common Stock -- 1,070 306,555 --
under stock bonus plan
Issuance of 10,000 shares of Common Stock upon -- 100 19,900 --
exercise of warrants
Issuance of 18,000 options to employees -- -- 51,660 --
Issuance of warrants with short-term notes -- -- 297,500 --
payable
Issuance of warrants for professional services -- -- 114,750 --
Preferred Stock dividends -- -- -- --
Preferred Stock dividends accreted -- -- 817,000 --
Purchase of 10,000 shares of Common Stock held -- -- -- --
in Treasury
Comprehensive income (loss):
Net (loss) -- -- -- --
Foreign Currency translation adjustment -- -- -- --

Comprehensive income (loss)
- ---------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 (balance forward) $ 6,800 $104,158 $43,833,843 --

Balance at September 30, 1997 $203,195 $(36,988,889) -- $ 3,554,638
Issuance of 729,927 shares of Preferred Stock -- -- -- 1,843,384
(net of offering costs of $156,616)
Issuance of 729,927 shares of Common Stock -- -- -- --
upon conversion of Preferred Stock
Issuance of 29,400 shares of Common Stock upon -- -- -- 58,800
exercise of stock options
Issuance of 25,000 shares of Common Stock for -- -- -- 93,750
consulting services
Issuance of 107,000 shares of Common Stock -- -- -- 307,625
under stock bonus plan
Issuance of 10,000 shares of Common Stock upon -- -- -- 20,000
exercise of warrants
Issuance of 18,000 options to employees -- -- -- 51,660
Issuance of warrants with short-term notes -- -- -- 297,500
payable
Issuance of warrants for professional services -- -- -- 114,750
Preferred Stock dividends -- (132,669) -- (132,669)
Preferred Stock dividends accreted -- (817,000) -- --
Purchase of 10,000 shares of Common Stock held -- -- (19,330) (19,330)
in Treasury
Comprehensive income (loss): --
Net (loss) -- (3,357,316) -- (3,357,316)
Foreign currency translation adjustment 101,785 -- -- 101,785
-----------
Comprehensive income (loss) (3,255,531)
- ---------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 (balance forward) $304,980 $(41,295,874) $(19,330) $ 2,934,577

</TABLE>

F-4

<PAGE> 49
THE FEMALE HEALTH COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1999 AND 1998

Additional Unearned
Preferred Common Paid-in Consulting
Stock Stock Capital Fees
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1998 (balance $6,800 $104,158 $43,833,843 --
forwarded)
Issuance of 482,964 shares of Common Stock -- 4,685 480,315 --
under equity line of credit
Issuance of 20,718 shares of Common Stock (200) 200 -- --
upon conversion of Preferred Stock
Issuance of 120,000 shares of Common Stock -- 1,200 128,760 --
upon exercise of warrants
Issuance of 175,000 shares of Common Stock -- 1,750 184,188 (185,938)
for consulting services
Issuance of warrants with convertible -- -- 1,276,300 --
debentures
Issuance of 15,000 shares of Common Stock -- 150 23,288 --
under stock bonus plan
Issuance of 18,000 shares of Common Stock -- 180 16,695 --
upon exercise of stock options
Issuance of warrants with short-term notes -- -- 253,515 --
payable
Issuance of 30,691 shares of Common Stock as -- 307 31,058 --
payment of preferred stock dividends
Issuance of warrants for consulting services -- -- 99,483 (99,483)
Preferred Stock dividends -- -- -- --
Purchase of 10,000 Shares of Common Stock -- -- -- --
held in Treasury
Issuance of 666,671 shares of Common Stock -- 6,667 493,333 --
Amortization of unearned consulting fees -- -- -- 84,047
Comprehensive income (loss):
Net (loss) -- -- -- --
Foreign currency translation adjustment -- -- -- --
Comprehensive income (loss)
-----------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $6,600 $119,297 $46,820,778 $(201,374)
-----------------------------------------------------------------------------------------------------------

Accumulated
Other Cost of
Comprehensive Accumulated Treasury
Income Deficit Stock Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1998 (balance $304,980 $(41,295,874) $(19,330) $ 2,934,577
forwarded)
Issuance of 482,964 shares of Common Stock -- -- -- 485,000
under equity line of credit
Issuance of 20,718 shares of Common Stock -- -- -- --
upon conversion of Preferred Stock
Issuance of 120,000 shares of Common Stock -- -- -- 129,960
upon exercise of warrants
Issuance of 175,000 shares of Common Stock -- -- -- --
for consulting services
Issuance of warrants with convertible -- -- -- 1,276,300
debentures
Issuance of 15,000 shares of Common Stock -- -- -- 23,438
under stock bonus plan
Issuance of 18,000 shares of Common Stock -- -- -- 16,875
upon exercise of stock options
Issuance of warrants with short-term notes -- -- -- 253,515
payable
Issuance of 30,691 shares of Common Stock as -- -- -- 31,365
payment of preferred stock dividends
Issuance of warrants for consulting services -- -- -- --
Preferred Stock dividends -- (133,919) -- (133,919)
Purchase of 10,000 Shares of Common Stock -- -- (12,746) (12,746)
held in Treasury
Issuance of 666,671 shares of Common Stock -- -- -- 500,000
Amortization of unearned consulting fees -- -- -- 84,047
Comprehensive income (loss):
Net (loss) -- (3,750,309) -- (3,750,309)
Foreign currency translation adjustment (115,133) -- -- (115,133)
Comprehensive income (loss) (3,865,442)
-----------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $189,847 $(45,180,102) $(32,076) $ 1,722,970
-----------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements.

F-5

<PAGE> 50

THE FEMALE HEALTH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------

1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) $ (3,750,309) $ (3,357,316)

Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation 468,758 533,994
Amortization of intellectual property rights 119,501 123,437
Provision for (recovery of) inventory obsolescence (6,394) (857,450)
Provision for doubtful accounts, returns and discounts 22,460 24,717
Issuance of common stock for bonuses and
consulting services 23,438 401,375
Issuance and revaluation of warrants and options
Amortization of unearned consulting fees 84,047 -
Amortization of discounts on notes payable
and convertible debentures 671,854 329,327
Amortization of deferred income realized
on U.K. grant (142,723) (61,274)
Amortization of deferred gain on sale and leaseback
of building (91,772) (94,795)
Amortization of debt issuance costs 174,124 --
Changes in operating assets and liabilities:
Accounts receivable (507,929) (538,219)
Inventories (105,433) 891,421
Prepaid expenses and other current assets 149,617 (92,058)
Accounts payable 128,165 (411,286)
Accrued expenses and other current liabilities (78,733) 188,798
---------------------------------------
Net cash (used in) operating activities (2,841,329) (2,752,919)
---------------------------------------

INVESTING ACTIVITIES
Capital expenditures (22,637) (58,827)
Proceeds from repayment of note receivable -- 750,000
Proceeds from return of lease deposits -- 90,859
---------------------------------------
Net cash (used in) provided by investing activities (22,637) 782,032
---------------------------------------

FINANCING ACTIVITIES
Proceeds from issuance of preferred stock -- 1,843,384
Proceeds from issuance of common stock 500,000 --
Proceeds from issuance of common stock
under the equity line of credit 485,000 --
Proceeds from issuance of common stock upon exercise
of options and warrants 146,835 78,800
Proceeds from related party notes issued 1,300,000 1,000,000
Proceeds from convertible debentures issued 1,305,000 --
Purchase of common stock held in treasury (12,746) (19,330)
Dividend paid on preferred stock (161,670) --
Payments on notes payable, related party (1,000,000) (1,000,000)
Payments on long-term debt and capital lease obligations (638,620) (113,131)
---------------------------------------
Net cash provided by financing activities 1,923,799 1,789,723
---------------------------------------

</TABLE>

F-6

<PAGE> 51

THE FEMALE HEALTH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------

1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect of exchange rate changes on cash $ 30,589 $ 27,984
---------------------------------------

Net (decrease) in cash (909,578) (153,180)
Cash at beginning of year 1,480,287 1,633,467
---------------------------------------

Cash at end of year $ 570,709 $ 1,480,287
=======================================

Supplemental Cash Flow Disclosures:
Interest paid $ 190,444 $ 125,246

Supplemental Schedule of Noncash Investing and
Financing Activities:

Issuance of warrants on convertible debentures and
notes payable $ 1,529,815 $ 297,500
Common stock issued for payment of preferred stock dividends 31,365 --
Preferred dividends declared, Series 1 133,919 132,669
Preferred dividends accreted, Series 2 -- 817,000

</TABLE>

See Notes to Financial Statements.

F-7

<PAGE> 52

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and nature of operations: The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries, The Female Health Company - UK and The Female Health Company - UK,
plc. All significant intercompany transactions and accounts have been eliminated
in consolidation. The Female Health Company ("FHC" or the "Company") is
currently engaged in the marketing, manufacture and distribution of a consumer
health care product known as the Reality female condom, "Reality," in the U.S.
and "femidom" or "femy" outside the U.S. The Female Health Company - UK, is the
holding company of The Female Health Company - UK, plc, which operates a 40,000
sq. ft. leased manufacturing facility located in London, England.

The product is currently sold or available in either or both commercial (private
sector) and public sector markets in 30 countries. It is commercially marketed
directly by the Company in the United States and the United Kingdom and through
marketing partners globally.

Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and use assumptions that affect certain reported amounts and disclosures. Actual
results may differ from those estimates.

Significant accounting estimates include the following:

Trade receivables include a provision for sales returns and trade allowances,
which is based on management's estimate of future product returns from customers
in connection with unsold product which has expired or is expected to expire
before it is sold. The estimated cost for product returns, price discounts and
trade allowances are accrued when the initial sale is recorded.

The market value of inventory is based on management's best estimate of future
sales and the time remaining before the existing inventories reach their
expiration dates.

The Company evaluates intellectual property rights for impairment by comparing
the net present value of the asset's estimated future income stream to the
asset's carrying value.

Although management uses the best information available, it is reasonably
possible that the estimates used by the Company will be materially different
from the actual results. These differences could have a material effect on the
Company's future results of operations and financial condition.

Cash: Substantially all of the Company's cash was on deposit with one financial
institution.

Inventories: Inventories are valued at the lower of cost or market. The cost
is determined using the first-in, first-out (FIFO) method.

F-8

<PAGE> 53

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency translation: In accordance with Financial Accounting Standards
No. 52, "Foreign Currency Translation", the financial statements of the
Company's international subsidiaries are translated into U.S. dollars using the
exchange rate at each balance sheet date for assets and liabilities, the
historical exchange rate for stockholders' equity and a weighted average
exchange rate for each period for revenues, expenses, and gains and losses.
Translation adjustments are recorded as a separate component of stockholders'
equity as the local currency is the functional currency.

Equipment and furniture and fixtures: Depreciation and amortization is computed
by the estimated useful lives of the respective assets which range as follows:

Equipment 5 - 10 years
Furniture and fixtures 3 years

Intellectual property rights: The Company holds patents on the female condom in
the United States, the European Union, Japan, Canada, Australia and The People's
Republic of China and holds patents on the manufacturing technology in various
countries. The Company also licenses the trademark "Reality" in the United
States and has trademarks on the names "femidom" and "femy" in certain foreign
countries. Intellectual property rights are amortized on a straight-line basis
over their estimated useful life of twelve years.

Financial instruments: The Company has no financial instruments for which the
carrying value materially differs from fair value.

Revenue Recognition: Revenues from product sales are recognized as the products
are shipped to the customers.

Research and Development Costs: Research and development costs are expensed as
incurred. The amount of costs expensed for the years ended September 1999 and
1998 was $122,196 and $2,500, respectively.

Stock-Based Compensation: The value of stock options awarded to employees is
measured using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." The
Company has provided pro forma disclosures of net income as if the fair
value-based method prescribed by Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation," ("FAS 123"). was used in measuring
compensation expense in Note 7.

F-9

<PAGE> 54
THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising: The Company's policy is to expense production costs in the period
in which the advertisement is initially presented to consumers.

Income taxes: The Company files separate income tax returns for its foreign
subsidiaries. Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (FAS 109) requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial statements and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Deferred tax assets are also provided for carryforwards for income tax purposes.
In addition, the amount of any future tax benefits is reduced by a valuation
allowance to the extent such benefits are not expected to be realized.

Earnings per share (EPS): The Company has adopted the provisions of Statement of
Financial Accounting Standards (FAS) No. 128, Earnings Per Share. FAS No. 128
requires the presentation of "basic" and "diluted" EPS. Basic EPS is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of the incremental common
shares issuable upon conversion of convertible preferred or convertible debt and
the exercise of stock options and warrants for all periods. Fully diluted (loss)
per share is not presented since the effect would be anti-dilutive.

New Accounting Pronouncements: The Financial Accounting Standards Board has
issued Statement No. 130, Reporting Comprehensive Income, that the Company
adopted during its year ended September 30, 1999. The Statement establishes
standards for reporting and presentation of comprehensive income and its
components. The Statement requires that items recognized as components of
comprehensive income be reported in a financial statement. The Statement also
requires that a company classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. For the
years ended September 30, 1999 and 1998, the Company's components of
comprehensive income (loss) consisted of its reported net (loss) and foreign
currency translation adjustments.

Effective December 31, 1998, the Company adopted FAS No. 131, Disclosures of an
Enterprise and Related Information (FAS 131). FAS 131 superseded FAS No. 14,
Financial Reporting for Segments of a Business Enterprise. FAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. FAS 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
operates primarily in one industry segment while operating in both foreign and
domestic regions. See Note 10.

F-10

<PAGE> 55
THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In June 1998, the Financial Accounting Standards Board issues FAS 133,
Accounting for Derivative Instruments and Hedging Activities (FAS 133), which is
required to be adopted in years beginning after June 15, 1999. FAS 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. Management believes that the
adoption of FAS No. 133 will have no material impact on the Company.

NOTE 2. INVENTORIES

The components of inventory consist of the following at September 30, 1999:

<TABLE>
<S> <C>
Raw materials
Work in process $ 230,765
Finished goods 270,184
546,473
Less allowance for obsolescence (32,220)
--------------
$ 1,015,202
==============
</TABLE>

NOTE 3. LEASES

The Company entered into a seven-year operating lease with a third party for
office space effective September 12, 1994. The Company also had an informal
agreement to reimburse an affiliate for office space used by the officers of the
Company through October 31, 1998. The affiliate's lease is with an unrelated
third party which expires January 31, 2001. On November 1, 1998 the office space
was sublet for the remaining term of the lease. Reimbursement for the affiliate
rent expense was $14,999 and $48,146 in 1999 and 1998, respectively, which in
1999 is net of sublease rentals of $35,018.

On December 10, 1996, the Company entered into what is in essence a sale and
leaseback agreement with respect to its 40,000 square foot manufacturing
facility located in London, England. The Company received $3,365,000 (Pound
Sterling 1,950,000) for leasing the facility to a third party for a nominal
annual rental charge and for providing the third party with an option to
purchase the facility for one pound during the period December 2006 to December
2027.

As part of the same transaction, the Company entered into an agreement to lease
the facility back from the third party for base rents of $336,000 ( Pound
Sterling 195,000) per year payable quarterly until 2016. The lease is renewable
through December 2027. The Company was also required to make a security deposit
of $336,000 ( Pound Sterling 195,000) to be reduced in subsequent years. The
facility had a net book value of $1,398,819 (Pound Sterling 810,845) on the date
of the transaction. The $1,966,181 (Pound Sterling 1,139,155) gain which
resulted from this transaction will be recognized ratably over the initial term
of the lease. Unamortized deferred gain as of September 30, 1999 was $1,583,260
(Pound Sterling 982,537).

F-11

<PAGE> 56

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 3. LEASES (CONTINUED)

In 1987, a subsidiary entered into a lease for office and factory space expiring
January 31, 2001. These offices and factory space were vacated and subsequently
this space was subleased to a third party for a period expiring January 31,
2001. At the time the sublease was entered into a liability was established for
all future costs to the end of the lease, net of expected sublease receipts.

Details of operating lease expense in total and separately for transactions with
related parties is as follows:

September 30,
1999 1998
-----------------------------------
<S> <C> <C>
Operating lease expense:
Factory and office leases $ 691,399 $ 820,695
Office space previously used by officers (net of sublease rentals) 14,999 48,146
Other 22,231 17,811
----------------------------------
$ 728,629 $ 886,652
==================================
</TABLE>

Future minimum payments under operating leases, including planned reimbursement
of an affiliate for office space previously used by officers, consisted of the
following at September 30, 1999:

Rentals
Receivable
Under
Operating Subleases
----------------------------------
<S> <C> <C>
2000 $ 481,063 $ 39,204
2001 443,513 13,068
2002 321,778 -
2003 321,778 -
2004 320,893 -
Thereafter 3,884,472 -
----------------------------------
Total minimum payments $ 5,773,497 $ 52,272
==================================

</TABLE>

NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT

During 1998, the Company repaid and then subsequently borrowed $1,000,000 from
Mr. Dearholt, a current director of the Company. The outstanding note payable
had an interest rate of 12% and was paid in full in 1999. As part of the
transaction, the Company issued Mr. Dearholt warrants to purchase 200,000 shares
of the Company's common stock at $2.25 per share, which represented 80% of the
average trading price for the five trading days prior to the closing date for
the transaction and resulted in an initial discount on the note of $297,500. Any
stock issued under the warrants carry certain registration rights. The warrants
expire in 2006.

F-12

<PAGE> 57

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

The discount in combination with the note's 12% coupon resulted in an effective
interest rate of 63 percent on the note. During 1999, the Company repaid and
then subsequently borrowed $1,000,000 from Mr. Dearholt. The outstanding note
payable bears interest at 12% and is payable in full in 2000. As part of the
transaction, the Company issued Mr. Dearholt warrants to purchase 200,000 shares
of the Company's common stock at $1.16 per share, which represented 80% of the
average trading price for the five trading days prior to the closing date for
the transaction and resulted in an initial discount on the note of $194,574. Any
stock issued under the warrants carry certain registration rights. The warrants
expire in 2008. In addition, if the Company defaults on its obligation under the
note, the Company is required to issue an additional 200,000 shares of its
common stock to Mr. Dearholt in addition to all other remedies to which Mr.
Dearholt may be entitled. The note is recorded at September 30, 1999, net of
unamortized discount of $93,626. The discount in combination with the note's 12%
coupon resulted in an effective interest rate of 35 percent on the note.

Additionally, during 1999 the Company borrowed $250,000 from Mr. Dearholt and
$50,000 from O.B. Parrish, also a current director of the Company. Each note
payable bears interest at 12% and is payable in full in 2000. As part of the
transactions, the Company issued Mr. Dearholt and Mr. Parrish warrants to
purchase 50,000 and 10,000 shares of the Company's common stock at $1.35 and
$1.25 per share, respectively, which represented 80% of the average trading
price for the five trading days prior to the closing date for the transaction
and resulted in an initial discount on the notes of $49,219 and $9,722,
respectively. Any stock issued under the warrants carry certain registration
rights. The warrants expire in 2008 and 2007, respectively. Also if the Company
defaults on its obligation under the note, the Company is required to issue an
additional 50,000 and 10,000 shares of its common stock to Mr. Dearholt and Mr.
Parrish, respectively, in addition to all other remedies to which each is
entitled. The notes are recorded at September 30, 1999, net of unamortized
discounts of $18,018 and $3,733, respectively. The discount in combination with
the notes' 12% coupon resulted in an effective interest rate of 35 percent for
each note.

On June 1, 1999 the Company completed a private placement of convertible
debentures in the principal amount of $1,500,000 and warrants to purchase
1,875,000 shares of common stock. The convertible debentures are convertible
into shares of the Company's common stock as follows: the first 50% of the
original principal balance and any accrued but unpaid interest thereon is
convertible into common stock at the investor's election, at any time after one
year, based on a per share price equal to the lesser of 70% of the market price
of the Company's common stock at the time of conversion or $1.25, the second 50%
of the original principal balance and, any accrued but unpaid interest thereon,
is convertible into common stock at the investor's election at any time after
one year based on a per share price equal to the lesser of 70% of the market
price of the Company's common stock at the time of conversion or $2.50. The
convertible debentures are payable one year after issuance or, if the Company
elects, two years after issuance. If the term extended for the extra one year,
the Company must issue to the investor at the time of execution, 375,000
additional warrants to purchase shares of the Company's common stock on the same
terms as the other warrants. Interest on the convertible debentures is due at a
rate of 8% per annum, payable quarterly in either cash or, at the
debentureholder's option, common stock of the Company.

The convertible debentures are collateralized by a first security interest in
all of the Company's assets. In addition, if the Company defaults in payment of
the principal or interest due on the convertible

F-13

<PAGE> 58

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

debentures in accordance with their terms, the Company must immediately issue
1,500,000 shares of its common stock to the investor at no cost. The issuance of
these shares will not affect any of the outstanding warrants then held by the
investor, which warrants will continue in effect in accordance with their terms.

Additionally, warrants to purchase 337,500 shares of the Company's common stock
were issued to the Company's placement agent in this offering. The warrants have
a term of five years and are exercisable at an exercise price equal to the
lesser of 70% of the market price of the common stock at the time of the
exercise or $1.00. The warrants were valued at $224,500 which was recorded as
additional paid-in capital.

The convertible debentures beneficial conversion feature is valued at $336,400
and the warrants to purchase 1,875,000 shares of the Company's common stock are
valued at $715,100. In accordance with SEC reporting requirements for such
transactions, the Company recorded the value of the beneficial conversion
feature and warrants (a total of $1,051,500) as additional paid in capital. The
corresponding amount of $1,051,500 was recorded as a discount on convertible
debentures and is amortized over 1 year using the interest rate method. The note
is recorded net of a discount of $680,645 at September 30, 1999. The discount in
combination with the debenture's 8% coupon resulted in an effective interest
rate of 159 percent for the debentures. Upon completion of the convertible
debenture private placement $195,000 of issuance costs were charged to equity.

On April 6, 1999 the Company restructured its $602,360 (Pound Sterling 370,000)
Aage V. Jensen Charity Foundation note payable. The terms included immediate
payment of $177,000 (Pound Sterling 110,000) as of the date of the restructuring
agreement and required nine installment payments beginning April 15, 1999 and
concluding on December 10, 1999. To avoid incurring additional interest related
to the loan, the Company paid off the entire loan on June 10, 1999.

NOTE 5. INCOME TAXES

A reconciliation of income tax expense and the amount computed by applying the
statutory Federal income tax rate to loss before income taxes as of September
30, 1999 and 1998, are as follows:

September 30,
1999 1998
---------------------------------
<S> <C> <C>
Tax credit statutory rates $ (1,275,100) $ (1,141,490)
Nondeductible expenses 59,300 47,900
State income tax, net of federal benefits (177,700) (159,100)
Benefit of net operating loss not recognized, increase in valuation allowance 1,374,500 1,252,690
Other 19,000 -
=================================
$ - $ -
=================================

</TABLE>

F-14
<PAGE> 59

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5. INCOME TAXES (CONTINUED)

As of September 30, 1999, the Company had federal and state net operating loss
carryforwards of approximately $32,853,000 for income tax purposes expiring in
years 2005 to 2015. The benefit relating to $1,537,800 of these net operating
losses relates to exercise of common stock options and will be credited directly
to stockholders' equity when realized. The Company also has investment tax and
research and development credit carryforwards for income tax purposes
aggregating approximately $150,000 at September 30, 1999, expiring in years 2000
to 2010. The Company's U.K. subsidiary, The Female Health Company - UK, plc
subsidiary has U.K. net operating loss carryforwards of approximately
$68,010,000 as of September 30, 1999. These U.K. net operating loss
carryforwards can be carried forward indefinitely to be used to offset future
U.K. taxable income. Significant components of the Company's deferred tax assets
and liabilities are as follows at September 30, 1999:

<TABLE>
<S> <C>
Deferred tax assets:
Federal net operating loss carryforwards $ 11,170,000
State net operating loss carryforwards 2,166,000
Foreign net operating loss carryforwards 20,403,000
Foreign capital allowances 4,008,000
Tax credit carryforwards 150,000
Accounts receivable allowances 138,000
Other 17,000
-------------------
Total gross deferred tax assets 38,052,000
Valuation allowance for deferred tax assets 38,036,000
-------------------
Deferred tax assets net of valuation allowance 16,000
Deferred tax liabilities:
Equipment, furniture and fixtures (16,000)
-------------------
Net deferred tax assets $ -
===================
</TABLE>

The valuation allowance increased by $1,711,000 and $1,252,690 for the years
ended September 30, 1999 and 1998, respectively.

NOTE 6. ROYALTY AGREEMENTS

The Company has royalty agreements for sales of its products which provide for
royalty payments based on sales quantities and achievement of specific sales
levels. The amount of royalty expense was $38,451 for the year ended September
30, 1998. There was no royalty expense for the year ended September 30, 1999.

F-15
<PAGE> 60

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 7. COMMON STOCK

Stock Option Plans

The Company has various stock option plans that authorize the granting of
options to officers, key employees and directors to purchase the Company's
common stock at prices generally equal to the market value of the stock at the
date of grant. Under these plans, the Company has 58,128 shares available for
future grants as of September 30, 1999. The Company has also granted options to
one of its legal counsel and an affiliate. Certain options are vested and
exercisable upon issuance, others over periods up to four years and still others
based on the achievement of certain performance criteria by the Company and
market prices of its common stock.

Summarized information regarding all of the Company's stock options is as
follows:

<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
-----------------------------------

<S> <C> <C>
Outstanding at September 30, 1997 1,460,746 $ 2.92
Granted 18,000 0.01
Exercised (29,400) 2.00
Expired or canceled (274,868) 5.50
----------------

Outstanding at September 30, 1998 1,174,478 2.29
Granted 1,876,000 .86
Exercised (18,000) .01
Expired or canceled (79,178) 6.75
----------------

Outstanding at September 30, 1999 2,953,300 $ 1.27
================
</TABLE>

Options shares exercisable at September 30, 1999 and 1998 are 425,766 and
463,410, respectively.

Options Outstanding and Exercisable

Range of Number Wghted. Avg. Wghted. Avg. Number Wghted. Avg.
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices At 9/30/99 Life Price at 9/30/99 Price
- ---------------------------------------------------------------------------------------------------------------------

F-16

<PAGE> 61

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 7. COMMON STOCK (CONTINUED)

During 1998, the Company granted options to employees to purchase 18,000 shares
of the Company's common stock at $.01. Compensation expense of $51,660 was
recognized regarding this issuance.

All other stock options have been granted to employees at, or in excess of, fair
market value at the date of grant. Accordingly, in accordance with APB 25 and
related interpretations, no compensation cost has been recognized related to
such stock option grants.

Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant dates for all awards during Fiscal 1997 and 1998
consistent with the method set forth under FASB Statement No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123") the Company's net loss and loss per
share would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
Year Ending September 30,
Loss Loss
1999 Per Share 1998 Per Share
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss attributable to common stockholders
$ (3,884,228) $ (.36) $ (4,306,985) $ (0.43)
Compensation expense related to stock options
granted (371,902) (.03) (615,776) (0.06)
===============================================================
$ (4,256,130) $ (0.39) $ (4,922,731) $ (0.49)
===============================================================
</TABLE>

As the provisions of FAS 123 have been applied only to options granted since
September 30, 1995, the resulting pro forma compensation cost is not
representative of that to be presented in future years, when the pro forma cost
would be fully reflected.

The fair value of options was estimated at the date of grant using the
Black-Scholes option pricing model assuming expected volatility of 63.4% and
69.1% and risk-free interest rates of 5.0% and 4.43% for 1999 and 1998,
respectively; and expected lives of one to three years and 0.0% dividend yield
in both periods. The weighted average fair value of options granted was $.61
and $2.87 for the years ended September 30, 1999 and 1998, respectively.

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. Because the Company's employee stock options have characteristics
different from those of traded options, and because changes in the input
assumptions can materially affect the fair value estimate, the model may not
provide a reliable single measure of the fair value of its employee stock
options.

F-17
<PAGE> 62

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 7. COMMON STOCK (CONTINUED)

Stock Bonus Plan

During 1997, the Company adopted a stock bonus plan ("1997 Bonus Plan") to
provide stock bonuses in lieu of cash bonuses to key employees who are
responsible for the Company's future growth and financial success. The 1997
Bonus Plan provides for the award of up to 200,000 shares which are
nontransferable and subject to a risk of forfeiture for one year subsequent to
grant date. During the year ended September 30, 1998, 107,000 shares of
restricted stock had been issued to key employees and consultants. During the
year ended September 30, 1999, 15,000 shares of restricted stock were issued to
key employees. Expense under the plan was $23,438 and $307,625 for the years
ended September 30, 1999 and 1998, respectively.

Common Stock Purchase Warrants

The Company enters into consulting agreements with separate third party
professionals to provide investor relations services and financial advisory
services. In connection with the consulting agreements, the Company granted
warrants to purchase common stock. At September 30, 1999, 165,000 warrants were
exercisable.

In 1998, the Company issued 165,000 warrants and recognized consulting expense
and additional paid-in capital of $114,750. In 1999, the Company issued 100,000
warrants. The value of the warrants of $99,483 was recognized as unearned
consulting fees and additional paid-in capital and the expense is being
recognized over the term of the agreement.

There were 120,000 warrants exercised during 1999. At September 30, 1999, the
following warrants were outstanding:

<TABLE>
<CAPTION>
Number
Outstanding
--------------
<S> <C>
Warrants issued in connection with:
Investor relations services contract 90,000
Financial advisory services contract 175,000
Convertible Debentures 2,320,034
Convertible Preferred Stock 176,000
Equity Line of Credit 200,000
Notes Payable 900,000
--------------
Outstanding at September 30, 1999 3,861,034
==============
</TABLE>

At September 30, 1999, the Company had reserved a total of 7,132,462 shares of
its common stock for the exercise of options and warrants outstanding. This
amount includes shares reserved to satisfy obligations due if the Company
defaults on the payment of interest or principal on $1.3 million of notes due
between February and March 2000.

F-18
<PAGE> 63

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 7. COMMON STOCK (CONTINUED)

Issuance of Stock

The Company has issued common stock to consultants for providing investor
relation services. In 1998, the Company issued 25,000 shares of common stock
with a market value of $93,750 which was recognized as consulting expense. In
1999, the Company issued 175,000 shares of common stock with a market value of
$185,938 which was recorded as unearned consulting fees which is being
recognized over the term of the agreement.

NOTE 8. PREFERRED STOCK

The Company has outstanding 660,000 shares of 8% cumulative convertible
preferred stock (Series 1). Each share of preferred stock is convertible into
one share of the Company's common stock on or after August 1, 1998. Annual
preferred stock dividends will be paid if and as declared by the Company's Board
of Directors. No dividends or other distributions will be payable on the
Company's common stock unless dividends are paid in full on the preferred stock.
The preferred stock may be redeemed at the option of FHC, in whole or in part,
on or after August 1, 2000, subject to certain conditions, at $2.50 per share
plus accrued and unpaid dividends. In the event of a liquidation or dissolution
of the Company, the preferred stock would have priority over the Company's
common stock. During 1999, 20,000 shares were converted into common stock.

On December 31, 1997, the Company completed a private placement of 729,927
shares of Class A Convertible Preferred Stock - Series 2 (the "Series 2
Preferred Stock") and warrants to purchase 240,000 shares of common stock. The
Series 2 Preferred Stock was sold at a per share price of $2.74, resulting in
net proceeds to the Company of $1.84 million, net of issuance costs of $156,616.
The Series 2 Preferred Stock automatically converted into common stock on a
one-for-one basis, on April 3, 1998, the date in which the registration
statement registering the resale of the common stock was declared effective by
the SEC. The investors received four-year warrants to purchase 240,000 shares of
common stock exercisable at a price per share equal to the lesser of $3.425 or
the average of the three closing bid prices per share of common stock for any
three consecutive trading days chosen by the investor during the 30 trading day
period ending on the trading day immediately prior to the exercise of the
warrants. Individuals providing services to the Company's placement agent for
the above convertible Preferred Stock received warrants to purchase 4,000 shares
of common stock exercisable at any time prior to December 31, 2001, at $4.11 per
share.

F-19
<PAGE> 64

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 8. PREFERRED STOCK (CONTINUED)

The Company's private placement of convertible Preferred Stock - Series 2 on
December 31, 1997 included a beneficial conversion feature valued at $500,000
and four-year warrants to purchase additional shares of common stock valued at
$317,000. In accordance with new SEC reporting requirements for such
transactions, the Company recorded the value of the beneficial conversion
feature and warrants, a total of $817,000 as additional paid-in capital. The
corresponding discount of $817,000, associated with the issuance of the
convertible preferred stock is a one-time, non-recurring charge that has been
fully amortized and reflected as preferred dividends accreted in the
consolidated statements of operations for the year ended June 30, 1998. The
dividend accretion had no impact on the Company's cash flow from operations.

NOTE 9. EMPLOYEE RETIREMENT PLAN

Effective October 1, 1997, the Company adopted a Simple Individual Retirement
Account (IRA) plan for its employees. Employees are eligible to participate in
the plan if their compensation reaches certain minimum levels and are allowed to
contribute up to a maximum of $6,000 annual compensation to the plan. The
Company has elected to match 100% of employee contributions to the plan up to a
maximum of 1% of employee compensation for the year. Company contributions were
$6,541 and $11,947 for 1999 and 1998, respectively.

NOTE 10. INDUSTRY SEGMENTS AND FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS

The Company currently operates primarily in one industry segment which includes
the development, manufacture and marketing of consumer health care products.

The Company operates in foreign and domestic regions. Information about the
Company's operations in different geographic areas (determined by the location
of the operating unit) is as follows.

<TABLE>
<CAPTION>
September 30,
(Amounts in Thousands) 1999 1998
--------------------------------
<S> <C> <C>
Net revenues:
United States $ 2,350 $ 2,481
International 2,365 2,970

Operating profit (loss):
United States (2,665) (2,731)
International (361) (420)

Identifiable assets
United States 1,760 2,088
International 4,747 5,471
</TABLE>

F-20

<PAGE> 65

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 10. INDUSTRY SEGMENTS AND FINANCIAL INFORMATION ABOUT FOREIGN AND
DOMESTIC OPERATIONS

On occasion, the Company's U.S. unit sells product directly to customers located
outside the U.S. Were such transaction reported by geographic destination of the
sale rather than the geographic location of the unit, U.S. revenues would be
decreased and International revenues increased by $177,000 and $396,000 in 1999
and 1998, respectively.

NOTE 11. CONTINGENT LIABILITIES

The Company's future obligations under the terms of a facilities lease were
assigned by the Company and assumed by the buyer as part of the 1996 sale of the
Company's subsidiary WPC Holdings, Inc. However, because the third party
creditor did not release the Company from any future liability under the lease
agreement at the time of their assignment, the Company remains contingently
liable if Holdings defaults in making any payments under the agreement. At
September 30, 1999, the total future payments under the lease agreement were
$2.5 million.

The testing, manufacturing and marketing of consumer products by the Company
entail an inherent risk that product liability claims will be asserted against
the Company. The Company maintains product liability insurance coverage for
claims arising from the use of its products. The coverage amount is currently
$5,000,000 for FHC's consumer health care product.

NOTE 12. RELATED PARTY TRANSACTIONS

For 1998, the Company paid the rent for office space leased by Phoenix Health
Care of Illinois, Inc. ("Phoenix"), a company that owns approximately 270,000
shares of the Company's outstanding common stock and has three officers and
directors that are also officers and directors of the Company. This leased space
was subleased as of November 1, 1998.

During 1998 the Company awarded Phoenix 25,000 shares of restricted common stock
with a market value of approximately $93,750 for consulting services provided to
the Company. No such amount was awarded in 1999.

It has been and currently is the policy of the Company that transactions between
the Company and its officers, directors, principal shareholders or affiliates
are to be on terms no less favorable to the Company than could be obtained from
unaffiliated parties. The Company intends that any future transactions between
the Company and its officers, directors, principal shareholders or affiliates
will be approved by a majority of the directors who are not financially
interested in the transaction.

F-21
<PAGE> 66

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 13. CONTINUING OPERATIONS AND SUBSEQUENT EVENT

The Company's consolidated financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company
incurred a loss of $3.8 million for the year ended September 30, 1999, and as of
September 30, 1999, had an accumulated deficit of $45.2 million. At September
30, 1999, the Company had working capital of $.4 million and stockholders'
equity of $1.7 million. In the near term, the Company expects operating and
capital costs to continue to exceed funds generated from operations, due
principally to the Company's fixed manufacturing costs relative to current
production volumes and the ongoing need to commercialize the female condom
around the world. As a result, operations in the near future are expected to
continue to use working capital. Management recognizes that the Company's
continued operations depend on its ability to raise additional capital through a
combination of equity or debt financing, strategic alliances and increased sales
volumes.

At various points during the developmental stage of the product, the Company was
able to secure resources, in large part through the sale of equity and debt
securities, to satisfy its funding requirements. As a result, the Company was
able to obtain FDA approval, worldwide rights, manufacturing facilities and
equipment and to commercially launch the female condom. Management believes that
recent developments, including the Company's agreement with the UNAIDS, a joint
United Nations program on HIV/AIDS, provide an indication of the Company's early
success in broadening awareness and distribution of the female condom and may
benefit efforts to raise additional capital and to secure additional agreements
to promote and distribute the female condom throughout other parts of the world.

On September 29, 1997, the Company entered into an agreement with Vector
Securities International, Inc. (Vector), an investment banking firm specializing
in providing advice to healthcare and life-science companies. Pursuant to this
agreement, as extended, Vector will act as the Company's exclusive financial
advisor for the purposes of identifying and evaluating opportunities available
to the Company for increasing shareholder value. These opportunities may include
selling all or a portion of the business, assets or stock of the Company or
entering into one or more distribution arrangements relating to the Company's
product. There can be no assurance that any such opportunities will be available
to the Company or, if so available, that the Company will ultimately elect or be
able to consummate any such transaction. Management is currently determining
whether the Company should seek to extend this arrangement.

On November 19, 1998, the Company executed an agreement with a private investor
(the Equity Line Agreement). This agreement provides for the Company, at its
sole discretion, subject to certain restrictions, to sell ("put") to the
investor up to $6.0 million of the Company's common stock, subject to a minimum
put of $1.0 million over the duration of the agreement. The Equity Line
Agreement expires 24 months after the effective date of the pending
registration statement and, among other things, provides for minimum and
maximum puts ranging from $100,000 to $1,000,000 depending on the Company's
stock price and trading volume. The Company is required to draw down a minimum
of $1 million during the two-year period. If the Company does not draw down the
minimum, the Company is required to pay the investor a 12% fee on that portion
of the $1 million minimum not drawn down at the end of the two-year period. As
of September 30, 1999, the Company had placed three puts for the combined cash
proceeds of $485,000 providing the investor with a total of 482,964
shares of the Company's common stock.

The timing and amounts of the stock sales under the agreement are totally at
the Company's discretion, subject to the Company's compliance with each of the
following conditions at the time the Company requests a stock sale under the
agreement:

- the registration agreement the Company filed with the SEC for
sales of stock under the agreement must remain in effect;

- all of the Company's representation and warranties in the
agreement must be accurate and the Company must have complied
with all of the obligations in the agreement;

- there may not be any injunction, legal proceeding or law
prohibiting the Company's sale of the stock to Kingsbridge;

- the Company's counsel must issue a legal opinion to
Kingsbridge;

- the sale must not cause Kingsbridge's ownership of the
Company's common stock to exceed 9.9% of the outstanding shares
of our common stock;

- the trading price of the Company's common stock over a five
trading day period preceding the date of the date of the sale
must equal or exceed $1.00 per share; and

- the average daily trading volume of the Company's common stock
for a 20 trading day period preceding the date of the sale must
equal or exceed 17,000 shares.

F-22

<PAGE> 67

THE FEMALE HEALTH COMPANY

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 13. CONTINUING OPERATIONS AND SUBSEQUENT EVENT (CONTINUED)

Between September and November 1999 the Company completed a private placement
where 983,333 shares of the Company's common stock were sold for $737,500, of
which $500,000 was received through September 30, 1999. The stock sales were
directly with accredited investors and included one current director of the
Company. The Company provided the shares to these investors at a $.75 share
price.

While the Company believes that its existing capital resources will be adequate
to fund its currently anticipated capital needs, if they are not the Company may
need to raise additional capital until its sales increase sufficiently to cover
operating expenses. In addition, there can be no assurance that the Company will
satisfy the conditions required for it to exercise puts under the Equity Line
Agreement. Accordingly, the Company may not be able to realize all or any of the
funds available to it under the Equity Line Agreement.

Further, there can be no assurance, assuming the Company successfully raises
additional funds or enters into business agreements with third parties, that the
Company will achieve profitability or positive cash flow. If the Company is
unable to obtain adequate financing, management will be required to sharply
curtail the Company's efforts to promote the female condom and to curtail
certain other of its operations or, ultimately, cease operations.

F-23
<PAGE> 68

YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS LISTED IN THIS PROSPECTUS
ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED.

NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO
PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF
THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.

THE FEMALE HEALTH COMPANY

5,345,843 SHARES OF COMMON STOCK

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

PROSPECTUS

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

January __, 2000

<PAGE> 69

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Pursuant to sections 180.0850 to 180.0859 of the Wisconsin Business
Corporation Law, directors and officers of the Company are entitled to mandatory
indemnification from the Company against certain liabilities and expenses (i) to
the extent such officers or directors are successful in the defense of a
proceeding and (ii) in proceedings in which the director or officer is not
successful in the defense thereof, unless (in the latter case only) it is
determined that the director or officer breached or failed to perform his duties
to the Company and such breach or failure constitute: (a) willful failure to
deal fairly with the Company or its shareholders in connection with a matter in
which the director or officer had a material conflict of interest; (b) a
violation of the criminal law unless the director or officer had reasonable
cause to believe his or her conduct was lawful or had no reasonable cause to
believe his or her conduct was unlawful; (c) a transaction from which the
director or officer derived an improper personal profit; or (d) willful
misconduct. It should be noted that section 180.0859 of the Wisconsin Business
Corporation Law specifically states that it is the public policy of Wisconsin to
require or permit indemnification in connection with a proceeding involving
securities regulation, as described therein, to the extent required or permitted
under sections 180.0850 to 180.0858 as described above. Additionally, under the
Wisconsin Business Corporation Law, directors of the Company are not subject to
personal liability to the Company, its shareholders or any person asserting
rights on behalf thereof for certain breaches or failures to perform any duty
resulting solely from their status as such directors, except in circumstances
paralleling those in subparagraphs (a) through (d) outlined above.

Consistent with sections 180.0850 to 180.0859 of the Wisconsin Business
Corporation Law, Article VIII of the Company's Amended and Restated By-Laws
provides that the Company shall indemnify any person in connection with legal
proceedings threatened or brought against him by reason of his present or past
status as an officer or director of the Company in the circumstances described
above. Article VIII of the Amended and Restated By-Laws also provides that the
directors of the Company are not subject to personal liability to the Company,
its shareholders or persons asserting rights on behalf thereof, as provided in
the Wisconsin Business Corporation Law. The Amended and Restated By-Laws also
contain a nonexclusivity clause which provides in substance that the
indemnification rights under the Amended and Restated By-Laws shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any agreement with the Company, any Amended and Restated
By-Law or otherwise.

The indemnification provided as set forth above is not exclusive of any
other rights to which a director or an officer of the Company may be entitled.

The general effect of the foregoing provisions is to reduce the
circumstances in which an officer or director may be required to bear the
economic burdens of the foregoing liabilities and expenses.

Item 25. Other Expenses of Issuance and Distribution.

The expenses in connection with the offering are as follows:

ITEM AMOUNT*
--------------------------- ---------
Registration fee.......... $ 1,370
Printing expenses......... $ 5,000
Legal fees and expenses... $25,000
Accounting fees and expenses $10,000
Miscellaneous expenses.... $ 5,000
-------

Total....... $46,370
=======

- ------------
* All amounts estimated except the registration fee.

Item 26. Recent Sales of Unregistered Securities.

On September 12, 1996, the Company completed a Regulation S offering to five
offshore institutional investors selling to such investors 8% cumulative
convertible debentures for an aggregate principal amount of $2 million. The
debentures are convertible into

<PAGE> 70

the Company's common stock. In addition, the debenture holders received warrants
to purchase 40,201 shares of the Company's common stock at an exercise price of
$5.72 per share.

On February 20, 1997, the Company sold $2,020,000 of 8% convertible
debentures and related warrants to eight foreign investors pursuant to the
exemption from the securities registration requirement provided by Regulation S
promulgated under the Securities Act of 1933, as amended. The convertible
debentures mature on January 31, 2000 and bear interest at 8% per annum, payable
semiannually. The convertible debentures are convertible at the election of the
holders into shares of common stock in accordance with their terms. As required
by Regulation S, the Company offered and sold the convertible debentures and
warrants in an offshore transaction only to non-U.S. persons. The Company did
not use the services of an underwriter in this offering but, rather, European
American Services, Inc. acted as a distributor for the offering. For its
services as the distributor, European American Services, Inc. received a
placement fee of 7% of the principal amount of the debentures sold. In
connection with this Regulation S offering, the investors also received warrants
to purchase a total of 67,333 shares of the Company's common stock at an
exercise price of $5.00 per share. The warrants expire on October 30, 1999.

The Company believes the above transactions were exempt from the securities
registration requirement pursuant to Regulation S promulgated under the
Securities Act because such sales were made to nonresidents of the United States
in an offshore transaction without any directed selling efforts made in the
United States by the Company, any distributor or any of their respective
affiliates or any persons acting on behalf of any of such parties. In addition,
the Company believes it implemented all offering restrictions and complied with
all of the terms and conditions of Regulation S which were imposed on the issuer
of the securities as of the date of each offering.

On each of March 25, 1997, March 25, 1998 and March 25, 1999 the Company
refinanced its $1 million borrowing from Mr. Dearholt by extending the one-year
note payable to him for an additional year. Accordingly, the note is now payable
in full on March 25, 2000. As part of these transactions, on the date of each
extension, the Company issued to Mr. Dearholt warrants to purchase 200,000
shares of the Company's common stock at exercise prices of $1.848, $2.25 and
$1.16 per share, respectively. These exercise prices represented 80% of the
average trading price of the Company's common stock for the five trading days
immediately prior to each of the refinancings. The warrants expire on the
earlier of their exercise or five years after the date of their issuance.

The Company believes that the sales described above were exempt from
registration under section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act because such sales were made to one person
who is an accredited investor and a director of the Company. Mr. Dearholt also
represented to the Company that he was purchasing for investment without a view
to further distribution. Restrictive legends were placed on all instruments
evidencing the securities described above.

On July 29, 1997, the Company completed a private placement of 680,000
shares of Class A Convertible Preferred Stock--Series 1 (the "Series 1 Preferred
Stock") to a group of accredited investors. Each share of the Series 1 Preferred
Stock was sold for $2.50. In connection with this private placement, the Company
issued to the placement agents in the offering warrants exercisable for a total
of 52,000 shares of common stock at an exercise price of $2.50 per share. The
Company also paid the placement agents a cash commission equal to 7% of the
proceeds received by the Company from sales made by the placement agents. The
Company raised approximately $1.6 million of proceeds, net of issuance costs of
$96,252. The Company believes that it has satisfied the exemption from the
securities registration requirement provided by section 4(2) of the Securities
Act and Regulation D promulgated thereunder in this offering in that the
securities were sold in a private placement to only accredited investors, most
of whom had a pre-existing personal or business relationship with the Company or
its officers or directors and each of whom provided representations which the
Company deemed necessary to satisfy itself that they were accredited investors
and were purchasing for investment and not with a view to resale in connection
with a public offering.

On December 31, 1997, the Company sold 729,927 shares of Class A Convertible
Preferred Stock--Series 2 ("Series 2 Preferred Stock") and warrants to purchase
240,000 shares of the Company's common stock to three institutional accredited
investors pursuant to section 4(2) of the Securities Act and Regulation D
promulgated thereunder. Each share of Series 2 Preferred Stock was sold for
$2.74. This private placement netted the Company $1.82 million, after deduction
for expenses and commissions. in connection with this private placement, the
Company issued to its placement agent in the offering warrants to purchase 4,000
shares of the Company's common stock at an exercise price of $4.11 per share.
The Company also paid the placement agent a commission equal to 7% of the gross
proceeds raised by the Company in this offering. The warrants issued to the
investors are exercisable at an exercise price per share equal to the lesser of
(a) $3.25 or (b) the average of the three closing bid prices per share of the
Company's common stock for any three consecutive trading days selected by the
holder in the 30 consecutive trading day period ending on the trading day
immediately prior to the date of exercise. Both the warrants issued to the
investors and the warrants issued to the Company's placement agent in this
offering expire on December 31, 2001. The Company believes that it has satisfied
the exemption from the

II-2

<PAGE> 71

securities registration requirement provided by section 4(2) of the Securities
Act and Regulation D promulgated thereunder in this offering in that the
securities were sold in a private placement to only sophisticated,
institutional, accredited investors, each of whom provided representations which
the Company deemed necessary to satisfy itself that they were accredited
investors and were purchasing for investment and not with a view to resale in
connection with a public offering.

On May 19, 1999 and June 3, 1999, the Company issued an aggregate of
$1,500,000 of convertible debentures and warrants to purchase 1,875,000 shares
of the Company's common stock to five accredited investors. The convertible
debentures bear interest at 8% per annum and have a one-year term; provided,
however, that the Company may extend the repayment term for an additional one
year if, upon such extension, it issues to the investors warrants to purchase
375,000 shares of the Company's common stock having the same terms and
conditions as the warrants issued to the investors in the private placement. The
investors may convert the convertible debentures into common stock at any time
after one year from the date they were issued as follows: (a) the first 50% of
the original principal balance of the convertible debentures, plus any accrued
but unpaid interest thereon, is convertible into common stock based on a per
share price equal to the lesser of (i) 70% of the market price of the common
stock at the time of conversion or (ii) $1.25; and (b) the second 50% of the
original principal balance plus any accrued but unpaid interest thereon is
convertible into common stock based on the per share price equal to the lesser
of (i) 70% of the market price of the common stock at the time of conversion or
(ii) $2.50. As part of this offering, the Company also issued to the investors
warrants to purchase 1,875,000 shares of the Company's common stock. The
warrants are exercisable by the investors at any time within five years after
their date of issuance at an exercise price per share equal to the lesser of (a)
70% of the market price of the Company's common stock from the date of exercise
or (b) $1.00. As part of the consideration that the Company paid R.J. Steichen &
Company, the Company's placement agent in the private placement of the
convertible debentures and warrants, the Company issued to R.J. Steichen
warrants to purchase a total of 337,500 shares of the Company's common stock.
The warrants issued to R.J. Steichen are exercisable at any time commencing one
year after the date of the private placement and for a period of four years
thereafter at an exercise price of $1.00 per share.

The Company believes it has satisfied the exemption from the securities
registration requirement provided by section 4(2) of the Securities Act and
Regulation D promulgated thereunder in this offering since the securities were
sold in a private placement to only sophisticated, accredited investors, each of
whom provided representations which the Company deemed necessary to satisfy
itself that they were accredited investors and were purchasing for investment
and not with a view to resale in connection with a public offering.

On September 24, 1999, the Company completed a private placement of 666,671
shares of its common stock to nine investors. Each share of common stock was
sold for a purchase price of $0.75, representing a discount of 12% from the
market price on the date that the shares were sold. In connection with this
private placement, the Company agreed to register the investors' resale of these
shares pursuant to this registration statement. The Company raised approximately
$500,000 of proceeds, net of issuance cost of $0 in connection with this private
placement. The Company believes that it has satisfied the exemption from the
securities registration requirement provided by section 4(2) of the Securities
Act and Regulation D promulgated thereunder in this offering since the
securities were sold in a private placement to only accredited investors, most
of whom had a preexisting personal or business relationship with the Company or
its officers or directors and each of whom provided representations which the
Company deemed necessary to satisfy itself that they were accredited investors
and were purchasing for investment and not with a view to resale in connection
with a public offering. In addition, the common stock issued to these investors
contained restrictive legends indicating that the shares had not been registered
and, therefore, cannot be resold unless the resale was registered under the
Securities Act or an exemption from such registration requirement was available.

On February 18, 1999, the Company borrowed $50,000 from O.B. Parrish, the
Company's Chairman and Chief Executive Officer. The extension was completed
through the execution of a $50,000, one year promissory note payable by the
Company to Mr. Parrish and a Note Purchase and Warrant Agreement and Stock
Issuance Agreement. Pursuant to this transaction, Mr. Parrish was granted
warrants to purchase 10,000 shares of common stock at an exercise price of $1.35
per share. The warrants expire upon the earlier of their exercise or five years
after the date of their issuance. Under the Stock Issuance Agreement, if we fail
to pay the $50,000 promissory note when due, we must issue 10,000 shares of our
common stock to Mr. Parrish. The issuance will not, however, alleviate our
liability under the note. We also granted Mr. Parrish securities registration
rights with respect to any common stock he receives from us under these warrants
or the Stock Issuance Agreement.

On February 12, 1999, we borrowed $250,000 from Mr. Dearholt. The borrowing
was effectuated in the form of a $250,000, one-year promissory note payable by
us to Mr. Dearholt. As part of this transaction, the Company entered into a Note
Purchase and Warrant Agreement and a Stock Issuance Agreement. Pursuant to the
Note Purchase and Warrant Agreement, Mr. Dearholt received a warrant to purchase
50,000 shares of our common stock at an exercise price of $1.25 per share. The
warrants expire upon the earlier of their exercise or five years after the date
of their issuance. Under the Stock Issuance Agreement, if we fail to pay the
$250,000 under the note when due, we must issue 50,000 shares of our common
stock to Mr. Dearholt. This issuance will not, however, alleviate our

II-3

<PAGE> 72

liability under the note. We also granted Mr. Dearholt securities registration
rights with respect to any common stock he receives from us under these warrants
or the Stock Issuance Agreement.

The Company has sold 129,506 shares of common stock on February 26, 1999,
157,356 shares of common stock on March 10, 1999 and 196,102 shares of common
stock on April 10, 1999 to a private investor under an equity line agreement.
The Company received net cash proceeds of $145,500, $145,500 and $194,000,
respectively, from these sales. As part of this offering, the Company also
issued to the investor warrants to purchase 200,000 shares of the Company's
common stock at an exercise price of $2.17 per share. The Company also issued
warrants to purchase 100,000 shares of the Company's common stock at an exercise
price of $1.625 to this investor on February 12, 1999 in connection with a
consulting agreement. The Company believes it has satisfied the exemption from
the securities registration requirement provided by section 4(2) of the
Securities Act and Regulation D promulgated thereunder in this offering since
the securities were sold in a private placement to a sophisticated, accredited
investor, who provided representations which the Company deemed necessary to
satisfy itself that it was an accredited investor and was purchasing for
investment and not with a view to resale in connection with a public offering.

The Company sold 316,668 shares of common stock to three investors in
November 1999. The Company received cash proceeds of $237,500 from these sales.
The Company believes it has satisfied the exemption from the securities
registration requirement provided by section 4(2) of the Securities Act and
Regulation D promulgated thereunder in this offering since the securities were
sold in a private placement to sophisticated, accredited investors, who provided
representations which the Company deemed necessary to satisfy itself that they
were accredited investors and were purchasing for investment and not with a view
to resale in connection with a public offering.

Item 27. Exhibits. The following exhibits are filed as part of this
Registration Statement.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------- --------------------------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company. (20)

3.2 Amended and Restated By-Laws of the Company.(3)

4.1 Amended and Restated Articles of Incorporation (same as Exhibit 3.1) (20).

4.2 Articles II, VII and XI of the Amended and Restated By-Laws of the Company (included in
Exhibit 3.2).(3)

4.3 Private Equity Line of Credit Agreement between the Company and Kingsbridge Capital Limited dated
November 19, 1998.(2)

4.4 Registration Rights Agreement between the Company and Kingsbridge Capital Limited dated as of
November 19, 1998.(2)

4.5 Warrant to Purchase up to 200,000 shares of common stock of the Company issued to Kingsbridge
Capital Limited as of November 19, 1998.(2)

4.6 Agreement between Kingsbridge Capital Limited and the Company dated February 12, 1999. (23)

4.7 Consulting Agreement between the Company and Kingsbridge Capital Limited dated February 12,
1999. (23)

4.8 Registration Rights Agreement between Kingsbridge Capital Limited and the Company dated
February 12, 1999. (23)

4.9 Warrant for 100,000 shares of the Company's common stock issued to Kingsbridge Capital Limited
as of February 12, 1999. (23)

5 Legal Opinion of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. regarding legality of
Securities being issued.

10.1 Employment Agreement between John Wundrock and the Company dated October 1, 1989.(3)

10.2 Wisconsin Pharmacal Company, Inc. (k/n/a The Female Health Company) 1990 Stock Option Plan.(4)

10.3 Commercial Building Lease dated May 1, 1992 covering the Jackson, Wisconsin, office and
manufacturing facility.(5)

10.4 Reality Female Condom Clinical Trial Data Agreement between the Company and Family Health
International dated September 24, 1992.(6)

10.5 Trademark License Agreement for Reality Trademark.(7)

10.6 Office space lease between the Company and John Hancock Mutual Life Insurance Company dated June
1, 1994.(8)
</TABLE>

II-4

<PAGE> 73

<TABLE>
<S> <C>
10.7 Employment Agreement dated September 10, 1994 between the Company and Dr. Mary Ann Leeper.(9)

10.8 1994 Stock Option Plan.(10)

10.9 Investor relations and development services Consulting Agreement between the Company and C.C.R.I.
Corporation dated March 13, 1995.(11)

10.10 Consultant Warrant Agreement dated March 13, 1995 between the Company and C.C.R.I. Corporation,
as amended on April 22, 1996.(12)

10.11 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.(13)

10.12 Outside Director Stock Option Plan.(12)

10.13 Exclusive Distribution Agreement between Chartex International Plc and Taiho Pharmaceutical Co.,
Ltd. dated October 18, 1994.(14)

10.14 Supply Agreement between Chartex International Plc and Deerfield Urethane, Inc. dated August 17,
1994. (14)

10.15 Employment Letter dated February 28, 1990 from Chartex Resources Ltd. to Michael Pope and Board
Amendments thereto.(14)

10.16 Grant Letter dated March 7, 1996 from the Government Office for London of the Secretary of State
of Trade and Industry regarding economic development grant to the Company.(14)

10.17 Letter Amendment to Asset Sale Agreement dated April 29, 1996 between the Company and Dowty Seals
Limited and Chartex International Plc.(14)

10.18 Form of 8% Convertible Debenture due August 31, 1999 issued by the Company to certain foreign
investors on September 12, 1996.(15)

10.19 Form of Warrant issued by the Company to certain foreign investors as of September 12,
1996.(15)

10.20 Fund Raising Agreement dated May 1, 1998 by and between Hartinvest-Medical Ventures and the
Company. (2)

10.21 Change of Control Agreement dated January 27, 1999, between The Female Health Company and Michael
Pope. (16)

10.22 Company Promissory Note to Stephen M. Dearholt for $250,000 dated February 1, 1999 and related
Note Purchase And Warrant Agreement, warrants and Stock issuance Agreement.(16)

10.23 Company Promissory Note to O.B. Parrish for $50,000 dated February 1, 1999 and related Note
Purchase And Warrant Agreement, warrants and Stock issuance Agreement.(16)

10.24 Company Promissory Note to Stephen M. Dearholt for $1 million dated March 25, 1999 and related
Note Purchase and Warrant Agreement, Warrant and Stock Issuance Agreement.(16)

10.25 Form of Registration Rights Agreement between the Company and certain private placement investors
dated as of June 1, 1999.(17)

10.26 Amendment to Registration Rights Agreement between the Company and Private Placement Investors
dated as of June 1, 1999.(17)

10.27 $1 million Convertible Debenture issued by the Company to Gary Benson dated May 19, 1999.(17)

10.28 $100,000 Convertible Debenture issued by the Company to Daniel Bishop dated June 2, 1999.(17)

10.29 $100,000 Convertible Debenture issued by the Company to Robert Johander dated June 3, 1999.(17)

10.30 $100,000 Convertible Debenture issued by the Company to Michael Snow dated June 3, 1999.(17)

10.31 $100,000 Convertible Debenture issued by the Company to W.G. Securities Limited Partnership dated
June 3, 1999.(17)

10.32 Warrant to purchase 1,250,000 shares of the Company's common stock issued to Gary Benson on May
19, 1999.(17)

10.33 Warrant to purchase 125,000 shares of the Company's common stock issued to Daniel Bishop on June
3, 1999.(17)

10.34 Warrant to purchase 125,000 shares of the Company's common stock issued to Robert Johander on
June 3, 1999.(17)
</TABLE>

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<PAGE> 74

<TABLE>
<S> <C>
10.35 Warrant to purchase 250,000 shares of the Company's common stock issued to Michael Snow on June
3, 1999.(17)

10.36 Warrant to purchase 125,000 shares of the Company's common stock issued to W.G. Securities
Limited Partnership on June 3, 1999.(17)

10.37 Form of Common Stock Purchase Warrant to acquire 337,500 shares issued to R.J. Steichen as
placement agent.(17)

10.38 Form of Change of Control Agreement between the Company and each of O. B. Parrish and Mary Ann
Leeper. (20)

10.39 Lease Agreement among Chartex Resources Limited, P.A.T. (Pensions) Limited and The Female
Health Company. (18)

10.40 Agreement dated March 14, 1997, between the Joint United Nations Programme on HIV/AIDS and
Chartex International PLC. (19)

10.41 Company promissory note payable to Stephen M. Dearholt for $1 million dated March 25, 1997, and
related stock purchase and warrant agreement, warrants and stock issuance agreement. (21)

10.42 1997 Stock Option Plan. (19)

10.43 Employee Stock Purchase Plan. (19)

10.44 Agreement dated September 29, 1997, between Vector Securities International and The Female
Health Company. (19)

21 Subsidiaries of Registrant. (22)

23.1 Consent of McGladrey & Pullen, LLP

23.2 Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c. (included in Exhibit 5).
</TABLE>

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

(1) Incorporated herein by reference to the Company's 1995 Form 10-KSB.

(2) Incorporated herein by reference to the Company's Form SB-2 Registration
Statement filed December 8, 1998.

(3) Incorporated herein by reference to the Company's Registration Statement
on Form S-18, Registration No. 33-35096, as filed with the Securities and
Exchange Commission on May 25, 1990.

(4) Incorporated herein by reference to the Company's December 31, 1990 Form
10-Q.

(5) Incorporated herein by reference to the Company's June 30, 1992 Form 10-Q.

(6) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-1, Registration No. 33-51586,
as filed with the Securities and Exchange Commission on September 28,
1992.

(7) Incorporated herein by reference to the Company's 1992 Form 10-KSB.

(8) Incorporated herein by reference to the Company's June 30, 1994 Form 10-Q.

(9) Incorporated herein by reference to the Company's Registration Statement
on Form S-2, Registration No. 33-84524, as filed with the Securities and
Exchange Commission on September 28, 1994.

(10) Incorporated herein by reference to the Company's 1994 Form 10-KSB.

(11) Incorporated herein by reference to the Company's March 31, 1995 Form
10-Q.

(12) Incorporated herein by reference to the Company's Form S-1 Registration
Statement filed with the Securities and Exchange Commission on April 23,
1996.

(13) Incorporated herein by reference to the Company's June 30, 1995 Form 10-Q.

II-6

<PAGE> 75

(14) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Company's Form S-1 Registration Statement filed with the Securities and
Exchange Commission on June 5, 1996.

(15) Incorporated herein by reference to the Company's 1996 Form 10-K.

(16) Incorporated herein by reference to the Company's March 31, 1999 Form
10-QSB.

(17) Incorporated herein by reference to the Company's June 30, 1999 Form
10-QSB.

(18) Incorporated herein by reference to the Company's December 31, 1996 Form
10-QSB.

(19) Incorporated herein by reference to the Company's Form 10-KSB/A-1 for the
year ended September 30, 1997.

(20) Previously filed.

(21) Incorporated herein by reference to the Company's March 31, 1997 Form
10-QSB.

(22) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended September 30, 1999.

(23) Incorporated herein by reference to the Company's December 31, 1998 Form
10-QSB.

Item 28. Undertakings.

The small business issuer hereby undertakes as follows:

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(b) File, during any period in which offers and sales of securities may be
made pursuant to this registration, a post-effective amendment to this
registration statement to:

(i) include any prospectus required by section 10(a) (3) of the
Securities Act;

(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and

(iii) include any additional or changed material information on the
plan of distribution.

(c) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(d) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

II-7
<PAGE> 76

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Chicago, State of Illinois, on the 11th day of January, 2000.

THE FEMALE HEALTH COMPANY

BY /s/ O.B. Parrish
-------------------------------------
Its Chairman and Chief Executive Officer
-------------------------------------

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ O.B. Parrish Chairman of the Board, January 11, 2000
- ---------------------------- Chief Executive
O.B. Parrish Officer and Director

/s/ Mary Ann Leeper President and Chief January 11, 2000
- ---------------------------- Operating Officer
Mary Ann Leeper, Ph.D. and Director

/s/ Robert R. Zic Chief Financial Officer January 11, 2000
- ----------------------------
Robert R. Zic

/s/ William R. Gargiulo Jr. Secretary and Director January 11, 2000
- ----------------------------
William R. Gargiulo, Jr.

/s/ David R. Bethune Director January 11, 2000
- ----------------------------
David R. Bethune

/s/ Stephen M. Dearholt Director January 11, 2000
- ----------------------------
Stephen M. Dearholt

Director January , 2000
- ----------------------------
James R. Kerber

Director January , 2000
- ----------------------------
Michael R. Walton

II-8
<PAGE> 77

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
EXHIBIT NUMBER DESCRIPTION NUMBER
- -------------- ---------------------------------------------------------- ------
<S> <C> <C>
5 Legal Opinion of Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. regarding legality of securities offered

23 Consent of McGladrey & Pullen, LLP
</TABLE>

<PAGE> 1

EXHIBIT 5

LEGAL OPINION

January 11, 2000

The Female Health Company
875 North Michigan Avenue
Suite 3660
Chicago, IL 60611

Gentlemen: Re: Registration Statement on Form SB-2

We have acted as counsel for The Female Health Company, a Wisconsin
corporation (the "Company"), in connection with the Company's registration of
5,345,843 shares (the "Shares") of its $.01 par value common stock at the
request of the selling stockholders listed in the Registration Statement
(defined below). Capitalized terms not otherwise defined have the meanings
assigned to them in the Registration Statement.

In such capacity we have examined, among other documents, the Amended
and Restated Articles of Incorporation of the Company and the Registration
Statement on Form SB-2 initially filed by the Company with the Securities and
Exchange Commission on or about October 19, 1999, as amended by Amendment No. 1
filed with the Securities and Exchange Commission on or about January 11, 2000
covering the sale by the selling stockholders of the Shares (the "Registration
Statement"). Based on the foregoing and such additional investigation as we
have deemed necessary, it is our opinion that:

1. The Company is a corporation existing under the laws of the State of
Wisconsin and, based solely on a certificate of the Secretary of the Department
of Financial Institutions of the State of Wisconsin; (a) has filed with the
Department of Financial Institutions during its most recently completed report
year the required annual report; (b) is not the subject of a proceeding under
Wisconsin Statutes Section 180.1421 to cause its administrative dissolution; (c)
no determination has been made by the Department of Financial Institutions that
grounds exist for such action; (d) no filing has been made with the Department
of Financial Institutions of a decree of dissolution with respect to the
Company; and (e) Articles of Dissolution of the Company have not been filed with
the Department of Financial Institutions.

2. The Shares are (or, after issuance upon exercise of the warrants and
conversion of the convertible debentures as set forth in the Registration
Statement, will be) legally issued, fully-paid and nonassessable, except as set
forth in Wisconsin Statutes section 180.0622(2)(b), as interpreted, which
provides that shareholders of the Company may be personally liable in an amount
equal to the par value of their shares for all debts owing to employees of the
Company for services performed for the Company, but not exceeding six months'
service in any one case.

We consent to the filing of a copy of this opinion as an exhibit to the
Registration Statement on Form SB-2 and to the use of our name beneath the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement.

REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, S.C.

BY /s/ James M. Bedore
---------------------------------------
James M. Bedore

<PAGE> 1
EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Amendment No. 1
to Form SB-2 of our report, dated November 11, 1999, which includes an emphasis
paragraph relating to an uncertainty as to the Company's ability to continue as
a going concern, on the audits of the consolidated financial statements of The
Female Health Company and subsidiaries as of September 30, 1999, and for each of
the two years then ended. We also consent to the reference to our Firm under the
caption "Experts" in the Registration Statement.

/s/ McGLADREY & PULLEN, LLP

Schaumburg, Illinois
January 7, 2000