FORM
        10-KSB
 SECURITIES
          AND EXCHANGE COMMISSION
 Washington,
          D.C. 20549
 (Mark
                  One)x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934For
                  the fiscal year ended September 30, 2005ORo
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934For
                  the transition period from _______ to
                  _________
 
 Commission
        file number: 1-13602
 
 THE
                  FEMALE HEALTH COMPANY(Name
                  of Small Business Issuer in Its
                  Charter)
   Wisconsin
                
                39-1144397(State
                    or other Jurisdiction of
                  Incorporation
                    or Organization)
                
                (IRS
                    Employer Identification No.)
   515
                    North State Street, Suite 2225, Chicago, Illinois
                
                60610(Address
                      of principal executive offices)
                
                Zip
                      Code
   312-595-9123(Issuer's
                    Telephone Number, Including Area
                    Code)
 
  Securities
        registered pursuant to Section 12(b) of the Exchange Act:
 None
 
 Securities
        registered pursuant to Section 12(g) of the Exchange Act:
 Common
        Stock, $.01 par value
 (Title
        of
        class)
  
  Check
        whether the Issuer is not required to file reports pursuant to Section 13
        or
        15(d) of the Exchange Act.   [   ]
 
 Check
        whether the Issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the Registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.   Yes [ X
        ]     No [    ]
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B in this form, and no disclosure will be contained, to the
        best of
        the registrant's knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-KSB or any amendments
        to this Form 10-KSB.   [    ]
 
 Indicate
        by check mark whether the Issuer is a shell company (as defined in Exchange
        Act
        Rule 12b-2).    Yes [    ]    No [
        X ]
 
 Issuer's
        revenues for its most recent fiscal year: $11,161,555.
 
 As
        of
        December 19, 2005, 23,585,084 shares of the Company's common stock were
        outstanding. As of December 19, 2005, the aggregate market value of shares
        of the Company's common stock held by non-affiliates was approximately
        $27.4 million (based upon the last reported sale price of $1.67 on that
        date on the Over the Counter Bulletin Board).
 
  2
  FORM
        10-KSB INDEX
 
 PART
        I
 
 PageItem
                  1.
              Description
                  of Business
              5Item
                  2.
              Description
                  of Property
              11Item
                  3.
              Legal
                  Proceedings
              11Item
                  4.
              Submission
                  of Matters To A Vote Of Security
                  Holders
              11
 
 Part
        II
 
 Item
                  5.
              Market
                  For Common Equity, Related Stockholder Matters and
                  Small Business Issuer Purchases of Equity Securities
              11Item
                  6.
              Management's
                  Discussion and Analysis of Financial Condition
                  and Results of Operations
              12Item
                  7.
              Financial
                  Statements
              18Item
                  8.
              Changes
                  in and Disagreements With Accountants On Accounting
                  and Financial Disclosure
              18Item
                  8A.
              Controls
                  and Procedures
              18Item
                  8B.
              Other
                  Information
              19
 
 Part
        III
 
 Item
                  9.
              Directors
                  and Executive Officers; Compliance with Section
                  16(a) of the Exchange Act
              20Item
                  10.
              Executive
                  Compensation
              25Item
                  11.
              Security
                  Ownership Of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              29Item
                  12.
              Certain
                  Relationships and Related
                  Transactions
              33Item
                  13.
              Exhibits
              34Item
                  14
              Principal
                  Accountant Fees and Services
              40
 
  3
  CAUTIONARY
          STATEMENT REGARDING FORWARD LOOKING STATEMENTS
  Certain
          statements included in this Annual Report on Form 10-KSB which are not
          statements of historical fact are intended to be, and are hereby identified
          as,
          "forward-looking statements" within the meaning of the Private Securities
          Litigation Reform Act of 1995. The Company cautions readers that forward-looking
          statements involve known and unknown risks, uncertainties and other factors
          that
          may cause the actual results, performance or achievements of the Company
          to be
          materially different from any future results, performance or achievement
          expressed or implied by such forward-looking statements. Such factors include,
          among others, the following: the Company's inability to secure adequate
          capital
          to fund operations, working capital requirements, advertising and promotional
          expenditures and principal and interest payments on debt obligations; factors
          related to increased competition from existing and new competitors including
          new
          product introduction, price reduction and increased spending on marketing;
          limitations on the Company's opportunities to enter into and/or renew agreements
          with international partners, the failure of the Company or its partners
          to
          successfully market, sell, and deliver its product in international markets,
          and
          risks inherent in doing business on an international level, such as laws
          governing medical devices that differ from those in the U.S., unexpected
          changes
          in the regulatory requirements, political risks, export restrictions, tariffs,
          and other trade barriers, and fluctuations in currency exchange rates;
          the
          disruption of production at the Company's manufacturing facility due to
          raw
          material shortages, labor shortages, and/or physical damage to the Company's
          facilities; the Company's inability to manage its growth and to adapt its
          administrative, operational and financial control systems to the needs
          of the
          expanded entity and the failure of management to anticipate, respond to
          and
          manage changing business conditions; the loss of the services of executive
          officers and other key employees and the Company's continued ability to
          attract
          and retain highly-skilled and qualified personnel; the costs and other
          effects
          of litigation, governmental investigations, legal and administrative cases
          and
          proceedings, settlements and investigations; and developments or assertions
          by
          or against the Company relating to intellectual property rights.
 
  4
  PART
          I
 
 Item
          1. Description of Business.
 
 General
 
 The
          Female Health Company ("FHC" or the "Company") manufactures, markets and
          sells
          the FC female condom (FC), the only FDA-approved product under a woman's
          control
          which can prevent unintended pregnancy and sexually transmitted diseases
          ("STDs"), including HIV/AIDS.
  FC
          has
          undergone extensive testing for efficacy, safety and acceptability, not
          only in
          the United States but also in many countries around the world. Certain
          of these
          studies show that having FC available allows women to have more options,
          resulting in an increase in protected sex acts and a decrease in STDs,
          including
          HIV/AIDS.
 
 The
          product is currently sold or available in various venues. It is commercially
          marketed in 14 countries by various FHC country specific partners, including
          the
          United States, United Kingdom, Canada, France, and Brazil. Currently there
          are
          programs and/or pilot studies ongoing in over 100 countries.
  Product
 
 FC
          is
          made of polyurethane, a thin but strong material which is resistant to
          rips and
          tears during use. FC consists of a soft, loose fitting sheath and two flexible
          O
          rings. One of the rings is used to insert the device and helps to hold
          it in
          place. The other ring remains outside the vagina after insertion. FC lines
          the
          vagina, preventing skin from touching skin during intercourse. FC is
          pre-lubricated and disposable and is intended for use during only one sex
          act.
 
 In
          2005,
          FHC announced that it had completed development of its second generation
          female
          condom, FC2. FC2 is made of a nitrile polymer which allows for a more rapid
          and
          economical manufacturing process. FC2 has the same physical design,
          specifications, safety and efficacy profile as the female condom the Company
          now
          sells. FC2 has been approved by the European Union ("EU") and received
          the CE
          mark and is under review by the World Health Organization ("WHO"). FHC
          is in
          discussions with the U.S. Food and Drug Administration (the "FDA") regarding
          requirements for US distribution. To date, the Company has not yet completed
          any
          sales or received any orders for FC2.
 
 Raw
          Materials
 
 Polyurethane
          is the principal raw material the Company uses to produce FC. The Company
          has
          entered into a supply agreement with Deerfield Urethane, Inc. for the purchase
          of the Company's requirement of polyurethane. Under this agreement, the
          parties
          negotiate pricing on an annual basis. The term of the agreement expires
          on
          December 31, 2006 and automatically renews for additional one year periods
          unless either party gives at least 12 months prior written notice of
          termination.
  5
  
 Global
          Market Potential
 
 It
          is
          more than twenty years since the first clinical evidence of AIDS was noted.
          HIV/AIDS is the most devastating pandemic that humankind has faced in recorded
          history. The Joint United Nations Programme on HIV/AIDS (“UNAIDS”) reported that
          at the end of 2005, 43 million people globally are living with HIV. Women
          now comprise the majority of the new cases. UNAIDS estimates that if further
          action isn’t taken up to 100 million people will have died of AIDS by 2020.
  Currently
          there are only two products that prevent the transmission of HIV/AIDS through
          sexual intercourse--the latex male condom and the female condom.
 
 The
          Condom Market
 
 Estimates
          for the global annual market for male condoms are between 6-9 billion units.
          In
          addition, given the rapid spread of HIV/AIDS in India and China, UNAIDS
          estimates that the need for condoms, both male and female, may be as high
          as 29
          billion units in the next 6 years.
 
 The
          FC
          Female Condom and the Male Condom
 
 FC
          is
          currently the only available barrier contraceptive method approved by FDA
          and
          listed as an essential product by WHO that is controlled by women which
          allows
          them to protect themselves from unintended pregnancy and STDs, including
          HIV/AIDS. The most important advantage is that using FC, a woman has a
          prevention method she controls as many men do not like to wear male condoms
          and
          may refuse to do so.
 
 The
          polyurethane material that is used for FC offers a number of benefits over
          latex, the material that is most commonly used in male condoms. Polyurethane
          is
          much stronger than latex, reducing the probability that FC sheath will
          tear
          during use. Unlike latex, polyurethane quickly transfers heat, so FC 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 the Company's knowledge, there
          is no
          reported allergy to date to polyurethane. FC 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.
 
 Numerous
          clinical and behavioral studies have been conducted regarding use of FC.
          Studies
          show that FC is found acceptable by women and their partners in many cultures.
          Importantly studies also show that when FC is made available with male
          condoms
          there is a significant increase in protected sex acts. The increase in
          protected sex acts varies by country and averages between 10% and
          35%.
 
  6
  Cost
          Effectiveness
 
 A
          study
          entitled "Cost-effectiveness of the female condom in preventing HIV and
          STDs in
          commercial sex workers in South Africa" was reported in the *Journal
          of Social Science and Medicine* in 2001.
          This study shows that making FC available is highly cost effective in reducing
          public health costs in developing countries as well as in the U.S.
 
 Female
          Condom Reuse
 
 Studies
          have shown that FC can be reused up to five times. WHO has noted the procedure
          to use regarding the washing and preparation of FC if it is going to be
          reused,
          on its website. WHO, UNAIDS and FHC all make the statement that FC should
          only
          be reused when a new female condom is not available.
 
 Worldwide
          Regulatory Approvals
 
 FC
          received Pre-Market Approval ("PMA") 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 the Company to market
          FC
          throughout the EU and in most countries of the world. In addition to the
          United
          States and the EU, several other countries have formally reviewed and approved
          FC for sale, including Canada, Australia, Japan and India.
 
 The
          Company believes that FC's PMA and FDA classification as a Class III Medical
          Device create a significant barrier to entry. The Company estimates that
          it
          would take a minimum of four to six years to implement, execute and receive
          FDA
          approval of a PMA to market another type of female condom.
 
 The
          Company believes there are no material issues or material costs associated
          with
          the Company's compliance with environmental laws related to the manufacture
          and
          distribution of FC.
 
 Strategy
 
 The
          Company's strategy is to act as a manufacturer, selling FC 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, the Company's
          operating expenses will not increase significantly.
 
 The
          Company filed a patent on its second generation product (FC2) in 2003.
          It
          completed development in 2005. FC2 has been approved by the EU and received
          the
          CE mark. The FC2 data base is currently under review by the WHO and the
          Company
          is in discussions with FDA regarding FDA’s requirements for US distribution.
          Because of the modified manufacturing procedure, it is expected that having
          FC2
          available will result in a meaningful reduction in cost to manufacture
          FC, and
          thus ultimately reduce the cost to customers based on the purchase of sufficient
          volume. It is the Company’s objective to use this opportunity to accelerate
          market penetration.
  7
 
 Commercial
          Markets
 
 The
          Company markets the product directly in the United Kingdom. The Company
          has
          distribution agreements with commercial partners in 14 countries with major
          programs in 12 countries, including the United States, Canada, Brazil,
          Mexico,
          Spain, France and India. The agreements are generally exclusive for a single
          country. Under these agreements, each partner markets and distributes FC
          in a
          single country and the Company manufacturers FC and sells the product to
          the
          partner for distribution in that country.
 
 After
          terminating its relationship with its first partner, the Company entered
          into a
          non-binding Memorandum of Understanding with a large Japanese pharmaceutical
          company to distribute FC to public and private markets in Japan. Since
          then that company has been sold, thus terminating discussions. The Company
          is
          currently in discussions with Fuji Latex, one of the largest male condom
          manufacturers and distributors in Japan and with whom the Company has previously
          signed an agreement to manage the importation and quality control of FC
          under
          Japanese regulatory requirements. The potential new relationship would
          broaden
          Fuji Latex’s involvement with FC to include marketing and distribution in
          Japan.
 
 Relationships
          and Agreements with Public Sector Organizations
 
 The
          Company has an agreement with UNAIDS to supply FC to developing countries
          at a
          reduced price which is negotiated each year based on the Company's cost
          of
          production. The current price per unit is approximately £0.40 (pounds), or
          approximately $0.69. Under the agreement, UNAIDS and the Company cooperate
          in
          education efforts and marketing FC in developing countries. Sales of FC
          are made
          directly to public health authorities in each country at the price established
          by the agreement with UNAIDS. The term of the agreement currently expires
          on
          December 31, 2006, but automatically renews for additional one-year periods
          unless either party gives at least 90 days prior written notice of termination.
          FC is available in 87 countries through public sector distribution.
 
 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.
 
 Manufacturing
          Facilities
 
 The
          Company manufactures FC in a 40,000 square-foot leased facility in London,
          England. The facility is currently capable of producing 60 million units
          per year.
 
 The
          Company manufactures and warehouses FC2 within 1,900 square footage of
          a leased
          facility located in Selangor D.E., Malaysia. The facility is presently
          capable
          of producing 8 million units per year. The Company intends to expand its
          capacity at this location and/or manufacture at additional locations as
          the
          demand for FC2 develops.
 
  8
  Government
          Regulation
 
 In
          the
          U.S., FC is regulated by the FDA. Pursuant to section 515(a)(3) of the
          Safe
          Medical Amendments Act of 1990 (the "SMA Act"), the FDA may temporarily
          suspend
          approval and initiate withdrawal of the PMA if the FDA finds that FC 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 conditions 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 SMA Act.
 
 Competition
 
 The
          Company's female condom participates in the same market as male condoms
          but is
          not seen as directly competing with male condoms. Rather, the Company believes
          that providing FC is additive in terms of prevention and choice. Latex
          male
          condoms cost less and have brand names that are more widely recognized
          than FC.
          In addition, male condoms are generally manufactured and marketed by companies
          with significantly greater financial resources than the Company.
 
 Medtech
          Products (MP) Ltd. is a condom company with a manufacturing facility in
          Chennai,
          India, which has developed the V/A - Feminine Condom, MP’s version of a latex
          female condom. USAID and Family Health International (FHI) are currently
          evaluating the MP condom for consideration to move into a Phase 3 clinical
          study, having already completed Phases 1 and 2. The manufacturing process
          has a
          CE mark for distribution in Europe and is available in German stores.
          Additionally, the Indian Drug Controller approval was received in January
          2003.
          The product has not received FDA approval nor has it been listed as an
          essential
          product by WHO.
 
 It
          is
          also possible that other parties will develop a female condom. These competing
          products could be manufactured, marketed and sold by companies with
          significantly greater financial resources than those of the Company.
 
 Patents
          and Trademarks
 
 The
          Company currently holds 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, South Korea and Australia.
          These patents expire between 2006 and 2013. Additional patent applications
          are
          pending in the U.S. and in other countries around the world through the
          Patent
          Cooperation Treaty. The applications cover the key aspects of the second
          generation female condom, FC2, including its overall design and manufacturing
          process.
 
 The
          Company has the registered trademark "FC Female Condom" in the United
          States. The
          Company has also secured, or applied for, 12 trademarks in 22 countries
          to
          protect the various names and symbols used in marketing the product around
          the
          world. These include "femidom" and "femy," "Reality" and others. In addition,
          the experience that has been gained through years of manufacturing the
          FC female
          condom has allowed the Company to develop trade secrets and know-how, including
          certain proprietary production technologies, that further secure its competitive
          position.
  9
  Employees
 
 As
          of
          December 19, 2005, the Company had 122 full-time employees and 1 part-time
          employee, all but two who are located within the U.S. or the U.K. No Company
          employees are represented by a labor union. The Company believes that its
          employee relations are good.
 
 Backlog
 
 At
          December 19, 2005, the Company had unfilled orders of $3,940,000. The
          comparable amount as of the same date of the prior year was $131,000. Unfilled
          orders materially fluctuate from quarter to quarter, and include orders
          with
          requested delivery dates later in fiscal 2006. The Company expects current
          unfilled orders to be filled during fiscal 2006.
 
 Research
          and Development
 
 The
          Company incurred approximately $274,000 of research and development costs
          in
          fiscal 2005 and $179,000 of research and development costs in fiscal 2004.
          Such
          expenditures pertained to the Company’s need to conduct acceptability studies
          and analyze second generation products.
 
 Industry
          Segments and Financial Information About Foreign And Domestic Operations
 
 See
          Note
          11 to Notes to Consolidated Financial Statements, included herein.
 
 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 certain 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 certain non-U.S. countries. The Company, known as Wisconsin
          Pharmacal Company, Inc. (the Company's predecessor), owned certain rights
          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.
 
 The
          Female Health Company is 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 owning
          certain
          rights to the female condom described above. The Company was originally
          incorporated in Wisconsin in 1971.
 
 In
          fiscal
          1995, the Company's Board of Directors approved a plan to complete a series
          of
          actions designed, in part, to maximize the potential of the female condom.
          First, the Company restructured and transferred all of the assets and
          liabilities of the Company other than those related primarily to the female
          condom to a newly formed, wholly-owned subsidiary of the Company, WPC Holdings,
          Inc. ("Holdings"). In January 1996, the Company sold Holdings to an
          unrelated third party. Then, in February 1996, the Company acquired Chartex
          (renamed The Female Health Company - UK in 1997), the manufacturer and
          owner of
          certain worldwide rights to, and the Company's sole supplier of, the female
          condom. As a result of the sale of Holdings and the acquisition of Chartex,
          The
          Female Health Company evolved to its current state with its sole business
          consisting of the manufacture, marketing and sale of the female condom.
 
 The
          FDA
          approved FC for distribution in 1993 and the Company's manufacturing facility
          in
          1994. Since that time, the Company has sold over 104 million female condoms
          around the world.
 
  10
  Item
          2. Description of Property.
 
 The
          Company leases approximately 3,100 square feet of office space at 515 North
          State Street, Suite 2225, Chicago, IL 60610. The lease expires
          September 30, 2006. The Company utilizes warehouse space and sales
          fulfillment services of an independent public warehouse located near
          Minneapolis, Minnesota for storage and distribution of the female condom.
          The
          Company manufactures the female condom in a 40,000 square foot leased facility
          located in London, England under a lease which expires in 2016, with the
          right
          to renew through 2027. The FDA-approved manufacturing process is subject
          to
          periodic inspections by the FDA as well as the EU quality group. Current
          capacity at the manufacturing facility is approximately 60 million female
          condoms per year. The Company manufactures and warehouses FC2 within 1,900
          square feet of a leased facility located in Selangor D.E., Malaysia. The
          Malaysian lease expires June 30, 2006, with the right to renew through
          2007.
          Current capacity at the manufacturing facility is approximately 8 million
          female condoms per year. Management believes the properties are adequately
          insured.
 
 Item
          3. Legal Proceedings.
 
 The
          Company is not currently involved in any material pending legal proceedings.
 
 Item
          4.   Submission of Matters To A Vote Of Security
          Holders.
 
 No
          matters were submitted to a vote of security holders during the fourth
          quarter
          of the fiscal year ended September 30, 2005.
 
 
 PART
          II
 
 Item
          5. Market For Common Equity, Related Stockholder Matters and
          Small Business Issuer Purchases of Equity Securities.
 
 Shares
          of
          the Company's common stock are traded on the OTC Bulletin Board under the
          symbol
          "FHCO." The approximate number of record holders of the Company's common
          stock
          at December 19, 2005 was 464. The Company has paid no cash dividends on its
          common stock and does not expect to pay cash dividends in the foreseeable
          future. The Company anticipates that for the foreseeable future it will
          retain
          any earnings for use in the operation of its business. The Company's credit
          facility contains a provision restricting the Company's ability to pay
          dividends
          and distributions. Information regarding the Company's high and low reported
          closing prices for its common stock for the quarters indicated is set forth
          in
          the table below. These sales prices reflect inter-dealer prices, without
          retail
          mark-ups, mark downs, or commissions.
 
 QuartersFIRST
                
                
                SECOND
                
                
                THIRD
                
                
                FOURTH2005
                    Fiscal YearPrice
                    per common share - High
                
                $
                2.13
                
                $
                2.10
                
                $
                1.95
                
                $
                1.86Price
                    per common share - Low
                
                $
                1.50
                
                $
                1.66
                
                $
                1.45
                
                $
                1.372004
                    Fiscal YearPrice
                    per common share - High
                
                $
                2.84
                
                $
                3.50
                
                $
                3.30
                
                $
                2.85Price
                    per common share - Low
                
                $
                2.05
                
                $
                2.70
                
                $
                2.50
                
                $
                1.50
 
 
 11
 
 Recent
          Sales of Unregistered Securities
 
 Between
          September 2004 and January 2005, the Company conducted a program to induce
          the
          holders of the Company’s outstanding common stock purchase warrants to exercise
          their warrants. Pursuant to this program, the Company offered an incentive
          to
          such holders providing for issuance of (1) shares of the Company’s common stock
          equal to 10% of the aggregate number of common stock purchase warrants
          exercised
          or (2) new common stock purchase warrants equal to 20% of the aggregate
          number
          of outstanding warrants exercised containing an exercise price per share
          equal
          to the closing price of the Company’s common
          stock as reported on the OTC Bulletin Board on the date the holder committed
          to
          exercise the outstanding warrants. Under this incentive program, one investor
          exercised 500,000 warrants as of September 30, 2004 and received 550,000
          shares
          of common stock which includes 50,000 incentive shares. Between October
          2004 and
          January 2005 four investors exercised 1,000,000 warrants and received 1,100,000
          shares of common stock which includes 100,000 incentive shares and two
          investors
          exercised 1,200,000 warrants and received 1,200,000 shares of common stock
          and
          240,000 incentive warrants with an exercise price in each case of $1.50
          per
          share and an expiration date of November 23, 2007. Among the seven persons
          participating in this program were three of the Company’s directors (Stephen M.
          Dearholt, Richard E. Wenninger and O.B. Parrish). The Company received
          aggregate
          proceeds of $2.5 million from the exercise of the outstanding
          warrants.
 
 The
          Company believes that the issuance of the common stock and the common stock
          purchase warrants pursuant to the program were exempt from registration
          under
          section 4(2) of the Securities Act and/or Regulation D promulgated under
          the
          Securities Act because such issuances were made to persons who are accredited
          investors. The accredited investors represented to the Company that they
          were
          purchasing for investment without a view to further distribution. Restrictive
          legends were placed on all instruments evidencing the securities described
          above.
 
 Item
          6. Management's Discussion and Analysis of Financial Condition
          and Results of Operations.
 
 Overview
 
 Over
          the
          past few years, the Company completed significant aspects of the development
          and
          commercialization of the female condom. These initiatives have resulted
          in the
          attainment of proprietary manufacturing technology and product design patents,
          necessary regulatory approvals, and the development of significant manufacturing
          capacity. These steps, taken as part of the Company's 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.
 
 The
          Company has begun the process of developing the commercial market for the
          female
          condom around the world. As part of this plan, the Company has completed
          a
          number of distribution agreements and is pursuing other arrangements for
          the
          marketing and sale of the female condom. Management believes that as the
          number
          of markets in which the female condom is sold increases, sales will grow
          and at
          certain levels the Company will become profitable. However, there can be
          no
          assurance that such level of sales will be achieved in the near term or
          at all.
 
 
 12
 
 Results
          of Operations
 
 Fiscal
          Year Ended September 30, 2005 ("2005") Compared to Fiscal Year Ended
          September 30, 2004 ("2004")
 
 The
          Company had net revenues of $11,161,555 and a net loss attributable to
          common
          stockholders of $(1,516,863) or $(0.07) per share in 2005 compared to net
          revenues of $8,982,074 and a net loss attributable to common stockholders
          of
          $(2,125,889) or $(0.11) per share in 2004.
 
 Gross
          profit increased $1,169,107, or 32%, to $4,791,400 for 2005 from $3,622,293
          for
          2004. The increase was a result of expanding net revenues more than offseting
          the higher fixed and variable costs incurred to manufacture the product
          in 2005.
 
 Net
          revenues increased $2,179,481, or 24%, in 2005 over the prior year. The
          higher
          net revenues resulted from increased unit sales shipped to global public
          sector
          customers.  The increased global public sector shipments in the countries
          of South Africa and Botswana were partially offset by smaller reductions
          in
          shipments in Zimbabwe, Congo and Kenya.
 
 On
          May
          20, 2004 the Brazilian Ministry of Health publicly reported a fraud in
          the
          purchasing of certain products by the ministry and several individuals
          involved
          were arrested. Purchases of products have been suspended while the investigation
          was ongoing. The fraud does not involve the Female Health Company or the
          female
          condom. However, the Company’s anticipated 4 million unit order was delayed due
          to the suspension and investigation. During 2004 and 2005 no public sector
          shipments to Brazil were made. The investigation has been completed and
          the
          Brazilian Ministry of Health has resumed orders of the female condom beginning
          with a 4 million unit order on October 5, 2005 to be shipped in fiscal
          year
          2006, of which the first 2 million units were shipped in December 2005.
          Additionally, the Company shipped 110,000 commercial units to a distributor
          in
          Brazil in 2005, compared to 65,000 units in 2004.
 
 Cost
          of
          products sold increased $1,010,374, or 19%, to $6,370,155 for 2005 from
          $5,359,781 for 2004. The increase in cost of products sold is a result
          of higher
          labor, direct material, and indirect production costs due to higher production
          levels during 2005 than 2004.
 
 Advertising
          and promotional expenditures increased $75,502 to $123,103 for 2005 from
          $47,601
          for 2004. The increase resulted from the Company hiring a public relations
          firm
          in 2005 to prepare for a worldwide FC2 product launch.
 
 Selling,
          general and administrative expenses increased $1,242,757, or 28%, from
          $4,463,018 in 2004 to $5,705,775 in 2005. The increase in 2005 was a result
          of a
          rise in stock compensation, consulting fees, executive staff compensation
          and
          increases in U.K. operating expenses. The higher stock compensation costs
          during
          2005 were a result of the Company recording $342,000 in non-recurring charges
          related to shares of common stock and stock purchase warrants issued as an
          incentive for exercising existing stock warrants during the first two quarters
          of fiscal 2005 as well as increased compensation for investor relation
          services.
          The higher consulting fees incurred represented services related to the
          documentation, design and testing stages required to design an internal
          control
          environment to comply with Section 404 of the Sarbanes-Oxley Act. During
          2005
          the Company incurred $435,381 in expenses related to the Sarbanes-Oxley
          implementation. The additional executive costs relate to the hiring of
          a Global
          Development Vice President during the fourth quarter of the prior fiscal
          year.
          The position was vacant for the first three quarters of that fiscal year.
          The
          overall higher UK operating costs were a result of increases in insurance
          costs,
          engaging an IT consultant, property taxes and the Company’s bad debt provision
          in 2005 compared to 2004 .
 
 
 13
 
 Research
          and development costs increased $94,575 to $273,776 in 2005 from $179,201
          in
          2004. The Company filed a patent on a second generation product (FC2) in
          the
          latter part of the 2003 fiscal year. The Company initiated a development
          program
          related to FC2 in 2004. The increase in costs during 2005 is a result of
          expenses related to the safety and acceptability studies for the FC2 program
          and
          setting up a facility in Malaysia to warehouse and manufacture the
          product.
 
 The
          Company's operating loss increased $243,727 to $(1,311,254) in 2005 from
          $(1,067,527) in 2004 due to the improved gross profit being more than offset
          by
          an increase in operating expenses. Total operating expenses increased $1,412,834
          from $4,689,820 in 2004 to $6,102,654 in 2005 as a result of increases
          in
          advertising and promotional, selling, general and administrative, research
          and
          development, and stock compensation expenses.
 
 Net
          interest and non-operating expenses decreased $906,959, or 95%, to $44,402
          for
          2005 compared to $951,361 for 2004. The reduction in the current fiscal
          year is
          primarily due to the Company eliminating its debt outstanding during the
          first
          quarter of fiscal 2005. The result is a substantially lower amount of both
          interest paid and non-cash expenses incurred from the amortization of discounts
          on the credit facility during 2005 than in 2004.
 
 Preferred
          dividends increased $54,206 to $161,207 for 2005 compared to $107,001 for
          2004.
          The increase occurred as a result of the Company’s issuance of 473,377 shares of
          Series 3 Preferred Stock to eleven investors during February 2004 which
          thereby
          impacted 12 months of 2005 but only 8 months of 2004.
 
 The
          Company was able to cover fixed manufacturing overhead costs and exceeded
          the
          break-even at the gross profit level. However, the Company must achieve
          cumulative annual unit sales of approximately 19.5 million female condoms
          based upon the current average selling price per unit in order to cover
          operating and non-operating expenses or approximately 32% of manufacturing
          capacity.
 
 Factors
          That May Affect Operating Results and Financial Condition
 
 The
          Company's future operating results and financial condition are dependent
          on the
          Company's ability to increase demand for the female condom and to
          cost-effectively manufacture sufficient quantities of the female condom.
          Inherent in this process are a number of factors that the Company must
          successfully manage in order to achieve favorable future results and improve
          its
          financial condition.
 
 
 14
 
 Reliance
          on a Single Product
 
 The
          Company expects to derive the vast majority, if not all, of its future
          revenues
          from the female condom, its sole current product. While management believes
          the
          global potential for the female condom is significant, the ultimate level
          of consumer demand around the world is not yet known. To date, sales of
          the
          female condom have not been sufficient to cover the Company's operating
          costs.
 
 Distribution
          Network
 
 The
          Company's strategy is to act as a manufacturer and to develop a global
          distribution network for the product by seeking the global public sector
          and by
          completing partnership arrangements with companies with the necessary marketing
          and financial resources and local market expertise. To date, this strategy
          has
          resulted in numerous in-country distributions in the public sector, particularly
          in Africa and Latin America. Several partnership agreements have been completed
          for the commercialization of the female condom in private sector markets
          around
          the world. However, the Company is dependent on country governments, global
          donors, as well as city and state public health departments within the
          United
          States to continue their commitment to prevention of STDs, including AIDS,
          by
          including female condoms in their programs. The Company is also dependent
          on
          finding appropriate partners for the private sector markets around the
          world.
          Once an agreement is completed, the Company is reliant on the effectiveness
          of
          its partners to market and distribute the product. Failure by the Company's
          partners to successfully market and distribute the female condom or failure
          of
          country governments to implement prevention programs which include distribution
          of barrier methods against the AIDS crisis, or an inability of the Company
          to
          secure additional agreements for the AIDS crisis, or an inability of the
          Company
          to secure additional agreements for new markets either in the public or
          private
          sectors could adversely affect the Company's financial condition and results
          of
          operations.
 
 Inventory
          and Supply
 
 All
          of
          the key components for the manufacture of the female condom are essentially
          available from either multiple sources or multiple locations within a source.
 
 Global
          Market and Foreign Currency Risks
 
 The
          Company manufactures the female condom in a leased facility located in
          London,
          England and FC2 in a leased facility located in Malaysia. Further, a material
          portion of the Company's future sales are likely to be in foreign markets.
          Manufacturing costs and sales to foreign markets are subject to normal
          currency
          risks associated with changes in the exchange rate of foreign currencies
          relative to the United States dollar. For 2005, 76% of the Company’s net
          revenues, 88% of the Company’s cost of products sold and 43% of the Company’s
          operating expenses were affected by changes in the exchange rate of foreign
          currencies relative to the United States dollar. Approximately, 19% of
          net
          revenues in 2005 were to the Company’s customers in South Africa. On an ongoing
          basis, management continues to evaluate its commercial transactions and
          is
          prepared to employ currency hedging strategies when it believes such strategies
          are appropriate. In addition, some of the Company's future international
          sales
          may be in developing nations where dramatic political or economic changes
          are
          possible. Such factors may adversely affect the Company's results of operations
          and financial condition. For 2005, the Company estimates that the net adverse
          impact of the exchange rate fluctuations was not significant.
 
 
 15
 
 Government
          Regulation
 
 The
          female condom is subject to regulation by the FDA pursuant to the federal
          Food,
          Drug and Cosmetic Act (the "FDC Act"), and by other state and foreign regulatory
          agencies. Under the FDC Act, medical devices must receive FDA clearance
          before
          they can be sold. FDA regulations also require the Company to adhere to
          certain
          "Good Manufacturing Practices," which include testing, quality control
          and
          documentation procedures. The Company's compliance with applicable regulatory
          requirements is monitored through periodic inspections by the FDA. The
          failure
          to comply with applicable regulations may result in fines, delays or suspensions
          of clearances, seizures or recalls of products, operating restrictions,
          withdrawal of FDA approval and criminal prosecutions. The Company's operating
          results and financial condition could be materially adversely affected
          in the
          event of a withdrawal of approval from the FDA.
 
 Liquidity
          and Sources of Capital
 
 Historically,
          the Company has incurred cash operating losses relating to expenses to
          develop,
          manufacture, and promote the female condom. Cash used in continuing operations
          was $0.2 million for 2005 and for 2004.
 
 The
          Company has funded operating losses and capital requirements, in large
          part,
          through the sale of preferred stock, common stock or debt securities convertible
          into common stock.
 
 While
          the
          Company believes that net revenues from sales of the female condom will
          exceed
          operating costs, and operations will generate sufficient funds to meet
          capital
          requirements, the Company can make no assurance that it will maintain such
          a
          level of operations in the near term or at all. If the Company does need to
          raise additional capital, the Company can make no assurance that the Company
          will be able to source required capital through the sale of debt or equity
          or,
          if raised, the amount will be sufficient to operate. In addition, any funds
          raised may be costly to the Company and/or dilutive to its shareholders.
 
 In
          an
          effort to generate funds for operating needs and to retire existing debt,
          during
          September and November 2004 the Company conducted a program to induce several
          holders of the Company’s common stock warrants to exercise such warrants and
          receive an incentive of (1) shares of the Company's common stock equal
          to 10% of
          the aggregate number of common stock purchase warrants exercised or (2)
          new
          common stock purchase warrants equal to 20% of the aggregate number of
          outstanding warrants exercised containing an exercise price per share equal
          to
          the closing price of the Company's common stock as reported on the OTC
          Bulletin
          Board on the date the holder committed to exercise the outstanding warrants.
          Under this incentive program, one investor exercised 500,000 warrants as
          of
          September 30, 2004 and received 550,000 shares of common stock which includes
          50,000 incentive shares. Between October and January 2005 four investors
          opted
          to exercise 1,000,000 warrants and receive 1,100,000 shares of common stock
          which include 100,000 incentive shares and two investors opted to exercise
          1,200,000 warrants and receive 1,200,000 shares of common stock and 240,000
          incentive common stock warrants. Among the seven accredited investors
          participating in this program three of the Company’s board of directors (Steve
          Dearholt, Richard Wenninger and O.B. Parrish) and the bank which held the
          Company’s outstanding promissory note (Heartland Bank). As a result of the
          exercise of the common stock warrants the Company received $2.5 million
          in
          aggregate proceeds. With the proceeds the Company paid off the remaining
          outstanding balance of its long term debt.
 
 16
 
 
 Presently,
          the Company has two revolving notes with Heartland Bank that allow the
          Company
          to borrow up to $1,500,000 and expire July 1, 2006. These notes were extended
          on
          July 20, 2005, at the same terms held when the notes initially became effective
          on May 19, 2004. These notes bear interest payable at a rate of prime plus
          2%
          (prime rate was 6.75% at September 30, 2005). No new warrants were issued
          as part of the extension of these notes.  These notes are collateralized by
          substantially all of the assets of the Company.  No amounts are outstanding
 under the revolving notes at September 30, 2005.
 
 Additionally,
          the Company entered into the following formal agreements during the past
          several
          fiscal years which it expects to contribute to continued improved sales
          volumes
          and operations.
  On
          September 30, 2003, the Company entered into an agreement with the U.S.
          Agency for International Development (USAID). Under this agreement, the
          Company
          may supply up to 25 million units of FC to USAID through December 31,
          2006 principally for use in family planning programs supported by USAID
          in
          developing countries. USAID has ordered 3 million units of FC for delivery
          between September 30, 2003 and December 31, 2004 and has the option to
          order up to an additional 6 million units during that period. USAID also
          has the option to order up to 8 million units of FC for the 2005 and 2006
          calendar years. USAID has the right to terminate the agreement at any time
          for
          its sole convenience, and no assurance can be given as to the amount of
          FC that
          USAID will purchase during the term of the agreement. As of December 19,
          2005, USAID has purchased 3.5 million units.
 
 On
          March
          25, 2004, the Company announced the appointment of Global Protection Corporation
          (“Global”) as the exclusive distributor for public sector sales within a 9 state
          region in the eastern United States. Global is required to purchase 2.6
          million
          units within a three year period to retain exclusive distribution rights.
          As of
          December 19, 2005, Global has purchased 678,000 units.
 
 On
          December 18, 2001, the Company announced the three year appointment of
          Total
          Access Group (“TAG”) as the exclusive distributor for public sales within a 15
          state region in the western United States. TAG was required to meet minimum
          unit
          purchase requirements within the three year period to retain exclusive
          distribution rights and achieved the required levels. As a result, effective
          January 1, 2005, TAG was rewarded a two year extension as the exclusive
          distributor for public sales within a 20 state region located between the
          Midwest and Western portion of the United States. TAG is now required to
          purchase 1.4 million units within the two year period to retain exclusive
          distribution rights. As of December 19, 2005, TAG has purchased 640,000
          units
          under the extension.
 
 As
          of
          December 19, 2005, the Company had approximately $1.6 million in cash,
          net trade accounts receivable of $1.4 million and current trade accounts
          payable of $0.9 million. Presently, the Company has no required debt
          service obligations. All principal payments were completed as of November
          23,
          2004.
  If
          the
          Company is unable to raise adequate financing when needed, the Company
          may be
          required to sharply curtail the Company's efforts to promote the female
          condom,
          to attempt to sell certain of its assets and rights or to curtail certain
          of its
          operations and may ultimately be forced to cease operations. Currently,
          the
          Company is focused on growing its business and, therefore, the Company
          has made
          no plans to sell any assets nor has it identified any assets to be sold
          or
          potential buyers.
 
 
 17
 
 Impact
          of
          Inflation and Changing Prices
 
 Although
          the Company cannot accurately determine the precise effect of inflation,
          the
          Company has experienced increased costs of product, supplies, salaries
          and
          benefits, and increased general and administrative expenses. Historically,
          the
          Company has absorbed increased costs and expenses without increasing selling
          prices.
 
 New
          Accounting Pronouncements
 
 Please
          see "New Accounting Pronouncements" in Note 1 of the financial statements.
 
 Item
          7. Financial Statements.
 
 The
          consolidated financial statements of the Company and notes thereto are
          filed
          under this item beginning on page F-1 of this report.
 
 Item
          8. Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure.
 
 Not
          applicable.
 
 Item
          8A. Controls and Procedures.
  As
          of the
          end of the period covered by this report, the Company carried out an evaluation,
          under the supervision and with the participation of the Company's management,
          including the Company's Chief Executive Officer and the Company's Principal
          Accounting Officer, of the effectiveness of the design and operation of
          the
          Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
          and
          15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on
          this evaluation, the Company's Chief Executive Officer and Principal Accounting
          Officer concluded that the Company's disclosure controls and procedures
          were
          effective. It should be noted that in designing and evaluating the disclosure
          controls and procedures, management recognized that any controls and procedures,
          no matter how well designed and operated, can provide only reasonable assurance
          of achieving the desired control objectives, and management necessarily
          was
          required to apply its judgment in evaluating the cost-benefit relationship
          of
          possible controls and procedures. The Company has designed its disclosure
          controls and procedures to reach a level of reasonable assurance of achieving
          desired control objectives and, based on the evaluation described above,
          the
          Company's Chief Executive Officer and Principal Accounting Officer concluded
          that the Company's disclosure controls and procedures were effective at
          reaching
          that level of reasonable assurance.
  During
          the evaluation of the Company's disclosure controls and procedures conducted
          at
          the end of fiscal 2005, the Company's management determined that two material
          weaknesses within its internal control framework, which had previously
          been
          identified in 2003 and 2004, do not appear to still be present.
 
 
 18
 
 The
          first
          weakness related to the timeliness of accounting for certain transactions. 
Equity transactions pertaining to outside consultants and new employees
          were not
          communicated in a timely manner to the Principal Accounting Officer by
          senior
          management. In the final stages of preparation of prior Form 10-KSB reports,
          as
          part of a reconciliation process, the Principal Accounting Officer discovered
          the excluded transactions and informed the Company’s external auditors of the
          proposed adjustments and their potential financial impact. Such issues
          were
          discovered at the end of both fiscal 2003 and fiscal 2004 and related to
          fourth
          quarter activity only. During the quarter following the discovery of each
          issue
          the Company discussed setting up a procedure to eliminate the possibility
          of
          future exceptions. No new weakness relating to the specific equity transactions
          have subsequently occurred.
  The
          second weakness related to the adequacy of supervisory reviews. The lack of
          reviews resulted in adjustments being proposed during the year-end field
          work by
          the Company’s external auditors following the end of fiscal 2004. To remediate
          this weakness, beginning with the first quarter of the current fiscal year,
          the
          Principal Accounting Officer began reviewing all of the components of the
          U.K.
          balance sheet and income statement including material financial transactions.
          No
          new adjustments have been proposed by the Company’s external auditors during the
          current fiscal year related to the U.K. financials.
  The
          Company is in the process of implementing Section 404 of the Sarbanes-Oxley
          Act.
          In doing so the above material weaknesses were addressed and remediated.
          In
          completing the evaluation of disclosure controls and procedures as of the
          end of
          the period covered by this report, the Company's management concluded that
          the
          Company's disclosure controls and procedures were effective.
 
 There
          was
          no change in the Company's internal control over financial reporting (as
          defined
          in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act
          of 1934,
          as amended) during the Company's most recently completed fiscal quarter
          that has
          materially affected, or is reasonably likely to materially affect, the
          Company's
          internal control over financial reporting.
 
 Item
          8B. Other Information.
  Effective
            October 1, 2005, the Company entered into Amended and Restated Change
            of Control
            Agreements with O.B. Parrish, the Company's Chairman and Chief Executive
            Officer, Mary Ann Leeper, the Company's President and Chief Operating
            Officer,
            and Michael Pope, the Company's Vice President.  These Amended and Restated
            Change of Control Agreements are described in more detail under Item
            10
            "Executive Compensation - Employment and Change of Control Agreements."
            These
            Amended and Restated Change of Control Agreements are attached to this
            report as Exhibits 10.78, 10.79 and 10.80 and are incorporated herein by
            reference.
 
 
 19
 
 PART
          III
 
 Item
          9. Directors and Executive Officers; Compliance with Section
          16(a) of the Exchange Act.
  Certain
          information about the Company's executive officers, directors and certain
          key
          employees as of September 30, 2005, is as follows:
 
 NAME
                POSITION
                AGEO.B.
                    Parrish
                Chairman
                    of the Board, Chief Executive Officer and Director
                72Mary
                    Ann Leeper, Ph.D.
                President,
                    Chief Operating Officer and Director
                65William
                    R. Garguilo, Jr.
                Secretary
                    and Director
                77Jack
                    Weissman
                Vice
                    President - Sales
                58Michael
                    Pope
                Vice
                    President and General Manager of The Female Health Company (UK)
                    Plc
                48Robert
                    R. Zic
                Principal
                    Accounting Officer
                42Karen
                    King
                Vice
                    President, Global Development
                46David
                    R. Bethune
                Director
                65Stephen
                    M. Dearholt
                Director
                59Michael
                    R. Walton
                Director
                67James
                    R. Kerber
                Director
                73Richard
                    E. Wenninger
                Director
                58Mary
                    Margaret Frank
                Director
                36
 
 O.B.
          PARRISH
 Age:
          72;
          Elected Director: 1987; Present Term Ends: 2006 Annual Meeting
 
 O.B.
          Parrish has served as Chief Executive Officer of the Company since 1994,
          as
          acting Chief Financial and Accounting Officer from February 1996 to
          March 1999 and as the Chairman of the Board and a Director of the Company
          since 1987. Mr. Parrish is a shareholder and has served as the President
          and as a Director of Phoenix Health Care of Illinois, Inc. ("Phoenix of
          Illinois") since 1987. Phoenix of Illinois owns approximately 233,501 shares
          of
          the Company's common stock. Mr. Parrish also is Chairman and a Director of
          ViatiCare, L.L.C., a financial services company, and Chairman and a Director
          of
          MIICRO, Inc., a neuroimaging company. 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. ("Searle"), a
          pharmaceutical/consumer products company. 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.
 
 
 20
 
 MARY
          ANN
          LEEPER, Ph.D.
 Age:
          65;
          Elected Director: 1987; Present Term Ends: 2006 Annual Meeting
 
 Dr. Leeper
          has served as the President and Chief Operating Officer of the Company
          since
          1996, as President and Chief Executive Officer of The Female Health Company
          Division from May 1994 until January 1996, as Senior Vice President -
          Development of the Company from 1989 until January 1996 and as a Director
          of the Company since 1987. Dr. Leeper is a shareholder and has served as a
          Vice President and Director of Phoenix of Illinois since 1987. From 1981
          until
          1986, 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. Dr. Leeper serves on the Board
          of Neenah Paper, Inc. (NP: NYSE) and is chair of its nominating and governance
          committee. She is also an adjunct professor at the University of Virginia
          Darden
          School of Business.
 
 WILLIAM
          R. GARGIULO, JR.
 Age:
          77;
          Elected Director: 1987; Present Terms Ends: 2006 Annual Meeting
 
 William
          R. Gargiulo, Jr. has served as Secretary of the Company from 1996 to present,
          as
          Vice President from 1996 to September 30, 1998, as Assistant Secretary of
          the Company from 1989 to 1996, as Vice President - International of The
          Female
          Health Company Division from 1994 until 1996, as Chief Operating Officer
          of the
          Company from 1989 to 1994, and as General Manager of the Company from 1988
          to
          1994. Mr. Gargiulo has also served as a Director of the Company since 1987.
          Mr. Gargiulo is a trustee of a trust which is a shareholder of Phoenix of
          Illinois. From 1984 until 1986, Mr. Gargiulo was the Executive
          Vice-President of the Pharmaceutical Group of Searle, in charge of Searle's
          European operations. From 1976 until 1984, Mr. Gargiulo was the Vice
          President of Searle's Latin American operations.
 
 JACK
          WEISSMAN
 Age:
          58;
          Vice President - Sales
 
 Mr. Weissman
          has served as Vice President - Sales since June 1995. From 1992 to 1994,
          Mr. Weissman was Vice President-Sales for Capitol Spouts, Inc., a
          manufacturer of pouring spouts for gable paper cartons. From 1989 to 1992,
          he
          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 and Military Sales Manager. From 1985 to 1989,
          he was
          Director - Retail Business Development for The NutraSweet Company, a Searle
          subsidiary. Prior to Searle, Mr. Weissman worked in the consumer products
          field as account manager and territory manager for Norcliff Thayer and
          Whitehall
          Laboratories.
 
 
 21
 
 MICHAEL
          POPE
 Age:
          48;
          Vice President, General Manager - The Female Health Company (UK) Plc.
 
 Mr. Pope
          has served as Vice President of the Company since 1996 and as General Manager
          of
          The Female Health Company (UK) Plc. (formerly Chartex International, Plc.)
          since
          the Company's 1996 acquisition of Chartex. Mr. Pope has also served as a
          Director of The Female Health Company, Ltd. (formerly Chartex Resources
          Limited)
          and The Female Health Company (UK) Plc. since 1995. From 1990 until 1996,
          Mr. Pope was Director of Technical Operations for Chartex with
          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. From 1982 to 1986, Mr. Pope was Site Manager, Engineering and
          Production Manager, Development Manager and Silicon Manager for Warne Surgical
          Products.
 
 ROBERT
          R.
          ZIC
 Age:
          42;
          Principal Accounting Officer
 
 Mr. Zic
          has served as Principal Accounting 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 division. 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 of Argonaut and its four
          subsidiaries. From 1990 to 1994, he was the Assistant Controller of CalFarm
          Insurance Company, where he was responsible for external reporting duties.
          From
          1988 to 1990, Mr. Zic was a Senior Accountant responsible for the
          statutory-based financials of Allstate Insurance Company. Mr. Zic began his
          career in 1986 as an auditor with Arthur Andersen & Co.
 
 KAREN
          KING
 Age:
          46;
          Vice President, Global Development
 
 Ms.
          King
          has served as Vice President, Global Development of the Company since August
          2004. Ms. King spent the previous 22 years with Baxter International, Inc.
          in
          general management, marketing and business development roles. Most recently,
          Ms.
          King was the President of a Baxter subsidiary, Pulse Nutrition Solutions,
          Inc.,
          a business focused on developing and marketing nutraceutical
          products.
 
 
 22
 
 DAVID
          R.
          BETHUNE
 Age:
          65;
          Elected Director: 1996; Present Term Ends: 2006 Annual Meeting
 
 Mr. Bethune
          has served as a Director since January 1996. Mr. Bethune served as
          Chairman and Chief Executive Officer of Atrix Laboratories, Inc. from 1999
          until
          his retirement in 2004. From 1997 to 1998, Mr. Bethune held the positions
          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
          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.
 
 STEPHEN
          M. DEARHOLT
 Age:
          59;
          Elected Director: 1996; Present Term Ends: 2006 Annual Meeting
 
 Mr. Dearholt
          has served as a director since April 1996. Mr. Dearholt is a
          co-founder of, and partner in, Insurance Processing Center, Inc., 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 the Company in its purchase of Chartex. Mr. Dearholt is also
          very active in the non-profit sector. He is currently on the Board of Directors
          of Children's Hospital Foundation of Wisconsin, an honorary board member
          of the
          Zoological Society of Milwaukee, and the national Advisory Council of the
          Hazelden Foundation. He is a past board member of Planned Parenthood Association
          of Wisconsin, and past Chairman of the Board of the New Day Club, Inc.
 
 MICHAEL
          R. WALTON
 Age:
          67;
          Elected Director: 1999; Present Term Ends: 2006 Annual Meeting
 
 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 under-performing, 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 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.
 
 
 23
 
 JAMES
          R.
          KERBER
 Age:
          73;
          Director: 1999; Present Term Ends: 2006 Annual Meeting
 
 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, predominately
          those associated with life and health. From 1994 to 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 a
          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 insurance companies for ICH Corporation,
          HCA Corporation and US Life Corporation.
 
 RICHARD
          E. WENNINGER
 Age:
          58;
          Director: 2001; Present Term Ends: 2006 Annual Meeting
 
 Mr. Wenninger
          has served as a Director since July 2001. Mr. Wenninger currently
          serves as Chairman of Wenninger Company, Inc., a mechanical contracting
          and
          engineering company. From 1976 to 2001, Mr. Wenninger served as President
          and Chief Executive Officer of Wenninger Company, Inc. He is also Secretary
          of
          Wenn Soft, Inc., a software development, sales and service company he founded
          in
          1997. From 1992 to 1999, Mr. Wenninger served as Secretary of Liftco, Inc.
          Mr. Wenninger is a current board member of the Boys & Girls Club of
          Milwaukee, a former President and board member of the Milwaukee Athletic
          Club, a
          former board member of the Wisconsin Psychoanalytic Foundation, a former
          board
          member of University Lake School, the former President and a current board
          member of the Plumbing and Mechanical Contractors Association of Milwaukee,
          the
          former President and a former board member of the Sheet Metal Contractors
          Association of Milwaukee and a former board member of the Mechanical Contractors
          Association of America.
 
 MARY
          MARGARET FRANK
 Age:
          36;
          Director: 2004; Present Term Ends: 2006 Annual Meeting
 
 Dr.
          Frank
          has served as a Director since October 2004. Dr. Frank has served as an
          Assistant Professor of Accounting at the Darden Graduate School of Business
          at
          the University of Virginia where she teaches financial and tax accounting
          since
          2002. From 1999 to 2002, Dr. Frank was an Assistant Professor at the Graduate
          School of Business at the University of Chicago. During 1997, Dr. Frank
          was an
          accounting instructor at the Kenan-Flagler Business School at the University
          of
          North Carolina at Chapel Hill. From 1992 to 1994, Dr. Frank served as a
          Senior
          Tax Consultant at Arthur Andersen.
  
 24
 
 Section
          16(a) Beneficial Ownership Reporting Compliance
 
 Section
          16(a) of the Securities Exchange Act of 1934 requires the Company's officers
          and
          directors, and persons who own more than 10% of a registered class of the
          Company's equity securities, to file reports of ownership and changes in
          ownership with the Securities and Exchange Commission ("SEC") on Forms
          3, 4 and
          5. Officers, directors and greater than 10% stockholders are required by
          SEC
          regulation to furnish the Company with copies of all Forms 3, 4 and 5 they
          file.
 
 Based
          solely on a review of the copies of such forms furnished to the Company,
          or
          written representations that no Forms 5 were required, the Company believes
          that
          during fiscal 2005 all section 16(a) filing requirements applicable to
          its
          officers, directors and greater than 10% beneficial owners were complied
          with,
          except that Mr. Pope filed a Form 4 on December 19, 2005 reporting
          transactions occurring on October 4, 2005, October 18, 2005 and
          November 2, 2005.
  Code
          of
          Ethics
 
 The
          Company has adopted a Code of Business Ethics that applies to all of the
          Company's employees, including the Company's principal executive officer,
          principal financial officer and principal accounting officer. A copy of
          the Code
          of Business Ethics is available on the Company's corporate website which
          is
          located at www.femalehealth.com. The Company also intends to disclose any
          amendments to, or waivers from, the Code of Business Ethics on its corporate
          website.
 
 Audit
          Committee Financial Expert
 
 The
          members of the Audit Committee of the Company's Board of Directors are
          Mary
          Margaret Frank, Ph.D. (Chairperson), David R. Bethune and James R. Kerber.
          The
          Company's Board of Directors has determined that Dr. Frank qualifies as
          an
          "audit committee financial expert" as defined by the rules of the SEC based
          on
          her work experience and education. Dr. Frank and the other members of the
          Audit
          Committee are independent directors in accordance with the listing standards
          of
          the Nasdaq Stock Market. The Audit Committee is an "audit committee" for
          purposes of Section 3(a)(58)(A) of the Securities Exchange Act of
          1934.
 
 Item
          10. Executive Compensation.
  Compensation
          of the Named Executive Officers
  The
          table
          shown below provides information for each of the Company's last three fiscal
          years regarding all annual, long-term and other compensation paid by the
          Company
          to its chief executive officer and the other executive officers whose total
          annual salary and bonus exceeded $100,000 for services rendered during
          the
          fiscal year ended September 30, 2005. The individuals listed in this table
          are
          referred to elsewhere in this report as the "named executive officers."
  
 25
  **SUMMARY
            COMPENSATION TABLE**
 
 **Annual
                      Compensation**
                  
                  **Long-Term**
                    **Compensation-Awards****Name and Principal Position**
                  
                  
                  **Fiscal**
                    **Year**
                  
                  
                  **Salary
                      ($)**
                  **Bonus
                      ($)**
                  
                  **Restricted**
                    **Stock**
                    **Awards
                      ($)**
                  
                  
                  **Securities**
                    **Underlying**
                    **Options
                      (#)**O.B.
                      Parrish, Chairman
                    and
                      Chief Executive
                    Officer
                  
                  
                  2005
                    2004
                    2003
                  
                  
                  90,000
                    90,000
                    90,000
                  ---
                    ---
                    ---
                  
                  75,000
                    117,500
                    66,000
                  (1)
                    (2)
                    (3)
                  
                  ---
                    ---
                    464,000
                      (4)Mary
                      Ann Leeper, Ph. D.,
                    President
                      and Chief
                    Operating
                      Officer
                  
                  
                  2005
                    2004
                    2003
                  
                  
                  250,000
                    250,000
                    225,000
                  ---
                      ---
                      ---
                  
                  37,500
                    47,000
                    46,200
                  (1)
                    (2)
                    (3)
                  
                  ---
                    ---
                    790,000
                      (4)Michael
                          Pope, Vice President
                        and
                          General Manager of the
                        Female
                          Health Company (UK) Plc. (5)
                  
                  
                  2005
                    2004
                    2003
                  
                  
                  160,343
                    155,059
                    121,893
                  ---
                    ---
                    16,473
                      (5)
                  
                  7,500
                    11,750
                    ---
                  (1)
                    (2)
                  
                  ---
                    ---
                    370,000 (4)
  (1)
                On
                    October 1, 2004, Mr. Parrish, Dr. Leeper and Mr. Pope were issued
                    50,000,
                    25,000 and 5,000 shares, respectively, of restricted common stock
                    by the
                    Company’s Board of Directors. The shares had a one year restriction and
                    became vested on October 1, 2005. The closing price of the Company’s
                    common stock on October 1, 2004 was $1.50 per share. As of September
                    30,
                    2005, the value of Mr. Parrish’s restricted stock was $83,000, the value
                    of Dr. Leeper’s restricted stock was $41,500 and the value of Mr. Pope’s
                    restricted stock was $8,300 based on a value of $1.66 per share,
                    the
                    closing price of the Company’s common stock on that date. The shares of
                    restricted stock have all the rights of the Company's common
                    stock,
                    including voting and dividend
                    rights.
 
 (2)
                On
                    October 1, 2003, Mr. Parrish, Dr. Leeper, and Mr. Pope were issued
                    50,000,
                    20,000 and 5,000 shares, respectively, of restricted common stock
                    by the
                    Company’s Board of Directors. The shares had a one year restriction and
                    became vested on October 1, 2004. The closing price of the Company’s
                    common stock on October 1, 2003 was $2.35 per share. As of September
                    30,
                    2005, the value of Mr. Parrish’s restricted stock was $83,000, the value
                    of Dr. Leeper’s restricted stock was $33,200, and the value of Mr. Pope’s
                    restricted stock was $8,300 based on a value of $1.66 per share,
                    the
                    closing price of the Company’s common stock on that date. The shares of
                    restricted stock have all the rights of the Company's common
                    stock,
                    including voting and dividend
                    rights.
  (3)
                On
                    February 12, 2003, Mr. Parrish and Dr. Leeper were issued 40,000
                    and
                    28,000 shares, respectively, of restricted common stock by the
                    Company's
                    Board of Directors. The shares had a one year restriction and
                    became
                    vested on February 12, 2004. The closing price of the Company's
                    common
                    stock on February 12, 2003 was $1.65 per share. As of September
                    30, 2005,
                    the value of Mr. Parrish's restricted stock was $66,400 and the
                    value of
                    Dr. Leeper's restricted stock was $46,480 based on a value of
                    $1.66 per
                    share, the closing price of the Company's common stock on that
                    date. 
                    The shares of restricted stock have all the rights of the Company's
                    common
                    stock, including voting and dividend
                    rights.
 
 
 26
 
 
 (4)
                On
                    April 22, 2003, Mr. Parrish, Dr. Leeper and Mr. Pope were issued
                    options
                    to purchase shares of the Company's common stock as part of an
                    exchange
                    for the cancellation of previously issued common stock options,
                    which
                    cancellation occurred on September 26, 2002. The common stock
                    options have
                    an exercise price of $1.40 per share, which was the closing stock
                    price of
                    the Company's common stock on April 22, 2003. The options vest
                    pro rata
                    (one thirty-sixth) on the first of each month for 36 months following
                    the
                    date of the grant, commencing on May 1, 2003 and ending on April
                    1,
                    2006.
 
 (5)
                Mr.
                    Pope’s salary and bonus are paid in U.K. pounds. Amounts shown for
                    Mr.
                    Pope’s salary and bonus are based on the 12- month average exchange
                    rate
                    for each year, which was 1.85 U.S. dollars per U.K. pound in
                    fiscal 2005,
                    was 1.79 U.S. dollars per U.K. pound in fiscal 2004 and 1.60
                    U.S. dollars
                    per U.K. pound in fiscal 2003.
  Stock
          Options
  No
          stock
          options were granted to the named executive officers of the Company during
          the
          fiscal years ended September 30, 2005.
 
 The
          following table provides information regarding the value of unexercised
          options
          held by the named executive officers at September 30, 2005. No named executive
          officer exercised any option during the fiscal year ended September 30,
          2005.
  AGGREGATED
          FISCAL YEAR END OPTION VALUES
 
 **Name**
                
                **Number
                    of Securities Underlying**
                  **Unexercised
                    Options at Fiscal Year End (#)****Exercisable/Unexercisable**
                
                **Value
                    of Unexercised In-the-Money**
                  **Options
                    at Fiscal Year End ($)**
                  **Exercisable/Unexercisable
                    (1)**O.B.
                    Parrish
                
                373,777
                    / 90,223
                
                97,182
                    / 23,458Mary
                    Ann Leeper
                
                636,388
                    / 153,612
                
                165,460
                    / 39,940Michael
                    Pope
                
                298,055
                    / 71,945
                
                77,494
                    / 18,706
  (1)  Calculated
          based upon a closing sale price of $1.66 on September 30, 2005.
 
 27
 
 Director
          Compensation and Benefits
  Directors
          who are officers of the Company do not receive compensation for serving
          in such
          capacity. Individual directors who are not officers of the Company receive
          $1,000 for attendance in person at each Board meeting or meeting of a committee
          of which he or she is a member. In addition, each director who is not an
          employee of the Company receives an automatic grant of options to purchase
          30,000 shares of common stock under the Company's Outside Director Stock
          Option
          Plan. Stephen M. Dearholt, Richard E. Wenninger, Mary Margaret Frank, Ph.D.,
          James R. Kerber, David R. Bethune and Michael R. Walton were awarded 30,000
          options each October 21, 2004. All of the options have an exercise price
          of
          $1.66 per share and vest pro rata over a thirty-six month period commencing
          November 22, 2004 and ending on October 22, 2007.
 
 Employment
          and Change of Control Agreements
  The
          Company 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 notice of termination is given. The employment
          agreement
          has automatically renewed for a term ending on April 30, 2006, and Dr.
          Leeper
          has given notice that her employment agreement will terminate as of
          April 30, 2006. Dr. Leeper plans to continue as an employee of the Company
          and a senior strategic adviser focusing on the commercialization of FC2
          and we
          are negotiating the terms of this arrangement. The Company may terminate
          the
          employment agreement at any time for cause. If Dr. Leeper's employment
          is
          terminated without cause, the Company is 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 the date of termination
          or
          the remainder of the then applicable term of the employment agreement.
          In
          addition, the Company is obligated to continue Dr. Leeper's participation
          in any
          of the Company's health, life insurance or disability plans in which Dr.
          Leeper
          participated prior to her termination of employment. Dr. Leeper's employment
          agreement provides 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 Company's 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 2003, Dr. Leeper's base salary
          was
          $225,000 per year. For fiscal 2004, the Board of Directors raised her base
          salary to $250,000 per year. Dr. Leeper's base salary for fiscal 2005 remained
          at $250,000 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 received a cash bonus.
 
 28
 
 Effective
          October 1, 2005, the Company entered into Amended and Restated Change of
          Control Agreements with each of O.B. Parrish, its Chairman and Chief Executive
          Officer, Mary Ann Leeper, its President and Chief Operating Officer, and
          Michael
          Pope, its Vice President. These agreements essentially act as springing
          employment agreements which provide that, upon a change of control, as
          defined
          in the agreement, the Company 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 the Company equal to the amount of compensation
          remaining to be paid to the executive under the agreement for the balance
          of the
          three-year term.
  Item
          11. Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder Matters.
  The
          following table sets forth information regarding the beneficial ownership
          of the
          Company's common stock as of December 19, 2005 with respect to (a) each
          person
          known to the Company to own beneficially more than 5% of the Company's
          common
          stock, (b) each named executive officer and each director of the Company
          and (c)
          all directors and executive officers as a group.
 
 The
          Company has determined beneficial ownership in accordance with the rules
          of
          the SEC. Unless otherwise indicated, the persons and entities included in
          the table have sole voting and investment power with respect to all shares
          beneficially owned, except to the extent authority is shared by spouses
          under
          applicable law. Shares of the Company's common stock subject to options
          or
          warrants that are either currently exercisable or exercisable within 60
          days of
          December 19, 2005 are treated as outstanding and beneficially owned by
          the
          holder for the purpose of computing the percentage ownership of the holder.
          However, these shares are not treated as outstanding for the purpose of
          computing the percentage ownership of any other person.
 
 29
 
 
 **Shares
                    Beneficially Owned****Name
                    and Address of Beneficial Owner (1)**
                
                
                **Number**
                
                
                **Percent**O.B.
                    Parrish (2)
                
                
                1,141,123
                
                
                4.7
                %William
                    R. Gargiulo, Jr. (3)
                
                
                131,944
                
                
                *Mary Ann
                    Leeper, Ph.D. (4)
                
                
                945,611
                
                
                3.9
                %Stephen
                    M. Dearholt (5)
                
                
                4,391,763
                
                
                17.0
                %David
                    R. Bethune (6)
                
                
                148,888
                
                
                *James
                    R. Kerber (7)
                
                
                551,766
                
                
                2.3
                %Michael
                    R. Walton (8)
                
                
                792,288
                
                
                3.3
                %Ri     Richard
                    E. Wenninger (9)
                
                
                3,041,251
                
                
                12.8
                %Mary
                    Margaret Frank (10)
                
                
                12,500
                
                
                
                *Michael
                    Pope (11)
                
                
                372,189
                
                
                1.6
                %Gary
                    Benson (12)
                
                
                1,538,258
                
                
                6.2
                %All directors,
                    nominees and executive officers,as
                    a group
                  (12
                    persons) (2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(13)
                
                
                11,596,684
                
                
                41.4
                %
 _______________
 
 *  Less
          than
          1 percent.
 
 (1)
                Unless
                    otherwise indicated, the address of each beneficial owner is
                    515 North
                    State Street, Suite 2225, Chicago, IL 60610; the address of
                    Mr. Dearholt is 759 North Milwaukee Street, Suite 316, Milwaukee,
                    WI
                    53202; the address of Mr. Kerber is 8547 East Arapahoe Road, #J217,
                    Englewood, CO 80112; the address of Mr. Walton is 1626 North Prospect
                    Avenue, No. 2310, Milwaukee, WI 53202; the address of Mr. Wenninger
                    is 855 West Dean Road, Milwaukee, WI 53217; the address of Dr.
                    Frank is
                    P.O. Box 6550, Charlottesville, VA 22906 and the address of
                    Mr. Benson is Regency Athletic Club, 1300 Nicollet Mall, Suite 600,
                    Minneapolis, MN 55403.
 
 (2)
                Includes
                    233,501 shares owned by Phoenix Health Care of Illinois, Inc.
                    ("Phoenix").
                    Under the rules of the SEC, Mr. Parrish may be deemed to have
                    voting and
                    dispositive power as to such shares since Mr. Parrish is an officer,
                    director and the majority shareholder of Phoenix. Also includes
                    207,900
                    shares of common stock owned directly by Mr. Parrish, 225,000
                    shares of
                    common stock owned by the Geneva O. Parrish 1996 Living Trust
                    of which Mr.
                    Parrish is beneficiary and for which Mr. Parrish may be deemed to
                    share voting and investment power 438,222 shares of common stock
                    subject
                    to stock options held by Mr. Parrish and 36,500 shares under
                    common stock
                    purchase warrants issued to Mr. Parrish.
 
 (3)
                Consists
                    of 37,500 shares of common stock owned directly by Mr. Gargiulo
                    and 94,444
                    shares of common stock subject to stock options held by Mr. Gargiulo.
 
 (4)
                Consists
                    of 199,500 shares of common stock owned directly by Dr. Leeper and
                    746,111 shares of common stock subject to stock options held
                    by Dr.
                    Leeper.
 
 
 30
 
 (5)
                Includes
                    1,414,855 shares owned directly by Mr. Dearholt. Also includes
                    69,500
                    shares held by the Dearholt, Inc. Profit Sharing Plan, 26,500
                    shares held
                    in a self-directed IRA, 275,820 shares held by the Mary C. Dearholt
                    Trust
                    of which Mr. Dearholt, a sibling and his mother are trustees,
                    18,100
                    shares held by Mr. Dearholt's minor child, and 418,100 shares
                    held by the
                    John W. Dearholt Trust of which Mr. Dearholt is a co-trustee
                    with a
                    sibling. Mr. Dearholt shares the power to vote and dispose of 693,920
                    shares of common stock held by the Mary C. Dearholt Trust and
                    the John W.
                    Dearholt Trust. Mr. Dearholt has sole power to vote and dispose of
                    the remaining shares of common stock. Also includes 116,388 shares
                    of
                    common stock subject to stock options and common stock purchase
                    warrants
                    for 2,052,500 shares of common stock.
 
 (6)
                Consists
                    of 32,500 shares of common stock owned directly by Mr. Bethune and
                    116,388 shares of common stock subject to stock options held
                    by Mr.
                    Bethune.
 
 (7)
                Includes
                    363,710 shares of common stock owned directly by Mr. Kerber and
                    88,056
                    shares of common stock subject to stock options held by Mr. Kerber.
                    Also
                    includes 100,000 shares subject to exercise of common stock purchase
                    warrants.
 
 (8)
                Consists
                    of (a) 353,448 shares of common stock owned directly by Mr. Walton,
                    (b) 59,722 shares of common stock subject to stock options held
                    by Mr.
                    Walton, (c) 30,900 shares subject to exercise of common stock
                    purchase
                    warrants held by Mr. Walton, (d) 112,760 shares of Common Stock
                    held by a
                    trust of which Mr. Walton is trustee and (e) 234,958 shares of
                    common
                    stock held by Sheboygan County Broadcasting Co., Inc. ("Sheboygan").
                    Under
                    the rules of the SEC, Mr. Walton may be deemed to have voting
                    and
                    dispositive power as to the shares held by Sheboygan since Mr.
                    Walton is
                    an officer, director and shareholder of Sheboygan.
 
 (9)
                Consists
                    of (a) 2,653,751 shares of common stock owned directly by Mr.
                    Wenninger,
                    (b) 5,000 shares of common stock held by Mr. Wenninger's spouse
                    (Mr. Wenninger disclaims beneficial ownership of the shares held by
                    his spouse), (c) 250,000 shares of Common Stock held by a trust
                    of which
                    Mr. Walton is trustee, (d) Also includes 12,500 shares of common
                    stock
                    subject to stock options and (e) common stock purchase warrants
                    for
                    120,000 shares of common stock.
  (10)
                  Consists
                      of 12,500 shares of common stock subject
                      to stock options held by Dr. Frank.
 (11)
                Consists
                    of 22,745 shares of common stock owned directly by Mr. Pope and
                    349,444
                    shares of common stock subject to stock
                    options.
 
 (12)
                Consists
                    of 375,166 shares of common stock and warrants to purchase 1,100,000
                    shares of common stock owned by Goben Enterprises, LP, a limited
                    partnership of which Mr. Benson is a general partner. Also includes
                    63,092 shares of preferred stock.
 
 (13)
                Also
                    includes 3,750 shares of common stock owned directly by Mr. Zic
                    and 63,611
                    shares of common stock subject to stock options held by Mr.
                    Zic.
  
 31
 
 The
          above
          beneficial ownership information is based on information furnished by the
          specified person and is determined in accordance with Rule 13d-3 under
          the
          Securities Exchange Act of 1934, as amended, as required for purposes of
          this
          annual report. This information should not be construed as an admission
          of
          beneficial ownership for other purposes.
 
 Equity
          Compensation Plan Information
 
 The
          following table summarizes share information, as of September 30, 2005, for
          the Company's equity compensation plans and arrangements. These plans and
          arrangements were not required to be approved by the Company's shareholders,
          and, accordingly, none of these plans or arrangements have been approved
          by the
          Company's shareholders.
 
 EQUITY PLAN CATEGORY
                    
                    NUMBER
                        OF COMMON SHARES TO
                      BE
                        ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS, AND
                        RIGHTS
                    
                    NUMBER
                        OF WEIGHTED-AVERAGE EXERCISE PRICE OF
                      OUTSTANDING
                        OPTIONS, WARRANTS, AND RIGHTS
                    
                    COMMON
                        SHARES
                      AVAILABLE
                        FOR
                      FUTURE
                        ISSUANCE UNDER COMPENSATION PLANSEquity
                          compensation plans approved by shareholders
                    
                    -
                    
                    -
                    
                    -Equity
                          compensation plans not approved by shareholders
                    
                    2,791,880
                    
                    $
                        1.38
                    
                    174,528Total
                    
                    2,791,880
                    
                    $
                        1.38
                    
                    174,528
 The
              Company's equity compensation plans include the 1997 Stock Option Plan,
              the 1997
              Outside Director Stock Option Plan, special option grants to three
              persons and
              warrant issuances to nine persons. All of the shares available for
              future
              issuance are under the Company's stock option plans. Shares of the
              Company's
              common stock are authorized for issuance under the 1997 Stock Option
              Plan to
              employees, officers and key executives of the Company and its subsidiaries
              and
              shares of the Company's common stock are authorized for issuance under
              the 1997
              Outside Director Stock Option Plan to outside directors of the Company.
              The
              Board of Directors administers both plans. Options granted are nonqualified
              stock options under the Internal Revenue Code. Options expire at such
              time as
              the Board of Directors determines, provided that no stock option may
              be
              exercised later than the tenth anniversary of the date of its grant.
              Options
              cannot be exercised until the vesting period, if any, specified by
              the Board of
              Directors. Options are not transferable other than by will or the laws
              of
              descent and distribution, and may be exercised during the life of the
              participant only by him or her. The option price per share is determined
              by the
              Board of Directors, but cannot be less than 100% of the fair market
              value of the
              Common Stock on the date such option is granted.
 
 The
          Company issued two options to purchase an aggregate of 150,000 shares of
          common
          stock to a consultant with an exercise price of $0.66 per share for each
          option
          and an expiration date of December 31, 2011 as to 50,000 shares and
          June 30, 2012 as to 100,000 shares.
  On
            September 19, 1997, the Company issued warrants to purchase 30,900 shares
            of common stock to a financial consultant with an exercise price of $2.50
            per
            share and an expiration date of September 19, 2006.
 32
  Item
          12. Certain Relationships and Related
          Transactions.
 
 Between
          September 2004 and January 2005, the Company conducted a program to induce
          the
          holders of the Company’s outstanding common stock purchase warrants to exercise
          their warrants. Pursuant to this program, the Company offered an incentive
          to
          such holders providing for issuance of (1) shares of the Company’s common stock
          equal to 10% of the aggregate number of common stock purchase warrants
          exercised
          or (2) new common stock purchase warrants equal to 20% of the aggregate
          number
          of outstanding warrants exercised containing an exercise price per share
          equal
          to the closing price of the Company’s common stock as reported on the OTC
          Bulletin Board on the date the holder committed to exercise the outstanding
          warrants. Under this incentive program, one investor exercised 500,000
          warrants
          as of September 30, 2004 and received 550,000 shares of common stock which
          includes 50,000 incentive shares. Between October 2004 and January 2005
          four
          investors opted to exercise 1,000,000 warrants and receive 1,100,000 shares
          of
          common stock which includes 100,000 incentive shares and two investors
          opted to
          exercise 1,200,000 warrants and received 1,200,000 shares of common stock
          and
          240,000 incentive warrants with an exercise price in each case of $1.50
          per
          share and an expiration date of November 23, 2007. Among the seven persons
          participating in this program were three of the Company’s directors (Stephen M.
          Dearholt, Richard E. Wenninger and O.B. Parrish). The Company received
          aggregate
          proceeds of 2.5 million from the exercise of the outstanding
          warrants.
 
 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.
 
 33
 
 Item
          13. Exhibits.
 
 EXHIBIT
                    NO.
                DESCRIPTION3.1
                Amended
                    and Restated Articles of Incorporation of the Company.(19)3.2
                Articles
                    of Amendment to the Amended and Restated Articles of Incorporation
                    of the
                    Company increasing the number of authorized shares of common
                    stock to
                    27,000,000 shares.(25)3.3
                Articles
                    of Amendment to the Amended and Restated Articles of Incorporation
                    of the
                    Company increasing the number of authorized shares of common
                    stock to
                    35,500,000 shares.(32)3.4
                Articles
                    of Amendment to the Amended and Restated Articles of Incorporation
                    of the
                    Company increasing the number of authorized shares of common
                    stock to
                    38,500,000 shares.(33)3.5
                Articles
                    of Amendment to the Amended and Restated Articles of Incorporation
                    of the
                    Company designating the terms and preferences for the Class A
                    Preferred
                    Stock - Series 3.(35)3.6
                Amended
                    and Restated By-Laws of the Company.(3)4.1
                Amended
                    and Restated Articles of Incorporation, as amended (same as
                    Exhibits 3.1, 3.2, 3.3 and 3.4).
 4.2
                Articles
                    II, VII and XI of the Amended and Restated By-Laws of the Company
                    (included in Exhibit 3.6).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
                Reality
                    Female Condom Clinical Trial Data Agreement between the Company
                    and Family
                    Health International dated September 24, 1992.(6)10.4
                Trademark
                    License Agreement for Reality Trademark.(7)10.5
                Office
                    space lease between the Company and John Hancock Mutual Life
                    Insurance
                    Company dated June 1, 1994.(8)10.6
                Employment
                    Agreement dated September 10, 1994 between the Company and
                    Dr. Mary Ann Leeper.(9)10.7
                1994
                    Stock Option Plan.(10)10.8
                Investor
                    relations and development services Consulting Agreement between
                    the
                    Company and C.C.R.I. Corporation dated March 13, 1995.(11)10.9
                Consultant
                    Warrant Agreement dated March 13, 1995 between the Company and
                    C.C.R.I. Corporation, as amended on April 22, 1996.(13)10.10
                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.(12)10.11
                Outside
                    Director Stock Option Plan.(13)10.12
                Exclusive
                    Distribution Agreement between Chartex International Plc and
                    Taiho
                    Pharmaceutical Co., Ltd. dated October 18, 1994.(13)10.13
                Supply
                    Agreement between Chartex International Plc and Deerfield Urethane,
                    Inc.
                    dated August 17, 1994.(13)10.14
                Employment
                    Letter dated February 28, 1990 from Chartex Resources Ltd. to Michael
                    Pope and Board Amendments thereto.(13)
 
 
 34
 
 
 10.15
                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.(13)10.16
                Letter
                    Amendment to Asset Sale Agreement dated April 29, 1996 between the
                    Company and Dowty Seals Limited and Chartex International Plc.(13)10.17
                Form
                    of Warrant issued by the Company to certain foreign investors
                    as of
                    September 12, 1996.(14)10.18
                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.(15)10.19
                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.(15)10.20
                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.(15)10.21
                Form
                    of Registration Rights Agreement between the Company and certain
                    private
                    placement investors dated as of June 1, 1999.(16)10.22
                Amendment
                    to Registration Rights Agreement between the Company and certain
                    private
                    placement investors dated as of June 1, 1999.(16)10.23
                $1 million
                    Convertible Debenture issued by the Company to Gary Benson dated
                    May 19, 1999.(16)10.24
                $100,000
                    Convertible Debenture issued by the Company to Daniel Bishop
                    dated
                    June 3, 1999.(16)10.25
                $100,000
                    Convertible Debenture issued by the Company to Robert Johander
                    dated
                    June 3, 1999.(16)10.26
                $100,000
                    Convertible Debenture issued by the Company to Michael Snow dated
                    June 3, 1999.(16)
 10.27
                $100,000
                    Convertible Debenture issued by the Company to W.G. Securities
                    Limited Partnership dated June 3, 1999.(16)10.28
                Warrant
                    to purchase 1,250,000 shares of the Company's common stock issued
                    to Gary
                    Benson on May 19, 1999.(16)10.29
                Warrant
                    to purchase 125,000 shares of the Company's common stock issued
                    to Daniel
                    Bishop on June 3, 1999.(16)10.30
                Warrant
                    to purchase 125,000 shares of the Company's common stock issued
                    to Robert
                    Johander on June 3, 1999.(16)10.31
                Warrant
                    to purchase 250,000 shares of the Company's common stock issued
                    to Michael
                    Snow on June 3, 1999.(16)10.32
                Warrant
                    to purchase 125,000 shares of the Company's common stock issued
                    to
                    W.G. Securities Limited Partnership on June 3, 1999.(16)10.33
                Form
                    of Common Stock Purchase Warrant to acquire 337,500 shares issued
                    to
                    R.J. Steichen as placement agent.(16)10.34
                Lease
                    Agreement among Chartex Resources Limited, P.A.T. (Pensions)
                    Limited and
                    The Female Health Company.(17)10.35
                Agreement
                    dated March 14, 1997, between the Joint United Nations Programme on
                    HIV/AIDS and Chartex International PLC.(18)10.36
                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.(20)10.37
                1997
                    Stock Option Plan.(18)10.38
                Employee
                    Stock Purchase Plan.(18)10.39
                Agreement
                    dated September 29, 1997, between Vector Securities International and
                    The Female Health Company.(18)10.40
                Private
                    Equity Line of Credit Agreement between the Company and Kingsbridge
                    Capital Limited dated November 19, 1998.(2)10.41
                Registration
                    Rights Agreement between the Company and Kingsbridge Capital
                    Limited dated
                    as of November 19, 1998.(2)
 
 
 35
 
 
 10.42
                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)10.43
                Agreement
                    between Kingsbridge Capital Limited and the Company dated
                    February 12, 1999.(22)10.44
                Consulting
                    Agreement between the Company and Kingsbridge Capital Limited
                    dated
                    February 12, 1999.(22)10.45
                Registration
                    Rights Agreement between Kingsbridge Capital Limited and the
                    Company dated
                    February 12, 1999.(22)10.46
                Warrant
                    for 100,000 shares of the Company's common stock issued to Kingsbridge
                    Capital Limited as of February 12, 1999.(22)10.47
                Company
                    Promissory Note to Stephen M. Dearholt for $250,000 dated
                    February 12, 2000 and related Warrants.(23)10.48
                Company
                    Promissory Note to O.B. Parrish for $50,000 dated February 18,
                    2000 and related Warrants.(23)10.49
                Company
                    Promissory Note to Stephen M. Dearholt for $1 million dated
                    March 25, 2000 and related Warrants.(23)10.50
                Stock
                    Purchase Agreement, dated as of June 14, 2000, between The Female
                    Health Company and The John W. Dearholt Trust.(24)10.51
                Warrant
                    to purchase 250,000 shares of the Company's common stock issued
                    to Gary
                    Benson on May 19, 2000.(24)10.52
                Warrant
                    to purchase 25,000 shares of the Company's common stock issued
                    to Daniel
                    Bishop on June 3, 2000.(24)10.53
                Warrant
                    to purchase 25,000 shares of the Company's common stock issued
                    to Robert
                    Johander on June 3, 2000.(24)10.54
                Warrant
                    to purchase 50,000 shares of the Company's common stock issued
                    to Michael
                    Snow on June 3, 2000.(24)10.55
                Warrant
                    to purchase 25,000 shares of the Company's common stock issued
                    to
                    W.G. Securities Limited Partnership on June 3, 2000.(24)10.56
                Stock
                    Purchase Agreement, dated as of June 14, 2000, between the Company
                    and The John W. Dearholt Trust.(24)
 10.57
                Exclusive
                    Distribution Agreement, dated as of October 1, 2000, between the
                    Company and Mayer Laboratories, Inc.(25)10.58
                Amended
                    and Restated Convertible Debenture issued by the Company to
                    Richard E. Wenninger dated March 30, 2001.(26)10.59
                Amended
                    and Restated Promissory Note to Stephen M. Dearholt for $250,000
                    dated
                    February 12, 2001 and related warrants.(5)10.60
                Amended
                    and Restated Promissory Note to O.B. Parrish for $50,000 dated
                    February 18, 2001 and related warrants.(5)10.61
                Amended
                    and Restated Promissory Note to Stephen M. Dearholt for $1,000,000
                    dated March 25, 2001 and related warrants.(26)10.62
                Loan
                    Agreement, dated as of May 18, 2001, between the Company and
                    Heartland Bank.(26)10.63
                Registration
                    Rights Agreement, dated as of May 18, 2001, between the Company and
                    Heartland Bank.(26)10.64
                Warrant
                    dated May 18, 2001 from the Company to Heartland Bank.(27)10.65
                Warrants
                    dated May 18, 2001 from the Company to Stephen M. Dearholt.(27)10.66
                Warrant
                    dated May 18, 2001 from the Company to James R. Kerber.(27)10.67
                Warrant
                    dated May 18, 2001 from the Company to Tom Bodine.(27)10.68
                Warrant
                    dated May 18, 2001 from the Company to The Geneva O. Parrish
                    1996 Living Trust.(27)10.69
                Warrants
                    dated May 23, 2001 from the Company to Richard E. Wenninger.(27)10.70
                Registration
                    Rights Agreement, dated as of May 18, 2001, among the Company and
                    certain guarantors.(27)10.71
                Exclusive
                    Distribution Agreement, dated October 18, 2001, between the Company
                    and Total Access Group.(28)10.72
                Memorandum
                    of Understanding, dated as of November 12, 2001, between the Company
                    and Hindustan Latex Limited.(29)10.73
                Warrant
                    dated December 18, 2001 from the Company to Dr. Jerry Kinder(30)10.74
                Warrant
                    dated December 20, 2001 from the Company to Tom Bodine(30)
 
 
 36
 
 
 10.75
                Warrant
                    dated February 20, 2002 from the Company to Gerald Stein(30)10.76
                Amended
                    and Restated Promissory Note to Stephen M. Dearholt for $1,000,000
                    dated March 25, 2002 and related warrants.(31)10.77
                Amended
                    and Restated Promissory Note to Stephen M. Dearholt for $1,000,000
                    dated
                    March 25, 2003 and related warrants.(34)10.78
                Amended
                    and Restated Change of
                    Control Agreement between the Company and O.B. Parrish dated
                    October 1, 2005.10.79
                Amended
                    and Restated Change of
                    Control Agreement between the Company and Mary Ann Leeper dated
                    October 1, 2005.10.80
                Amended
                    and Restated Change of
                    Control Agreement between the Company and Michael Pope dated
                    October 1, 2005.21
                Subsidiaries
                    of Registrant.(21)23.1
                Consent
                  of McGladrey & Pullen,
                  LLP.24.1
                Power
                    of Attorney (included as part of the signature page
                    hereof).31.1
                Certification
                    of Chief Executive
                    Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                    2002.31.2
                Certification
                    of Principal Financial
                    Officer pursuant to section 302 of the Sarbanes-Oxley Act of
                    2002.32.1
                Certification
                    of Chief Executive
                    Officer and Principal Financial Officer pursuant to 18 U.S.C.
                    Section 1350
                    (Section 906 of the Sarbanes-Oxley Act of 2002).(36)
 
 ___________________
 
 (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-QSB.
 (5) Incorporated
            herein by reference to the Company's March 31, 2001 Form 10-QSB.
 
 (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.
 37
  (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 June 30, 1995 Form 10-Q.
 
 (13)
                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.
 
 (14) Incorporated
          herein by reference to the Company's 1996 Form 10-K.
 
 (15) Incorporated
          herein by reference to the Company's March 31, 1999 Form 10-QSB.
 
 (16)        
          Incorporated herein by reference to the Company's June 30, 1999 Form
          10-QSB.
 
 (17) Incorporated
          herein by reference to the Company's December 31, 1996 Form 10-QSB.
 
 (18)
                Incorporated
                    herein by reference to the Company's Form 10-KSB/A-2 for the
                    year ended
                    September 30, 1997.
 
 (19)
                Incorporated
                    herein by reference to the Company's Form SB-2 Registration Statement
                    filed with the Securities and Exchange Commission on October 19,
                    1999.
 
 (20) Incorporated
          herein by reference to the Company's March 31, 1997 Form 10-QSB.
 
 (21)
                Incorporated
                    herein by reference to the Company's Form 10-KSB for the year
                    ended
                    September 30, 1999.
 
 
 38
 
 (22) Incorporated
          herein by reference to the Company's December 31, 1998 Form 10-QSB.
 
 (23) Incorporated
          herein by reference to the Company's March 31, 2000 Form 10-QSB.
 
 (24) Incorporated
          herein by reference to the Company's June 30, 2000 Form 10-QSB.
 
 (25)
                Incorporated
                    herein by reference to the Company's Form SB-2 Registration Statement
                    filed with the Securities and Exchange Commission on September 21,
                    2000.
 
 (26) Incorporated
          herein by reference to the Company's June 30, 2001 Form 10-QSB.
 
 (27)
                Incorporated
                    herein by reference to the Company's Form SB-2 Registration Statement
                    filed on November 13, 2001.
 
 (28)
                Incorporated
                    herein by reference to Amendment No. 1 to the Company's Form
                    SB-2
                    Registration Statement filed on February 6, 2002.
 
 (29)
                Incorporated
                    herein by reference to Amendment No. 2 to the Company's Form
                    SB-2
                    Registration Statement filed on February 27, 2002.
 
 (30)
                Incorporated
                    herein by reference to Amendment No. 3 to the Company's Form
                    SB-2
                    Registration Statement filed on March 18, 2002.
 
 (31) Incorporated
          herein by reference to the Company's March 31, 2002 Form 10-QSB.
  (32)
                Incorporated
                    by reference herein to the Company's Form SB-2 Registration Statement
                    filed on September 6, 2002.
  (33) Incorporated
          herein by reference to the Company's March 31, 2003 Form 10-QSB.
  (34) Incorporated
          herein by reference to the Company's September 30, 2003 Form
          10-KSB.
 
 (35) Incorporated
          herein by reference to the Company's March 31, 2004 Form
          10-QSB.
 
 (36)
                This
                    certification is not "filed" for purposes of Section 18 of the
                    Securities
                    Exchange Act of 1934, as amended, or incorporated by reference
                    into any
                    filing under the Securities Exchange Act of 1933, as amended,
                    or the
                    Securities Exchange Act of 1934, as
                    amended.
 
  
 39
  Item
          14.  Principal Accountant Fees and
          Services.
  The
          following table summarizes the fees the Company paid for audit and nonaudit
          services rendered by the Company's independent auditors, McGladrey & Pullen,
          LLP, during fiscal years 2005 and 2004:
 
 **Service
                    Type**
                **Fiscal
                    2005**
                
                **Fiscal
                    2004**Audit
                    Fees (1)
                $
                189,101
                
                $
                172,588Audit-Related
                    Fees (2)
                
                205,094
                
                
                --Tax
                    Fees (3)
                
                20,723
                
                
                32,873All
                    Other Fees
                
                --
                
                
                --Total
                    Fees Billed
                $
                414,918
                
                $
                205,461
 
 ________________
 
 (1)
                Consists
                    of fees for professional services rendered in connection with
                    the audit of
                    the Company's financial statements for the fiscal years ended
                    September 30, 2005 and September 30, 2004; the reviews of the
                    financial statements included in each of the Company's quarterly
                    reports
                    on Form 10-QSB during those fiscal years; and consents and assistance
                    with
                    documents filed by the Company with the
                    SEC.
 (2)
                      Consists
                          of activities in support of the Company's Sarbanes-Oxley
                          Section 404
                          implementation project and costs incurred for consultation
                          on various
                          accounting matters in support of the Company's financial
                          statements.
 (3)
                  For
                        the fiscal years ended September 30, 2004 and September 30, 2005
                        consists of fees for professional services rendered in connection
                        with
                        preparation of federal and state income tax returns, including
                        foreign tax
                        filings, and assistance with foreign tax
                        structuring.
 
 The
          Audit
          Committee of the Board of Directors of the Company considered that the
          provision
          of the services and the payment of the fees described above are compatible
          with
          maintaining the independence of McGladrey & Pullen, LLP.
 
 The
          Audit
          Committee is responsible for reviewing and pre-approving any non-audit
          services
          to be performed by the Company's independent auditors. The Audit Committee
          has
          delegated its pre-approval authority to the Chairman of the Audit Committee
          to
          act between meetings of the Audit Committee. Any pre-approval given by
          the
          Chairman of the Audit Committee pursuant to this delegation is presented
          to the
          full Audit Committee at its next regularly scheduled meeting. The Audit
          Committee or Chairman of the Audit Committee reviews and, if appropriate,
          approves non-audit service engagements, taking into account the proposed
          scope
          of the non-audit services, the proposed fees for the non-audit services,
          whether
          the non-audit services are permissible under applicable law or regulation
          and
          the likely impact of the non-audit services on the independence of the
          independent auditors.
 
 Each
          new
          engagement of the Company's independent auditors to perform non-audit services
          set forth in the table above has been approved in advance by the Audit
          Committee
          or the Chairman of the Audit Committee pursuant to the foregoing
          procedures.
 
 
 40
 
 SIGNATURES
 
 In
          accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
          caused
          this report to be signed on its behalf by the undersigned, thereunto duly
          authorized.
 
 
 Date:
          December 29,
          2005 THE
          FEMALE HEALTH COMPANY
 
 BY:  
          /s/ O.B.
          Parrish
 O.B.
          Parrish, Chairman,
 Chief
          Executive Officer
 
 BY:  
          /s/ Robert R.
          Zic
 Robert
          R.
          Zic,
 Principal
          Accounting Officer
 
 
 POWER
          OF
          ATTORNEY
 
 Each
          person whose signature appears below hereby appoints O.B. Parrish and Robert
          R.
          Zic, and each of them individually, his true and lawful attorney-in-fact,
          with
          power to act with or without the other and with full power of substitution
          and
          resubstitution, in any and all capacities, to sign any or all amendments
          to the
          Form 10-KSB and file the same with all exhibits thereto, and other documents
          in
          connection therewith, with the Securities and Exchange Commission, granting
          unto
          said attorneys-in-fact and agents full power and authority to do and perform
          each and every act and thing requisite and necessary to be done in and
          about the
          premises, as fully to all intents and purposes as he might or could do
          in
          person, hereby ratifying and confirming all that said attorneys-in-fact
          and
          agents, or their substitutes, may lawfully cause to be done by virtue hereof.
 
 In
          accordance with the Exchange Act, this Report has been signed below by
          the
          following persons on behalf of the Registrant and in the capacities and
          on the
          date indicated.
 
 Signature
                Title
                Date/s/
O.B.
                  Parrish
                Chairman
                    of the Board Chief Executive Officer and Director
                December 29,
                    2005O.B.
                    Parrish
 
 41
 
 
 /s/
                  Mary Ann Leeper
                President,
                    Chief Operating officer and Director
                December
                    29, 2005Mary
                    Ann Leeper, Ph.D./s/
                  Robert Zic
                Principal
                    Accounting Officer
                December 29,
                    2005Robert
                    Zic/s/
                    William R. Gargiulo
                Secretary
                    and Director
                December 27,
                    2005William
                    R. Gargiulo/s/
                  David R. Bethune
                Director
                December 29,
                    2005David
                    R. Bethune
 Director
                December ___,
                    2005Stephen
                    M. Dearholt/s/
                  Michael R. Walton
                Director
                December 28,
                    2005Michael
                    R. Walton/s/
                  James R. KerberJames
                    R. Kerber
                Director
                December 27,
                    2005Richard
                    E. Wenninger
                Director
                December ___,
                    2005/s/
                  Mary Margaret FrankMary
                    Margaret Frank
                Director
                December 27,
                    2005
  42
  **The
          Female Health Company and Subsidiaries**
 **Index
          to Consolidated Financial Statements**
   Document
                  Page
                      No.Audited
                      Consolidated Financial Statements.Report
                      of McGladrey & Pullen, LLP, Independent
                      Registered Public Accounting Firm.
                  F-1Consolidated
                      Balance Sheet as of September 30,
                      2005.
                  F-2Consolidated
                      Statements of Operations for the
                      years ended
                    September
                      30, 2005 and 2004.
                  F-3Consolidated
                      Statements of Stockholders’ Equity
                      for
                        the years ended September 30, 2005 and
                        2004.
                  F-4
                      and F-5Consolidated
                      Statements of Cash Flows for the years
                      ended
                      September
                        30, 2005 and 2004.
                  F-6
                      and F-7Notes
                      to Consolidated Financial
                      Statements.
                  F-8
                      through F-21
  
   
 **Report
          of Independent Registered Public Accounting
          Firm**
 
 
 To
          the
          Board of Directors and Stockholders
 The
          Female Health Company and Subsidiaries
 Chicago,
          Illinois
 
 We
          have
          audited the accompanying consolidated balance sheet of The Female Health
          Company
          and Subsidiaries, as of September 30, 2005, and the related consolidated
          statements of operations, stockholders' equity, and cash flows for the
          years
          ended September 30, 2005 and 2004. 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 the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provided 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, 2005, and the results of their operations
          and their cash flows for the years ended September 30, 2005 and 2004, in
          conformity with U.S. generally accepted accounting principles.
 
 Schaumburg,
          Illinois        /s/
          McGladrey &
Pullen, LLP
 November
          21, 2005
 
  F-1
 
 **The
                    Female Health Company and Subsidiaries****Consolidated
                    Balance Sheet****September
                    30, 2005**
 
 **Assets**Current
                    AssetsCash
                
                **$**
                **1,775,066**Accounts
                    receivable, net of allowance for doubtful accounts****of
                    $58,000
                
                
                **2,040,476**Inventories
                
                
                **883,709**Prepaid
                    expenses and other current assets
                
                
                **344,383****Total
                    current assets**
                
                
                **5,043,634**Other
                    Assets****Certificate
                    of deposit
                
                
                **47,934**Patents,
                    net of accumulated amortization of $1,079,405
                
                
                **43,809**Other
                
                
                **185,625****277,368**Equipment,
                    Furniture and FixturesEquipment
                    not yet in service
                
                
                **207,819**Equipment,
                    furniture and fixtures
                
                
                **4,556,277**Less
                    accumulated depreciation
                
                
                **4,405,947****358,149****$**
                **5,679,151****Liabilities
                    and Stockholders' Equity**Current
                    Liabilities****Accounts
                    payable
                
                **$**
                **559,414**Accrued
                    expenses and other current liabilities
                
                
                **664,709**Preferred
                    dividends payable
                
                
                **11,201****Total
                    current liabilities**
                
                
                **1,235,324**Deferred
                    gain on sale of facility
                
                
                **1,134,003**Stockholders'
                    EquityConvertible
                    preferred stock, Class A Series 1, par value $.01 per share;authorized
                    5,000,000 shares; issued and outstanding 56,000 shares
                
                
                **560**Convertible
                    preferred stock, Class A Series 3, par value $.01 per share;authorized
                    700,000 shares; issued and outstanding 473,377 shares
                
                
                **4,734**Convertible
                    preferred stock, Class B, par value $.50 per share;authorized
                    15,000 shares; no shares issued and outstanding
                
                
                **-**Common
                    stock, par value $.01 per share; authorized 38,500,000shares;
                    issued and outstanding 23,497,334 shares
                
                
                **234,973**Additional
                    paid-in capital
                
                
                **62,836,236**Unearned
                    consulting fees
                
                
                **(105,449**
                **)**Accumulated
                    other comprehensive income
                
                
                **315,075**Accumulated
                    deficit
                
                
                **(59,944,229**
                **)****3,341,900**Treasury
                    stock, at cost, 20,000 shares of common stock
                
                
                **(32,076**
                **)****3,309,824****$**
                **5,679,151**
 
 See
            Notes
            to Consolidated Financial Statements.
  F-2
 
 **The
                    Female Health Company and Subsidiaries****Consolidated
                    Statements of
                    Operations****Years
                    Ended September 30, 2005 and
                    2004**
 
 **2005**
                
                2004Net
                    revenues
                
                **$**
                **11,161,555**
                
                $
                8,982,074Cost
                    of products sold
                
                
                **6,370,155**
                
                
                5,359,781**Gross
                    profit**
                
                
                **4,791,400**
                
                
                3,622,293Operating
                    expenses:Advertising
                    and promotion
                
                
                **123,103**
                
                
                47,601Selling,
                    general and administrative
                
                
                **5,705,775**
                
                
                4,463,018Research
                    and development costs
                
                
                **273,776**
                
                
                179,201Total
                    operating expenses
                
                
                **6,102,654**
                
                
                4,689,820**Operating
                    loss**
                
                
                **(1,311,254**
                **)**
                
                (1,067,527
                )Nonoperating
                    income (expense):Interest
                    expense
                
                
                **(53,752**
                **)**
                
                (894,385
                )Interest
                    income
                
                
                **23,453**
                
                
                6,967Foreign
                    currency transaction loss
                
                
                **(14,103**
                **)**
                
                (63,943
                )**(44,402**
                **)**
                
                (951,361
                )**Net
                    loss**
                
                
                **(1,355,656**
                **)**
                
                (2,018,888
                )Preferred
                    dividends, Class A Series 1
                
                
                **11,201**
                
                
                11,456Preferred
                    dividends, Class A Series 3
                
                
                **150,006**
                
                
                95,545Net
                    loss attributable to common stockholders
                
                **$**
                **(1,516,863**
                **)**
                $
                (2,125,889
                )Net
                    loss per basic and diluted common share outstanding
                
                **$**
                **(0.07**
                **)**
                $
                (0.11
                )Basic
                    and diluted weighted average common shares outstanding
                
                
                **23,094,868**
                
                
                19,925,716
  See
            Notes
            to Consolidated Financial Statements.
  F-3
  **The
                      Female Health Company and Subsidiaries****Consolidated
                      Statements of Stockholders' Equity****Years
                      Ended September 2005 and
                      2004**
 Class
                        A
                    
                    Class
                        A
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    AccumulatedSeries
                        1
                    
                    Series
                        3
                    
                    Preferred
                    
                    
                    
                    Additional
                    
                    Unearned
                    
                    
                    
                    Other
                    
                    
                    
                    Cost
                        ofPreferred
                    
                    Preferred
                    
                    Stock
                    
                    Common
                    
                    Paid-in
                    
                    Consulting
                    
                    Deferred
                    
                    Comprehensive
                    
                    Accumulated
                    
                    TreasuryStock
                    
                    Stock
                    
                    Class
                        B
                    
                    Stock
                    
                    Capital
                    
                    Fees
                    
                    Compensation
                    
                    Income
                    
                    Deficit
                    
                    Stock
                    
                    TotalBalance
                        at September 30, 2003
                    
                    $
                    560
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    195,250
                    
                    $
                    56,421,553
                    
                    $
                    (182,045
                    )
                    $
                    -
                    
                    $
                    391,366
                    
                    $
                    (56,301,476
                    )
                    $
                    (32,076
                    )
                    $
                    493,132Issuance
                        of 473,377shares
                        of PreferredStock
                    
                    
                    -
                    
                    
                    4
                        ,734
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,495,868
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,500,602Issuance
                          of 41,000 sharesofCommon
                          Stock forconsulting
                          services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    410
                    
                    
                    72,160
                    
                    
                    (72,570
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Issuance
                          of 53,250 sharesof
                          Common Stock upon exercise
                          of stock options
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    532
                    
                    
                    74,018
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    74,550Issuance
                          of 5,388 sharesof
                          Common Stockuponcashless
                          exerciseof
                          6,667stock
                          options
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    54
                    
                    
                    (54
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Issuance
                        of 75,000restricted
                        shares ofCommon
                        Stock
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    750
                    
                    
                    175,500
                    
                    
                    -
                    
                    
                    (176,250
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Issuance
                        of 2,500unrestricted
                        sharesofCommon
                        Stock
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    23
                    
                    
                    6,750
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,773Issuance of 95,008sharesof
                          CommonStockuponcashlessexerciseof138,750stockwarrants
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    950
                    
                    
                    (950
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Issuance
                        of warrantswith
                        note payable,bank
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    51,961
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    51,961Issuance
                          of 823,000 sharesof
                          Common Stockupon
                          exercise ofstock
                          warrants
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    8,230
                    
                    
                    984,371
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    92,601Issuance
                          of 45,303 sharesof
                          Common Stockaspayment
                          of preferredstock
                          dividends
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    453
                    
                    
                    95,033
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    95,486Issuance
                          of 50,000 sharesof
                          Common Stock asincentive
                          for exerciseof
                          stock warrants
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    500
                    
                    
                    74,500
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    75,000Preferred
                        Stock dividends
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (107,001
                    )
                    
                    -
                    
                    
                    (107,001
                    )Amortization
                        of deferredcompensation
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    176,250
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    176,250Amortization
                        ofunearned
                        consultingfees
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    185,068
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    185,068Comprehensive
                        income(loss):Net
                        (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,018,888
                    )
                    
                    -
                    
                    
                    (2,018,888
                    )Foreign
                        currencytranslation
                        adjustment
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    299,823
                    
                    
                    -
                    
                    
                    -
                    
                    
                    299,823Forgiveness
                        ofinter-company
                        debt
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    249,555
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (249,555
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -Comprehensive
                        income (loss)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (1,719,065
                    )Balance
                        at September 30, 2004
                    
                    $
                    560
                    
                    $
                    4,734
                    
                    $
                    -
                    
                    $
                    207,152
                    
                    $
                    59,700,265
                    
                    $
                    (69,547
                    )
                    $
                    -
                    
                    $
                    441,634
                    
                    $
                    (58,427,365
                    )
                    $
                    (32,076
                    )
                    $
                    1,825,357
 See
              Notes
              to Consolidated Financial Statements.
  F-4
  **The
                      Female Health Company and Subsidiaries****Consolidated
                      Statements of Stockholders' Equity****Years
                      Ended September 2005 and
                      2004**
 
 Class
                      A
                  
                  Class
                      A
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  AccumulatedSeries
                      1
                  
                  Series
                      3
                  
                  Preferred
                  
                  
                  
                  Additional
                  
                  Unearned
                  
                  
                  
                  Other
                  
                  
                  
                  Cost
                      ofPreferred
                  
                  Preferred
                  
                  Stock
                  
                  Common
                  
                  Paid-in
                  
                  Consulting
                  
                  Deferred
                  
                  Comprehensive
                  
                  Accumulated
                  
                  TreasuryStock
                  
                  Stock
                  
                  Class
                      B
                  
                  Stock
                  
                  Capital
                  
                  Fees
                  
                  Compensation
                  
                  Income
                  
                  Deficit
                  
                  Stock
                  
                  TotalBalance
                      at September 30, 2004 (balance forwarded)
                  
                  $
                  560
                  
                  $
                  4,734
                  
                  $
                  -
                  
                  $
                  207,152
                  
                  $
                  59,700,265
                  
                  $
                  (69,547
                  )
                  $
                  -
                  
                  $
                  441,634
                  
                  $
                  (58,427,365
                  )
                  $
                  (32,076
                  )
                  $
                  1,825,357Issuance
                        of 275,000 shares of Common Stock for consulting
                        services
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,750
                  
                  
                  421,000
                  
                  
                  (423,750
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Issuance
                        of 3,000 shares of Common Stock upon exercise of stock
                        options
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  30
                  
                  
                  4,170
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,200Issuance
                      of 113,500 restricted shares of Common Stock
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,135
                  
                  
                  197,672
                  
                  
                  -
                  
                  
                  (198,807
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Issuance
                        of 2,200,000 shares of Common Stock upon exercise of stock
                        warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  22,000
                  
                  
                  2,023,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,045,000Issuance
                      of 90,647 shares of Common Stock as payment of preferred stock
                      dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  906
                  
                  
                  149,053
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  149,959Issuance
                        of 100,000 shares of Common Stock as incentive for exercise
                        of stock
                        warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,000
                  
                  
                  171,400
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  172,400Issuance
                        of 240,000 Common Stock warrants as incentive for exercise of stock
                        warrants
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  169,676
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  169,676Preferred
                      Stock dividends
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (161,207
                  )
                  
                  -
                  
                  
                  (161,207
                  )Amortization
                      of deferredcompensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  198,807
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  198,807Amortization
                      of unearnedconsulting
                      fees
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  387,848
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  387,848Comprehensive
                      income(loss):Net
                      (loss)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,355,656
                  )
                  
                  -
                  
                  
                  (1,355,656
                  )Foreign
                      currencytranslation
                      adjustment
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (126,559
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (126,559
                  )Comprehensive
                      income(loss)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,482,215
                  )Balance
                      at September 30, 2005
                  
                  $
                  560
                  
                  $
                  4,734
                  
                  $
                  -
                  
                  $
                  234,973
                  
                  $
                  62,836,236
                  
                  $
                  (105,449
                  )
                  $
                  -
                  
                  $
                  315,075
                  
                  $
                  (59,944,228
                  )
                  $
                  (32,076
                  )
                  $
                  3,309,825
 See
              Notes
              to Consolidated Financial Statements.
  F-5
  **The
                      Female Health Company and Subsidiaries****Consolidated
                      Statements of Cash
                      Flows****Years
                      Ended September 30, 2005 and
                      2004**
  **2005**
                  
                  2004Operating
                      ActivitiesNet
                      loss
                  
                  **$**
                  **(1,355,656**
                  **)**
                  $
                  (2,018,888
                  )Adjustments
                      to reconcile net loss to net cashused
                      in operating activities:Depreciation
                  
                  
                  **56,950**
                  
                  
                  241,148Amortization
                      of patents
                  
                  
                  **136,818**
                  
                  
                  132,947(Recovery
                      of) increase in inventory obsolescence
                  
                  
                  **(3,356**
                  **)**
                  
                  12,805Increase
                      in allowance for doubtful accounts,
                    returns
                      and discounts
                  
                  
                  **47,561**
                  
                  
                  554Interest
                      added to certificate of deposit
                  
                  
                  **(2,802**
                  **)**
                  
                  (3,573
                  )Amortization
                      of unearned consulting fees
                  
                  
                  **387,848**
                  
                  
                  185,068Amortization
                      of discounts on notes payable
                  
                  
                  **46,252**
                  
                  
                  678,135Amortization
                      of deferred income realized on UK grant
                  
                  
                  **-**
                  
                  
                  (48,503
                  )Amortization
                      of deferred gain on sale and leasebackof
                      building
                  
                  
                  **(105,071**
                  **)**
                  
                  (102,098
                  )Common
                      stock issued to employees
                  
                  
                  **198,807**
                  
                  
                  199,578Stock
                      compensation
                  
                  
                  **342,076**
                  
                  
                  75,000Loss
                      on sale of equipment and furniture and fixtures
                  
                  
                  **-**
                  
                  
                  7,796Changes
                      in operating assets and liabilities:Accounts
                      receivable
                  
                  
                  **(705,118**
                  **)**
                  
                  779,228Inventories
                  
                  
                  **523,406**
                  
                  
                  (235,202
                  )Prepaid
                      expenses and other assets
                  
                  
                  **(93,258**
                  **)**
                  
                  (22,962
                  )Accounts
                      payable
                  
                  
                  **169,539**
                  
                  
                  5,458Accrued
                      expenses and other current liabilities
                  
                  
                  **156,746**
                  
                  
                  (103,255
                  )**Net
                      cash used in operating activities**
                  
                  
                  **(199,258**
                  **)**
                  
                  (216,764
                  )Investing
                      ActivitiesDecrease
                      in restricted cash
                  
                  
                  **-**
                  
                  
                  129,074Proceeds
                      from maturity of certificate of deposit
                  
                  
                  **27,062**
                  
                  
                  27,600Capital
                      expenditures
                  
                  
                  **(251,687**
                  **)**
                  
                  (43,990
                  )Proceeds
                      on sale of equipment and furniture and fixtures
                  
                  
                  **-**
                  
                  
                  3,404**Net
                      cash (used in) provided by investing activities**
                  
                  
                  **(224,625**
                  **)**
                  
                  116,088Financing
                      ActivitiesProceeds
                      from issuance of preferred stock
                  
                  
                  **-**
                  
                  
                  1,500,602Proceeds
                      from exercise of stock options
                  
                  
                  **4,200**
                  
                  
                  74,550Proceeds
                      from exercise of common stock warrants
                  
                  
                  **2,045,000**
                  
                  
                  992,601Payments
                      on note payable, bank
                  
                  
                  **(500,000**
                  **)**
                  
                  (1,400,000
                  )Payments
                      on note payable, related party
                  
                  
                  **-**
                  
                  
                  (1,000,000
                  )Dividend
                      paid on preferred stock
                  
                  
                  **(7,206**
                  **)**
                  
                  (11,200
                  )Payments
                      on capital lease obligations
                  
                  
                  **(21,980**
                  **)**
                  
                  (34,730
                  )**Net
                      cash provided by financing activities**
                  
                  
                  **1,520,014**
                  
                  
                  121,823(continued)
 
 F-6
 
 **The
                      Female Health Company and Subsidiaries****Consolidated
                      Statements of Cash Flows****Years
                      Ended September 2005 and 2004
                      (continued)**
  **2005**
                  
                  2004Effect
                      of exchange rate changes on cash
                  
                  **$**
                  **(76,547**
                  **)**
                  $
                  102,040Net
                      increase in cash
                  
                  
                  **1,019,584**
                  
                  
                  123,187Cash
                      at beginning of year
                  
                  
                  **755,482**
                  
                  
                  632,295Cash
                      at end of year
                  
                  **$**
                  **1,775,066**
                  
                  $
                  755,482Supplemental
                      Cash Flow Disclosures:Interest
                      paid
                  
                  **$**
                  **7,500**
                  
                  $
                  210,766Supplemental
                      Schedule of Noncash Investing and Financing Activities:Issuance
                      of warrants on notes payable
                  
                  **$**
                  **-**
                  
                  $
                  51,961Common
                      stock issued for payment of preferred stock dividends
                  
                  
                  **149,959**
                  
                  
                  95,486Preferred
                      dividends declared
                  
                  
                  **11,201**
                  
                  
                  11,456
  See
            Notes
            to Consolidated Financial Statements.
  F-7
 **The
                  Female Health Company and Subsidiaries**
 
 **Notes
                  to Consolidated 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 “FC Female Condom” 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 87 countries. The product is marketed
          in 14
          countries by various country-specific commercial partners. The Company’s credit
          terms are primarily on a net 30-day basis.
 
 Use
          of
          estimates :
          The
          preparation of financial statements 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:
 
 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 patents 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.
 
 Accounts
          receivable and credit risk :
          Accounts receivable are carried at original invoice amount less an estimate
          made
          for doubtful receivables based on a review of all outstanding amounts on
          a
          periodic basis. Management determines the allowance for doubtful accounts
          by
          identifying troubled accounts and by using historical experience applied
          to an
          aging of accounts. Management also periodically evaluates individual customer
          receivables and considers a customer’s financial condition, credit history, and
          the current economic conditions. Accounts receivable are written off when
          deemed
          uncollectible. Recoveries of accounts receivable previously written off
          are
          recorded when received.
 
 A
          significant portion of the Company’s product is being sold to developing
          countries and the stability of the political environment within these countries
          could have a material effect on the operations of the Company.
  F-8
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial
              Statements**
   **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  Inventories :
          Inventories are valued at the lower of cost or market. The cost is determined
          using the first-in, first-out (FIFO) method. Inventories are also written
          down
          for management’s estimates of product which will not sell prior to its
          expiration date. Write downs of inventories establish a new cost basis
          which is
          not increased for future increases in the market value of inventories or
          changes
          in estimated obsolescence.
  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 are computed using primarily the straight-line
          method. Depreciation and amortization are computed over the estimated useful
          lives of the respective assets which range as follows:
 
 Equipment     5
          - 10
          years
 Furniture
          and fixtures    3
          years
 
 Depreciation
          on leased assets and leasehold improvements is computed over the lesser
          of the
          remaining lease term or the estimated useful lives of the assets. Depreciation
          on leased assets is included with depreciation on owned assets.
 
 Patents
          and trademarks :
          The
          Company currently holds product and technology patents on the female condom
          in
          the United States, Japan, the United Kingdom, France, Italy, Germany, Spain,
          the
          European Patent Convention, Canada, the People’s Republic of China, Brazil,
          South Korea and Australia. The Company has the registered trademark "FC
          Female
          Condom" in the United States and has trademarks on the names "femidom,"
          "femy,"
“Reality,” and others in certain foreign countries. Patents are amortized on a
          straight-line basis over their estimated useful life of 12 years. Trademarks
          have no carrying value in the accompanying balance sheet at September 30,
          2005.
 
 Financial
          instruments :
          The
          Company has no financial instruments for which the carrying value materially
          differs from fair value.
 
 Research
          and development costs :
          Research and development costs are expensed as incurred. The amount of
          costs
          expensed for the years ended September 30, 2005 and 2004, was approximately
          $274,000 and $179,000, respectively.
 
 Revenue
          recognition :
          The
          Company recognizes revenue from product sales when each of the following
          conditions have been met: an arrangement exists, delivery has occurred,
          there is
          a fixed price, and collectibility is reasonably assured.
  F-9
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  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,* and
          related interpretations *.* Accordingly, no stock-based compensation cost has been recognized, as all
          options granted under the Company’s stock option plans had an exercise price
          equal to or greater than the market value of the underlying common stock
          on the
          date of grant. The following table illustrates the effect on net losses
          and
          losses per share had compensation cost for all of the stock-based compensation
          plans been determined based on the grant date fair values of awards (the
          method
          prescribed by Financial Accounting Standard No. 123, *Accounting
          for Stock-Based Compensation):*
 
 Year
                    Ended September 30,2005
                
                2004Net
                    loss attributable to common stockholders, as reported
                
                $
                (1,516,863
                )
                $
                (2,125,889
                )Deduct:
                    Total stock-based employee compensation expensedetermined
                    under fair-value-based method for all awards
                
                
                (824,930
                )
                
                (769,480
                )Pro
                    forma net loss
                
                $
                (2,341,793
                )
                $
                (2,895,369
                )Basic
                    and diluted loss per common share:As
                    reported
                
                $
                (0.07
                )
                $
                (0.11
                )Pro
                    forma
                
                $
                (0.10
                )
                $
                (0.15
                )
 
 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) :
          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
          shares or convertible debt and the exercise of stock options and warrants
          for
          all periods. The Company’s dilutive potential common shares were 2,836,472 for
          the twelve months ended September 30, 2005 and 5,596,617 for the twelve
          months
          ended September 30, 2004.
  F-10
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  Other
          comprehensive income :
          Accounting principles generally require that recognized revenue, expenses,
          gains
          and losses be included in net income. Although certain changes in assets
          and
          liabilities, such as foreign currency translation adjustments, are reported
          as a
          separate component of the equity section of the balance sheet, such items,
          along
          with net income, are components of comprehensive income.
 
 During
          the 4 th quarter
          of 2004, the Company recorded an adjustment of $249,555 to comprehensive
          loss.
          This adjustment relates to the forgiveness of intercompany debt.
 
 Over
          the
          years, the Parent Company has financed the operations of its subsidiaries
          through an intercompany loan with The Female Health Company, plc. which
          was
          eliminated upon consolidation. The Company has designated the intercompany
          loan
          to be long-term in nature as prescribed by FAS 52. Further, the Company
          followed
          the guidance of FAS 52 paragraph 20. b. when translating the subsidiary’s
          balance sheet for consolidation purposes. This paragraph states that “gains and
          losses on intercompany foreign currency transactions that are of a long-term
          investment nature (that is, settlement is not planned or anticipated in
          the
          foreseeable future) would not be included in the computation of net income
          when
          the entities to the transaction are consolidated.”
 
 The
          Parent Company forgave a portion of this loan and needed to adjust accumulated
          other comprehensive income on the balance sheet for the cumulative amount
          of
          foreign currency adjustments relating to this portion of the intercompany
          loan.
 
 Since
          the
          currency effect of the change in the intercompany debt flowed through
          comprehensive income (loss) as income while the debt was outstanding, the
          Company recorded the currency effect of the debt forgiveness through
          comprehensive income (loss) as an expense when the debt was
          forgiven.
 
 New
          accounting pronouncements :
          The
          Financial Accounting Standards Board has issued Statement of Financial
          Accounting Standards No. 123 (revised), *Share-Based
          Payment* .
          SFAS
          123(R) is a replacement of SFAS 123, *Accounting
          for Stock-Based Compensation,* and
          supersedes APB Opinion No. 25, *Accounting
          for Stock Issued to Employees* ,
          and its
          related interpretive guidance.
 
 SFAS
          123(R) requires that the compensation cost relating to share-based payment
          transactions be recognized in financial statements. That cost will be measured
          based on the fair value of the equity or liability instruments issued.
          The
          effect of the standard will be to require entities to measure the cost
          of
          employee services received in exchange for stock options based on the grant-date
          fair value of the award, and to recognize the cost over the period the
          employee
          is required to provide services for the award.
 
 The
          Company will be required to apply Statement 123(R) as of the beginning
          of its
          interim reporting period that begins January 1, 2006.
  F-11
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  SFAS
          123(R) allows two methods for determining the effects of the transition:
          the
          modified prospective transition method and the modified retrospective method
          of
          transition. Under the modified prospective transition method, an entity
          would
          use the fair value-based accounting method for all employee awards granted,
          modified, or settled after the effective date. As of the effective date,
          compensation cost related to the nonvested portion of awards outstanding
          as of
          that date would be based on the grant-date fair value of those awards as
          calculated under the original provisions of Statement No. 123; that is,
          an
          entity would not remeasure the grant-date fair value estimate of the unvested
          portion of awards granted prior to the effective date of the final Statement.
          Under the modified retrospective method of transition, an entity would
          recognize
          employee compensation cost for prior periods presented in accordance with
          the
          original provisions of Statement No. 123; that is, an entity would recognize
          employee compensation cost in the amounts reported in the pro forma disclosures
          provided in accordance with Statement No. 123.
 
 The
          Company will elect the modified prospective transition method. Under this
          method, the Company estimates that the adoption of FAS 123(R) will require
          the
          Company to record approximately $378,000 of stock compensation expense
          in the
          year ending September 30, 2006, related to employee options issued and
          outstanding at September 30, 2005.
 
 Reclassifications :
          Certain
          items in the 2004 financial statements have been reclassified to conform
          to the
          2005 presentation. The reclassifications have had no effect on the net
          loss for
          the year then ended.
  **Note
                    2.**
                **Inventories**
  The
          components of inventory consist of the following at September 30,
          2005:
 
 Raw
                    materials
                
                $
                511,551Work
                    in process
                
                
                182,656Finished
                    goods
                
                
                214,028Less
                    allowance for obsolescence
                
                
                (24,526
                )$
                883,709
  **Note
                    3.**
                **Acquired
                    Intangible Asset**
  The
          Company follows SFAS 142, *Goodwill
          and Other Intangible Assets* .
          The
          following is a summary of acquired intangible assets at September 30,
          2005:
 
 GrossCarrying
                
                AccumulatedAmount
                
                AmortizationSubject
                    to amortization:Patents
                
                $
                1,123,214
                
                $
                1,079,405
  Amortization
          expense recognized on all amortizable intangible assets totaled $136,818
          and
          $132,947 for the years ended September 30, 2005 and 2004,
          respectively.
 
 Estimated
          aggregate amortization expense for the year ending September 30, 2006,
          is
          $43,809.
  F-12
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                      4.**
                  **Notes
                      Payable and Long-Term Debt**
 During
          2003, the Company renewed a $1,000,000 note with Mr. Dearholt, a current
          director of the Company. The outstanding note payable bears interest at
          12
          percent and was payable in full in March 2004. As part of the transaction,
          the
          Company issued Mr. Dearholt warrants to purchase 300,000 shares of the
          Company’s
          common stock at $1.20 per share which represented 80 percent 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 $278,400.
          Any
          stock issued under the warrants carries certain registration rights. The
          warrants expire in 2016. The discount, in combination with the note’s 12 percent
          coupon, resulted in an effective interest rate of 48 percent on the note.
          On
          February 29, 2004, the Company paid off the entire balance of the
          note.
 
 On
          May
          19, 2004, the Company amended its previous credit facility and two line
          of
          credit agreements with Heartland Bank and established three promissory
          notes
          totaling $2,500,000. The first promissory note replaces the previous credit
          facility, and had an initial outstanding balance of $1,000,000, bears interest
          payable at a rate of 10 percent per year and extended the due date of the
          credit
          facility to July 1, 2006. Related to this renewal the Company issued the
          Heartland Bank warrants to purchase 50,000 shares of the Company’s common stock
          at $2.65 per share. The warrants were valued at $51,961 and these were
          recorded
          by the Company as additional paid-in capital and a discount on the credit
          facility.
 
 As
          of
          September 30, 2004, the Company had $500,000 remaining due under this credit
          facility. The credit facility is recorded at September 30, 2004, net of
          unamortized discount of $46,252. The remaining due amount of $500,000 was
          paid
          off as part of the warrant exercise program discussed in detail in Note
          7,
          Common Stock Purchase Warrants.
 
 Presently,
          the Company has two revolving notes with Heartland Bank that allow the
          Company
          to borrow up to $1,500,000 and expire July 1, 2006. The two notes total
          $1,500,000 and bear interest payable at a rate of prime plus 2% (prime
          rate was
          6.75% at September 30, 2005). No new warrants were issued as part of the
          extension of these notes. These notes are collateralized by substantially
          all of
          the assets of the Company.  No amounts are outstanding under the revolving
          notes at September 30, 2005.
 
 Interest
          expense to related parties was $53,752 and $894,385 for the years ended
          September 30, 2005 and 2004, respectively.
 
 F-13
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
 **Note
                      5.**
                  **Operating
                      Leases and Rental Expense**
 The
          Company has a lease agreement for office space with an unrelated third
          party
          which expires September 2006. The lease requires monthly payments of $6,055
          plus
          real estate taxes, utilities, and maintenance expenses. The Company was
          required
          to make an initial security deposit of $115,000 which has been reduced
          to
          $23,000 in October 2004. The security deposit is in the form of an irrevocable
          letter of credit from a bank. The bank presently requires the Company to
          hold a
          $23,000 certificate of deposit as collateral for the letter of
          credit.
  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
          (£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 $474,474 (£268,125) per
          year payable quarterly until 2016. The lease is renewable through December
          2027.
          The Company was also required to make an initial security deposit of $396,021
          (£268,125) which has been reduced to $172,536 (£97,500) and is included in other
          assets in the balance sheet at September 30, 2005. The facility had a net
          book
          value of $1,398,819 (£810,845) on the date of the transaction. The $1,966,181
          (£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, 2005, was $1,134,003 (£697,777).
  On
          June
          1, 2005, the Company entered into a lease agreement to utilize 1900 square
          feet
          of a facility located in Selangor D.E., Malaysia for warehousing and
          manufacturing FC2. The lease requires an annual payment of $6,840 and the
          lease
          expires May 31, 2006. The lease shall automatically renew for an additional
          six
          month period, unless either party gives written notice of termination.
          The
          Company was not required to make an initial security deposit.
 
 The
          Company also leases equipment under a lease agreement which expires in
          March
          2006. The aggregate monthly rental was $943 at September 30, 2005.
 
 Details
          of operating lease expense, including real estate taxes and insurance,
          are as
          follows:
 
 September
                    30,2005
                
                2004Operating
                    lease expense:Factory
                    and office leases
                
                $
                856,525
                
                $
                788,723Other
                
                
                11,314
                
                
                11,007$
                867,839
                
                $
                799,730
  F-14
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    5.**
                **Operating
                    Leases and Rental Expense
                    (continued)**
  Future
          minimum payments under operating leases consisted of the following at September
          30, 2005:
 
 OperatingLeases2006
                
                $
                587,0822007
                
                
                494,6642008
                
                
                494,6642009
                
                
                494,6642010
                
                
                494,664Thereafter
                
                
                3,069,993Total
                    minimum payments
                
                $
                5,635,731
  **Note
                    6.**
                **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, 2005 and 2004, is as follows:
 
 September
                    30,2005
                
                2004Income
                    tax credit at statutory rates
                
                $
                (461,000
                )
                $
                (686,000
                )Nondeductible
                    expenses
                
                
                66,000
                
                
                42,000State
                    income tax, net of federal benefits
                
                
                (64,000
                )
                
                (96,000
                )Benefit
                    of net operating loss not recognized, increase invaluation
                    allowance
                
                
                459,000
                
                
                740,000$
                -
                
                $
                -
 
 As
          of
          September 30, 2005, the Company had federal and state net operating loss
          carryforwards of approximately $45,966,000 and $27,196,000, respectively,
          for
          income tax purposes expiring in years 2010 to 2025. 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 $127,000
          at
          September 30, 2005, expiring in years 2006 to 2010. The Company's UK subsidiary,
          The Female Health Company - UK, plc has UK net operating loss carryforwards
          of
          approximately $85,099,000 as of September 30, 2005. These UK net operating
          loss
          carryforwards can be carried forward indefinitely to be used to offset
          future UK
          taxable income.
  F-15
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    6.**
                **Income
                    Taxes (continued)**
  Significant
          components of the Company's deferred tax assets and liabilities are as
          follows
          at September 30, 2005:
 
 Deferred
                    tax assets:Federal
                    net operating loss carryforwards
                
                $
                15,629,000State
                    net operating loss carryforwards
                
                
                1,360,000Foreign
                    net operating loss carryforwards
                
                
                28,933,000Foreign
                    capital allowances
                
                
                416,000Tax
                    credit carryforwards
                
                
                127,000Other
                
                
                34,000Total
                    gross deferred tax assets
                
                
                46,499,000Valuation
                    allowance for deferred tax assets
                
                
                46,499,000Net
                    deferred tax assets
                
                $
                -
  The
          valuation allowance increased by $5,942,000 and $3,667,000 for the years
          ended
          September 30, 2005 and 2004, respectively.
  **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 174,528 shares available for future
          grants as
          of September 30, 2005. The Company has also granted options to one of its
          legal counsel, an affiliate and consultants. Certain options are vested
          and
          exercisable upon issuance and others vest over periods up to three
          years.
 
 Summarized
          information regarding all of the Company's stock options is as
          follows:
 WeightedAverageNumber
                    of
                
                ExerciseShares
                
                PriceOutstanding
                    at September 30, 2003
                
                
                2,665,980
                
                $
                1.38Granted
                
                
                10,000
                
                
                2.47Exercised
                
                
                (59,917
                )
                
                1.31Expired
                    or canceled
                
                
                (38,333
                )
                
                1.80Outstanding
                    at September 30, 2004
                
                
                2,577,730
                
                $
                1.38Granted
                
                
                195,000
                
                
                1.72Exercised
                
                
                (3,000
                )
                
                1.40Expired
                    or canceled
                
                
                (108,750
                )
                
                1.90Outstanding
                    at September 30, 2005
                
                
                2,660,980
                
                $
                1.39
  F-16
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    7.**
                **Common
                    Stock (Continued)**
  Option
          shares exercisable at September 30, 2005 and 2004, are 2,070,051 and 1,279,017,
          respectively, at weighted average exercise prices of $1.36 and $1.34,
          respectively.
 
 Options
          Outstanding and Exercisable
 
 Number
                
                Wghted.
                    Avg.
                
                Wghted.
                    Avg.
                
                Number
                
                Wghted.
                    Avg.Exercise
                
                Outstanding
                
                Remaining
                
                Exercise
                
                Exercisable
                
                ExercisePrice
                
                At
                    9/30/05
                
                Life
                
                Price
                
                At
                    9/30/05
                
                Price$
                0.66
                
                
                150,000
                
                
                6.25
                
                $
                0.66
                
                
                150,000
                
                $
                0.661.40
                
                
                2,305,980
                
                
                7.58
                
                
                1.40
                
                
                1,853,366
                
                
                1.401.66
                
                
                180,000
                
                
                9.06
                
                
                1.66
                
                
                56,219
                
                
                1.662.40
                
                
                15,000
                
                
                8.83
                
                
                2.40
                
                
                5,836
                
                
                2.402.70
                
                
                10,000
                
                
                8.61
                
                
                2.70
                
                
                4,630
                
                
                2.702,660,980
                
                
                7.62
                
                $
                1.39
                
                
                2,070,051
                
                $
                1.36
  The
          Company granted 195,000 options in 2005 and 10,000 options in 2004 to employees
          and outside board of directors with exercise prices equal to fair market
          value
          of the Company’s stock at the date of grant. Therefore, no compensation expense
          was recognized related to these options under APB 25 at the date of
          grant.
 
 The
          weighted average fair value of employee options granted for the years ended
          September 30, 2005 and 2004, was $1.33 and $2.10, respectively. The fair
          value of options was estimated at the date of grant using the Black-Scholes
          option pricing model assuming expected volatilities ranging from 47.9 percent
          to
          52.8 percent, respectively, and risk-free interest rates ranging from 3.98
          percent to 4.78 percent, respectively, expected lives of three years and
          no
          dividend yield for the years ended September 30, 2005 and 2004.
 
 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.
 
 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 has
          historically granted warrants to purchase common stock, although none were
          issued in 2004 or 2005.
  F-17
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                    7.**
                **Common
                    Stock (Continued)**
  In
          an
          effort to generate funds for operating needs and to retire outstanding
          debt,
          between September 2004 and January 2005, the Company conducted a program
          to
          induce the holders of the Company’s outstanding common stock purchase warrants
          to exercise their warrants. Pursuant to this program, the Company offered
          an
          incentive to such holders providing for issuance of (1) shares of the Company’s
          common stock equal to 10% of the aggregate number of common stock purchase
          warrants exercised or (2) new common stock purchase warrants equal to 20%
          of the
          aggregate number of outstanding warrants exercised containing an exercise
          price
          per share equal to the closing price of the Company’s common stock as reported
          on the OTC Bulletin Board on the date the holder committed to exercise
          the
          outstanding warrants. Under this incentive program, one investor exercised
          500,000 warrants as of September 30, 2004 and received 550,000 shares of
          common stock which includes 50,000 incentive shares. The shares were valued
          at
          $75,000 and the shares were recorded by the Company in selling, general
          and
          administrative expense.
 
 Between
          October 2004 and January 2005 four investors opted to exercise 1,000,000
          warrants and receive 1,100,000 shares of common stock which includes 100,000
          incentive shares and two investors opted to exercise 1,200,000 warrants
          and
          received 1,200,000 shares of common stock and 240,000 incentive warrants
          with an
          exercise price in each case of $1.50 per share and an expiration date of
          November 23, 2007. Among the seven persons participating in this program
          were
          three of the Company’s directors. The Company received aggregate proceeds of
          $2.5 million from the exercise of the outstanding warrants. The incentive
          shares
          and warrants were valued at $342,076 and recorded by the Company in selling,
          general and administrative expense.
 
 As
          a
          result of the inducement program, during 2005, 2,200,000 warrants were
          exercised. At September 30, 2005, the following warrants were outstanding
          and
          exercisable:
 
 NumberOutstandingWarrants
                    issued in connection with:Convertible
                    debentures
                
                
                2,150,000Convertible
                    preferred stock
                
                
                30,900Note
                    payable, bank
                
                
                340,000Notes
                    payable, related party
                
                
                2,039,000Outstanding
                    at September 30, 2005
                
                
                4,559,900
 
 Warrants
          Outstanding and Exercisable
 
 Range
                    of
                
                Number
                
                Wghted.
                    Avg.
                
                Wghted.
                    Avg.Exercise
                
                Outstanding
                
                Remaining
                
                ExercisePrices
                
                At
                    9/30/05
                
                Life
                
                Price$0.40
                    to $0.50
                
                
                364,000
                
                
                4.48
                
                $
                0.400.51
                    to 1.00
                
                
                2,575,000
                
                
                2.05
                
                
                0.961.01
                    to 3.00
                
                
                1,620,900
                
                
                3.57
                
                
                1.724,559,900
                
                
                2.78
                
                $
                1.19
   F-18
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                      7.**
                  **Common
                      Stock (Continued)**
 Issuance
          of Stock
 
 The
          Company has issued common stock to consultants for providing investor relation
          services. In 2004, the Company issued 41,000 shares of common stock with
          a
          market value of $72,570 which was recorded as unearned consulting fees
          and is
          being recognized over the term of the agreement. In 2005, the Company issued
          275,000 shares of common stock with a market value of $423,750 which was
          recorded as unearned consulting fees and is being recognized over the terms
          of
          the agreement. In the past the Company also issued options to purchase
          shares of
          its common stock. In 2004 and 2005, the Company did not issue any additional
          options for providing investor relation services.
 
 Stock
          Based Compensation Expense
 
 The
          Company has issued common stock to outside consultants, issued common stock
          or
          common stock purchase warrants to certain warrant holders and restrictive
          common
          stock to employees. Total stock-based compensation was $928,731 and $459,646
          for
          the years ended September 30, 2005 and 2004, respectively, and is included
          in
          selling, general and administrative expenses in the statements of
          operations.
  **Note
                    8.**
                **Preferred
                    Stock**
  The
          Company has 56,000 outstanding shares of 8 percent cumulative convertible
          Series
          1 Preferred Stock. Each share of preferred stock is convertible into one
          share
          of the Company's common stock. 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 Series 1 Preferred Stock. The Series 1 Preferred Stock
          may
          be redeemed at the option of FHC, in whole or in part, 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 Series 1 Preferred
          Stock
          would have priority over the Company's common stock.
 
 The
          Company issued 473,377 shares of Series 3 Preferred Stock to eleven investors
          during February 2004 and received $1,500,602 in proceeds. Each share of
          Series 3
          Preferred Stock is convertible at any time into one share of the Company’s
          common stock. Holders of shares of the Series 3 Preferred Stock are entitled
          to
          cumulative dividends in preference to any dividend on the Company’s common stock
          at the rate of 10 percent of the original issuance price ($3.17 per share)
          per
          annum, payable quarterly at the Company’s option in cash or shares of the
          Company’s common stock. If dividends are paid in shares of common stock, the
          dividend rate will be equal to 95 percent of the average of the closing
          sales
          prices of the common stock on the five trading days preceding the dividend
          reference date. The dividend reference date means January 1, April 1, July
          1,
          October 1 of each year. In the event of a liquidation or dissolution of
          the
          Company, the Series 3 Preferred Stock would have priority over the Company’s
          common stock and holders of any other series of preferred stock of the
          Company.
          The Company may redeem any share of Series 3 Preferred Stock at any time
          that is
          after the second anniversary of the date of issuance of the share, provided
          that
          the redemption may not occur until the first day on or after the second
          anniversary of the date of issuance of such share in which the market value
          of
          the Company’s common stock is at least 150 percent of the original issuance
          price of $3.17 per share. The liquidation preference on the Series 3 Preferred
          Stock is $3.17 per share plus accrued and unpaid dividends.
  F-19
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
  **Note
                      9.**
                  **Employee
                      Benefit Plans**
 Employee
          retirement plan :
 The
          Company has 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
          $8,000
          annual compensation to the plan. The Company has elected to match 100 percent
          of
          employee contributions to the plan up to a maximum of 3 percent of employee
          compensation for the years ended September 30, 2005 and 2004. Company
          contributions were approximately $23,000 and $19,000 for 2005 and 2004,
          respectively.
 
 Bonus
          and retention program :
 During
          2004, the Company implemented a new management compensation and employee
          retention program. The program provided for the issuance of 75,000 shares
          of
          restricted common stock as a bonus to senior management with a market value
          of
          $176,250. As of October 1, 2004, the restricted legend was removed. Under
          the
          terms of the retention program, employees were granted 7,750 shares of
          common
          stock as a retention bonus with a market value of $23,328, in which 2,250
          shares
          have been issued and 5,500 shares have been deferred until a UK employee
          tax
          restriction lapses. Total expense for these bonus awards was approximately
          $200,000 and is included in selling, general and administrative expenses
          in the
          statement of operations for the year ended September 30, 2004.
 
 During
          2005, the program provided for the issuance of 80,000 shares of restricted
          common stock as a bonus to senior management with a market value of $120,000.
          As
          of October 1, 2005, the restricted legend was removed. Under the terms
          of the
          retention program, employees were granted 13,500 shares of common stock
          as a
          retention bonus with a market value of $29,307.
 
 In
          addition, the Company issued 20,000 shares to new employees during the
          year
          ended September 30, 2005. Total expense for these awards was approximately
          $49,500.
 
 Total
          expense for all 2005 awards was $198,807 and is included in selling, general
          and
          administrative expenses in the statement of operations for the year ended
          September 30, 2005.
 
 F-20
 **The
              Female Health Company and Subsidiaries**
 
 **Notes
              to Consolidated Financial Statements**
 **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 by geographic area is as follows.
  (Amounts
                  in Thousands)
                
                Net
                    Sales toExternal
                    Customers
                
                
                Long-Term
                    AssetsSeptember
                    30,
                
                
                September
                    30,2005
                
                
                
                2004
                
                
                
                2005
                
                2004United
                    States
                
                $
                2,280
                
                
                
                
                $
                2,373
                
                
                
                
                $
                95
                
                $
                103South
                    Africa
                
                
                2,140
                
                (1)
                
                
                
                499
                
                
                
                
                
                -
                
                
                -Botswana
                
                
                1,050
                
                
                
                
                
                *
                
                
                
                
                
                -
                
                
                -France
                
                
                849
                
                
                
                
                
                1,144
                
                (1)
                
                
                
                -
                
                
                -Zimbabwe
                
                
                697
                
                
                
                
                
                1,480
                
                (1)
                
                
                
                -
                
                
                -Congo
                
                
                *
                
                
                
                
                
                489
                
                
                
                
                
                -
                
                
                -Kenya
                
                
                *
                
                
                
                
                
                698
                
                
                
                
                
                -
                
                
                -United
                    Kingdom
                
                
                *
                
                
                
                
                
                *
                
                
                
                
                
                541
                
                
                502Other
                
                
                4,146
                
                
                
                
                
                2,299
                
                
                
                
                
                -
                
                
                -$
                11,162
                
                
                
                
                $
                8,982
                
                
                
                
                $
                636
                
                $
                605*
                    Less than 5 percent of total net sales(1)Comprised of a single customer considered to be a major customer
                    (exceeds
                    10% of net sales).
 
  **Note
                    11.**
                **Contingent
                    Liabilities**
  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
                    Parties**
  It
          has
          been and currently is the policy of the Company that transactions between
          the
          Company and its officers, directors, principal stockholders 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 stockholders or affiliates
          will be approved by a majority of the directors who are not financially
          interested in the transaction.
   F-21