<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K
 
(MARK ONE)
 
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                    FOR THE FISCAL YEAR ENDED JUNE 30, 1997
                                       OR
 
[  ]       TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF THE
 
                        SECURITIES EXCHANGE ACT OF 1934
                 FOR THE TRANSITION PERIOD FROM       TO
                         COMMISSION FILE NUMBER 0-27576
                            ------------------------
 
                                 ULTRAFEM, INC
                          (Exact name of registrant as
                           specified in its charter)
 
<TABLE>
<S>                                                   <C>
                      DELAWARE                                             33-0435037
          (State or other jurisdiction of                               (I.R.S. Employer
           incorporation or organization)                             Identification No.)
            805 THIRD AVENUE, 17TH FLOOR                                     10022
                 NEW YORK, NEW YORK                                        (Zip Code)
               (Address of principal
                 executive offices)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 575-5740
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                    COMMON STOCK, PAR VALUE $.001 PER SHARE
                                (TITLE OF CLASS)
                            ------------------------
 
    Indicate by check mark whether the registrant (1)has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
 
                                 Yes X    No __
                            ------------------------
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].
                            ------------------------
 
    The aggregate market value of the common stock held by persons other than
affiliates of the registrant, as of September 5, 1997, is approximately
$74,849,871.
                            ------------------------
 
    The number of shares outstanding of each of the registrant's classes of
common stock, as of September 5, 1997 is as follows:
 
<TABLE>
<CAPTION>
CLASS                                                                                               NUMBER OF SHARES
--------------------------------------------------------------------------------------------------  -----------------
<S>                                                                                                 <C>
Common Stock, par value $.001 per share...........................................................        8,541,771
</TABLE>
 
                            ------------------------
 
                      DOCUMENTS INCORPORATED BY REFERENCE
                                     None.
 
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<PAGE>
                                 ULTRAFEM, INC.
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                                             PAGE
                                                                                                           ---------
<S>         <C>                                                                                            <C>
                                                       PART I
 
Item 1.     Business.....................................................................................          3
 
Item 2.     Properties...................................................................................         16
 
Item 3.     Legal Proceedings............................................................................         16
 
Item 4.     Submission of Matters to Vote of Security Holders............................................         16
 
                                                      PART II
 
Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters........................         17
 
Item 6.     Selected Financial Data......................................................................         18
 
Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations........         19
 
Item 7A.    Quantitative and Qualitative Disclosures About Market Risks..................................         23
 
Item 8.     Financial Statements and Supplementary Data..................................................         23
 
Item 9.     Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.........         23
 
                                                      PART III
 
Item 10.    Directors and Executive Officers of The Registrant...........................................         24
 
Item 11.    Executive Compensation.......................................................................         27
 
Item 12.    Security Ownership of Certain Beneficial Owners and Management...............................         34
 
Item 13.    Certain Relationships and Related Party Transactions.........................................         36
 
                                                      PART IV
 
Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K..............................         37
</TABLE>
 
------------------------
 
* Page F-1 follows page 44.
 
                                       2
<PAGE>
    THIS ANNUAL REPORT ON FORM 10-K INCLUDES STATEMENTS THAT ARE NOT
DESCRIPTIONS OF HISTORICAL FACTS AND WHICH MAY BE FORWARD-LOOKING STATEMENTS,
INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONTAINED IN "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS."
SUCH STATEMENTS ARE BASED ON MANY ASSUMPTIONS AND ARE SUBJECT TO RISKS AND
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, THE COMPANY'S DEPENDENCE ON A
SINGLE PRODUCT, NEED FOR ADDITIONAL FINANCING, NEED TO ACHIEVE ECONOMIES OF
SCALE WITH RESPECT TO MANUFACTURING AND LIMITED MANUFACTURING RESOURCES, AS WELL
AS COMPETITION, RISKS ASSOCIATED WITH COMPETITIVE RESPONSE, MARKETING RISKS AND
THE UNCERTAINTY OF CONSUMER ACCEPTANCE, PRODUCT LIABILITY RISKS AND THE
POSSIBILITY OF INSUFFICIENT INSURANCE COVERAGE. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS DUE TO A
NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THE FOREGOING RISKS AND THOSE
SET FORTH BELOW.
 
                                     PART I
 
ITEM 1. BUSINESS.
 
GENERAL
 
    Ultrafem-Registered Trademark-, Inc. ("Ultrafem" or the "Company") was
formed to design, develop and manufacture products based upon its proprietary
and patented SoftCup-Registered Trademark- Technology to address women's health
care needs. The SoftCup Technology is a physical barrier-type vaginal device
designed to enhance the comfort, functionality and effectiveness of products
designed for women in the areas of feminine protection, contraception, the
prevention of sexually transmitted diseases ("STDs") and the treatment of
vaginal infections. The commercial products which will employ the SoftCup
Technology will be disposable, single use, universal size and made from a soft,
inert, thermoplastic material which becomes more pliable at body temperature and
molds to fit the individual user's anatomy. The Company's products target women
of reproductive age and are intended to be sold over-the-counter ("OTC") without
a prescription.
 
    The Company's business strategy is to develop and market proprietary
products based on its patented SoftCup Technology directed at high potential,
underserved segments of the women's health care market. The key elements of this
strategy are to (i) continue the launch and ongoing support of the Company's
feminine protection product, INSTEAD-Registered Trademark-, in the United
States, (ii) develop and submit for the United States Food and Drug
Administration ("FDA") clearance or pre-market approval products based upon the
SoftCup Technology for the women's health care product arena and (iii) pursue
strategic alliances with multi-national consumer product and pharmaceutical
companies for national and international marketing, sales and distribution.
 
FEMININE PROTECTION PRODUCT--INSTEAD-REGISTERED TRADEMARK-
 
    Management of the Company believes that INSTEAD-Registered Trademark-
represents one of the most significant technological developments for feminine
protection since the introduction of the first commercial disposable tampon in
1933. INSTEAD-Registered Trademark- differs from other forms of feminine
protection currently on the market in that it collects, rather than absorbs,
menstrual fluid. The Company believes that the unique design of
INSTEAD-Registered Trademark- provides several distinct benefits over currently
available forms of feminine protection, including increased comfort, improved
performance, reduced health concerns and freedom to engage in most physical
(including sexual) activities during menstruation. The Company has obtained FDA
clearance to market INSTEAD-Registered Trademark- in the United States.
INSTEAD-Registered Trademark- may also be marketed in each of Belgium, Canada,
Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden,
Switzerland and the United Kingdom subject to compliance with applicable
international labeling laws and United States export requirements.
 
    The Company initiated the launch of INSTEAD-Registered Trademark- in the
Fall of 1996 in the Pacific Northwest, a region which the Company estimates
represents approximately 8% of United States households and includes the major
markets of San Francisco, Seattle, Portland, Spokane, Sacramento and Boise. In
the Spring of 1997
 
                                       3
<PAGE>
the Company expanded the distribution of INSTEAD-Registered Trademark- into the
remaining Western United States, a region which the Company estimates represents
approximately 16% of United States households and includes the major markets of
Los Angeles, San Diego, Phoenix, Salt Lake City, Las Vegas and Denver. In the
first half of 1997 the Company also began to distribute
INSTEAD-Registered Trademark- on a national basis through its agreements with
Target and Walgreens. Target began shipping nationally in February 1997, and
Walgreens began to ship INSTEAD-Registered Trademark- nationally in the
beginning of March 1997. CVS/Revco, Eckerd and Rite-Aid have agreed to begin
national distribution of INSTEAD-Registered Trademark- during the July to
September 1997 period. In addition, the Company intends to increase distribution
of INSTEAD-Registered Trademark- with full national distribution anticipated
over a three year period beginning with the initial launch of
INSTEAD-Registered Trademark-, which may be accelerated or delayed depending
upon various factors including market acceptance by retailers and consumers, the
availability of additional financing or a strategic alliance. The Company has
conducted market research and consumer use testing which indicate significant
consumer interest in INSTEAD-Registered Trademark-. See "--Product Testing," and
"-- Strategy and Plan of Operations." Marketing and sales programs, such as
print and TV advertising, sampling, consumer promotion, direct mail, public and
professional relations, and in-store merchandising have been developed and are
being utilized to generate consumer awareness and trial in the Western United
States.
 
    The Company distributes INSTEAD-Registered Trademark- primarily through
supermarkets, drug stores and mass merchandisers. INSTEAD-Registered Trademark-
was widely available on retailers' shelves (defined as available at more than
50% of stores) in the Pacific Northwest launch area beginning in October 1996.
Key retailers carrying INSTEAD-Registered Trademark- include Albertsons, Fred
Meyer, Longs, Luckys, Safeway, Target, Thrifty Payless, and Walgreen's. Sales to
Albertsons and Safeway during the fiscal year ended June 30, 1997 accounted for
approximately 15.5% and 14.4%, respectively, of the Company's net sales. The
loss of either of these two key retailers could have a material adverse effect
on the Company.
 
    After nine months following its introduction in the Pacific Northwest, a
study conducted by KRC Consulting and Research revealed that
INSTEAD-Registered Trademark- has gained brand awareness levels of approximately
67%, which compares favorably to its major competitors, who have all been in the
market for a minimum of 20 years. Management believes that awareness of the
product leads directly to trial which in turn leads directly to purchase and
conversion to regular usage.
 
    INSTEAD-Registered Trademark- became widely available on retailers' shelves
in the rest of the Western United States in May 1997. New key retailers in the
second launch area include Fry's, King Sooper, Osco, Ralph's, Vons and Wal-Mart.
As a result of greater distribution, a refined marketing program, increasing
public relations and growing word-of-mouth, INSTEAD-Registered Trademark- has
gained market acceptance more rapidly in the second launch area than in the
initial launch area.
 
    Management estimates that the domestic and international feminine protection
markets in developed countries are in excess of $9 billion annually. The United
States market for feminine protection products such as tampons and pads
generates approximately $1.8 billion in annual revenues (based on a 1995 report
by AC Nielsen). Approximately 58 million women between the ages of 18 and 54 use
feminine protection products in the United States. Approximately 63% of
menstruating women in the United States use tampons exclusively or in
combination with pads (based on 1996 Simmons Market Research Bureau). The
European market for feminine protection products generates approximately $2.9
billion in annual revenues (based on a 1995 report by AC Nielsen) with an
estimated 105 million women between the ages of 18 and 54 using feminine
protection products. Other developed markets, including Canada, Latin America,
Mexico and Asia (other than China and India) represent a combined population in
excess of 200 million potential users.
 
FUTURE WOMEN'S HEALTH CARE PRODUCT APPLICATIONS
 
    Ultrafem intends to develop additional applications of the SoftCup
Technology for vaginal delivery of agents for use in contraception, the
prevention of STDs, and the treatment of vaginal infections. The
 
                                       4
<PAGE>
Company's initial women's health care product under development is an OTC
contraceptive product which combines the SoftCup Technology with the
BufferGel-TM- Technology, which is licensed by the Company for vaginal use on a
worldwide basis. The BufferGel Technology, which has the ability to maintain the
normal vaginal pH balance while killing sperm and most STD pathogens, was
invented by scientists associated with The Johns Hopkins University ("Johns
Hopkins") with whom the Company has previously conducted research. The Company
has entered into a research and development agreement with ReProtect, LLC
("ReProtect"), a company founded by these scientists which will continue the
investigation and development of women's health care applications of the SoftCup
Technology.
 
    The National Institutes of Health ("NIH") has granted $2 million in
contracts to ReProtect and Johns Hopkins for the research and development of the
BufferGel Technology for contraception and the prevention of AIDS and other
STDs. HIVNET, a unit of the NIH, elected to test the use of the BufferGel
Technology as a vaginal microbicide for the prevention of AIDS and other STDs.
The FDA allowed an Investigational New Drug ("IND") application permitting the
BufferGel Technology to enter Phase I clinical trials which began in December
1996. The Company plans to begin clinical trials of a contraceptive product upon
completion of the first stage of the Phase I clinical trials of the BufferGel
Technology. In order to achieve this timetable, the Company will need to
complete the development of the contraceptive product by combining the SoftCup
Technology and the BufferGel Technology. The Company has developed prototypes
for the contraceptive product and has begun limited clinical trials on the
prototypes in order to determine the optimal design for the contraceptive
product. The Company plans to develop additional applications of such
technologies for treatment of vaginal infections and topical and systemic
therapies. There can be no assurance, however, that any of the clinical trials
will demonstrate the necessary degree of safety and effectiveness required for
FDA pre-market approval, that ReProtect will receive the benefit of the entire
$2 million under the NIH contracts or that any of the foregoing goals or
timetables can be met.
 
    The United States market for contraceptive products such as condoms, oral
contraceptives, diaphragms and implantable contraceptives generates
approximately $2 billion in annual revenues (based on Theta Corporation, 1994).
Based on the population of women between the ages of 18 and 54, estimated to be
in excess of 300 million women in Europe and other developed markets, and
assuming that the frequency of use of contraceptive products is less than that
in the United States, management estimates the international markets for
contraceptives to be approximately $6 billion annually outside the United
States. Additionally, at least 330 million new cases of STDs occur each year
throughout the world (World Health Organization, 1995), indicating a significant
market for a STD prevention product.
 
STRATEGY AND PLAN OF OPERATIONS
 
    The Company's business strategy is to develop and market proprietary
products based on its patented SoftCup Technology directed at high potential,
underserved segments of the women's health care market. The key elements of this
strategy are to (i) continue the launch and ongoing support of
INSTEAD-Registered Trademark- in the United States, (ii) develop and submit for
FDA clearance or pre-market approval products based upon the SoftCup Technology
for the women's health care product arena and (iii) pursue strategic alliances
with multi-national consumer product and pharmaceutical companies for national
and international marketing, sales and distribution.
 
    The Company markets INSTEAD-Registered Trademark- as an innovative
alternative to tampons and sanitary napkins. During the Company's fiscal year
ended June 30, 1997, the Company commenced distribution of
INSTEAD-Registered Trademark- in the Western United States, into an area which
management believes represents approximately 24% of U.S. households. In the
first half of 1997, the Company also began to distribute
INSTEAD-Registered Trademark- on a national basis through its agreements with
Target and Walgreens. CVS/Revco, Eckerd and Rite-Aid have agreed to begin
national distribution of INSTEAD-Registered Trademark- during the July to
September 1997 period. The Company intends to increase distribution of
INSTEAD-Registered Trademark- with full national distribution anticipated over a
three year period beginning with the initial launch of
INSTEAD-Registered Trademark-, which may be accelerated or delayed
 
                                       5
<PAGE>
depending upon various factors including market acceptance by retailers and
consumers, and the availability of additional financing. Distribution in foreign
markets could occur simultaneously, provided an appropriate strategic partner is
identified. No assurance can be given that the foregoing goals or timetables can
be met.
 
    The Company is developing a contraceptive product and intends to develop
additional applications of the combination of the SoftCup Technology with the
BufferGel Technology for treatment of vaginal infections and topical and
systemic therapies. The Company plans to begin clinical trials of a
contraceptive product upon completion of the first stage of the Phase I clinical
trials relating to use of the BufferGel Technology as a vaginal microbicide for
the prevention of AIDS and other STDs. These Phase I clinical trials, which
began in December 1996, are being funded by HIVNET. Any introduction of new
products would be dependent on individual product development, obtaining
regulatory clearances, the confirmation of the commercial viability of any such
product and the development of strategic partnerships to support international
market penetration. See "--Other Potential Applications of the SoftCup
Technology."
 
MARKETING AND SALES
 
    The Company is marketing INSTEAD-Registered Trademark- as an innovative
alternative to existing feminine protection products, including tampons and
sanitary napkins. When the marketing campaign is expanded into the full United
States market, it will be directed specifically at the Company's target consumer
audience of approximately 58 million women. See "--Feminine Protection
Market--Domestic Market." The Company, in conjunction with Bozell Worldwide,
Inc., a leading multinational advertising and marketing communications company,
has developed detailed plans integrating consumer advertising, professional
advertising, consumer research, professional and consumer public relations, and
direct marketing.
 
    The Company has implemented marketing programs directed at the consumer
target audience, the professional target audience and the retail trade. Initial
plans for the consumer target audience included a multimedia consumer
advertising campaign comprised of direct response television, product sampling
and couponing via mail, public relations, print advertising, professional
outreach, a 1-800-INSTEAD-Registered Trademark- Care Line and in-store
merchandising. To date, all marketing programs have been substantially directed
to the Western United States. The Company intends to increase marketing to other
geographic regions as the national roll out of INSTEAD-Registered Trademark-
continues.
 
    The professional target audience is defined as Obstetrician/Gynecologists,
Obstetrician/Gynecologist Nurses and Pharmacists. Plans for a professional
campaign have been formulated and include presentations at scientific meetings,
education for health and fitness organizations, by-lined articles in
professional journals, brochures for distribution through physicians' offices as
well as advertising in professional journals and through direct mail. The first
by-lined article ("Latest Developments in Menstrual Protection") appeared April
15, 1996 in CONTEMPORARY OB/GYN and was authored by Richard M. Soderstrom, M.D.,
a member of the Company's Scientific Advisory Board.
 
    The Company distributes INSTEAD-Registered Trademark- principally through
supermarkets, drug stores and mass merchandisers. Management believes that this
marketing approach enables it to compete effectively for sales and shelf space
with its larger, better capitalized competitors. The Company has retained
Meridian Consulting Group ("Meridian") to formulate selling strategies and
implement sales plans by trade channel and key accounts. Meridian provides the
sales management organization, which supervises a broker network and which
develops trade promotion plans and introductory sales presentations for the
introduction of INSTEAD-Registered Trademark- into the United States market. The
fees for such services are currently $100,000 per month plus additional fees for
special projects requested by the Company. The Company expects that this amount
will increase in the future as INSTEAD-Registered Trademark- is introduced into
additional geographies. Ultrafem has retained five Health and Beauty Aid brokers
as the brokers for INSTEAD-Registered Trademark-. The use of brokers is
predominant in the Health and Beauty Aid business. The brokers are generally
compensated on a
 
                                       6
<PAGE>
commission basis, based on a percentage of sales of
INSTEAD-Registered Trademark-. There can be no assurance that the Company's
marketing efforts will be successfully implemented.
 
    The Company works with an array of outside marketing and sales professionals
who are supporting the launch of INSTEAD-Registered Trademark-. The Company's
in-house marketing and sales professionals both supervise and coordinate the
Company's use of outside professionals. The Company currently plans to continue
to outsource a significant portion of its marketing and sales activities, since
outside professionals contribute significant and diverse skills, knowledge of
trade, and marketing and sales experience to the Company, at a cost which the
Company could not currently provide in-house.
 
FEMININE PROTECTION MARKET
 
    BACKGROUND
 
    The menstrual cycle normally begins between the ages of 12 and 13 and
continues to menopause, which generally occurs between the ages of 46 and 54.
The cycle averages 28 days, with the normal period lasting from five to six
days. The period begins with one to three days of heavy flow and then tapers to
a daily light flow over several more days.
 
    Some women use either tampons or sanitary napkins on an exclusive basis.
Many women use both tampons and sanitary napkins because they are not satisfied
with the use of any one type of product. Management believes that
INSTEAD-Registered Trademark- provides women with significant advantages over
the currently available feminine protection products and expects to attract
women that use both sanitary napkins and tampons.
 
    INSTEAD-Registered Trademark- is a new product and women will need to become
accustomed to using it. Some women may find digital insertion unappealing.
INSTEAD-Registered Trademark-, like certain other vaginal products, is not
recommended for women who have had toxic shock syndrome ("TSS") or use an IUD.
INSTEAD-Registered Trademark- also should not be used immediately after
childbirth, miscarriage or early termination of pregnancy.
INSTEAD-Registered Trademark- is not reusable, nor is it flushable or
biodegradable.
 
    DOMESTIC MARKET
 
    The United States feminine protection product market has grown approximately
11% from 1992 to 1995, with annual revenues increasing from approximately $1.6
billion in 1992 to approximately $1.8 billion in 1995. In 1995, the market was
divided between sanitary napkins, with a market share measured in dollars of
62%, and tampons, with a market share measured in dollars of 38%.
 
<TABLE>
<CAPTION>
                                                                                 % OF                            % OF
PRODUCT TYPE                                                     1992        MARKET SHARE        1995        MARKET SHARE
------------------------------------------------------------  -----------  -----------------  -----------  -----------------
<S>                                                           <C>          <C>                <C>          <C>
                                                              ($MILLION)                      ($MILLION)
Sanitary Napkins............................................   $     941              59%      $   1,084              62%
Tampons.....................................................         643              41             677              38
                                                              -----------            ---      -----------            ---
Total.......................................................   $   1,584             100%      $   1,761             100%
                                                              -----------            ---      -----------            ---
                                                              -----------            ---      -----------            ---
</TABLE>
 
------------------------
 
Source: AC Nielsen
 
    Management believes approximately 58 million women between the ages 18 and
54 use feminine protection products and represent the Company's target user
group in the United States domestic market. Based on the Company's market
research, management expects to ultimately generate trial of
INSTEAD-Registered Trademark- by approximately 15-17 million women in this
target audience. There can be no assurance that INSTEAD-Registered Trademark-
will be tried by such number of women, or that such women will remain as users
of INSTEAD-Registered Trademark-.
 
                                       7
<PAGE>
    EUROPEAN AND OTHER DEVELOPED MARKETS
 
    The European market for feminine protection products generated approximately
$2.9 billion in revenues in 1995, which represents a 7.5% increase over the
prior two years (based on 1995 Nielsen). According to such report, pantyliners
and pads had a 76% market share and tampons had a 24% share.
 
<TABLE>
<CAPTION>
                                                                                 % OF                            % OF
PRODUCT TYPE                                                     1993        MARKET SHARE        1995        MARKET SHARE
------------------------------------------------------------  -----------  -----------------  -----------  -----------------
<S>                                                           <C>          <C>                <C>          <C>
                                                              ($MILLION)                      ($MILLION)
Pantyliner..................................................   $     424              16%      $     483              17%
Towels (Pads)...............................................       1,638              60           1,739              59
Tampons.....................................................         643              24             688              24
                                                              -----------            ---      -----------            ---
Total.......................................................   $   2,705             100%      $   2,910             100%
                                                              -----------            ---      -----------            ---
                                                              -----------            ---      -----------            ---
</TABLE>
 
------------------------
 
Source: AC Nielsen
 
    Management believes approximately 105 million women between the ages of 18
and 54 use feminine protection products in Europe and represent the Company's
target user group in this market.
 
    Other developed markets, including Canada, Latin America, Mexico and Asia
(other than India and China) present a combined population in excess of 200
million potential users.
 
MANUFACTURING
 
    INSTEAD-Registered Trademark- is currently produced at the Company's
manufacturing facility in Missoula, Montana using a patent-pending process. The
facility currently has two semi-automated lines which each have a capacity of
approximately 4,000,000 units per month on a three shift basis. The
semi-automated lines consist of a piece of special equipment to manufacture the
INSTEAD-Registered Trademark- SoftCup, which is called the thermoforming line; a
flow wrapper machine that puts INSTEAD-Registered Trademark- into individual
"intimate wraps" and the cartoning machine that puts
INSTEAD-Registered Trademark- into 6, 14, 20 and 24 count cartons. To
commercialize INSTEAD-Registered Trademark- successfully, the Company will have
to increase the number of units it can produce, reduce per-unit manufacturing
costs and achieve the high-quality standards required. Two fully automated lines
have been ordered. Each fully automated line will have a capacity of
approximately 14,500,000 units per month. Management believes that these two
production lines will be able to significantly lower the per unit production
costs of INSTEAD-Registered Trademark-. The Company ultimately plans to add
additional capacity to meet its future product requirements for U.S. and
international markets. The Company leases the office and manufacturing space in
Missoula which contains a controlled environment module which secures the
manufacturing equipment. To date the Company estimates that it has produced an
aggregate of approximately 35 million of INSTEAD-Registered Trademark- SoftCups
through June 30, 1997.
 
    The Company has developed thermoplastic formulations which are proprietary
to the Company. They are permeable to many commercially established drugs and
are easily welded to each other and to other delivery components. Management
believes the performance of these formulations in combination with the
manufacturing process is an important component of developing a practical, low
cost production process. See "--Patent Status and Patent Applications;
Proprietary Technology."
 
                                       8
<PAGE>
OTHER POTENTIAL APPLICATIONS OF THE SOFTCUP TECHNOLOGY
 
    The SoftCup Technology has significant potential women's health care
applications. Management plans to develop commercial applications of the SoftCup
Technology to be used as a vaginal drug delivery system because, by virtue of
direct contact with vaginal mucous membranes, the SoftCup Technology can provide
an easy and direct method for topical and systemic vaginal drug treatments. The
Company believes that these products have significant commercial applications
for contraception, prevention of STDs, treatments of vaginal infections and
topical and systemic therapies.
 
    Under a research agreement, which expired by its terms on June 30, 1993,
Johns Hopkins investigated using the SoftCup Technology as a delivery system for
monoclonal antibodies and other agents as protection against pregnancy and STDs.
Laboratory experiments have indicated that the SoftCup Technology can deliver
the BufferGel both to the surface of the cervix and to the lumenal surfaces of
the vagina. Dr. Richard A. Cone and Dr. Kevin J. Whaley, who are affiliated with
Johns Hopkins, and along with Dr. Thomas Moench, previously conducted research
for the Company in connection with the research agreement with Johns Hopkins.
These individuals formed ReProtect which will continue the investigation of
using the SoftCup Technology as a vaginal drug delivery system of agents for
contraception, prevention of STDs, treatments of vaginal infections and for
topical and systemic therapies. Dr. Richard A. Cone is a member of the Company's
Board of Directors. Dr. Thomas R. Moench, formerly an Assistant Professor of
Medicine at Johns Hopkins, is an expert in virology, molecular biology and
monoclonal antibody production. From 1984 through 1993, he served on the faculty
of Johns Hopkins as a consultant physician in Infectious Diseases. He developed
an animal model for studying the vaginal and rectal (transmucosal) transmission
of an AIDS-like disease in cats caused by feline immunodeficiency virus. Dr.
Kevin J. Whaley, an Associate Research Scientist in Biophysics and an Adjunct
Faculty member, Population Dynamics/ Reproductive Biology, Johns Hopkins, is an
expert on monoclonal antibodies and vaccines that protect against both pregnancy
and disease and on vaginal drug delivery.
 
    Two of the scientists who formed ReProtect invented the BufferGel
Technology, which ReProtect has licensed to the Company. The Company believes
that the BufferGel Technology, when combined with the patented SoftCup
Technology, will provide enhanced protection against pregnancy and STDs as well
as enhanced treatments for vaginal infections. The BufferGel Technology has the
ability to maintain the normal vaginal pH balance while killing sperm and most
STD pathogens. The mechanical barrier action of the SoftCup Technology combined
with the BufferGel Technology may fill the needs for an effective woman
controlled prophylactic contraceptive as well as vaginal anti-infective. The NIH
has granted $2 million in contracts for the research and development of the
BufferGel Technology for contraception and the prevention of AIDS and other
STDs. There can be no assurance, however, that ReProtect will receive the
benefit of the entire $2 million under the NIH contracts.
 
    The FDA has allowed an IND application permitting the BufferGel Technology
to enter Phase I clinical trials which began in December 1996. These Phase I
clinical trials are being funded by HIVNET, a unit of the NIH, to test the use
of the BufferGel Technology as a vaginal microbicide for the prevention of AIDS
and other STDs. The Company plans to begin clinical trials of a contraceptive
product upon completion of the first stage of the Phase I clinical trials of the
BufferGel Technology. In order to achieve this timetable, the Company will need
to complete development of the contraceptive product by combining the SoftCup
Technology and the BufferGel Technology. The Company will develop additional
applications of the combination of the SoftCup Technology and the BufferGel
Technology, for treatment of vaginal infections and topical and systemic
therapies with a view towards seeking FDA approval to enter clinical trials for
such applications. The Company also intends to develop other vaginal drug
delivery products, including for the prevention of STDs. There can be no
assurance, however, that any of the foregoing goals or timetables can be met, or
that any of the clinical trials will demonstrate the necessary degree of safety
and effectiveness required for FDA pre-market approval.
 
                                       9
<PAGE>
    ReProtect conducts research at Johns Hopkins in accordance with a ten year
License, Research and Development Agreement between the Company and ReProtect
(the "ReProtect Agreement") under which the Company provides ReProtect at least
$1 million annually for research. ReProtect is party to a research agreement
with Johns Hopkins which expires August 31, 1999. In addition, ReProtect also
has an independent research facility and could conduct research independent of
Johns Hopkins by upgrading its current facilities. The ReProtect Agreement
provides the Company with an exclusive, worldwide license for the use of the
BufferGel Technology coupled with the SoftCup Technology, for which ReProtect
received a one time payment of $100,000, a royalty of $.01 per unit of the
product sold and ten and one-half year options to purchase 125,000 shares of
common stock, par value $.001 per share ("Common Stock"), at an exercise price
of $8.00 per share and 100,000 shares of Common Stock at an exercise price of
$6.00 per share, exercisable upon the attainment of certain milestones. In
addition, ReProtect has granted the Company a worldwide license for vaginal use
of the BufferGel Technology without the SoftCup Technology, for which ReProtect
received a one time payment of $100,000, options to purchase 175,000 shares of
Common Stock at an exercise price of $8.00 per share, exercisable upon the
attainment of certain milestones, and a royalty of either 5% or 3% (depending on
whether a patent has been issued) of net sales of the BufferGel Technology
(without the SoftCup Technology). The ReProtect Agreement contains the parties'
agreement to negotiate in good faith to extend the term, as well as other
customary provisions in agreements of this type, including provisions relating
to noncompetition, confidentiality and early termination of the agreement and
the licenses therein under certain circumstances.
 
    The Company plans to continue pursuing other potential applications of the
SoftCup Technology. Beyond the potential applications discussed above, the
ongoing longer-range research and development with the ReProtect research team
will focus on the development of vaginal delivery of monoclonal antibodies
against sperm and STD pathogens. Management believes that these natural
protective agents will facilitate a new generation of products for vaginal
protection and therapy. The Company will require FDA clearance or pre-market
approval to market different applications of the SoftCup Technology in the
United States. There is no assurance that the Company will be successful in
developing, or getting regulatory approval for, additional applications for the
SoftCup Technology.
 
STRATEGIC ALLIANCES
 
    The Company is seeking domestic and international strategic alliances with
multinational pharmaceutical and/or consumer product companies to support the
launch of INSTEAD-Registered Trademark- into international markets, to support
the distribution of INSTEAD-Registered Trademark- into the full United States
market and to support the development of other commercial applications of the
SoftCup Technology. The Company believes that forming strategic alliances with
multinational pharmaceutical and/or consumer product companies will enhance both
its ability to successfully bring INSTEAD-Registered Trademark- to international
markets and its capability to develop new applications for the SoftCup
Technology, such as contraception and vaginal drug delivery applications.
 
    The Company has retained a number of consultants specializing in health care
and business strategy to assist it in formulating and implementing the strategic
alliance strategy. The Company and its consultants have contacted a selected
list of target companies as potential strategic partners and are currently
engaged in preliminary discussions regarding formation of strategic alliances
with companies in both the United States and in Europe.
 
PRODUCT TESTING
 
    The Company has completed extensive laboratory testing of
INSTEAD-Registered Trademark- for the purpose of satisfying the FDA's safety
requirements. The Company has conducted biocompatibility, toxicity and
microbiological testing both IN VITRO (outside a living organism) and IN VIVO
(inside a living organism). Management believes, based on the non-absorbent
nature of INSTEAD-Registered Trademark- and the results of tests performed by
two
 
                                       10
<PAGE>
independent laboratories on the materials of which INSTEAD-Registered Trademark-
is made and human clinical trials, that INSTEAD-Registered Trademark- is safe.
 
    The tests for toxicity and biocompatibility were conducted by the Company
through independent laboratories in compliance with good laboratory practice
("GLP") regulations. Management believes the results of these tests demonstrate
INSTEAD-Registered Trademark-'s safety. Arent Fox Kintner Plotkin & Kahn, FDA
regulatory counsel to the Company, has advised the Company that such results,
which have been submitted to the FDA, satisfy current FDA safety testing
requirements for this type of product.
 
    The microbiological testing that was conducted demonstrated that
INSTEAD-Registered Trademark- did not alter the growth of bacteria normally
present in the vaginal micro flora and did not cause the production of Toxic
Shock Syndrome Toxin-l. All studies were conducted by an independent laboratory
in accordance with GLP regulations. All test results described herein were
submitted to the FDA in connection with the initial 510(k) notification relating
to INSTEAD-Registered Trademark-. See "--Regulatory Status."
 
    Subsequent to the clearance of the initial 510(k) notification, the Company
completed human clinical test studies to determine the safety of longer wear
times of INSTEAD-Registered Trademark-. While the Company did not believe it
necessary to conduct clinical testing to increase the maximum wear time of
INSTEAD-Registered Trademark- since the devices to which it was found
substantially equivalent by the FDA either do not have a maximum wear time or
can be worn for at least 12 to 14 hours, if not longer, the Company conducted a
clinical study to support the safety of the 12 hour wear time. The study was
conducted by The Crucible Group of Atlanta, Georgia, following review by an
Institutional Review Board, and was analyzed by MTC-BRI International, Inc.
("MTC-BRI") of Rockville, Maryland. The study evaluated the effect of use of
INSTEAD-Registered Trademark- on the vaginal micro flora in approximately 100
women for 8, 12, and 24 hours. The investigators concluded that increasing the
wear time to 12 or even 24 hours does not result in increased colonization by
the etiologic agent of TSS, does not lead to increased colonization by pathogens
that cause bacterial vaginosis, does not lead to increased colonization by E.
COLI, the most common agent causing urinary tract infections, and does preserve
the normal LACTOBACILLUS-predominant vaginal flora. In response to the results
of such testing the Company increased the recommended wear time from 8 to 12
hours. See "--Regulatory Status"
 
COMPANY-SPONSORED RESEARCH
 
    AWARENESS AND TRIAL RESEARCH
 
    In December 1996, the Company retained KRC Research and Consulting to begin
quarterly tracking of consumer awareness and trial in the Pacific Northwest. A
random phone survey of women in December, March and June showed a growing
awareness level of INSTEAD-Registered Trademark- of 23%, 62% and 67% among women
18-54. Concurrently, trial among women 18-54 grew from 3%, to 8%, to 13%.
 
    CONVERSION RESEARCH
 
    In November 1996 the Company retained KRC Research and Consulting, a
division of Bozell Worldwide, Inc., to contact approximately 2,400 consumers who
had requested an INSTEAD-Registered Trademark- starter kit or coupon. The survey
indicated that of the approximately 2,400 women who had requested a starter kit
or coupon, 35% had already tried the product with 64% indicating that they
definitely or probably intended to purchase INSTEAD-Registered Trademark-. In
January 1997, a follow-up survey was conducted with the same population.
Approximately 60% of the original non-triers had tried the product and 32% had
already purchased the product with an additional 32% indicating a positive
purchase intent.
 
    In May 1997, the Company retained Yankelovich Partners, Inc. to conduct a
study of 1,500 women in the Pacific Northwest who had tried
INSTEAD-Registered Trademark-. The study concluded that approximately 35% of
women who try INSTEAD-Registered Trademark- will ultimately become long-term
users; i.e. women who purchased INSTEAD-Registered Trademark- on at least three
occasions.
 
                                       11
<PAGE>
PATENT STATUS AND PATENT APPLICATIONS; PROPRIETARY TECHNOLOGY
 
    A United States patent with respect to the SoftCup Technology (for use for
feminine protection during menstruation either with or without vaginal drug
delivery) was issued on March 22, 1994. Foreign patent applications
corresponding thereto were filed by the Company in Australia, Belgium, Brazil,
Canada, Denmark, France, Germany, Italy, the Netherlands, Spain, Sweden,
Switzerland and the United Kingdom. In addition, United States patents with
respect to the BufferGel Technology were issued to ReProtect on January 14, 1997
and April 8, 1997, for a vaginal device and method for controlling pH by acidic
buffering.
 
    The Company has in the past and will continue to pursue in the future patent
protection for its technology and products that are patentable. The Company's
original patent application was filed by Ms. Contente and subsequently assigned
to the Company. The patent contains claims covering the use of the SoftCup
Technology for menstruation either with or without vaginal drug delivery. The
Company has filed a United States continuation application with additional
claims on other aspects of the SoftCup Technology. In addition, the Company has
filed patent applications in the United States on specific drug delivery systems
and in the United States and in foreign countries under the Patent Cooperation
Treaty on the method of manufacturing the SoftCup Technology. To further protect
its technology, the Company intends to file additional patent applications on
inventions relating to processing technology, specific vaginal drug delivery
systems and other new product applications.
 
    The Company relies on trade secrets, unpatented proprietary know-how and
continuing technological innovation to develop and maintain its competitive
position. The Company requires its employees and consultants and other advisors
to execute confidentiality agreements. There can be no assurance that these
agreements will provide meaningful protection for the Company's trade secrets in
the event of unauthorized use or disclosure of such information or that others
will not independently develop substantially equivalent proprietary information
and manufacturing techniques or otherwise gain access to the Company's trade
secrets.
 
TRADEMARKS
 
    The Company obtained registrations for its trademarks with the United States
Patent and Trademark Office for "INSTEAD-Registered Trademark-,"
"INSTEAD-Registered Trademark- and its logo," "SoftCup," and "Ultrafem" in 1996,
1997, 1992 and 1993, respectively. As of September 2, 1997, the
INSTEAD-Registered Trademark- mark has been registered in Australia, Canada,
Paraguay, Switzerland and Taiwan. The Company has also filed an application to
register the trademark "INSTEAD-Registered Trademark-" in Argentina, Brazil,
Chile, India, Korea, Mexico, New Zealand, Pakistan, Panama, Philippines, Russia,
South Africa, Turkey, Uruguay, Venezuela, and the European Community.
 
REGULATORY STATUS
 
    Government regulation, both domestic and foreign, will be a significant
factor in manufacturing and marketing INSTEAD-Registered Trademark-. The lengthy
process of seeking FDA and foreign government clearance and the ongoing process
of complying with applicable federal statutes and regulations require expending
substantial resources.
 
    In 1993, the FDA cleared the Company's pre-market notification submission
under Section 510(k) of the FDCA. The FDA's clearance of this notification
enables the Company to market INSTEAD-Registered Trademark- in the United States
and to export it overseas subject to the general controls provisions of the
FDCA. Subsequent to FDA clearance of this notification submission,
modifications, which the Company believes to be minor, were made to the
formulation of certain materials used in INSTEAD-Registered Trademark- to
improve the manufacturing process. An applicable FDA regulation requires the
filing of a new 510(k) notification when, among other things, there is a major
change or modification in the intended use of the device, or a change or
modification in material, chemical composition or manufacturing process, that
could significantly affect the device's safety or effectiveness. A device
manufacturer is responsible for making the initial determination
 
                                       12
<PAGE>
as to whether a proposed change to a cleared device or its intended use
necessitates the filing of a new 510(k) notification. The Company conducted a
full range of toxicological testing subsequent to the changes in materials,
including laboratory tests to determine the effect on the vaginal micro flora
and on the production of the toxin which causes TSS. The results of the studies
confirmed that these changes did not affect the safety of the product. As a
result, the Company, and its regulatory counsel, do not believe a new 510(k)
notification was necessary to make this change. The Company's rationale and
support for the change are in records as required by FDA GMP regulations and are
available for inspection by the FDA.
 
    The Company has also decided to label INSTEAD-Registered Trademark- with a
12 hour maximum wear time. The labeling for INSTEAD-Registered Trademark-, as
cleared by the FDA in the original 510(k) notification, included an 8 hour
maximum wear time. While the Company did not believe it necessary to conduct
clinical testing to increase the maximum wear time since the devices to which
INSTEAD-Registered Trademark- was found substantially equivalent by the FDA
either do not have a maximum wear time or can be worn for at least 12 to 14
hours, if not longer, the Company conducted a clinical study to support the
safety of the 12 hour wear time. See "--Product Testing." The study was
conducted by The Crucible Group of Atlanta, Georgia. The investigators concluded
that increasing the wear time of INSTEAD-Registered Trademark- to 12 or even 24
hours does not result in increased colonization by the etiologic agent of TSS,
does not lead to increased colonization by pathogens that cause bacterial
vaginosis, does not lead to increased colonization by E. COLI, the most common
agent causing urinary tract infections, and does preserve the normal
LACTOBACILLUS-predominant vaginal flora. Since there has not been a change in
the intended use of the product, and the Company's clinical studies have
demonstrated that the 12 hour maximum wear time is safe, and since the wear time
is similar to that for devices to which the product was found "substantially
equivalent" by the FDA, the Company does not believe a new 510(k) notification
is necessary to increase the maximum wear time to 12 hours. Prior to finalizing
the change in labeling, the Company met with the FDA on June 19, 1996. At that
meeting the results of the studies were discussed. The FDA requested that the
Company submit these results of its clinical testing, which the Company provided
on July 17, 1996. On October 25, 1996 the Company received a letter from the FDA
confirming that the Company could increase the wear time of
INSTEAD-Registered Trademark- to 12 hours without filing a new 510(k)
notification. On June 16, 1997 the Company received a letter from the FDA, in
response to a letter submitted by the Company, which reiterated that the change
did not appear to significantly affect the safety or effectiveness of the
device. The Company has prepared a report on its rationale that it need not file
a new 510(k) notification for this change, which is kept on file as required by
FDA GMP regulations.
 
    On April 7, 1997, the Company submitted a supplemental 510(k) notification
to the FDA, requesting clearance to amend the labeling of
INSTEAD-Registered Trademark- to include use of the product in anticipation of
menses to help prevent accidents and for use outside the menstrual period to
help prevent staining and spotting of clothing caused by normal occasional
bleeding. This 510(k) notification was cleared by the FDA on June 6, 1997, and
the Company is in the process of amending labeling to include these new
indications for use and information relating thereto.
 
    The Company's manufacturing facility in Missoula, Montana is subject to GMP
regulations which are promulgated by the FDA, international quality standards
and other regulatory requirements. The failure by the Company to comply with the
foregoing could adversely affect the Company's production and financial
condition.
 
    The Company has obtained Canadian government acceptance to market
INSTEAD-Registered Trademark- in Canada. INSTEAD-Registered Trademark- may be
marketed in each of Belgium, Denmark, Finland, France, Germany, Italy, the
Netherlands, Spain, Sweden, Switzerland and the United Kingdom subject to
compliance with applicable labeling laws and FDA requirements concerning
exports. Regulatory approvals or clearances are being pursued in Argentina,
Australia, Brazil, India, Mexico, Pakistan, Russia, Saudi Arabia, Turkey, and
the United Arab Emirates; however, there can be no assurance that the Company
will be able to comply with any such requirements.
 
                                       13
<PAGE>
    The potential health care applications of the SoftCup Technology will
require FDA clearance or pre-market approval in accordance with the FDCA
applicable regulations. Although most of the potential uses do not incorporate
new chemical compounds, the Company will be required to submit applications for
each such use involving an already marketed drug, as a new form of delivery is
involved. Obtaining such approval or clearance can entail a lengthy process and
significant expense, including potential costs of clinical trials to demonstrate
safety and efficacy.
 
    In conjunction with developing other applications of the SoftCup Technology,
the Company has formulated a comprehensive regulatory strategy and has retained
MTC-BRI, an international contract research organization which specializes in
managing regulated health care products. MTC-BRI assists in determining that
potential products will meet applicable FDA requirements. Within MTC-BRI, the
project team for the Company is headed by Dr. David L. West who previously was
FDA Deputy Director, Office of Device Evaluation, Center for Devices and
Radiological Health.
 
GOVERNMENT REGULATION
 
    Medical devices are regulated in the United States under the 1976 Medical
Device Amendments ("MDA") and the 1991 Safe Medical Devices Act to the FDCA, and
under pertinent implementing regulations issued by the FDA. Every medical device
in United States commercial distribution is classified by the FDA as a Class I,
II or III device. All three classes require compliance with the general device
controls of the MDA (provisions governing establishment registration; product
listing; adulteration; misbranding; pre-market notification; notification of
unreasonable risk; repair, replacement or refund; recalls; device records and
reports; and GMP regulations). A Class II device must comply with such MDA
general controls and any applicable performance standard or other special
controls promulgated by the FDA. A Class III device must be clinically tested
for safety and effectiveness for its intended use(s) and obtain the FDA's
approval of a pre-market approval application ("PMA") containing the results of
such tests before it can be marketed. Thereafter, such a device must comply with
the conditions of approval of the PMA and with the MDA general controls.
 
    Each new medical device product never before commercially distributed in the
United States is automatically deemed a Class III device requiring pre-market
approval, unless it can be demonstrated that it is substantially equivalent in
intended use, design, materials and/or technological characteristics to one or
more predicate medical devices that were on the market before the MDA enactment
date of May 28, 1976, thereby establishing that the new device is as safe and
effective as the predicate device. Such substantial equivalence is demonstrated
by a manufacturer in a 510(k) pre-market notification submission, which must be
filed with the FDA at least 90 days before the product's targeted date of first
commercial distribution. Marketing of the device is not allowed until the FDA
clears the 510(k) notification submission.
 
    FDA clearance of a supplemental 510(k) submission is required before any
significant change can be made to an already-marketed device in design,
materials, chemical composition, energy source or manufacturing process that
could affect the product's safety or effectiveness. Where a 510(k) notification
submission is based on a predicate device that has been classified by the FDA in
Class III, the 510(k) submission must also include a certification that the
submitter has conducted a reasonable search for all data and information
relevant to the predicate device and the device for which 510(k) clearance is
sought, as well as a summary of all safety and effectiveness data for both
devices. A device cleared through the 510(k) process that is substantially
equivalent to a predicate Class III device for which the FDA ultimately
establishes a PMA requirement will eventually have to receive approval of its
own PMA to remain on the market, unless it is the fifth or subsequent device of
its kind that has been commercially distributed in the United States, in which
case no PMA is required.
 
    On April 7, 1997, the Company submitted a supplemental 510(k) notification
to the FDA, requesting clearance to amend the labeling of
INSTEAD-Registered Trademark- to include use of the product in anticipation of
menses to
 
                                       14
<PAGE>
help prevent accidents and for use outside the menstrual period to help prevent
staining and spotting of clothing caused by normal occasional bleeding. This
510(k) notification was cleared by FDA on June 6, 1997, and the Company is in
the process of amending labeling to include these new indications for use and
information relating thereto.
 
    Menstrual cups such as INSTEAD-Registered Trademark- are classified as Class
II medical devices by the FDA pursuant to applicable FDA regulations. Submission
and clearance of a 510(k) notification, through a finding of "substantial
equivalence" is required under the FDCA to market a Class II medical device in
the United States. The FDA cleared the 510(k) notification for
INSTEAD-Registered Trademark- on October 5, 1993.
 
    The FDA has promulgated regulations establishing stringent GMP requirements
for all medical devices. The FDA conducts periodic inspections of manufacturing
plants to ensure compliance with these regulations. Failure of compliance can
result in regulatory action of the kinds stated below.
 
    The FDA has statutory authority to institute civil administrative
proceedings or court enforcement actions against medical device manufacturers or
distributors for violations of applicable requirements of the MDA and FDA
implementing regulations. A finding of liability in an administrative proceeding
can result in the imposition of civil monetary penalties. Court enforcement
actions, involving seizure of products, injunction against continued
distribution of products or criminal prosecution, can result, respectively, in
destruction of products, orders against further distribution of products or
criminal fines if the FDA prevails. The FDA can also require the recall of an
already-marketed medical device when the agency believes that the product would
cause serious adverse health consequences or deaths if marketing were allowed to
continue.
 
    Exports of medical devices manufactured in the United States are allowed if
the devices have satisfied applicable pre-market requirements and are not
adulterated or misbranded. Exports of medical devices manufactured in the United
States are allowed without prior FDA export approval if the product has
satisfied applicable pre-market approval or notification requirements and is not
adulterated or misbranded. An unapproved medical device manufactured in the
United States can also be exported to 23 "Tier 1" countries without prior FDA
export approval, if the device has valid marketing authorization in a "Tier 1"
country and the device complies with the laws of the importing country, subject
to notification to the FDA at the time of export. Exports of medical devices not
approved in the United States to non- "Tier 1" countries require prior FDA
approval. In addition, exports of unapproved medical devices manufactured in the
United States for export for clinical investigations in "Tier 1" countries or
where marketing authorization is imminent in a "Tier 1" country may be made
without prior FDA approval, provided that a notice is submitted to the FDA at
the time of export.
 
COMPETITION
 
    The market for feminine protection products is presently dominated by large
and well-financed companies which have substantially greater resources than the
Company. The Company believes that certain of such competitors have increased
their marketing efforts in response to the launch of
INSTEAD-Registered Trademark-. Management believes INSTEAD-Registered Trademark-
has significant distinct benefits when compared to other feminine protection
products currently available and that the Company is the sole provider of this
type of feminine protection. In addition, the market for contraceptives and
other women's health care products is presently dominated by large and
well-financed companies which have substantially greater resources than the
Company, and the ability of the Company to compete in this area is dependent to
a large extent on its ability to successfully develop products, have such
products cleared for market, and the ability to manufacture any such products on
a cost-efficient basis.
 
RAW MATERIALS
 
    INSTEAD-Registered Trademark- is manufactured from a thermoplastic elastomer
which is available from a wide variety of domestic and international sources and
is currently supplied by Shell Chemical Company pursuant to a
 
                                       15
<PAGE>
written sales contract. Management has identified several sources of supply of
raw materials and believes such materials are readily available from such other
sources. A change in the supplier of a raw material would not require further
FDA clearance, provided that there is no change in the raw material. See "--
Regulatory Status."
 
EMPLOYEES
 
    As of June 30, 1997, the Company had 103 full-time employees, and 35
temporary full-time employees. The Company believes its relations with its
employees are satisfactory. None of the Company's employees are covered by a
collective bargaining agreement or represented by a collective bargaining unit.
 
ITEM 2. PROPERTIES.
 
    The Company has entered into a ten year lease for office space at 805 Third
Avenue, New York, New York for its principal office which provides for monthly
base rent of approximately $42,233 for the first two years, increasing to a
maximum of approximately $48,682 per month by the end of the term. The Company
has entered into a three and one-half year sublease for a portion of such space
under which the subtenant will pay approximately $13,000 per month, plus
allocable expenses of approximately $1,000 per month. In July 1997, the Company
extended the leases, for a minimum of twelve months, for modular office space in
Missoula, Montana, with rental payments of $1,230 per month and $1,350 per
month, respectively. In April 1996, the Company entered into a three year lease
for administrative office space in Missoula, Montana for a monthly rent of
$2,123. The Company has also entered into two five-year leases beginning in July
1997 for its manufacturing facility in Missoula, Montana. One of such leases is
for approximately 40,000 square feet at a monthly rent of $10,833.33. The other
lease is for up to 38,055 square feet, as such space becomes available over an
eighteen month period, at an annual rate of $3.25 per square foot.
 
ITEM 3. LEGAL PROCEEDINGS.
 
    In September 1997, a complaint was filed by Dr. Earl Pruyn in the United
States District Court for the District of Montana, Missoula Division seeking a
judgment against the Company and its directors. The plaintiff alleges that the
Company and its directors did not satisfy the terms of the plaintiff's 10%
Subordinated Convertible Debenture, Number 94-C1, dated October 28, 1994 (the
"Debenture"). The plaintiff further alleges that the Debenture was convertible
into 46,316 shares of Common Stock rather than the 11,579 shares of Common Stock
which the Company believes were due upon such conversion. The suit seeks
recovery of damages and attorney fees. The Company believes it has meritorious
defenses in this lawsuit and intends to vigorously defend the lawsuit.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    No matters were submitted to a vote of security holders in the fourth
quarter of fiscal year 1997.
 
                                       16
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
PRICE RANGE OF COMMON STOCK
 
    The Common Stock was initially offered to the public on February 22, 1996 at
a price of $10.00 per share and is quoted on the Nasdaq National Market. The
following table sets forth the range of high and low sale prices for the Common
Stock for the periods indicated as reported on the Nasdaq National Market.
 
<TABLE>
<CAPTION>
                                                                            HIGH      LOW
                                                                           -------  -------
<S>                                                                        <C>      <C>
Fiscal year 1996:
  Third quarter (since February 22nd)..................................... $16      $11 1/8
  Fourth quarter..........................................................  36       11 3/4
Fiscal year 1997:
  First quarter...........................................................  25 3/4   14
  Second quarter..........................................................  26 1/4   16 1/2
  Third quarter...........................................................  21 1/4   12 1/2
  Fourth quarter..........................................................  16 3/4   12 5/8
</TABLE>
 
    On September 5, 1997, the last sale price of the Common Stock was $8.75 as
reported on the Nasdaq National Market. At September 5, 1997, there were 281
stockholders of record of the Common Stock.
 
    The Company has not paid any dividends on its Common Stock to date. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements and financial condition. It is the present intention of the Board
of Directors to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board of Directors does not expect to declare
or pay any cash dividends in the foreseeable future.
 
                                       17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
 
    The selected financial data for the five years ended June 30, 1997 should be
read in conjunction with the financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED JUNE 30,
                                      ---------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>            <C>             <C>
                                          1993           1994           1995            1996            1997
                                      -------------  -------------  -------------  --------------  --------------
Net sales...........................  $    --        $    --        $    --        $     --        $    3,533,810
Cost of sales (exclusive of
  depreciation).....................       --             --             --              --             3,371,544
Marketing, sales and
  distribution......................       --             --              123,531       2,406,277      26,448,837
Research and development............        830,761        452,552        181,475       1,403,557       2,464,674
General and administrative..........      1,139,339      1,387,784      1,444,911       5,095,261       8,510,195
Depreciation and amortization.......         50,686        126,872        166,533         738,883       1,045,163
Interest expense....................         71,117        336,732        464,615         665,381          15,945
Interest income.....................       --             --             --              (489,379)     (1,601,693)
                                      -------------  -------------  -------------  --------------  --------------
Net loss............................  $   2,091,903  $   2,303,940  $   2,381,065  $    9,819,980  $   36,720,855
                                      -------------  -------------  -------------  --------------  --------------
                                      -------------  -------------  -------------  --------------  --------------
Net loss per share..................  $        0.79  $        0.87  $        0.87  $         2.74  $         5.08
                                      -------------  -------------  -------------  --------------  --------------
                                      -------------  -------------  -------------  --------------  --------------
Weighted average number of common
  shares and equivalents (1)........      2,640,387      2,658,214      2,698,152       3,529,494       7,231,401
                                      -------------  -------------  -------------  --------------  --------------
                                      -------------  -------------  -------------  --------------  --------------
Balance Sheet Data:
  Working capital (2)...............  $  (2,386,815) $  (2,438,701) $  (2,662,142) $   17,962,533  $   13,317,812
  Total assets......................        670,147        603,424        766,959      29,407,936      40,706,293
  Long-term debt....................        787,358      2,880,075      4,032,493         700,000         700,000
  Stockholders' (deficiency)
    equity..........................     (2,573,795)    (4,733,714)    (6,011,780)     21,283,944      24,868,238
</TABLE>
 
------------------------
 
(1) The weighted average number of common shares outstanding during the first
    half of fiscal year 1996 and during fiscal years 1995, 1994 and 1993 include
    incremental shares for the Common Stock, warrants and other potentially
    dilutive securities issued and options granted to purchase Common Stock
    which were issued within one year prior to the effective date of the Initial
    Public Offering (the "Incremental Shares"). Such Incremental Shares were
    determined utilizing the treasury stock method. For periods subsequent to
    the effective date of the Initial Public Offering ("IPO"), the Company
    computes loss per common and common equivalent share in accordance with APB
    No. 15, accordingly, the effect of the assumed exercise of stock options
    which were issued in periods prior to the one-year period previously
    mentioned and the effect of the assumed conversion of the convertible
    preferred stock are not included because their effect is antidilutive.
 
(2) Includes current portion of long-term debt.
 
                                       18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.
 
OVERVIEW
 
    The Company's activities during the year ended June 30, 1997 were focused on
the commercial introduction of INSTEAD-REGISTERED TRADEMARK-. The introduction
of INSTEAD-REGISTERED TRADEMARK- was initiated in the Fall of 1996 in the
Pacific Northwest, a region which the Company estimates represents approximately
8% of U.S. households and includes the major markets of San Francisco, Seattle,
Portland, Spokane, Sacramento and Boise. Key retailers carrying
INSTEAD-REGISTERED TRADEMARK- in this geography include Albertsons, Fred Meyer,
Longs, Luckys, Safeway, Target, Thrifty Payless, and Walgreens. In the Spring of
1997, the Company expanded the distribution of INSTEAD-REGISTERED TRADEMARK-
into the remaining Western United States, a region which the Company estimates
represents approximately 16% of U.S. households and includes the major markets
of Los Angeles, San Diego, Phoenix, Salt Lake City, Las Vegas and Denver. New
key retailers in this geography include Fry's, King Sooper, Osco, Ralph's, Vons
and Wal-Mart. In the first half of 1997, the Company began to distribute
INSTEAD-REGISTERED TRADEMARK- on a national basis to Target and Walgreens. In
addition, CVS/Revco, Eckerd and Rite-Aid have agreed to begin national
distribution in the first quarter of fiscal 1998.
 
    During the year ended June 30, 1997, the Company continued marketing and
advertising activities for INSTEAD-REGISTERED TRADEMARK- directed to the
consumer audiences and retail trade. These activities were centered on
generating awareness and trial of INSTEAD-REGISTERED TRADEMARK-. The Company
also conducted research on the impact of its advertising campaign in the Pacific
Northwest. The INSTEAD-REGISTERED TRADEMARK- advertising received the highest
recall score in feminine protection advertising history, according to the
independent testing firm that conducted the research. Furthermore, an additional
independent tracking survey showed that this advertising in combination with the
other INSTEAD-REGISTERED TRADEMARK- marketing programs has resulted in brand
awareness of 67% in the Pacific Northwest, approaching the awareness levels of
key competitors who have been in the marketplace for over twenty (20) years.
 
    Since INSTEAD-Registered Trademark-'s commercial introduction into the U.S.
Pacific Northwest, AC Nielsen dollar market share of internal feminine
protection has increased every quarter with a 4.4% dollar market share for the
quarter ended June 1997. Consumer trial continues to steadily trend upward as
tracked by a large scale, quantitative study by KRC Research and Consulting,
with 13% of consumers in the Pacific Northwest trying
INSTEAD-REGISTERED TRADEMARK- after nine months of retail availability in June
1997, up from 8% in March 1997.
 
    In May 1997, the Company utilized Yankelovich Partners, Inc., a leading
independent research firm, to complete an extensive study with the objective of
providing an evaluation of long-term conversion. The study, using Yankelovich's
proprietary 11 point purchase intent scale, determined that the likelihood of a
consumer purchasing INSTEAD-REGISTERED TRADEMARK- at least 3 times after initial
trial was 35.7%. The strong conversion rate was the result primarily of
extremely high product satisfaction of 89%. In addition, over 90% of the
purchasers claim they would recommend INSTEAD-REGISTERED TRADEMARK- to a friend
or relative.
 
    Manufacturing activities to support the launch of
INSTEAD-REGISTERED TRADEMARK- progressed during the second half of the fiscal
year. For the year ended June 30, 1997, gross margin exclusive of depreciation
was positive, as the Company maintained a level of production adequate to absorb
manufacturing costs. The manufacturing facility has contributed greater gross
profit dollars in each of the last three quarters of the fiscal year ended June
30, 1997 while increasing production to meet greater demand for the Company's
product INSTEAD-REGISTERED TRADEMARK-.
 
    In addition to INSTEAD-REGISTERED TRADEMARK- launch activities, research and
development activities on new products continued. The BufferGel Technology
("BufferGel") developed by the Company's research and development partner,
ReProtect, LLC, was selected by HIVNET for funding Phase I clinical trials to
test its safety in humans for use as an agent for the prevention of AIDS and
other sexually transmitted diseases (STDs). The Phase I clinical trials began in
December 1996 in Providence, Rhode Island. The first patent for the BufferGel
Technology for a vaginal device for controlling pH by acidic buffering was
received on January 14, 1997 by Ultrafem's research and development partner,
ReProtect, LLC.
 
                                       19
<PAGE>
    The following table sets forth, for the periods indicated, the percentage
increases or decreases of certain items included in the Company's statements of
operations:
 
<TABLE>
<CAPTION>
                                                                                               PERCENTAGE
                                                                                        INCREASE (DECREASE) FROM
                                                                                              PRIOR PERIOD
                                                                                      ----------------------------
<S>                                                                                   <C>            <C>
                                                                                      JUNE 30, 1996  JUNE 30, 1997
                                                                                      COMPARED WITH  COMPARED WITH
                                                                                      JUNE 30, 1995  JUNE 30, 1996
                                                                                      -------------  -------------
Net sales (1).......................................................................       --             --
Cost of sales (exclusive of depreciation) (1).......................................       --             --
Marketing, sales and distribution (1)...............................................       --             --
Research and development............................................................         673.4%          75.6%
General and administrative..........................................................         252.6           67.0
Depreciation and amortization.......................................................         343.7           41.5
Interest income (2).................................................................       --               227.3
Interest expense....................................................................          43.2          (97.6)
Net loss............................................................................         312.4          273.9
</TABLE>
 
------------------------
 
(1) This percentage is not meaningful since the Company began generating sales
    in August 1996.
 
(2) This percentage is not meaningful since the Company began generating
    interest income in February 1996.
 
NET SALES
 
    Net sales for the year ended June 30, 1997 were $3,533,810 resulting from
the sale of INSTEAD-REGISTERED TRADEMARK-. Net sales for the fourth quarter
ended June 30, 1997 were $1,961,803, more than double the third quarter ended
March 31, 1997 of $917,177, representing the third consecutive, sequential
doubling of quarterly sales. The Company did not begin selling its product until
fiscal 1997, therefore no sales were generated during the year ended June 30,
1996.
 
COST OF SALES (EXCLUSIVE OF DEPRECIATION)
 
    Cost of sales during the year ended June 30, 1997 was $3,371,544 ending the
full year with a positive gross margin, exclusive of depreciation. The Company
did not begin selling its product until fiscal 1997, therefore no cost of sales
were incurred during the year ended June 30, 1996. The cost of sales for the
year ended June 30, 1997 was attributable to start-up and manufacturing costs
associated with the production of INSTEAD-REGISTERED TRADEMARK- to support
related sales and samples. Additionally, cost of sales includes approximately
$95,000 of expenses in connection with "debugging" the new automated
manufacturing line, which is scheduled to be put into production during fiscal
1998. Cost of sales and gross profit net of this charge was $3,276,544 and
$257,266, respectively.
 
MARKETING, SALES AND DISTRIBUTION
 
    Marketing, sales and distribution expense during the year ended June 30,
1997 was $26,448,837 as compared to $2,406,277 during the year ended June 30,
1996. The increase in marketing, sales and distribution expenses for the year
ended June 30, 1997 compared to June 30, 1996 was principally attributable to
expenses incurred in connection with the initial launch of
INSTEAD-REGISTERED TRADEMARK- into the Pacific Northwest, expansion into further
western geography and initiation of distribution into selected national
accounts. This included marketing, advertising for television, print, sampling
and coupon mailings to generate consumer trial and awareness of
INSTEAD-REGISTERED TRADEMARK- and, to a lesser extent, administration of the
various marketing and sales programs and market research.
 
                                       20
<PAGE>
    Marketing, sales and distribution expense increased to $2,406,277 for the
year ended June 30, 1996
from $123,531 for the year ended June 30, 1995. The increase was primarily due
to expenses related to the launch of INSTEAD-REGISTERED TRADEMARK- which had
been planned for, and commenced in, the Fall of 1996, including market research,
development of trade promotion plans and package design.
 
RESEARCH AND DEVELOPMENT
 
    Research and development expense increased 75.6% to $2,464,674 for the year
ended June 30, 1997 from $1,403,557 for the year ended June 30, 1996. The
increase was primarily attributable to payments to ReProtect under the terms of
the Company's research and development agreement and to a lesser extent
administration of the various research and development programs.
 
    Research and development expense increased 673.4% to $1,403,557 during the
year ended June 30, 1996 from $181,475 for the year ended June 30, 1995. The
increase was primarily attributable to payments to ReProtect under the terms of
the Company's research and development agreement, research and testing expenses
related to INSTEAD-REGISTERED TRADEMARK-, increased travel expenses and raw
material costs in connection with production startup expenses, as well as legal
expenses associated with research and development.
 
GENERAL AND ADMINISTRATIVE
 
    General and administrative expense increased 67.0% to $8,510,195 for the
year ended June 30, 1997 from $5,095,261 for the year ended June 30, 1996. This
increase was primarily due to salaries attributable to support general and
administrative activities, financial investor relations expense, professional
fees, consulting expense and office related expenses. This increase was also
due, to a lesser extent, to non-cash charges resulting from the issuance of
warrants to purchase Common Stock in connection with the settlement of a claim.
This was offset in part by lower non-cash charges resulting from issuance in
prior years of options to purchase Common Stock to a director, employee and
officers of the Company.
 
    General and administrative expense increased 252.6% to $5,095,261 during the
year ended June 30, 1996 from $1,444,911 for the year ended June 30, 1995. The
increase was primarily due to expenses related to the launch of
INSTEAD-REGISTERED TRADEMARK-, including market research, development of trade
promotion plans and package designs, as well as non-cash charges resulting from
the issuance of options to purchase Common Stock to a director, employee and
officers of the Company.
 
DEPRECIATION AND AMORTIZATION
 
    Depreciation and amortization increased 41.5% to $1,045,163 for the year
ended June 30, 1997 from $738,883 for the year ended June 30, 1996. This
increase was attributable to the increase in the depreciation of property and
equipment offset by a decrease in the amortization of deferred debt issuance
costs.
 
    Depreciation and amortization increased 343.7% to $738,883 for the year
ended June 30, 1996 from $166,533 for the year ended June 30, 1995. The increase
was attributable to increases in the amortization of deferred debt issuance
costs.
 
INTEREST EXPENSE
 
    Interest expense was $15,945 and $665,381 for the years ended June 30, 1997
and 1996, respectively. For the year ended June 30, 1997 interest expense was
offset by $401,330 resulting from capitalized interest for construction in
progress. The decrease in interest expense for the year ended June 30, 1997
compared to the year ended June 30, 1996 was attributable to the repayment of
debt by the Company, conversion of convertible debt to Common Stock, and the
capitalization of interest associated with construction in progress for the year
ended June 30, 1997.
 
                                       21
<PAGE>
    Interest expense was $665,381 for the year ended June 30, 1996 and $464,615
for the year ended June 30, 1995. The 43.2% increase for the year ended June 30,
1996 compared to the year ended June 30, 1995 was attributable to the increase
in debt incurred by the Company in the year ended June 30, 1996.
 
INTEREST INCOME
 
    Interest income was $1,601,693 and $489,379 for the years ended June 30,
1997 and 1996, respectively. The increase for the year ended June 30, 1997
compared to the year ended June 30, 1996 was attributable to the interest on
money received by the Company during February 1996 from its IPO and during
November 1996 from its second offering which was invested in cash equivalents
during the year ended June 30, 1997.
 
    Interest income was $489,379 for the year ended June 30, 1996 compared to
$-0- for the year ended June 30, 1995. The increase for the year ended June 30,
1996 compared to the year ended June 30, 1995 was attributable to the interest
on money received by the Company in February 1996 from its IPO which was
invested in cash equivalents during the year ended June 30, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    At June 30, 1997, the Company had $20,751,393 in cash and cash equivalents.
From June 30, 1996 to June 30, 1997, the Company's cash position decreased by
$3,758,678, principally reflecting $31,050,950 used in operating activities,
$9,086,281 used for the purchase of and deposits on property and equipment, and
$321,221 for the repayment of debt; offset in part by $35,924,421 in net
proceeds from the sale of 2,000,000 shares of the Company's Common Stock through
a second public offering and $775,353 in proceeds from the exercise of stock
options and warrants.
 
    The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the staged market introduction of
INSTEAD-REGISTERED TRADEMARK-, the Company's research and development
activities, the level of resources that the Company devotes to the clinical,
patent, regulatory and marketing aspects of its products and the extent to which
strategic alliances with multi-national pharmaceutical or consumer product
companies are formed. At June 30, 1997, the Company had commitments in the
amount of approximately $7,250,000, of which $2,882,178 was unpaid, principally
for the purchase of manufacturing equipment and improvements to the
manufacturing facility to support increased levels of production. Included in
accounts payable and accrued liabilities at June 30, 1997 was approximately
$1,270,443 of these unpaid commitments. In addition, in February 1996, the
Company and ReProtect entered into a License, Research and Product Development
Agreement under which the Company is obligated to pay ReProtect a minimum of $1
million per year for research and development. The Company will also continue to
incur additional expenses for research and development, prototype manufacturing,
laboratory and human clinical studies, regulatory and patent as well as market
research.
 
    The Company's stockholders' equity increased by approximately $3,584,000
from June 30, 1996 to June 30, 1997 reflecting net proceeds of approximately
$35,924,000 from the sale of 2,000,000 shares of the Company's Common Stock
through a second public offering; approximately $4,381,000 from the conversion
of convertible debt into Common Stock, proceeds from the exercise of stock
options and warrants, non-employee stock-based compensation and issuance of
stock warrants in connection with the settlement of a claim; offset by a net
loss for the year ended June 30, 1997 of approximately $36,721,000.
 
    The Company believes that the financial resources available to it is an
important factor in its ability to achieve the marketing and distribution of
INSTEAD-REGISTERED TRADEMARK- and its ability to develop and eventually bring
women's health care products to market. The Company's need for funds has
increased from period to period as it has incurred expenses for, among other
things, the manufacturing, marketing and distribution of
INSTEAD-REGISTERED TRADEMARK-, research and development activities, engineering
and design of fully automated manufacturing systems, clinical testing, meeting
domestic and international regulatory requirements, applications for domestic
and international patent protection, applications for domestic trademark
protection and
 
                                       22
<PAGE>
market research. The Company will require additional financing to meet these
needs and if unforeseen risks are encountered. The Company is currently seeking
to raise up to $50 million in a private placement. The securities sold in the
private placement will not be registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent registration
or in an applicable exemption from registration requirements of such Act.
Additional financing may require the issuance of new equity securities, and
there can be no assurance that the Company will be able to obtain working
capital or additional financing at a favorable rate, if at all.
 
    This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements involve risks
and uncertainties that may cause the Company's actual results to differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such differences include the following: dependence on the
Company's single product; the need for additional financing to successfully
market and distribute INSTEAD-REGISTERED TRADEMARK- as well as for unforeseen
risks; the changing priorities of customers, inherent limitations of market
research and accuracy of syndicated data purchased by the Company, as well as
other marketing risks; the Company's need to achieve economies of scale in its
manufacturing operations; the uncertainty of consumer acceptance; the necessity
of regulatory clearances to market its products; potential product liability;
risks associated with the Company's proprietary technology; risks associated
with the research and development for other applications of the SoftCup
Technology; and risks associated with a competitive response to the Company's
product. The Company urges readers to carefully review the risks and factors
discussed more completely under the heading "Risk Factors" in the Company's
Prospectus dated November 13, 1996 and the description of the Company's business
in Form 10-K for the year ended June 30, 1997.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
 
    Not Applicable.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
    Financial Statements are included herein commencing on Page F-1.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.
 
    None.
 
                                       23
<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
DIRECTORS AND EXECUTIVE OFFICERS
 
    The following table sets forth certain information with respect to the
directors and executive officers of the Company. The executive officers of the
Company are elected for a term of one year or until their successors are duly
elected and qualify; however, certain of the executive officers have employment
agreements which provide for longer terms of office. See "--Employment
Agreements and Certain Agreements with Management."
 
<TABLE>
<CAPTION>
NAME                                                       AGE                            POSITION
-----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                    <C>          <C>
John W. Andersen.....................................          60   President; Chief Executive Officer; Director and
                                                                    Chairman of the Board of Directors
Audrey Contente......................................          54   Executive Vice President and Founder; Director
Dori M. Reap.........................................          46   Senior Vice President of Finance and Administration;
                                                                    Chief Financial Officer and Secretary
Tonya G. Hinch.......................................          34   Senior Vice President, Marketing and Sales
Gary Nordmann........................................          55   Vice President, Operations
Richard A. Cone......................................          61   Director
Joy Vida Jones.......................................          47   Director
Martin Nussbaum......................................          50   Director
Charles D. Peebler, Jr...............................          61   Director
Barrie Zesiger.......................................          52   Director
</TABLE>
 
EXECUTIVE OFFICERS AND KEY PERSONNEL
 
    JOHN W. ANDERSEN has been the Chairman of the Board, Chief Executive Officer
and President of the Company since July 1994. He has an extensive background in
consumer product management, including food, beverage and personal products. He
has been the Chief Executive Officer of five consumer companies over the past 20
years and has substantial experience in Japan and western Europe. From June 1993
until July 1994, Mr. Andersen was self-employed. For the period of 1990 to 1993,
Mr. Andersen was President and Chief Executive Officer of Johanna Dairies, a
subsidiary of John Labatt Limited with annual sales of approximately $1 billion.
From 1983 to 1989, he was President, Chief Executive Officer and Director of
Whitbread North America, Inc., a beverage subsidiary of Whitbread PLC with
annual sales of approximately $450 million. Prior to 1983, Mr. Andersen served
as Executive Vice President of Marriott Corporation, President and Chief
Executive Officer of Sonoma Vineyards, and Vice President of Norton Simon, Inc.
 
    AUDREY CONTENTE is the Executive Vice President and a Director of the
Company, as well as the Founder of the Company and inventor of the SoftCup
Technology. Ms. Contente is responsible for manufacturing and product
development. Ms. Contente has served as a Director of the Company since its
formation in March 1990; as an Executive Vice President since July 1996; as a
Senior Vice President from July 1993 to June 1996; and as Senior Vice President
of Manufacturing and Product Development from November 1995 to June 1996. Ms.
Contente also served as Chairman of the Board of the Company from March 1990 to
July 1993, and Chief Executive Officer of the Company from May 1992 to July
1993. She has experience in marketing and sales, business development and
biomedical instrumentation. As a result of years of research in feminine hygiene
technology which led to the ultimate design of the SoftCup Technology, Ms.
Contente applied for a United States patent and subsequently founded the
Company. She began her career in sales in 1976 with J.T. Baker Chemical Co.
where she was responsible for selling biomedical
 
                                       24
<PAGE>
instrumentation and supplies. From 1980 to 1990 she was the principal of Audrey
Contente & Associates, a management consulting firm specializing in strategic
planning and market development projects. During this 10-year period, she
devoted substantial and continuous effort in researching, designing and
developing the SoftCup Technology and INSTEAD-Registered Trademark-.
 
    DORI M. REAP has been the Senior Vice President of Finance and
Administration and Chief Financial Officer of the Company since August 1, 1995.
She became Secretary of the Company in June 1996. She has been in senior
financial positions over the past 18 years in major consumer products companies
and has significant experience in finance, business planning and analysis,
restructuring and information systems. Ms. Reap was Chief Financial Officer of
The Franklin Mint in 1994. For the period of 1990 to 1993, Ms. Reap was Vice
President and Chief Financial Officer of Johanna Dairies, a subsidiary of John
Labatt Limited, with annual sales of approximately $1 billion. From 1978 to
1989, Ms. Reap worked for Frito Lay, Inc., a subsidiary of PepsiCo, Inc., in
successively senior positions and as Finance Director from 1985 to 1989.
 
    TONYA G. HINCH joined the Company in November 1995 as the Senior Vice
President, Marketing and Sales of the Company. She has ten years of experience
marketing women's personal care and broad-based consumer products. Ms. Hinch
worked at Neutrogena from 1991 to 1995, last serving as General Manager of
Neutrogena Haircare. From 1987 to 1991, Ms. Hinch worked at Clairol,
specializing in new product development and last serving as Senior Marketing
Manager in New Products. From 1985 to 1987, Ms. Hinch was employed at Procter &
Gamble, last serving as an Assistant Brand Manager.
 
    GARY NORDMANN joined the Company full-time in April 1996 as the Vice
President, Operations. He also served as a consultant to the Company from May
1994 to March 1996. He has had over 20 years experience in senior management
positions in consumer product companies with manufacturing operations. Mr.
Nordmann worked at Johanna Dairies, a subsidiary of John Labatt Limited, from
1991 to 1994 as Vice President, Finance and Administration, and at Whitbread
North America, Inc., a subsidiary of Whitbread PLC, as Executive Vice President,
Finance and Administration from 1983 to 1990. Mr. Nordmann worked for Marriott
Corporation, Inc., from 1981 to 1983, Mattel, Inc. from 1977 to 1981, PepsiCo
from 1972 to 1977, and S.C. Johnson & Son, Inc. from 1970 to 1972.
 
DIRECTORS
 
    RICHARD A. CONE, a Director of the Company since 1994, has been a Professor
of Biophysics and Biology at Johns Hopkins since 1973. Dr. Cone trained in
Physics at the Massachusetts Institute of Technology and at the University of
Chicago (Ph.D. 1963). In 1979 he jointly received the Cole Award from the
Biophysical Society for discovering the fluid-like nature of cell membranes.
Since 1979 he has been pursuing research to develop improved methods for
protecting against STDs and unwanted pregnancy. He is an expert on the
protective properties of mucus secretions and the mechanisms by which antibodies
protect mucus epithelia against pathogens. He is Managing Director of ReProtect,
a research and development company he co-founded in 1993 with Thomas R. Moench
and Kevin J. Whaley to develop products that protect reproductive health.
 
    JOY VIDA JONES, a Director of the Company since 1994, has practiced law for
the last twenty-one years, having received a J.D. from New York University
School of Law (1976). She was a partner at Rogers & Wells when she left the firm
in 1993 after 10 years of practice there. She has served since 1990 as a Trustee
of the Calvert Social Investment Fund, which is an investor in the Company.
Since June 1993, Ms. Jones has acted as a personal manager to musicians. She is
a Trustee of her alma mater, Sarah Lawrence College (B.A. 1971), as well as
several funds and societies.
 
    MARTIN NUSSBAUM, a Director of the Company since 1996, has been a partner of
the law firm of Shereff, Friedman, Hoffman & Goodman, LLP since 1976. The
Company has retained Shereff, Friedman, Hoffman & Goodman, LLP in the past and
during the fiscal year. See "Certain Relationships and Related Party
Transactions" and "Legal Matters."
 
                                       25
<PAGE>
    CHARLES D. PEEBLER, JR., a Director of the Company since 1995, is President
and Chief Executive Officer, as well as director, of Bozell, Jacobs, Kenyon &
Eckhardt, Inc. ("BJK&E"), the 14th largest marketing communications company in
the world. He also serves as Chief Executive Officer of Bozell Worldwide, Inc.,
BJK&E's major advertising agency division. Mr. Peebler joined Bozell Worldwide,
Inc. in 1958 and became President in 1965. The Company has retained Bozell
Worldwide and certain of its affiliates in the past and during the current
fiscal year. See "Certain Relationships and Related Party Transactions." Mr.
Peebler, in addition to serving on the boards of a number of non-profit
organizations, is a member of the Board of Directors of American Radio Systems.
 
    BARRIE ZESIGER, a Director of the Company since 1993, is a Managing Director
in charge of operations for Zesiger Capital Group LLC, a New York City money
management firm. She worked as a security analyst for the Madison Fund from 1968
to 1970 and in the private practice of law from 1974 to 1984, having received
her J.D. degree from the Stanford University Law School. Having formerly served
on a number of non-profit cultural boards, she currently serves as the Vice
Chair of the Asphalt Green, Inc., an innovative non-profit sports and fitness
center in New York City with programs that promote self-improvement, personal
achievement, and lifetime health. Ms. Zesiger is also a private investor in the
Company.
 
                                       26
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
 
    The following table sets forth the cash compensation paid by the Company, as
well as certain other compensation paid for the fiscal years ended June 30,
1997, 1996 and 1995 to the Company's President and Chief Executive Officer and
the four other most highly compensated executive officers of the Company whose
annual compensation exceeds $100,000 (collectively, the "Named Executives"). See
also "Employment Agreements and Certain Agreements with Management."
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                              ANNUAL COMPENSATION
                                                -----------------------------------------------
                                                                                    LONG-TERM
                                                                                   COMPENSATION
                                                                                      AWARDS
                                                                                   ------------
                                                                                    SECURITIES
                                                                    OTHER ANNUAL    UNDERLYING
NAME AND PRINCIPAL POSITION                      SALARY    BONUS    COMPENSATION   OPTIONS (#)
----------------------------------------        --------  --------  ------------   ------------
<S>                                       <C>   <C>       <C>       <C>            <C>
John W. Andersen........................  1997  $333,332     --       $92,457(1)      --
  President and Chief Executive           1996  $250,000  $195,000(2)   $56,627(3)    --
  Officer, Chairman of the Board          1995   $20,833     --        --           574,862
 
Audrey Contente.........................  1997  $288,333   $75,000(4)   $71,322(5)    --
  Executive Vice President,               1996  $570,164(6)    --      --             --
  Founder and Director                    1995   $74,286     --        --             --
 
Dori M. Reap............................  1997  $195,834     --       $42,933(7)      --
  Senior Vice President, Finance          1996  $150,000   $75,000    $25,401(7)    150,000
  and Administration, Chief               1995     --        --        --             --
  Financial Officer and Secretary
 
Tonya G. Hinch..........................  1997  $183,333     --       $25,270(8)      --
  Senior Vice President,                  1996   $97,917   $30,000    $28,997(8)    100,000
  Marketing and Sales                     1995     --        --        --             --
 
Gary Nordmann...........................  1997  $140,000     --       $42,384(9)      --
  Vice President, Operations              1996   $32,308     --       $37,775(10)   30,000
                                          1995     --        --       $33,897(10)     --
</TABLE>
 
------------------------
 
(1) Includes royalty payments on the sale of INSTEAD-Registered Trademark- of
    $30,615; payment of $24,819 premium on universal life insurance policy, and
    use of Company car of $2,500. Mr. Andersen accrued royalty payments on the
    sale of INSTEAD-Registered Trademark- of approximately $37,217 in the fourth
    quarter of the fiscal year 1997, which was subsequently paid in fiscal year
    1998.
 
(2) Mr. Andersen became entitled to a signing bonus of $195,000 upon the
    execution of his employment agreement in July 1994. A portion of the signing
    bonus was paid out of the proceeds of the Company's initial public offering
    of Common Stock (the "IPO") which occurred in February 1996. See "Employment
    Agreements and Certain Agreements with Management."
 
(3) Includes payment of $24,818 premium on a universal life insurance policy.
 
(4) Ms. Contente became entitled to a signing bonus of $75,000 upon the
    execution of her employment agreement in July 1996.
 
(5) Includes royalty payments on the sale of INSTEAD-Registered Trademark- of
    $30,615, and $37,500 due to Ms. Contente in connection with her serving as a
    spokeswoman for INSTEAD-Registered Trademark-. See "-Employment Agreements
    and Certain Agreements with Management." Ms. Contente accrued royalty
    payments on the sale of
 
                                       27
<PAGE>
    INSTEAD-Registered Trademark- of approximately $37,217 in the fourth quarter
    of the fiscal year 1997, which was subsequently paid in fiscal year 1998.
 
(6) Includes Ms. Contente's base salary for fiscal year 1996 of $175,000 and
    $395,164 of accrued salary for fiscal years 1992, 1993 and 1994, a portion
    of which was paid out of the proceeds of the IPO.
 
(7) Includes relocation allowance of $20,580 for 1996 and $24,000 for 1997.
 
(8) Includes relocation allowance of $28,791 for 1996 and $24,516 for 1997.
 
(9) Includes relocation allowance of $41,792 for 1997.
 
(10) Consists of consulting fees paid to Mr. Nordmann, who served as a
    consultant to the Company prior to becoming the Vice President, Operations
    in March 1996.
 
STOCK OPTION PLAN
 
    In October 1990, the Board of Directors approved a stock option plan (the
"1990 Stock Option Plan"), which was subsequently approved by the stockholders
of the Company. The 1990 Stock Option Plan authorized the grant of options for
up to 250,000 shares of Common Stock to employees, officers, directors,
consultants and advisors. In May 1993, the Board of Directors approved the
number of shares authorized to be granted under the 1990 Stock Option Plan to
increase to 900,000 which was subsequently approved by the stockholders of the
Company. The 1990 Stock Option Plan is designed to provide an incentive to the
officers and certain other key employees of and consultants to the Company by
making available to them an opportunity to acquire a proprietary interest in the
Company or to increase their proprietary interest in the Company.
 
    In the past, the Board of Directors has delegated the authority to
administer the 1990 Stock Option Plan to the Compensation Committee. The
Compensation Committee had the full power and authority, subject to the
provisions of the 1990 Stock Option Plan, to designate participants, grant
options and determine the terms of all options, and the right to make
adjustments with respect to options granted under the 1990 Stock Option Plan in
order to prevent dilution of the rights of any holder. Members of the
Compensation Committee are not eligible to receive options under the 1990 Stock
Plan. In the future, it is anticipated that the entire Board of Directors will
administer the 1990 Stock Option Plan, and exercise such powers and authority,
with respect to most grants of options thereunder.
 
    The terms of specific options are determined by the Compensation Committee.
Options granted may be non-qualified or incentive stock options. The exercise
price per share for a non-qualified option is subject to the determination of
the Compensation Committee. Incentive stock options may not be granted at less
than 100% of the fair market value at the date of grant. Each option will be
exercisable after the period or periods specified in the option agreement.
 
    The 1990 Stock Option Plan meets the requirements of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which exempts
the acquisition of certain options under the 1990 Stock Option Plan from the
operation of Section 16(b) under the Exchange Act.
 
    Upon the exercise of an option, the option holder shall pay to the Company
the exercise price plus the amount of the required Federal and state withholding
taxes, if any. Options may be exercised and the withholding obligation may be
paid for with cash or shares of Common Stock. Shares surrendered on exercise
will be valued at the market price for the Common Stock, generally based on
average closing prices of the Common Stock over a 30-day period prior to
exercise, less the option exercise price. The period after termination of
employment during which an option may be exercised is as determined by the
Compensation Committee.
 
                                       28
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
  VALUES
 
<TABLE>
<CAPTION>
                                                                               NUMBER OF SECURITIES
                                                                                    UNDERLYING
                                                                                    UNEXERCISED
                                                                                 OPTIONS AT FISCAL      VALUE OF UNEXERCISED
                                                                                       YEAR             IN-THE-MONEY OPTIONS
                                          SHARES ACQUIRED          VALUE              END(#)           AT FISCAL YEAR END($)
                                            ON EXERCISE          REALIZED          EXERCISABLE/             EXERCISABLE/
NAME                                            (#)                 ($)            UNEXERCISABLE           UNEXERCISABLE
-------------------------------------  ---------------------  ---------------  ---------------------  ------------------------
<S>                                    <C>                    <C>              <C>                    <C>
John W. Andersen.....................                0                   0          459,890/114,972   $   4,322,966/$1,080,737
 
Audrey Contente......................                0                   0                 75,000/0   $              431,250/0
 
Dori M. Reap.........................                0                   0           120,000/30,000   $       770,000/$192,500
 
Tonya Hinch..........................                0                   0            60,000/40,000   $       345,000/$230,000
 
Gary Nordmann........................                0                   0            10,000/20,000   $         32,500/$65,000
</TABLE>
 
COMPENSATION OF DIRECTORS
 
    The Directors of the Company receive no cash compensation for serving on the
Board of Directors. Prior to July 1, 1997, non-employee directors of the Company
received stock options under the Ultrafem, Inc. 1995 Stock Option Plan for
Non-Employee Directors (the "1995 Plan"). The 1995 Plan, which was approved by
the Company's stockholders, provided that upon becoming a director (and persons
who were non-employee directors on the date of adoption of the 1995 Plan, upon
the adoption date) receive a one-time grant of a ten-year option to purchase
15,000 shares of Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date immediately preceding the date of grant.
Of the aggregate number of shares issuable under such option, 5,000 shares vest
immediately and the remaining 10,000 shares vest in equal installments of 2,500
shares on each of the first four anniversaries of the date of grant, provided
that the holder is then still serving as a director of the Company. The holder
of such an option may exercise the option with respect to the vested portion of
the option, in accordance with its terms, for a period of one year after ceasing
to be a member of the Board of Directors due to death or permanent disability. A
maximum of 250,000 shares ("Shares) of Common Stock may be issued pursuant to
the 1995 Plan, and 75,000 Shares have already been used for the grant of stock
options.
 
    On June 17, 1997 the Board of Directors approved the amendment and
restatement of the 1995 Plan, as the "Amended and Restated Ultrafem, Inc. 1995
Stock Plan For Non-employee Directors" (the "Amended 1995 Plan"). Beginning in
the Company's 1998 fiscal year, each non-employee director will be entitled to
receive an annual retainer of 800 Shares for Board membership, 600 Shares for
committee chairmanship and 150 Shares for committee membership. In addition, a
non-employee director will receive compensation of 50 Shares per meeting for the
attendance of Board meetings and 25 Shares per meeting for the attendance
committee meetings. Payment of the annual retainer and meeting fee compensation
will be made annually, if not deferred pursuant to the Amended 1995 Plan, on the
first business day following the end of the fiscal year for which such
compensation is payable. If a non-employee director does not serve a full fiscal
year, the annual retainer for such incomplete fiscal year will be pro-rated
based on the number of full months during which he or she served as a
non-employee director, and payment will be made on the first business day
following the end of the fiscal year for which the pro-rated compensation is
payable. The Shares, when issued pursuant to the Amended 1995 Plan, may be
transferred or sold by the non-employee director subject to compliance with any
lock-up agreement, insider trading policy and federal or states securities laws
to which the non-employee director may be subject. Non-employee directors may
choose to defer the compensation due under the Amended 1995 Plan. Upon deferral,
all compensation which a non-employee director accrues will be credited to an
account maintained on the books of the Company for the benefit of such director.
Non-employee directors who choose to defer compensation may elect to receive the
compensation in one lump-sum payment to be paid as of (i) the first business day
on or after the fifth anniversary of the date on which the compensation would
otherwise be payable, (ii) upon a change in control (as defined) of the Company,
or (iii) the earlier of those two events
 
                                       29
<PAGE>
as the Director may elect. Despite any such election, the balance in a
director's account will be paid on the first business day of the month
immediately following the date of a director's cessation of services as a non-
employee director of the Company. After July 1, 1997, persons retained to serve
as non-employee directors will receive an initial retainer of 1,000 Shares
provided that he or she serves as a director for at least one year, and has not
previously received an option or an initial retainer under the Amended 1995
Plan. The Amended 1995 Plan does not affect options granted to non-employee
directors prior to the amendment of the Plan.
 
                                       30
<PAGE>
EMPLOYMENT AGREEMENTS AND CERTAIN AGREEMENTS WITH MANAGEMENT
 
    Mr. Andersen is the Chairman of the Board, Chief Executive Officer and
President of the Company. Mr. Andersen entered into a five year employment
agreement with the Company, dated July 29, 1994, which, as amended, provides for
a base salary of $250,000 per annum. The base salary increased to $350,000 upon
the introduction of INSTEAD-Registered Trademark- to at least five percent of
the United States. His base salary will increase to $500,000 upon the formation
of a "strategic alliance," which is defined as the formation of an alliance with
one or more multinational pharmaceutical and/or consumer product companies to
facilitate developing and marketing the Company's product line. Mr. Andersen is
entitled to receive royalties of $.005 for each unit of
INSTEAD-Registered Trademark- sold and $.01 for each unit of product based on
the SoftCup Technology sold for medical purposes. Upon the execution of his
employment agreement, Mr. Andersen received an option exercisable to purchase
10% of the number of shares of Common Stock outstanding on a fully-diluted basis
(as defined) immediately before the IPO at an aggregate exercise price of $2.5
million. Such option is exercisable with respect to 20% of the shares subject
thereto upon the date of grant (subject to forfeiture in limited cases) and the
balance of the option vesting in equal installments upon the Company's
attainment of each of the following goals: (w) raising development financing of
approximately $5-$10 million, (x) closing of an initial public offering, (y)
distributing INSTEAD-Registered Trademark- to the public in one half or more of
the United States or Europe and (z) achieving annual revenues of $100 million;
provided, however, that in any event the full amount shall vest upon the
following: termination of the agreement by the Company for reasons other than
for cause; change of control; termination by Mr. Andersen for good reason; or
six months prior to the expiration of the agreement. Upon the execution of the
agreement Mr. Andersen became entitled to a signing bonus of $195,000, a portion
of which was paid out of the proceeds of the IPO.
 
    Ms. Contente is the Executive Vice President and Founder of the Company, as
well as a Director of the Company. Ms. Contente entered into a five year
employment agreement with the Company, dated July 1, 1996, which provides for a
base salary of $230,000 per annum. This base salary increased to $300,000 upon
the introduction of INSTEAD-Registered Trademark- to at least five percent of
the United States. Her base salary will increase to $350,000 upon the formation
of a "strategic alliance," which is defined as the formation of an alliance with
one or more multinational pharmaceutical and/or consumer product companies to
facilitate developing and marketing the Company's product line. Ms. Contente
will receive royalties of $.005 for each unit of product based on the SoftCup
Technology sold. Under the employment agreement, Ms. Contente is entitled to
medical, life and disability insurance coverage. In mid-1990, as part of the
organization of the Company, Ms. Contente received 526,250 shares of Common
Stock in exchange for assigning to the Company all pending patent applications,
trademarks, copyrights, technology and similar rights associated with products
relating to or evolving from the patent application filed by Ms. Contente and
relating to the SoftCup Technology. In mid-1992, Ms. Contente received options
to purchase 75,000 shares of Common Stock, which vests over a five-year period
at an exercise price of $8.00 per share; such option will vest immediately upon
a change of control of the Company (as defined therein). Upon the execution of
the agreement Ms. Contente became entitled to a signing bonus of $75,000. In
connection with the execution of her employment agreement, Ms. Contente entered
into a Name, Likeness, and Voice Release and Agreement (the "Release"). The
Release provides that Ms. Contente will serve as a spokesperson for
INSTEAD-Registered Trademark- in both television and print/media campaigns for
which Ms. Contente will receive $12,500 for the television campaign, $12,500 for
the print/media campaign. Ms. Contente is entitled to receive an additional
$12,500 for the television campaign and $12,500 for the print/media campaign if
such campaign is actively used by the Company to support the rollout of
INSTEAD-Registered Trademark- into certain additional geographic areas. If the
Company decides to produce a new television campaign or print/media campaign
using Ms. Contente as spokesperson then Ms. Contente will receive an additional
$25,000. After the employment agreement is terminated, Ms. Contente will no
longer be required to provide further services under the Release; however, the
Company will have the ability to use her name and likeness in the campaigns for
up to a year after termination, and in connection with
INSTEAD-Registered Trademark- in perpetuity.
 
                                       31
<PAGE>
    Ms. Reap is Senior Vice President of Finance and Administration, Chief
Financial Officer and Secretary of the Company. Ms. Reap entered into a five
year employment agreement dated August 1, 1995, as amended as of January 1,
1997, which provides for a base salary of $150,000 per annum. This base salary
increased to $225,000 upon the introduction of INSTEAD-Registered Trademark- to
at least five percent of the United States. Her base salary will increase to
$250,000 upon the formation of a "strategic alliance," which is defined as the
formation of an alliance with one or more multinational pharmaceutical and/or
consumer product companies to facilitate developing and marketing the Company's
product line. Ms. Reap received options to purchase 150,000 shares of the Common
Stock (100,000 at an exercise price of $8.00 per share and 50,000 at an exercise
price of $6.00 per share). Such options are exercisable with respect to 20% of
the shares subject thereto upon the date of grant; 20% upon the closing of the
IPO; 20% upon the first to occur of (a) consummation of a strategic alliance
with proceeds to Ultrafem exceeding $8 million or (b) completion by Ultrafem of
a second public offering with proceeds to the Company exceeding $20 million; 20%
at such time as Ultrafem's product becomes available for sale to the general
public in one-half or more of the United States or European market, measured
demographically; and 20% upon the realization of the Company of EBITDA (as
defined) equal to or in excess of $20 million in any fiscal period of 12 months.
Such options will vest regardless of the achievement of such milestones no later
than six months prior to the expiration of the term of her employment agreement.
In addition, such options will vest immediately upon a change of control of the
Company (as defined therein). Upon the execution of her agreement Ms. Reap was
entitled to a signing bonus of $75,000, a portion of which was paid out of the
proceeds of the IPO.
 
    Ms. Hinch is Senior Vice President, Marketing and Sales of the Company. Ms.
Hinch entered into a five year employment agreement dated November 6, 1995, as
amended as of January 1, 1997, which provides for a base salary of $150,000 per
annum. This base salary increased to $200,000 upon the introduction of
INSTEAD-Registered Trademark- to at least five percent of the United States. Her
base salary will increase to $225,000 upon the formation of a "strategic
alliance," which is defined as the formation of an alliance with one or more
multinational pharmaceutical and/or consumer product companies to facilitate
developing and marketing the Company's product line. Ms. Hinch received an
option to purchase 100,000 shares of the Common Stock at an exercise price of
$8.00 per share. Such option is exercisable with respect to 20% of the shares
subject thereto upon the execution of her employment agreement; 20% upon the
successful introduction of INSTEAD-Registered Trademark- into a minimum of 5% of
the United States or European market to be measured by the revenue and
distribution targets set forth in the option; 20% upon the consummation of a
strategic alliance with proceeds to Ultrafem exceeding $8 million; 20% at such
time as Ultrafem's product becomes available for sale to the general public in
one-half or more of the United States or European market, measured
demographically; and 20% upon the realization of Ultrafem of EBITDA (as defined)
equal to or in excess of $20 million in any fiscal period of 12 months. Such
option will vest regardless of the achievement of such milestones no later than
six months prior to the expiration of the term of her employment agreement. In
addition, such option will vest immediately upon a change of control of the
Company (as defined therein). Upon the execution of her agreement Ms. Hinch was
entitled to a signing bonus of $30,000, a portion of which was paid out of the
proceeds of the IPO.
 
    Mr. Nordmann is Vice President, Operations of the Company. Mr. Nordmann
entered into a three year employment agreement dated April 1, 1996, which
provides for a base salary of $140,000 per annum. Mr. Nordmann received an
option to purchase 30,000 shares of the Common Stock at an exercise price of
$10.50 per share. Such option is exercisable with respect to 33 1/3% of the
shares upon the shipment, on or prior to August 4, 1996, of a quantity of
INSTEAD-Registered Trademark- into designated markets; 33 1/3% upon the
successful completion of the building-out Ultrafem's Missoula plant to "full
capacity"; and 33 1/3% of the shares upon the successful development of the
following strategic plans (x) a Master Plan for completing distribution for the
balance of the United States, (y) a Master Plan for health care, and (z) a
Master Plan for International Strategic Alliances. Such option will vest
regardless of the achievement of such milestones no later than six months prior
to the expiration of the term of his employment agreement. In addition, such
 
                                       32
<PAGE>
option may vest immediately at the discretion of the Board of Directors upon a
change of control of the Company (as defined therein).
 
    Each of the employment agreements listed above (i) contains certain
non-competition provisions, (ii) provides that the executive may participate in
incentive bonus plans adopted by the Company, and (iii) with respect to Ms.
Reap, Ms. Hinch and Mr. Nordmann, provides for the reimbursement of certain
relocation expenses. The employment agreement for each of Mr. Andersen, Ms.
Contente, Ms. Reap, Ms. Hinch and Mr. Nordmann provides that if the agreement is
terminated by the Company (which in the case of Mr. Andersen would include a
failure on its part to renew the agreement at the end of its term) without "Due
Cause" (as defined) or by the executive (other than Mr. Nordmann) for Good
Reason (as defined) or during the first year following a Change of Control (as
defined), the agreement provides for severance payments equal to the annual
salary in effect at the time of termination payable monthly for a period of
twenty-four months with respect to Mr. Andersen and Ms. Contente, twelve months
with respect to Ms. Reap and Ms. Hinch, and six months with respect to Mr.
Nordmann, or in a lump sum, and in certain cases, fringe and other benefits. Ms.
Contente's employment agreement also provides for severance payments equal to
the base salary in effect at the time of termination for a six month period upon
the non-renewal of her employment agreement.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    Mr. Peebler is the President and Chief Executive Officer BJK&E, a marketing
communications company, of which the Company has retained certain affiliates in
the past and during the current fiscal year. Mr. Nussbaum is a partner of the
law firm of Shereff, Friedman, Hoffman & Goodman, LLP which the Company has
retained in the past and during the current fiscal year. See "Certain
Transactions."
 
                                       33
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    The following table sets forth certain information as of June 30, 1997
(except as otherwise noted) with respect to the beneficial ownership of the
Common Stock by (i) each person known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of Common Stock, (ii) each director of
the Company, (iii) each named officer of the Company listed in the Summary
Compensation Table, and (iv) all officers and directors of the Company as a
group. Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. Unless otherwise noted, the mailing
address of each person listed in the following chart is Ultrafem's executive
offices.
 
                        COMMON STOCK BENEFICIALLY OWNED
 
<TABLE>
<CAPTION>
                                                                                              BENEFICIAL OWNERSHIP(1)
                                                                                              -----------------------
<S>                                                                                           <C>         <C>
NAME                                                                                            NUMBER      PERCENT
--------------------------------------------------------------------------------------------  ----------  -----------
Audrey Contente (2)(3)(4)...................................................................     601,250         7.0
Barrie R. Zesiger (3)(5)....................................................................   1,081,359        12.3
Richard A. Cone (3)(6)......................................................................      20,000           *
Joy Vida Jones (3)(7).......................................................................       7,500           *
Martin Nussbaum (3)(8)......................................................................      16,225           *
Charles D. Peebler, Jr. (3).................................................................      18,750           *
John W. Andersen (2)(3)(9)..................................................................     462,140         5.2
Dori M. Reap (2)(10)........................................................................     120,000         1.4
Tonya G. Hinch (2)(11)......................................................................      60,000           *
Albert L. Zesiger (12)......................................................................   1,081,359        12.3
Wells Fargo Bank, N.A.(13)..................................................................   1,230,800        14.5
Mellon Bank Corporation (14)................................................................   1,090,000        12.8
Directors and executive officers as a group (consists of 10 persons) (5)....................   2,344,724        24.7
</TABLE>
 
------------------------
 
*   Less than 1%
 
(1) Each beneficial owner's percentage ownership is determined by assuming that
    convertible securities, options or warrants that are held by such person
    (but not those held by any other person) and which are exercisable within 60
    days of June 30, 1997 have been exercised.
 
(2) Officer.
 
(3) Director.
 
(4) Ms. Contente has granted an option to each of Jeffrey Simon and Frank Cole
    to purchase 106,250 shares of Common Stock, and an option to Arthur Appleman
    to purchase 12,500 shares of Common Stock, each such option at an exercise
    price of $2.00 per share ("Optioned Shares") and with an expiration date of
    December 1, 1998. The Optioned Shares are subject to a voting trust, to be
    voted by a majority of Ms. Contente, Ms. Zesiger and Mr. Andersen, as voting
    trustees. The voting trust will terminate on the earliest of (i) the
    transfer of the Optioned Shares to Messrs. Cole, Simon and Appleman, (ii)
    August 22, 1997, or (iii) upon the breach of certain representations
    contained in the agreement. Subsequent to June 30, 1997, Mr. Appleman
    exercised his option to purchase 12,500 shares of Common Stock.
 
(5) Includes 705,338 shares of Common Stock and 269,200 shares of Common Stock
    issuable upon the exercise or conversion of convertible securities of the
    Company, both of which are held in accounts managed by Zesiger Capital
    Group, LLC, an investment advisor, for which Albert L. Zesiger, Ms.
    Zesiger's husband, is a Managing Director. Ms. Zesiger disclaims beneficial
    ownership of such
 
                                       34
<PAGE>
    shares. Also includes 40,000 shares of Common Stock and 12,500 shares of
    Common Stock issuable upon the exercise or conversion of convertible
    securities of the Company which are owned by Mr. Zesiger; Ms. Zesiger
    disclaims beneficial ownership of such shares. See also footnote 12.
    Includes 16,238 shares which are issuable upon the exercise of an
    outstanding option and warrant which are exercisable within 60 days of June
    30, 1997. Does not include the Optioned Shares which are subject to a voting
    trust of which Ms. Zesiger is a voting trustee. See footnote 4.
 
(6) Does not include 400,000 shares of Common Stock issuable upon exercise of
    options granted to ReProtect.
 
(7) Includes options to purchase 7,500 shares of Common Stock which are
    exercisable within 60 days of June 30, 1997; however, exercise of Ms. Jones'
    options is subject to certain restrictions. Does not include 150,000 shares
    of Common Stock beneficially owned by the Calvert Social Investment Fund, of
    which Ms. Jones is a trustee. Ms. Jones disclaims beneficial ownership of
    such shares of Common Stock, except to the extent of her beneficial
    ownership in the Calvert Social Investment Fund.
 
(8) Includes option to purchase 7,500 shares of Common Stock and warrants to
    purchase 4,050 shares of Common Stock which are exercisable within 60 days
    of June 30, 1997. See "Certain Transactions."
 
(9) Includes options to purchase 459,890 shares of Common Stock and warrants to
    purchase 375 shares of Common Stock which are exercisable within 60 days of
    June 30, 1997 and 1,875 shares of Common Stock. Does not include additional
    options to purchase 114,972 shares of Common Stock upon the attainment of
    certain milestones. Does not include the Optioned Shares which are subject
    to a voting trust of which Mr. Andersen is a voting trustee. See footnote 4.
 
(10) Includes options to purchase 120,000 shares of Common Stock which are
    exercisable within 60 days of June 30, 1997.
 
(11) Includes option to purchase 60,000 shares of Common Stock which is
    exercisable within 60 days of June 30, 1997.
 
(12) Includes 705,338 shares of Common Stock and 269,200 shares of Common Stock
    issuable upon the exercise or conversion of convertible securities of the
    Company which are held in accounts managed for certain parties through
    Zesiger Capital Group, LLC, an investment advisor, for which Mr. Zesiger is
    a Managing Director. Mr. Zesiger has dispositive power with respect to such
    shares but disclaims beneficial ownership of such shares. Also includes
    38,083 shares of Common Stock and 16,238 shares of Common Stock issuable
    upon the exercise or conversion of convertible securities of the Company
    which are owned by Barrie Zesiger, Mr. Zesiger's wife; Mr. Zesiger disclaims
    beneficial ownership of such shares. See footnote 5. Includes 12,500 shares
    which are issuable upon the exercise of an outstanding warrant which is
    exercisable within 60 days of June 30, 1997. Mr. Zesiger's address is
    Zesiger Capital Corp, LLC, 320 Park Avenue, New York, New York 10022.
 
(13) The Wells Fargo Bank, N.A. is located at 464 California Street, San
    Francisco, California 94163. Information based on Schedule 13G filed by the
    Wells Fargo Bank, N.A. with the Securities and Exchange Commission on
    February 19, 1997, and the "Report of Ownership by Major Institutions" (for
    the quarter ended June 30, 1997), CDA Spectrum, August 12, 1997.
 
(14) The Mellon Bank Corporation, located at One Mellon Bank Center, Pittsburgh,
    Pennsylvania 15258, owns such shares of Common Stock through its
    subsidiaries, Mellon Bank, N.A. and The Dreyfus Corporation. Information
    based on Amendment No. 2 to Schedule 13G filed by the Mellon Bank
    Corporation and its subsidiaries with the Securities and Exchange Commission
    on January 30, 1997, and the "Report of Ownership by Major Institutions"
    (for the quarter ended June 30, 1997), CDA Spectrum, August 12, 1997.
 
                                       35
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
 
    Charles D. Peebler, Jr., a member of the Board of Directors of the Company,
is the President and Chief Executive Officer, as well as a Director, of BJK&E, a
worldwide marketing and communications company. The Company has retained Bozell
Worldwide, Inc. ("Bozell"), a wholly-owned subsidiary of BJK&E, to assist in
marketing, advertising creative work and media planning for the Company. Bozell
holds a warrant to purchase an aggregate of 50,000 shares of Common Stock.
 
    KRC Research and Consulting, a division of Bozell, has performed consumer
research on INSTEAD-Registered Trademark-. The Company believes that
transactions entered into with Bozell and its subsidiaries and divisions are on
terms which are at least as favorable as those which the Company could have
obtained from an unrelated third party. The total amount of fees paid BJK&E by
the Company in fiscal year 1997 was approximately $13,743,000. As of July 31,
1997, BJK&E was acquired by True North Communications. An affiliate of True
North Communications was paid $1,138,000 in fiscal year 1997.
 
    One of the Company's directors is a partner of Shereff, Friedman, Hoffman &
Goodman, LLP, a law firm which the Company has retained since fiscal year 1995.
The total amount of fees paid to such firm by the Company in fiscal year 1997
was approximately $909,000. SFH&G Investors, a partnership comprised of the
partners of Shereff, Friedman, Hoffman & Goodman, LLP, holds a warrant to
purchase an aggregate of 35,000 shares of Common Stock.
 
                                       36
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(a) 1. FINANCIAL STATEMENTS
 
    The following financial statements of the Company are filed on the pages
listed below, as part of Part II, Item 8 of this report:
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Independent Auditors' Report...............................................................................         F-2
Balance Sheets.............................................................................................         F-3
Statements of Operations...................................................................................         F-4
Statements of Stockholders' (Deficiency) Equity............................................................         F-5
Statements of Cash Flows...................................................................................         F-6
Notes to Financial Statements..............................................................................         F-8
</TABLE>
 
    2. FINANCIAL STATEMENT SCHEDULES
 
    All other schedules have been omitted because they are inapplicable, or not
required, or the information is included in the financial statements or notes
thereto.
 
    3. EXHIBITS
 
<TABLE>
<C>        <S>
      3.1  Form of Restated Certificate of Incorporation (incorporated by reference to Exhibit
           3.3 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-97960)
           filed with the Securities and Exchange Commission on November 17, 1995).
 
      3.2  Amendment to Restated Certificate of Incorporation (incorporated by reference to
           Exhibit 3.1 to Post -Effective Amendment No. 1 on Form S-3 to Registration
           Statement on Form S-1 (File No. 333-11995) filed with the Securities and Exchange
           Commission on May 6, 1997).
 
      3.3  Amended and Restated By-Laws (incorporated by reference to Exhibit 3.4 to Amendment
           No. 1 to Registration Statement on Form S-1 (File No. 33-97960) filed with the
           Securities and Exchange Commission on November 17, 1995).
 
      3.4  Amendment to the Amended Restated By-laws of Ultrafem, Inc. (incorporated by
           reference to Exhibit 3.1 to Quarterly Report on Form 10-Q for the period ended
           December 31, 1995 (File No. 0-27576) filed February 5, 1997).
 
      4.1  Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
           Amendment No. 2 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on January 16, 1996).
 
      9.1  Voting Trust Agreement, dated as of August 8, 1994 among Audrey Contente, John
           Andersen, Barrie Zesiger and Ultrafem, Inc. (incorporated by reference to Exhibit
           9.1 to Registration Statement on Form S-1 (File No. 33-97960) filed with the
           Securities and Exchange Commission on October 10, 1995).
 
      9.2  Amendment, dated August 8, 1994 to Voting Trust Agreement, dated as of August 8,
           1994 among Audrey Contente, John Andersen, Barrie Zesiger and Ultrafem, Inc.
           (incorporated by reference to Exhibit 9.2 to Registration Statement on Form S-1
           (File No. 33-97960) filed with the Securities and Exchange Commission on October
           10, 1995).
</TABLE>
 
                                       37
<PAGE>
<TABLE>
<C>        <S>
      9.3  Amendment to Voting Trust Agreement, dated as of August 8, 1995 among Audrey
           Contente, John Andersen and Barrie Zesiger (incorporated by reference to Exhibit
           9.3 to Registration Statement on Form S-1 (File No. 333-11995) filed with the
           Securities and Exchange Commission on September 13, 1996).
 
     10.1  Form of Ultrafem, Inc. Class A Warrant to purchase Common Stock (1995 Unit Private
           Placement) (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
     10.2  Form of Ultrafem, Inc. Class B Warrant to purchase Common Stock (1995 Unit Private
           Placement) (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
     10.3  Form of Ultrafem, Inc. Registration Rights Agreement relating to Class A Warrant to
           purchase Common Stock, Class B Warrant to purchase Common Stock, and Secured
           Convertible Promissory Note (incorporated by reference to Exhibit 10.5 to Amendment
           No. 1 to Registration Statement on Form S-1 (File No. 33-97960) filed with the
           Securities and Exchange Commission on November 17, 1995).
 
     10.4  Settlement Agreement and Mutual General Release, dated August 1, 1995, between
           Ultrafem, Inc. and C. Austin Burrell (incorporated by reference to Exhibit 10.6 to
           Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on November 17, 1995).
 
    10.6*  Employment Agreement, dated as of July 1, 1996 by and between Ultrafem, Inc. and
           Audrey Contente (incorporated by reference to Exhibit 10.11 to Registration
           Statement on Form S-1 (File No. 333-11995) filed with the Securities and Exchange
           Commission on September 13, 1996).
 
    10.7*  Name, Likeness, and Voice Release and Agreement, dated as of July 1, 1996 by and
           between Ultrafem, Inc. and Audrey Contente (incorporated by reference to Exhibit
           10.12 to Registration Statement on Form S-1 (File No. 333-11995) filed with the
           Securities and Exchange Commission on September 13, 1996).
 
    10.8*  Termination Benefits Agreement, dated as of October 1, 1990 by and between
           Ultrafem, Inc. and Audrey Contente (incorporated by reference to Exhibit 10.13 to
           Registration Statement on Form S-1 (File No. 333-11995) filed with the Securities
           and Exchange Commission on September 13, 1996).
 
    10.9*  Restated Modification Agreement, dated July 29, 1993 by and between Ultrafem, Inc.
           and Audrey Contente (incorporated by reference to Exhibit 10.12 to Amendment No. 1
           to Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
   10.10*  Amendment to Employment Agreement, dated August 1, 1995, between the Company and
           Audrey Contente (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
   10.11*  Employment Agreement, dated July 29, 1994 between Ultrafem, Inc. and John W.
           Andersen (incorporated by reference to Exhibit 10.14 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
</TABLE>
 
                                       38
<PAGE>
<TABLE>
<C>        <S>
   10.12*  Amendment to Employment Agreement, dated August 1, 1995 between Ultrafem, Inc. and
           John Andersen (incorporated by reference to Exhibit 10.15 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
   10.13*  Employment Agreement, dated August 1, 1995 between Ultrafem, Inc. and Dori M. Reap
           (incorporated by reference to Exhibit 10.16 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
   10.14*  Amendment dated as of January 1, 1997 to Employment Agreement dated August 1, 1995
           between Ultrafem, Inc. and Dori M. Reap (incorporated by reference to Exhibit 10.1
           to Post-Effective Amendment No. 1 on Form S-3 to Registration Statement on Form S-1
           (File No. 333-11995) filed with the Securities and Exchange Commission on May 6,
           1997).
 
    10.15  Letter Agreement, dated July 13, 1995 between Ultrafem, Inc. and The Sage Group
           (incorporated by reference to Exhibit 10.17 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
   10.16*  Employment Agreement, dated November 6, 1995 between Ultrafem, Inc. and Tonya G.
           Hinch (incorporated by reference to Exhibit 10.18 to Amendment No. 2 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on January 16, 1996).
 
   10.17*  Amendment dated as of January 1, 1997 to Employment Agreement dated November 6,
           1995 between Ultrafem, Inc. and Tonya Hinch (incorporated by reference to Exhibit
           10.2 to Post-Effective Amendment No. 1 on Form S-3 to Registration Statement on
           Form S-1 (file No. 333-11995) filed with the Securities and Exchange Commission on
           May 6, 1997).
 
    10.18  Agreement, dated June, 1995, by and between Audrey Contente, Jeffrey Simon, Frank
           Cole, Arthur Appleman and Ultrafem, Inc. (incorporated by reference to Exhibit
           10.19 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-97960)
           filed with the Securities and Exchange Commission on November 17, 1995).
 
   10.19*  Indemnity Agreement dated as of October 1, 1990 between Ultrafem, Inc. and Audrey
           Contente (incorporated by reference to Exhibit 10.20 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
   10.20*  Amendment to Indemnity Agreement dated April 23, 1992 between Ultrafem, Inc. and
           Audrey Contente (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
    10.21  United States Patent No. 5,295,984, issued March 22, 1994 (incorporated by
           reference to Exhibit 10.23 to Amendment No. 1 to Registration Statement on Form S-1
           (File No. 33-97960) filed with the Securities and Exchange Commission on November
           17, 1995).
 
    10.22  Settlement Agreement, dated as of May 19, 1993 by and between Ultrafem, Inc.,
           Audrey Contente, Frank Martin, Albert L. Zesiger, and John S. Stafford
           (incorporated by reference to Exhibit 10.24 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
</TABLE>
 
                                       39
<PAGE>
<TABLE>
<C>        <S>
    10.23  Form of Ultrafem, Inc. Convertible Debenture issued to the Montana Board of Science
           and Technology (incorporated by reference to Exhibit 10.25 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995).
 
    10.24  Memorandum Agreement, dated September 15, 1992, relating to registration rights of
           Ultrafem, Inc. (incorporated by reference to Exhibit 10.27 to Amendment No. 1 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on November 17, 1995). Convertible Debenture issued to the
           Montana Board of Science and Technology.
 
    10.25  Letter Agreement dated June 23, 1995 between Ultrafem, Inc. and Pro-Active
           International, as amended (incorporated by reference to Exhibit 10.28 to Amendment
           No. 1 to Registration Statement on Form S-1 (File No. 33-97960) filed with the
           Securities and Exchange Commission on November 17, 1995).
 
   10.26*  Agreement effective July 17, 1990 between Ultrafem, Inc. and Audrey Contente
           (incorporated by reference to Exhibit 10.31 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
   10.27*  Restated Technology Transfer Agreement, dated as of May 17, 1993 by and between
           Ultrafem, Inc. and Audrey Contente (incorporated by reference to Exhibit 10.34 to
           Registration Statement on Form S-1 (File No. 333-11995) filed with the Securities
           and Exchange Commission on September 13, 1996).
 
   10.28*  Amendment to Restated Technology Transfer Agreement dated August 1, 1995 between
           Ultrafem, Inc. and Audrey Contente (incorporated by reference to Exhibit 10.32 to
           Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on November 17, 1995).
 
   10.29*  1990 Stock Option Plan of Ultrafem, Inc. (incorporated by reference to Exhibit
           10.33 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 33-97960)
           filed with the Securities and Exchange Commission on November 17, 1995).
 
   10.30*  Amended and Restated Ultrafem, Inc. 1995 Stock Plan for Non-Employee Directors
           (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to Registration
           Statement on Form S-8 (File No. 333-17765) filed with the Securities and Exchange
           Commission on June 28, 1997).
 
   10.31*  Form of Option Certificate and Agreement for 1990 Stock Option Plan of Ultrafem,
           Inc. (incorporated by reference to Exhibit 10.35 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
   10.32*  Form of Option Certificate and Agreement for 1995 Ultrafem, Inc. Stock Option Plan
           for Non-Employee Directors (incorporated by reference to Exhibit 10.36 to Amendment
           No. 2 to Registration Statement on Form S-1 (File No. 33-97960) filed with the
           Securities and Exchange Commission on January 16, 1996).
 
   10.33*  Form of Ultrafem, Inc. Option Certificate and agreement to C. Austin Burrell
           (incorporated by reference to Exhibit 10.37 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
</TABLE>
 
                                       40
<PAGE>
<TABLE>
<C>        <S>
   10.34*  Option Certificate and Agreement, dated November 6, 1995, Re: 100,000 shares to
           Tonya G. Hinch (incorporated by reference to Exhibit 10.38 to Amendment No. 2 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on January 16, 1996).
 
   10.35*  Option Certificate and Agreement, dated August 1, 1995, Re: 100,000 shares to Dori
           M. Reap (incorporated by reference to Exhibit 10.39 to Amendment No. 2 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on January 16, 1996).
 
   10.36*  Amendment No. 1 to Option Certificate and Agreement, dated August 1, 1995, Re:
           100,000 shares to Dori M. Reap (incorporated by reference to Exhibit 10.40 to
           Amendment No. 2 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on January 16, 1996).
 
   10.37*  Option Certificate and Agreement, dated August 1, 1995, Re: 50,000 shares to Dori
           M. Reap (incorporated by reference to Exhibit 10.41 to Amendment No. 2 to
           Registration Statement on Form S-1 (File No. 33-97960) filed with the Securities
           and Exchange Commission on January 16, 1996).
 
   10.38*  Amendment No. 1 to Option Certificate and Agreement, dated August 1, 1995, Re:
           50,000 shares to Dori M. Reap (incorporated by reference to Exhibit 10.42 to
           Amendment No. 2 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on January 16, 1996).
 
   10.39*  Amended and Restated Option Certificate and Agreement, dated August 1, 1995, Re:
           105,970 shares (or 2% of shares) to John W. Andersen (incorporated by reference to
           Exhibit 10.43 to Amendment No. 1 to Registration Statement on Form S-1 (File No.
           33-97960) filed with the Securities and Exchange Commission on November 17, 1995).
 
   10.40*  Amended and Restated Option Certificate and Agreement, dated August 1, 1995, Re:
           423,879 shares (or 8% of shares) to John W. Andersen (incorporated by reference to
           Exhibit 10.44 to Amendment No. 1 to Registration Statement on Form S-1 (File No.
           33-97960) filed with the Securities and Exchange Commission on November 17, 1995).
 
   10.41*  Option Agreement and Certificate, dated June 1, 1992, to Audrey Contente
           (incorporated by reference to Exhibit 10.45 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
   10.42*  Option Agreement and Certificate, dated August 9, 1991, to Wendell Guthrie
           (incorporated by reference to Exhibit 10.46 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
    10.43  Form of Warrant to purchase Common Stock (1993 Private Placement) (incorporated by
           reference to Exhibit 10.48 to Amendment No. 1 to Registration Statement on Form S-1
           (File No. 33-97960) filed with the Securities and Exchange Commission on November
           17, 1995).
 
    10.44  Form of Warrant to purchase Common Stock (1995 Preferred Stock Private Placement)
           (incorporated by reference to Exhibit 10.49 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-97960) filed with the Securities and Exchange
           Commission on November 17, 1995).
 
    10.45  Form of Warrant to purchase Common Stock (1994 Private Placement) (incorporated by
           reference to Exhibit 10.50 to Amendment No. 1 to Registration Statement on Form S-1
           (File No. 33-97960) filed with the Securities and Exchange Commission on November
           17, 1995).
</TABLE>
 
                                       41
<PAGE>
<TABLE>
<C>        <S>
    10.46  Form of Representative's Warrant (incorporated by reference to Exhibit 10.52 to
           Amendment No. 2 to Registration Statement on Form S-1 (File No. 33-97960) filed
           with the Securities and Exchange Commission on January 16, 1996).
 
    10.47  Form of Class C Warrant issued January 1996 (incorporated by reference to Exhibit
           10.54 to Amendment No. 3 to Registration Statement on Form S-1 (File No. 33-97960)
           filed with the Securities and Exchange Commission on February 16, 1996).
 
    10.48  License, Research and Product Development Agreement by and between Ultrafem, Inc.
           and ReProtect, LLC as of February 8, 1996 (incorporated by reference to Exhibit
           10.55 to Amendment No. 4 to Registration Statement on Form S-1 (File No. 33-97960)
           filed with the Securities and Exchange Commission on February 22, 1996).
 
    10.49  Equipment Agreement, dated October 17, 1995 between Ultrafem, Inc. and Remmele
           Engineering (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
           10-Q for the period ended March 31, 1996 (File No. 0- 27576) filed May 15, 1996).
 
    10.50  Sales Contract, dated January 1, 1996 between Ultrafem, Inc. and Shell Chemical
           Company (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q
           for the period ended March 31, 1996 (File No. 0- 27576) filed May 15, 1996).
 
    10.51  Lease Agreements dated July 30, 1997 between Ultrafem, Inc. and Dennis R.
           Washington d/ b/a Western Trade Center.
 
    10.52  Letter Agreement, dated March 14, 1996, between Ultrafem, Inc. and The Elliot
           Company (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q
           for the period ended March 31, 1996 (File No. 0- 27576) filed May 15, 1996).
 
   10.53*  Employment Agreement, dated April 1, 1996, between Ultrafem, Inc. and Gary Nordmann
           (incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for the
           period ended March 31, 1996 (File No. 0-27576) filed May 15, 1996).
 
   10.54*  Option Agreement, dated March 8, 1996, between Ultrafem, Inc. and Gary Nordmann
           (incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q for the
           period ended March 31, 1996 (File No. 0-27576) filed May 15, 1996).
 
    10.55  Broker Representation Agreement, dated April 29, 1996, between Ultrafem, Inc. and
           Morgan & Sampson Pacific (incorporated by reference to Exhibit 10.65 to
           Registration Statement on Form S-1 (File No. 333-11995) filed with the Securities
           and Exchange Commission on September 13, 1996).
 
    10.56  Distribution Service Agreement, dated June 1, 1996, between Ultrafem, Inc. and
           Morgan & Sampson Pacific (incorporated by reference to Exhibit 10.66 to
           Registration Statement on Form S-1 (File No. 333-11995) filed with the Securities
           and Exchange Commission on September 13, 1996).
 
    10.57  Lease Agreement, dated July 23, 1996 between Ultrafem, Inc. and 805 Third Ave. Co.
           (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
           period ended December 31, 1995 (File No. 0-27576) filed February 5, 1997).
 
    10.58  Lease Agreement--Amendment No. 1, dated October 30, 1996 between Ultrafem, Inc. and
           805 Third Ave. Co. (incorporated by reference to Exhibit 10.2 to Quarterly Report
           on Form 10-Q for the period ended December 31, 1995 (File No. 0-27576) filed
           February 5, 1997).
</TABLE>
 
                                       42
<PAGE>
<TABLE>
<C>        <S>
    10.59  Sublease agreement dated October 31, 1996 between Ultrafem, Inc. and High View
           Capital Corporation and High View Asset Management Corporation as Subtenant
           (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the
           period ended December 31, 1995 (File No. 0-27576) filed February 5, 1997).
 
  10.60**  Letter Agreement, dated April 14, 1997, between Ultrafem, Inc. and The Elliott
           Company.
 
  10.61**  Letter Agreement, dated August 4, 1997 between Ultrafem, Inc. and Meridian
           Consulting Group.
 
     11**  Computation of Earnings Per Share.
 
   23.1**  Independent Auditors' Consent.
 
     27**  Financial Data Schedule.
</TABLE>
 
------------------------
 
(b) Reports on Form 8-K
 
(c) Management contracts or compensatory plans or arrangements required to be
    filed as an exhibit pursuant to Item 14(c) are denoted by an (*).
 
   Exhibits filed herewith are denoted by an (**).
 
                                       43
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                ULTRAFEM, INC.
 
Dated: September 29, 1997       By:             /s/ JOHN W. ANDERSEN
                                     -----------------------------------------
                                                  John W. Andersen
                                             PRESIDENT, CHIEF EXECUTIVE
                                                OFFICER AND DIRECTOR
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
          SIGNATURE                        TITLE                    DATE
------------------------------  ---------------------------  -------------------
 
                                President, Chief Executive
     /s/ JOHN W. ANDERSEN         Officer and Director
------------------------------    (Principal Executive       September 29, 1997
       John W. Andersen           Officer)
 
                                Senior Vice President of
                                  Finance and
       /s/ DORI M. REAP           Administration, Secretary
------------------------------    and Chief Financial        September 29, 1997
         Dori M. Reap             Officer (Principal
                                  Financial & Accounting
                                  Officer)
 
     /s/ AUDREY CONTENTE        Executive Vice President,
------------------------------    Founder and Director       September 29, 1997
       Audrey Contente
 
     /s/ RICHARD A. CONE
------------------------------  Director                     September 29, 1997
       Richard A. Cone
 
      /s/ JOY VIDA JONES
------------------------------  Director                     September 29, 1997
        Joy Vida Jones
 
     /s/ MARTIN NUSSBAUM
------------------------------  Director                     September 29, 1997
       Martin Nussbaum
 
 /s/ CHARLES D. PEEBLER, JR.
------------------------------  Director                     September 29, 1997
   Charles D. Peebler, Jr.
 
      /s/ BARRIE ZESIGER
------------------------------  Director                     September 29, 1997
        Barrie Zesiger
 
                                       44
<PAGE>
                                 ULTRAFEM, INC.
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
 
Independent Auditors' Report...............................................................................         F-2
 
Balance Sheets.............................................................................................         F-3
 
Statements of Operations...................................................................................         F-4
 
Statements of Stockholders' Equity.........................................................................         F-5
 
Statements of Cash Flows...................................................................................         F-6
 
Notes to Financial Statements..............................................................................         F-8
</TABLE>
 
                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and
Stockholders of
Ultrafem, Inc.
 
    We have audited the accompanying balance sheets of Ultrafem, Inc. (the
"Company") as of June 30, 1997 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended June 30, 1997. 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 conduct our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1997 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended June 30, 1997, in conformity with generally accepted
accounting principles.
 
DELOITTE & TOUCHE LLP
 
New York, New York
August 12, 1997
 
                                      F-2
<PAGE>
                                 ULTRAFEM, INC.
 
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                               JUNE 30,
                                                                                    ------------------------------
                                                                                         1996            1997
                                                                                    --------------  --------------
<S>                                                                                 <C>             <C>
                                                      ASSETS
Current Assets:
  Cash and cash equivalents.......................................................  $   24,510,071  $   20,751,393
  Accounts receivable--less allowance for doubtful accounts of $72,000............        --             1,515,788
  Inventory.......................................................................         266,951       4,581,944
  Prepaid marketing and other current assets......................................         609,503       1,420,330
                                                                                    --------------  --------------
      Total Current Assets........................................................      25,386,525      28,269,455
 
Property and equipment--net.......................................................       2,875,153      11,227,028
Other assets--net.................................................................       1,146,258       1,209,810
                                                                                    --------------  --------------
      TOTAL ASSETS................................................................  $   29,407,936  $   40,706,293
                                                                                    --------------  --------------
                                                                                    --------------  --------------
 
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current portion--long-term debt.................................................  $    3,442,013  $     --
  Accounts payable................................................................         893,548       3,639,035
  Accrued interest................................................................         724,932         463,833
  Accrued salaries................................................................       1,426,093       2,823,615
  Accrued marketing and selling...................................................         200,590       5,665,363
  Other accrued liabilities.......................................................         736,816       2,359,797
                                                                                    --------------  --------------
      Total Current Liabilities...................................................       7,423,992      14,951,643
 
Long-term debt....................................................................         700,000         700,000
Other liabilities.................................................................        --               186,412
                                                                                    --------------  --------------
      Total Liabilities...........................................................       8,123,992      15,838,055
 
Stockholders' Equity:
  Preferred stock, $.001 par value--authorized, 5,000,000 shares $8 cumulative
    Convertible Series A: issued and outstanding 1,121.25 shares stated at
    liquidation preference of $112,125 at June 30, 1996...........................         112,125        --
  Common Stock, $.001 par value--authorized 70,000,000 shares; outstanding
    5,737,241 and 8,499,420 shares, respectively (stated at)......................           9,905          12,668
  Additional paid-in capital......................................................      42,207,697      82,622,208
  Deficit.........................................................................     (21,045,783)    (57,766,638)
                                                                                    --------------  --------------
      Total Stockholders' Equity..................................................      21,283,944      24,868,238
                                                                                    --------------  --------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................  $   29,407,936  $   40,706,293
                                                                                    --------------  --------------
                                                                                    --------------  --------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-3
<PAGE>
                                 ULTRAFEM, INC.
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED JUNE 30,
                                                                        -----------------------------------------
                                                                            1995          1996          1997
                                                                        ------------  ------------  -------------
<S>                                                                     <C>           <C>           <C>
Net sales.............................................................  $    --       $    --       $   3,533,810
                                                                        ------------  ------------  -------------
Costs and Expenses:
  Cost of sales (exclusive of depreciation)...........................       --            --           3,371,544
  Marketing, sales and distribution...................................       123,531     2,406,277     26,448,837
  Research and development............................................       181,475     1,403,557      2,464,674
  General and administrative..........................................     1,444,911     5,095,261      8,510,195
  Depreciation and amortization.......................................       166,533       738,883      1,045,163
                                                                        ------------  ------------  -------------
                                                                           1,916,450     9,643,978     41,840,413
                                                                        ------------  ------------  -------------
Loss from operations..................................................     1,916,450     9,643,978     38,306,603
Interest income.......................................................       --           (489,379)    (1,601,693)
Interest expense--net of capitalized interest of $401,330 in 1997.....       464,615       665,381         15,945
                                                                        ------------  ------------  -------------
Net loss..............................................................  $  2,381,065  $  9,819,980  $  36,720,855
                                                                        ------------  ------------  -------------
                                                                        ------------  ------------  -------------
Net loss per share....................................................         $0.87         $2.74          $5.08
                                                                        ------------  ------------  -------------
                                                                        ------------  ------------  -------------
Weighted average number of common shares and equivalents
  outstanding.........................................................     2,698,152     3,529,494      7,231,401
                                                                        ------------  ------------  -------------
                                                                        ------------  ------------  -------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-4
<PAGE>
                                 ULTRAFEM, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                       PREFERRED
                                         STOCK         COMMON STOCK        ADDITIONAL
                                      CONVERTIBLE  ---------------------     PAID-IN
                                       SERIES A      SHARES     AMOUNT       CAPITAL       (DEFICIT)         TOTAL
                                      -----------  ----------  ---------  -------------  --------------  -------------
<S>                                   <C>          <C>         <C>        <C>            <C>             <C>
BALANCE, JULY 1, 1994...............                1,314,312  $   5,257  $   4,105,767  $   (8,844,738) $  (4,733,714)
Sales of stock ($8.00 per share) net
  of costs of $74,720...............                   28,125        113        150,167        --              150,280
Issuance of stock warrants ($.23529
  per warrant)......................                   --         --             28,000        --               28,000
Issuance of stock for consulting and
  other services (valued at $8.00 to
  $15.66 per share).................                   30,100        120        221,660        --              221,780
Conversion of convertible debt......                   16,875         68        134,932        --              135,000
Sales of Series A Preferred Stock
  ($100 per share) net of costs of
  $100,505..........................   $ 653,250       --         --           (100,505)       --              552,745
Issuance of options and warrants
  (valued at $.23529 per option and
  warrant)..........................      --           --         --             15,194        --               15,194
Net loss............................      --           --         --           --            (2,381,065)    (2,381,065)
                                      -----------  ----------  ---------  -------------  --------------  -------------
BALANCE, JUNE 30, 1995..............     653,250    1,389,412      5,558      4,555,215     (11,225,803)    (6,011,780)
Sales of stock ($10.00 per share)
  net of costs of $5,014,389........      --        3,910,000      3,910     34,081,701        --           34,085,611
Exercise of stock options and
  warrants..........................      --          298,104        298      1,869,224        --            1,869,522
Sale of warrants....................      --           --         --                527        --                  527
Issuance of options and warrants....      --           --         --            945,044        --              945,044
Conversion of preferred stock to
  common stock ($5.00 per share)....    (541,125)     108,225        108        541,017        --             --
Conversion of convertible debt ($5
  to $10 per share).................                   31,500         31        214,969        --              215,000
Net loss............................      --           --         --           --            (9,819,980)    (9,819,980)
                                      -----------  ----------  ---------  -------------  --------------  -------------
BALANCE, JUNE 30, 1996..............     112,125    5,737,241      9,905     42,207,697     (21,045,783)    21,283,944
Conversion of preferred stock to
  common stock ($5.00 per share)....    (112,125)      22,425         22        112,103        --             --
Exercise of stock options and
  warrants..........................      --          140,115        141        699,753        --              699,894
Conversion of convertible debt to
  common stock......................      --          599,579        600      3,120,193        --            3,120,793
Sales of stock ($20.00 per share)
  net of costs of $4,075,579........      --        2,000,000      2,000     35,922,421        --           35,924,421
Non-employee stock based claim
  settlement and other non-employee
  stock-based compensation..........      --               60     --            560,041        --              560,041
Net loss............................      --           --         --           --           (36,720,855)   (36,720,855)
                                      -----------  ----------  ---------  -------------  --------------  -------------
BALANCE, JUNE 30, 1997..............   $  --        8,499,420  $  12,668  $  82,622,208  $  (57,766,638) $  24,868,238
                                      -----------  ----------  ---------  -------------  --------------  -------------
                                      -----------  ----------  ---------  -------------  --------------  -------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-5
<PAGE>
                                 ULTRAFEM, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED JUNE 30,
                                                                     --------------------------------------------
                                                                         1995           1996            1997
                                                                     -------------  -------------  --------------
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities:
  Net loss.........................................................  $  (2,381,065) $  (9,819,980) $  (36,720,855)
  Adjustments to reconcile net loss to net cash used in operating
    activities:
    Depreciation...................................................         62,996         79,184         715,872
    Provision for doubtful accounts................................       --             --                72,000
    Amortization of debt issuance, consulting, licensing and patent
      costs........................................................        103,535        659,699         329,291
    Amortization of debt discount..................................         43,480       --              --
    Non-cash officers compensation.................................       --            1,411,871         770,390
    Non-employee stock-based claim settlement......................       --             --               337,500
    Non-employee stock-based compensation..........................        221,780        385,044         222,541
    Other non-cash items...........................................         15,194       --                18,536
    Changes in operating assets and liabilities....................      1,103,808       (291,271)      3,203,775
                                                                     -------------  -------------  --------------
      Net Cash Used in Operating Activities........................       (830,272)    (7,575,453)    (31,050,950)
                                                                     -------------  -------------  --------------
Cash flows from investing activities:
  Purchase of and deposits on property and equipment...............         (3,028)    (2,651,618)     (9,086,281)
                                                                     -------------  -------------  --------------
      Net Cash Used in Investing Activities........................         (3,028)    (2,651,618)     (9,086,281)
                                                                     -------------  -------------  --------------
Cash flows from financing activities:
  Proceeds from issuance of subordinated convertible debentures....        225,000       --              --
  Proceeds from sale of convertible debentures.....................       --            2,125,000        --
  Proceeds from notes payable......................................        135,000      2,227,870        --
  Proceeds from sale of preferred stock (net of related
    expenses)......................................................        552,745       --              --
  Proceeds from sale of common stock (net of related expenses).....        150,280     34,085,611      35,924,421
  Proceeds from sale of options and warrants.......................         28,000            527              --
  Proceeds from exercise of stock options and warrants.............       --            1,794,054         775,353
  Repayment of borrowings..........................................        (84,800)    (4,852,287)       (321,221)
  Debt issue costs.................................................       (110,025)      (717,023)       --
                                                                     -------------  -------------  --------------
      Net Cash Provided by Financing Activities....................        896,200     34,663,752      36,378,553
                                                                     -------------  -------------  --------------
Net increase (decrease) in cash....................................  $      62,900  $  24,436,681  $   (3,758,678)
                                                                     -------------  -------------  --------------
Cash and cash equivalents, beginning of period.....................         10,490         73,390      24,510,071
                                                                     -------------  -------------  --------------
Cash and cash equivalents, end of period...........................  $      73,390  $  24,510,071  $   20,751,393
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
</TABLE>
 
                                                        (CONTINUED ON NEXT PAGE)
 
                       See notes to financial statements.
 
                                      F-6
<PAGE>
                                 ULTRAFEM, INC.
 
                      STATEMENTS OF CASH FLOWS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED JUNE 30,
                                                                     --------------------------------------------
                                                                         1995           1996            1997
                                                                     -------------  -------------  --------------
<S>                                                                  <C>            <C>            <C>
Changes in operating assets and liabilities consist of:
  Increase in accounts receivable..................................  $    --        $    --            (1,587,788)
  Increase in inventory............................................       --             (266,951)     (4,314,993)
  Increase in prepaid marketing and other current assets...........         (2,841)      (523,322)       (886,287)
  Increase in other assets.........................................       (151,272)      (233,798)       (392,843)
  Increase in accounts payable.....................................        937,594        650,667       2,745,487
  Increase in accrued liabilities..................................        320,327         82,133       7,453,787
  Increase in other long-term liabilities..........................       --             --               186,412
                                                                     -------------  -------------  --------------
                                                                     $   1,103,808  $    (291,271) $    3,203,775
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
Supplementary Information:
  Cash paid during the year for:
    Interest (net of amount capitalized)...........................  $         955  $     578,764  $      277,074
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
    Taxes..........................................................  $    --        $    --        $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
Non-cash financing activities:
  Conversion of accounts payable and accrued liabilities to
    long-term debt.................................................  $   1,586,666  $    --        $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Conversion of notes payable to common stock......................  $     135,000  $    --        $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Conversion of secured notes and notes payable to convertible
    debentures.....................................................  $    --        $     850,000  $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Conversion of secured notes to notes payable.....................  $    --        $     850,000  $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Conversion of convertible debt to common stock...................  $    --        $     215,000  $    3,120,792
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Conversion of preferred stock to common stock....................  $    --        $     541,125  $      112,125
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
Other non-cash activities:
  Conversion of accounts payable to warrants.......................  $    --        $      85,000  $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Issuance of options and warrants in connection with employee and
    non-employee stock-based compensation..........................  $    --        $   2,271,915  $    1,330,431
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
  Amounts receivable from the issuance of common stock.............  $    --        $      75,467  $     --
                                                                     -------------  -------------  --------------
                                                                     -------------  -------------  --------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-7
<PAGE>
                                 ULTRAFEM, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    ORGANIZATION--Ultrafem, Inc. (the "Company") was incorporated under the laws
of the State of Delaware on March 22, 1990 and is engaged in the manufacturing
and sale of its proprietary feminine protection product. At June 30, 1996,
principal operations had commenced and during August 1996, the Company began
selling its product, INSTEAD-REGISTERED TRADEMARK-. Accordingly, as of July 1,
1996, the Company is considered an operating entity rather than a development
stage enterprise.
 
    USE OF ESTIMATES--The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
    CASH AND CASH EQUIVALENTS--Cash equivalents include short-term investments
principally in commercial paper with an original maturity of three months or
less when purchased.
 
    CONCENTRATION OF CREDIT RISK--The Company places its temporary cash
investments and investments with high credit quality financial institutions and,
by policy, limits the amount of credit exposure with any one financial
institution.
 
    The Company grants credit primarily to national retail chain stores,
supermarkets and drug chains based on an evaluation of the customer's financial
condition, without requiring collateral. Exposure to losses on receivables is
principally dependent on each customer's financial condition. The Company
controls its exposure to credit risk through credit approvals, credit limits and
monitoring procedures and establishes allowances for anticipated losses.
 
    INVENTORY--Inventories are stated at the lower of weighted average cost
(first-in, first-out) or market.
 
    PROPERTY AND EQUIPMENT--Property and equipment are stated at cost less
accumulated depreciation. Depreciation is recorded using the straight-line
method over the estimated useful lives of the assets which are between 3 and 10
years.
 
    CONSTRUCTION IN PROGRESS--Capitalized interest is included in construction
in progress.
 
    LICENSING COSTS--Licensing costs are amortized over the life of the license,
ten years, using the straight-line method. Royalties based on net units sold are
expensed as incurred.
 
    DEBT ISSUANCE COSTS--Debt issuance costs in connection with various debt
agreements are amortized over the lives of the related debt.
 
    DEBT DISCOUNT--Debt discount in connection with the issuance of debt with
stock purchase warrants is amortized over the life of the related obligation and
is included as interest expense.
 
    PATENT COSTS--Patent costs are stated at cost less accumulated amortization.
Patent costs are amortized using the straight-line method over the 17-year life
of the patent when obtained, or expensed if not obtained.
 
                                      F-8
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    STOCK OFFERING COSTS--Costs incurred in connection with the sale of the
Company's equity securities are recorded as a reduction of the proceeds when
received. Costs incurred prior to the receipt of proceeds are deferred until the
proceeds are received or expensed if such sale is not consummated.
 
    REVENUE RECOGNITION--Revenue is recognized upon shipment of merchandise.
 
    MARKETING COSTS AND PREPAID MARKETING--Marketing costs are expensed when an
advertisement or promotion takes place and are capitalized as prepaid marketing
until such time.
 
    RESEARCH AND DEVELOPMENT COSTS--Research and development costs are expensed
as incurred.
 
    REVERSE STOCK SPLIT--Effective July 28, 1995, the stockholders of the
Company approved a one-for-four reverse split of its common stock. All
references in the accompanying financial statements to the number of shares and
per share amounts have been retroactively restated to reflect this transaction.
 
    LONG-LIVED ASSETS--Effective July 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets to Be Disposed of." This statement establishes accounting
standards for the measurement of the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets. This Statement
requires that an asset to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Long-lived assets are
assessed for recoverability on an ongoing basis. In evaluating the value and
future benefits of long-lived assets, the carrying value would be reduced by the
excess, if any, of the long-lived assets over management's estimates of the
anticipated undiscounted future net cash flows of the related asset. The
adoption of this Statement did not have a material effect on the Company's
financial position or results of operations.
 
    STOCK-BASED COMPENSATION--Effective July 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The standard encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees based on fair value accounting rules. The
Company has adopted the disclosure only provisions of SFAS No. 123 for pro forma
information.
 
    RECENTLY ISSUED ACCOUNTING STANDARD--In February 1997, The Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share," which establishes new standards for computing and
presenting net income per share and replaces the standards previously found in
Accounting Principles Board Opinion No. 15, Earnings Per Share. The Company will
begin reporting per share information according to this new standard in the
second quarter of fiscal 1998. The Company does not expect the implementation of
SFAS No. 128 regarding the restatement of prior periods per share data to have a
material effect on the Company's computation.
 
    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement requires that changes in the amounts of comprehensive income items be
shown in a primary financial statement. The disclosure of per-share amounts for
comprehensive income is not required. This statement is effective for fiscal
years beginning after December 15, 1998. The Company expects that the adoption
of this statement will not have any significant impact on the financial
statements of the Company.
 
                                      F-9
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which changes the way public companies are
to report information about segments of their business in their annual financial
statements and requires them to report information about segments of their
business in their annual financial statements and requires them to report
selected segment information in their quarterly reports issued to shareholders.
It also requires entity-wide disclosures about the products and services an
entity provides, the material countries in which it holds assets and reports
revenues, and its major customers. Statement No. 131 requires that companies
disclose segment data based on how management makes decisions about allocating
resources to segments and measuring their performance. This statement is
effective for fiscal years beginning after December 15, 1998. The Company
expects that the adoption of this statement will not have any impact on the
financial statements of the Company.
 
    LOSS PER COMMON AND COMMON EQUIVALENT SHARE--Loss per common and common
equivalent share for the years ended June 30, 1997, 1996 and 1995 was computed
using the weighted average number of common shares outstanding during each year.
The weighted average number of common shares outstanding during the first half
of fiscal year 1996, and during fiscal year 1995, includes incremental shares
for the common stock, warrants and other potentially dilutive securities issued
and options granted to purchase common stock which were issued within one year
prior to the effective date of the Company's initial public offering (the
"Incremental Shares"). Such Incremental Shares were determined utilizing the
treasury stock method. For periods subsequent to the effective date of the IPO,
the Company computes loss per common and common equivalent share in accordance
with APB No. 15, accordingly, the effect of the assumed exercise of stock
options which were issued in periods prior to the one-year period previously
mentioned and the effect of the assumed conversion of the convertible preferred
stock are not included for 1995 because their effect is antidilutive. Loss per
common share assuming full dilution is not presented because such calculation is
antidilutive.
 
    RECLASSIFICATIONS--Certain reclassifications have been made to prior year
balances in order to conform with the current year presentation.
 
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    At June 30, 1997, the fair values of cash, cash equivalents, accounts
receivable, prepaid marketing and other current assets, accounts payable,
accrued interest, accrued salaries, accrued marketing and selling and other
accrued liabilities approximated their carrying values because of the short-term
nature of these instruments. The estimated fair values of the convertible debt
subject to fair value disclosures was determined by multiplying the number of
common shares the debt is convertible into by the quoted market price of the
Company's Common Stock at June 30, 1996 and 1997, respectively.
 
<TABLE>
<CAPTION>
                                                   1996                        1997
                                        ---------------------------  ------------------------
                                          CARRYING        FAIR        CARRYING       FAIR
                                           VALUE          VALUE        VALUE        VALUE
                                        ------------  -------------  ----------  ------------
<S>                                     <C>           <C>            <C>         <C>
Convertible debt......................  $  3,857,432  $  14,679,049  $  700,000  $  1,925,000
                                        ------------  -------------  ----------  ------------
                                        ------------  -------------  ----------  ------------
</TABLE>
 
                                      F-10
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
3. INVENTORY
 
    Inventory consists of the following:
 
<TABLE>
<CAPTION>
                                                                            JUNE 30,
                                                                   ---------------------------
<S>                                                                <C>           <C>
                                                                       1996          1997
                                                                   ------------  -------------
Raw materials....................................................  $    258,919  $   1,026,051
Work-in-process..................................................       --              26,785
Finished goods...................................................         8,032      3,529,108
                                                                   ------------  -------------
                                                                   $    266,951  $   4,581,944
                                                                   ------------  -------------
                                                                   ------------  -------------
</TABLE>
 
4. PROPERTY AND EQUIPMENT
 
    Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                            JUNE 30,
                                                                   ---------------------------
<S>                                                                <C>           <C>
                                                                       1996          1997
                                                                   ------------  -------------
Machinery and equipment..........................................  $  1,797,941  $   4,400,397
Office furniture and equipment...................................       105,096        744,614
Leasehold improvements...........................................       439,172      1,234,016
Construction in progress.........................................       804,068      5,785,501
                                                                   ------------  -------------
                                                                      3,146,277     12,164,528
Less accumulated depreciation and amortization...................      (271,124)      (937,500)
                                                                   ------------  -------------
                                                                   $  2,875,153  $  11,227,028
                                                                   ------------  -------------
                                                                   ------------  -------------
</TABLE>
 
5. OTHER ASSETS
 
    Other assets consist of the following:
 
<TABLE>
<CAPTION>
                                                                            JUNE 30,
                                                                   ---------------------------
<S>                                                                <C>           <C>
                                                                       1996          1997
                                                                   ------------  -------------
Patent and trademark costs.......................................  $    222,493  $     222,493
Debt issuance costs..............................................       971,490        971,490
Deferred second offering costs...................................        70,000       --
Consulting agreement.............................................       275,000        275,000
Licensing agreements.............................................       400,000        400,000
Security deposits................................................        35,830        498,673
                                                                   ------------  -------------
                                                                      1,974,813      2,367,656
Less accumulated amortization....................................      (828,555)    (1,157,846)
                                                                   ------------  -------------
                                                                   $  1,146,258  $   1,209,810
                                                                   ------------  -------------
                                                                   ------------  -------------
</TABLE>
 
                                      F-11
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
6. DEBT
 
    Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                              JUNE 30,
                                                                      ------------------------
<S>                                                                   <C>           <C>
                                                                          1996         1997
                                                                      ------------  ----------
Unsecured convertible notes, due April 1997 interest compounded
  quarterly at 10% per year (a).....................................  $  2,875,000  $   --
Convertible debentures, due December 1998 to October 1999, interest
  compounded annually at 10.5% per year (b).........................       700,000     700,000
Unsecured notes to former officers, due December 1995 to December
  1996, interest at 6% or 10% per year (c)..........................       221,033      --
Unsecured notes to trade and other creditors, due October 1996 to
  March 1997, interest at 10% per year (d)..........................        63,548      --
Subordinated convertible debentures, due on demand or due August
  1996 to November 1996, interest at 10%
  per year (e)......................................................       282,432      --
                                                                      ------------  ----------
                                                                         4,142,013     700,000
Less current maturities.............................................    (3,442,013)     --
                                                                      ------------  ----------
                                                                      $    700,000  $  700,000
                                                                      ------------  ----------
                                                                      ------------  ----------
</TABLE>
 
    Annual maturities on long-term debt as of June 30, 1997 during the next five
years are:
 
<TABLE>
<CAPTION>
                                                                                  PERIOD ENDED
                                                                                    JUNE 30,
                                                                                  ------------
<S>                                                                               <C>
1998............................................................................   $   --
1999............................................................................      350,000
2000............................................................................      350,000
2001............................................................................       --
2002............................................................................       --
                                                                                  ------------
                                                                                   $  700,000
                                                                                  ------------
                                                                                  ------------
</TABLE>
 
------------------------
 
(a) During June 1995, the Company entered into an agreement with an investment
    banking firm, Hampshire Securities Corporation ("Hampshire") for the private
    placement of securities, which closed during July 1995 and September 1995
    (the "1995 Unit Private Placement"), in which the Company raised $5,950,000
    through the sale of Units. Each "Unit" consisted of one $50,000 non-
    convertible promissory note bearing interest compounded quarterly at 10% per
    annum (the "Non-Convertible Notes"), one $50,000 convertible promissory note
    bearing interest compounded quarterly at 10% per annum and which is
    convertible into shares of Common Stock at a conversion price per share
    equal to $5.00 (the "Convertible Notes"), one Class A Warrant to purchase
    10,000 shares of Common Stock at a purchase price per share equal to $5.00
    and one Class B Warrant to purchase 10,000 shares of Common Stock at a
    purchase price per share equal to $12.50. Both Class A and Class B Warrants
    expire five years from the date of issuance. In June 1996, a Convertible
    Note in the principal amount of $100,000 was converted into 20,000 shares of
    Common Stock. Certain holders of secured notes which were issued in a 1993
    private placement agreed to amend and restate their promissory notes and
    invest the principal amount of such notes in the amount of $1,650,000 in the
 
                                      F-12
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
6. DEBT (CONTINUED)
    1995 Unit Private Placement. On July 28, 1995, the other investors from a
    1993 private placement who did not amend and restate their secured notes
    were paid their principal and interest of $200,000 and $22,557,
    respectively, from the proceeds of the 1995 Unit Private Placement. In
    addition, through June 30, 1996, interest of $186,281 was paid related to
    the $1,650,000 Secured Notes. The Non-Convertible Notes in the amount of
    $2,975,000 plus interest in the amount of $162,319 was paid on February 27,
    1996. At June 30, 1997, all the Convertible Notes were converted into
    595,000 shares of common stock. Interest in the amount of $528,435 was paid
    on the convertible notes through June 30, 1997.
 
(b) Between December 1991 and October 1992, the Company borrowed an aggregate of
    $700,000 from the Montana Board of Science and Technology Development
    evidenced by convertible debentures. The convertible debentures are
    convertible into shares of Common Stock at $5.00 per share, with accrued
    interest being waived upon conversion.
 
(c) Unsecured notes to former officers and an officer/stockholder of the Company
    represent loans made to the Company and accrued salaries which were
    converted to promissory notes. Of such unsecured notes, principal in the
    amount of $221,033 and $725,199 plus interest in the amount of $41,896 and
    $116,039 was paid through June 30, 1997 and 1996, respectively.
 
(d) During October 1994 and March 1995, the Company issued to certain trade and
    other creditors unsecured notes in the principal amount of $588,227. Of such
    unsecured notes, principal in the amount of $63,548 and $524,679 plus
    interest in the amount of $12,727 and $24,260 was paid through June 30, 1997
    and 1996, respectively. As of June 30, 1996 the Company owed a member of the
    Board of Directors and a principal of ReProtect, LLC ("ReProtect") $15,099
    which was paid during the year ended June 30, 1997. Interest in the amount
    of $3,024 and $1,415 was paid to this director during the years ended June
    30, 1997 and 1996, respectively. Additionally, two other principals of
    ReProtect were owed $44,698 at June 30, 1996 which was paid during the year
    ended June 30, 1997. Interest in the amount of $8,952 and $4,188 was paid to
    these two individuals through June 30, 1997 and 1996, respectively.
 
(e) During October, 1994, the Company raised $450,000 through a private
    placement of units composed in the aggregate of (i) $225,000 in subordinated
    convertible debentures which accrues interest at 10% annually, maturing on
    August 31, 1996 and convertible into 22,500 shares of Common Stock at $10.00
    per share, (ii) warrants, exercisable for a five-year period, to purchase
    47,813 shares of Common Stock at $10.00 per share, and (iii) 28,125 shares
    of Common Stock at $8.00 per share. These shares of Common Stock, including
    those issuable upon the conversion of the debentures or the exercise of the
    warrants, were registered in a concurrent offering with the initial public
    offering. At June 30, 1997 and 1996, subordinated convertible debentures in
    the principal amount of $130,000 and $95,000, respectively were converted
    into 13,000 and 9,500 shares of Common Stock. Interest in the amount of
    $40,099 was paid through June 30, 1997 on these subordinated convertible
    debentures.
 
    In October and November 1994, the Company issued to certain trade creditors
    subordinated convertible debentures in the total principal amount of
    $172,432. Each such debenture has a two-year term, bears interest at 10% per
    annum and is convertible into Common Stock at $10.00 per share. As of June
    30, 1997 and 1996, $115,792 and $20,000 was converted into 11,579 and 2,000
    shares of Common Stock, respectively. In addition, principal in the amount
    of $36,640 plus interest in the amount of $7,338 was paid through June 30,
    1997 on the remaining subordinated convertible debenture.
 
                                      F-13
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
7. STOCK OPTIONS AND WARRANTS
 
    The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost for employees has been
recognized for the stock options and warrants awarded except for $770,390 and
$1,411,871 for fiscal years ended 1997 and 1996, respectively, which represents
the value of stock options and warrants that were granted below fair market
value at the time of the grant. Had compensation cost for the Company's stock
option plans and warrants been determined based on the fair value at the grant
date for awards in fiscal year ended 1997 and 1996, the Company's net loss and
net loss per share would have increased to the pro forma amounts indicated
below:
 
<TABLE>
<CAPTION>
                                                                         YEARS ENDED
                                                                           JUNE 30,
                                                                 ----------------------------
<S>                                                              <C>            <C>
                                                                     1996           1997
                                                                 -------------  -------------
Net loss--as reported..........................................  $   9,819,980  $  36,720,855
Net loss--pro forma............................................  $  10,148,082  $  37,203,026
Loss per share--as reported....................................  $        2.74  $        5.08
Loss per share--pro forma......................................  $        2.88  $        5.14
</TABLE>
 
    The fair value of options and warrants are estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997 and 1996: dividend yield of -0-%, expected
volatility of 60%, risk-free interest rate of 5.51% to 6.45% and expected lives
of 3 to 8 years.
 
    The Company grants stock options and warrants as follows:
 
    (a) In October 1990, the Board of Directors authorized the 1990 Stock Option
Plan (the "1990 Plan") under which options to purchase up to 250,000 shares of
the Common Stock may be granted to employees, officers, directors, consultants
and advisors. In May 1993, the number of shares covered was increased to 900,000
shares by resolution of the Board of Directors. The Board of Directors is
authorized to set the exercise period, the number of shares subject to each
option, the grantees receiving the options, and the exercise price at their best
determination of fair market value.
 
    Options granted generally become exercisable over five years and expire ten
years from the date of grant. The Plan also provides for the granting of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1954, as amended.
 
    On November 20, 1996, the Company issued ten-year options to purchase 60,000
shares of Common Stock at exercise prices varying from $30.00 per share to
$40.00 per share which vest over a two-year period in connection with a
consulting agreement. This resulted in a $434,475 consulting expense which is
being amortized over the two-year vesting period. The expense for the year ended
June 30, 1997 was $221,431.
 
    (b) On September 28, 1995, the Company adopted the 1995 Stock Option Plan
for Non-Employee Directors, a non-qualified stock option plan (the "1995 Plan").
The 1995 Plan reserves for the issuance of up to 250,000 shares of the Common
Stock pursuant to stock options to be granted to the Company's Non-Employee
Directors. Over a period of six months, each of the five Non-Employee Directors
was granted an option to purchase 15,000 shares of the Common Stock at fair
market value ($8.00 and $14.50 per share). Such options become immediately
exercisable with respect to one-third of the shares of Common Stock (5,000
shares), the remaining 10,000 shares of Common Stock vest in equal annual
installments over the next four years following the anniversary date of the
initial grant. The options expire ten years from date of grant.
 
                                      F-14
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
    On June 17, 1997, the 1995 Plan was amended by the Board. The amended 1995
Plan provides that each Non-Employee Director who serves the Company during the
fiscal year shall be entitled to receive an annual retainer with respect to that
fiscal year and meeting fee compensation payable in shares of Common Stock. Each
person who becomes a Non-Employee Director, and has not previously received a
non-qualified stock option shall be entitled to receive an initial retainer.
Each Non-Employee Director may choose to have such compensation deferred or
distributed on the first business day after the end of the fiscal year.
 
    An initial retainer of 1,000 shares of Common Stock shall be payable to a
Non-Employee Director at any time on or after July 1, 1997, who serves for at
least one year, and has not previously received non-qualified stock options
under the 1995 Plan or an initial retainer.
 
    The annual retainer payable to Non-Employee Directors for services rendered
during a fiscal year is as follows: 800 shares of Common Stock for Board
membership; 600 shares of Common Stock for committee chairmanship; and 150
shares of Common Stock for committee membership. The meeting fee compensation
payable to Non-Employee Directors for Board and committee meetings attended
during a fiscal year shall be paid in shares of the Companys' Common Stock, as
follows: 50 shares of Common Stock per Board meeting; and 25 shares of Common
Stock per committee meeting.
    (c) A director, employee and officers of the Company were issued options to
purchase 659,862 shares of the Common Stock at $4.35 to $10.50 per share,
resulting in compensation expenses of approximately $3,418,000 which are
amortized over the remaining lives of their contracts. The expense for the year
ended June 30, 1997 and 1996 was $770,390 and $1,411,871; accrued salaries as at
June 30, 1997 and 1996 includes $2,182,261 and $1,411,871, respectively. Of
these options, options to purchase 574,862 shares of Common Stock are not
pursuant to either the 1990 Plan or the 1995 Plan. As of June 30, 1997, options
to purchase 511,890 shares of Common Stock are exercisable by the director,
employee and officers of the Company.
 
    (d) The Company has warrants outstanding to purchase 2,651,513 shares of the
Common Stock at exercise prices varying from $.004 per share to $16.50 per share
which generally vest upon issuance. In April 1996, the Company issued a
five-year warrant to purchase 200,000 shares of Common Stock at an exercise
price of $11.00 per share (which was below fair market value) in connection with
the execution of a consulting agreement. This resulted in an additional $275,000
consulting expense which is being amortized over the three year term of the
agreement. In March 1996, the Company issued five-year warrants to purchase
20,000 shares of Common Stock at an exercise price of $10.00 (which was below
fair market value) in connection with legal services provided to the Company.
This resulted in an additional $235,000 legal expense during the year ended June
30, 1996. The expenses referred to above were calculated as the excess of fair
market value over the grant price. On August 27, 1996, the Company settled a
claim with certain individuals pursuant to which the Company issued five year
warrants to purchase an aggregate of 30,000 shares of Common Stock at an
exercise price of $10.00 per share. This resulted in an additional expense of
$337,500 during the year ended June 30, 1997.
 
                                      F-15
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
    Information regarding the Company's Stock Option Plans and Warrants for
fiscal years ended 1995, 1996 and 1997 is as follows:
 
<TABLE>
<CAPTION>
                                      1995                            1996                            1997
                         ------------------------------  ------------------------------  ------------------------------
                                             WEIGHTED                        WEIGHTED                        WEIGHTED
                                              AVERAGE                         AVERAGE                         AVERAGE
                                             EXERCISE                        EXERCISE                        EXERCISE
                              SHARES           PRICE          SHARES           PRICE          SHARES           PRICE
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
<S>                      <C>                <C>          <C>                <C>          <C>                <C>
Options outstanding,
  beginning of year....            329,000   $    7.86             883,056   $    5.56           1,656,965   $    6.63
Options exercised......         --              --                 (85,216)       7.27             (14,500)       5.24
Options granted........            578,612        4.35             864,125        7.80              65,225       33.63
Options canceled.......            (24,556)       8.00              (5,000)       8.00              (1,950)      12.81
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
Options outstanding,
  end of year..........            883,056   $    5.56           1,656,965   $    6.63           1,705,740   $    7.66
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
Option price range at
  end of year..........     $4.00 to $8.00               $  4.00 to $14.50                 $4.00 to $40.00
Option price range for
  exercised shares.....         --                          $4.00 to $8.00                  $4.00 to $8.00
Options available for
  grant at end of
  year.................          1,070,931                         461,806                         398,531
</TABLE>
 
<TABLE>
<CAPTION>
                                      1995                            1996                            1997
                         ------------------------------  ------------------------------  ------------------------------
                                             WEIGHTED                        WEIGHTED                        WEIGHTED
                                              AVERAGE                         AVERAGE                         AVERAGE
                                             EXERCISE                        EXERCISE                        EXERCISE
                              SHARES           PRICE          SHARES           PRICE          SHARES           PRICE
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
<S>                      <C>                <C>          <C>                <C>          <C>                <C>
Warrants outstanding,
  beginning of year....            737,687        7.60             956,493        7.23           2,747,355        9.30
Warrants exercised.....         --              --                (212,888)       5.87            (125,842)       5.00
Warrants granted.......            218,806        5.99           2,010,000        9.99              30,000       10.00
Warrants canceled......         --              --                  (6,250)      32.00          --              --
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
Warrants outstanding,
  end of year..........            956,493        7.23           2,747,355        9.30           2,651,513        9.52
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
                         -----------------  -----------  -----------------  -----------  -----------------  -----------
Warrant price range at
  end of year..........  $  .004 to $32.00               $  .004 to $16.50               $  .004 to $16.50
Warrant price range for
  exercised shares.....                N/A               $  .004 to $10.00                           $5.00
Warrants available for
  grant at end of
  year.................          2,010,000                          30,000                             N/A
</TABLE>
 
                                      F-16
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
    The weighted exercise price and weighted fair value of options and warrants
granted by the Company for fiscal years ended 1996 and 1997 are as follows:
 
<TABLE>
<CAPTION>
                                                                                   1996                      1997
                                                                         ------------------------  ------------------------
                                                                          WEIGHTED     WEIGHTED     WEIGHTED     WEIGHTED
                                                                           AVERAGE      AVERAGE      AVERAGE      AVERAGE
                                                                          EXERCISE       FAIR       EXERCISE       FAIR
                                                                            PRICE        VALUE        PRICE        VALUE
                                                                         -----------  -----------  -----------  -----------
<S>                                                                      <C>          <C>          <C>          <C>
Weighted average of options and warrants
  granted during the year whose
  exercise price exceeded fair
  market value at the date of grant....................................   $   13.94    $    9.09    $   35.00    $    7.24
Weighted average of options and warrants
  granted during the year whose
  exercise price was equal to fair
  market value at the date of grant....................................   $    8.00    $    5.44    $   17.88    $   11.85
Weighted average of options and warrants
  granted during the year whose
  exercise price was less than fair
  market value at the date of grant....................................   $    6.68    $    5.18    $   10.00    $   11.34
</TABLE>
 
    The following table summarizes information about fixed-price stock options
and warrants outstanding at June 30, 1997.
 
<TABLE>
<CAPTION>
                                                                    WEIGHTED                   NUMBER
                                                        NUMBER       AVERAGE     WEIGHTED    EXERCISABLE  WEIGHTED
                                                      OUTSTANDING   REMAINING     AVERAGE     AT JUNE      AVERAGE
                                                      AT JUNE 30,  CONTRACTUAL   EXERCISE       30,       EXERCISE
RANGE OF EXERCISE PRICES                                 1997         LIFE         PRICE        1997        PRICE
----------------------------------------------------  -----------  -----------  -----------  ----------  -----------
<S>                                                   <C>          <C>          <C>          <C>         <C>
 
$.004 to $6.00......................................   1,532,308      5 Years    $    4.84    1,407,336   $    4.87
 
$8.00 to $14.50.....................................   2,433,170      4 Years    $    9.71    2,064,670   $    9.96
 
$16.50 to $17.88....................................     331,775      4 Years    $   16.52      327,500   $   16.50
 
$30.00 to $40.00....................................      60,000     11 Years    $   35.00       19,998   $   35.00
                                                      -----------                            ----------
 
                                                       4,357,253                              3,819,504
                                                      -----------                            ----------
                                                      -----------                            ----------
</TABLE>
 
8. INCOME TAXES
 
    The Company has a net operating loss ("NOL") carryforward of approximately
$57,800,000 for financial reporting purposes and approximately $43,364,000 for
tax purposes with research and development credit carryforward of approximately
$116,000 expiring in the years 2006 through 2009. The Company has not reflected
any benefit of such net operating loss carryforward in the accompanying
financial statements as the realization of this deferred tax benefit is not more
than likely. The NOL carryforward for tax purposes expire in the years 2006
through 2012. The difference between financial reporting and tax purposes
results from the temporary difference caused by the capitalization of start-up
expenditures for tax purposes, the use of accelerated depreciation methods for
property and equipment and temporary timing differences between the
deductibility of certain expenses for financial reporting purposes and tax
purposes. During 1997, the Company will amortize these start-up expenditures for
tax purposes over five years.
 
                                      F-17
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
8. INCOME TAXES (CONTINUED)
    The Tax Reform Act of 1986 provided for a limitation on the use of NOL
carryforwards, following certain ownership changes. As a result of transactions
in the Company's stock during 1993 through 1996, a change of ownership of
greater than 50%, as defined, may have occurred. Under such circumstances, the
potential benefits from utilization of tax carryforward may be substantially
limited or reduced on an annual basis.
 
    The types of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts that give rise to a deferred
tax asset and deferred tax liability and their approximate tax effects are:
 
<TABLE>
<CAPTION>
                                                                               JUNE 30,
                                                     ------------------------------------------------------------
                                                                 1996                           1997
                                                     ----------------------------  ------------------------------
                                                       TEMPORARY         TAX         TEMPORARY          TAX
                                                      DIFFERENCE       EFFECT        DIFFERENCE        EFFECT
                                                     -------------  -------------  --------------  --------------
<S>                                                  <C>            <C>            <C>             <C>
 
Net operating loss carryforward....................  $  (6,177,000) $  (2,471,000) $  (40,762,000) $  (16,305,000)
 
Deferred start-up expenses.........................    (12,925,000)    (5,170,000)    (12,925,000)     (5,170,000)
 
Non-cash compensation and expenses.................     (1,797,000)      (719,000)     (3,145,000)     (1,258,000)
 
Research and development credits...................       (116,000)      (116,000)       (116,000)       (116,000)
 
Other..............................................         (5,000)        (2,000)       (632,000)       (253,000)
 
Depreciation.......................................       --             --               507,000         203,000
 
Valuation allowance................................     21,020,000      8,478,000      57,073,000      22,899,000
                                                     -------------  -------------  --------------  --------------
 
                                                     $    --        $    --        $     --        $     --
                                                     -------------  -------------  --------------  --------------
                                                     -------------  -------------  --------------  --------------
</TABLE>
 
9. OTHER RELATED PARTY TRANSACTIONS AND AGREEMENTS
 
    During 1990, as part of the organization of the Company, the founder of the
Company and Executive Vice President and Director received 526,250 shares of
Common Stock in exchange for assigning to the Company all pending patent
applications, trademarks, copyrights, technology and similar rights associated
with products relating to or evolving from the patent application filed by the
Executive Vice President and Director. In addition, under the terms of an
employment agreement dated May 15, 1992, a royalty of $.005 for each device
sold, as defined, will be paid. The total amount of royalties earned was $67,999
of which $30,613 was paid as of June 30, 1997.
 
    On July 29, 1994 and as amended August 1, 1995, the Company entered into an
employment agreement with the President and Chief Executive Officer of the
Company. Among other matters, he will receive a royalty of $.005 for each unit
of feminine protection product sold and $.01 for each unit sold for medical
purposes. The total amount of royalties earned was $67,999 of which $30,613 was
paid as of June 30, 1997.
 
    A director and stockholder of the Company is the Chairman of the Executive
Committee of an advertising agency used by the Company which was paid
approximately $13,743,000 and $1,077,000 during the years ended June 30, 1997
and 1996, respectively. In addition, approximately $5,752,000 and $560,000 owed
to such agency are included in accrued expenses and accounts payable at June 30,
1997 and 1996, respectively. In March, 1996, the Company issued a five-year
warrant to purchase 50,000 shares of
 
                                      F-18
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
9. OTHER RELATED PARTY TRANSACTIONS AND AGREEMENTS (CONTINUED)
Common Stock at an exercise price of $10.00 per share in repayment of $50,000 of
fees owed to such agency, which were incurred in connection with the launch of
INSTEAD-REGISTERED TRADEMARK-. This resulted in an additional advertising
expense of $118,500. As of July 31, 1997, the parent company of the agency was
acquired by True North Communications ("True North"). An affiliated company of
True North was paid approximately $1,138,000 and $40,000 for the years ended
June 30, 1997 and 1996, respectively, for consumer promotion activities. In
addition, $320,387 and $89,386 owed to such company are included in accrued
expenses and accounts payable at June 30, 1997 and 1996, respectively.
 
    In March 1996, the Company issued a five-year warrant to purchase 35,000
shares of Common Stock to an entity formed by the partners of a law firm which
provided legal services in connection with the Company's initial public
offering. The warrant has an exercise price of $10.00 per share and was issued
in repayment of $35,000 of legal fees which were incurred in connection with the
initial public offering. This resulted in an additional legal expense of
approximately $27,000 and a charge to additional paid-in capital of $56,000. A
partner of the law firm was appointed to the Company's Board of Directors in
April 1996 and was issued five-year warrants to purchase 15,000 shares of Common
Stock at $14.50 per share. The total amount of fees paid by the Company to such
law firm was approximately $909,000, $647,000, and $30,000 for the years ended
June 30, 1997, 1996 and 1995, respectively. In addition, $102,000, and $95,000,
owed to the law firm is included in accounts payable and accrued expenses at
June 30, 1997 and 1996, respectively.
 
    In February 1996, the Company reached an agreement (the "ReProtect
Agreement") with a company, ReProtect, formed by scientists (including a current
director) who previously conducted research for the Company under an expired
research agreement. The ReProtect Agreement is for a ten-year term and provides
that the Company will provide ReProtect $1 million annually for research after
the IPO. The ReProtect Agreement provides the Company with an exclusive license
for the use of the BufferGel Technology coupled with the SoftCup Technology, for
which ReProtect received a one-time payment of $100,000, a ten-year option to
purchase 225,000 shares of Common Stock, exercisable upon the attainment of
certain milestones and will receive a royalty of $.01 per unit of the product
sold. In addition, ReProtect granted the Company a ten-year license for vaginal
use of the BufferGel Technology without the SoftCup Technology, for which
ReProtect received a one time payment of $100,000, options to purchase 175,000
shares of Common Stock, exercisable upon the attainment of certain milestones,
and a royalty of either 5% or 3% (depending on whether a patent has been issued)
of net sales of the BufferGel Technology (without the SoftCup Technology). Of
the above mentioned stock options, 100,000 were granted at $6.00 per share
resulting in capitalized licensing costs of $200,000 which will be amortized
over the life of the research agreement which is ten years. Research and
development expenditures pursuant to the above agreements amounted to
approximately $1,000,000, $626,500 and $60,230 for each of the years ended June
30, 1997, 1996 and 1995, respectively.
 
10. PREFERRED STOCK
 
    In 1995, the Company raised $670,000 through a private placement sale of
units. Each unit consisted of (1) 1,950 shares of Series A Preferred Stock, for
an allocated purchase price of $195,000, and (2) a warrant, exercisable for a
five-year period, to purchase 21,250 shares of Common Stock at $10.00 per share,
subject to adjustment for certain dilutive events for an allocated purchase
price of $5,000.
 
    Each share of Series A Preferred Stock was initially (a) convertible, at any
time at the option of the Holder, into Common Stock at a conversion rate of 12.5
shares of Common Stock for each such share,
 
                                      F-19
<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
10. PREFERRED STOCK (CONTINUED)
subject to adjustment for certain dilutive events, (b) entitled to cumulative
annual dividends of $8.00, (c) participating with the Common Stock in any
dividend after payment of said $8.00, (d) has a liquidation preference of
$100.00 and (e) entitled to the number of votes equal to the number of shares of
Common Stock into which such share can be converted.
 
    During the year ended June 30, 1997 and 1996, all of the Series A Preferred
Stock were converted into 22,425 and 108,225 shares of Common Stock,
respectively.
 
11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
 
    LEASES
 
    The Company leases office, manufacturing facilities and office equipment.
Certain of these leases require the Company to pay certain executory costs (such
as insurance and maintenance). In July 1996, the Company signed a ten-year lease
for office space in New York, New York. The Company obtained a one-year
renewable standby letter of credit, expiring in August 1998, in the amount of
$494,000 as rent security for the above premises collateralized by cash
equivalents.
 
    Future minimum lease payments for operating leases are as follows:
 
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
-------------------------------------------------------------------------
<S>                                                                        <C>
1998.....................................................................     $     654,456
1999.....................................................................           681,490
2000.....................................................................           807,233
2001.....................................................................           779,958
2002.....................................................................           791,750
Thereafter...............................................................     $   2,706,327
                                                                           -------------------
                                                                              $   6,421,214
                                                                           -------------------
                                                                           -------------------
</TABLE>
 
    Rental expense was approximately $403,000 , $123,000 and $108,000, for the
years ended June 30, 1997, 1996 and 1995, respectively. Minimum lease payments
have not been reduced by minimum sublease rentals of approximately $525,000 due
in the future under a non-cancelable sublease.
 
    SALES
 
    The Company had sales in excess of ten percent with two supermarket chains
in the amounts and percentages of approximately $546,545 (15.5%) and $510,748
(14.4%) for the year ended June 30, 1997.
 
    MANUFACTURING EQUIPMENT AND IMPROVEMENTS
 
    The Company has commitments in the amount of approximately $7,250,000 of
which approximately $4,368,000 has been paid principally for the purchase of
manufacturing equipment. Of these commitments approximately $2,882,000 is unpaid
of which approximately $1,270,000 is included in accounts payable and accrued
expenses at June 30, 1997.
 
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<PAGE>
                                 ULTRAFEM, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
                    YEARS ENDED JUNE 30, 1997, 1996 AND 1995
 
12. INITIAL PUBLIC OFFERING AND SECOND OFFERING
 
    On February 27, 1996, the Company completed its initial public offering of
Common Stock. The initial public offering was consummated with the sale of
3,910,000 shares of its Common Stock at $10.00 per share with proceeds of
$34,085,611, net of related expenses of $5,014,389.
 
    On November 13, 1996, the Company completed a second public offering of
Common Stock with the sale of 2,000,000 shares of its Common Stock at $20 per
share with proceeds of $35,924,421, net of related expenses of $4,075,579.
 
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