þ
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
|
Wisconsin
|
39-1144397
|
|
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
|
|
515 N. State Street, Suite
2225, Chicago, Illinois
|
60654
|
|
(Address of principal executive offices) | (Zip Code) | |
|
|
Title
of each class
|
Name
of each exchange on which registered
|
|
Common stock, $.01 par
value
|
NASDAQ
Stock Market
|
|
Large accelerated filer o | Accelerated filer o | |
Non-accelerated
file
o
(Do not
check if a smaller reporting company)
|
Smaller reporting company þ |
PART
I
|
Page
|
|||
Item
1.
|
Business
|
5
|
||
Item
2.
|
Properties
|
14
|
||
Item
3.
|
Legal
Proceedings
|
14
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
14
|
||
PART
II
|
||||
Item
5.
|
Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
15
|
||
Item
6.
|
Selected
Financial Data
|
18
|
||
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
25
|
||
Item
8.
|
Financial
Statements and Supplementary Data
|
26
|
||
Item
9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
26
|
||
Item
9A(T).
|
Controls
and Procedures
|
26
|
||
Item
9B.
|
Other
Information
|
27 | ||
PART III | ||||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
28
|
||
Item
11.
|
Executive
Compensation
|
33
|
||
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
38
|
||
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
41
|
||
Item
14.
|
Principal
Accounting Fees and Services
|
42
|
||
PART IV | ||||
Item
15.
|
Exhibits,
Financial Statement Schedules
|
43
|
||
Signatures
|
47
|
1.
|
Increase
women’s access to prevention that they could initiate through a lower
public sector price
|
2.
|
Increase
HIV/AIDS prevention
|
3.
|
Lower
health care costs
|
4.
|
Increase
gross margins
|
●
|
the
leading cause of death for African American women aged 25-34
years;
|
●
|
the
3
rd
leading cause of death for African American women aged 35-44 years;
and
|
●
|
the
4
th
leading cause of death for African American women aged 45-54 years;
and
|
●
|
the
4
th
leading cause of death for Hispanic women aged
35-44.
|
Item
5.
|
Market
For Registrant’s Common Equity, Related Stockholder Matters and Small
Issuer Purchases of Equity
Securities
|
Quarters
|
||||||||||||||||
FIRST
|
SECOND
|
THIRD
|
FOURTH
|
|||||||||||||
2009
Fiscal Year
|
||||||||||||||||
Price
per common share – High
|
$ | 3.72 | $ | 4.35 | $ | 4.82 | $ | 7.65 | ||||||||
Price
per common share – Low
|
$ | 1.95 | $ | 2.87 | $ | 3.51 | $ | 4.48 | ||||||||
2008
Fiscal Year
|
||||||||||||||||
Price
per common share – High
|
$ | 3.60 | $ | 2.84 | $ | 2.87 | $ | 3.15 | ||||||||
Price
per common share – Low
|
$ | 2.20 | $ | 2.17 | $ | 2.30 | $ | 2.15 |
Issuer
Purchases of Equity Securities:
|
Details
of Treasury Stock Purchases to date through September 30,
2009
|
|||||||||||||
Period:
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
Per
Share
|
Total
Number
of
Shares
Purchased
As
Part of
Publicly
Announced
Program
|
Maximum
Number
of
Shares that
May
Yet
be Purchased
Under
the
Program
|
||||||||||
January
1, 2007 – June 30, 2009
|
1,756,161 | $ | 3.07 | 1,756,161 | 1,243,839 | |||||||||
July
1, 2009 – July 31, 2009
|
- | $ | - | 1,756.161 | 1,243,839 | |||||||||
August
1, 2009 – August 31, 2009
|
62,644 | $ | 7.23 | 1,818,805 | 1,181,195 | |||||||||
September
1, 2009 – September 30, 2009
|
25,000 | $ | 5.53 | 1,843,805 | 1,156,195 | |||||||||
Quarterly
Subtotal
|
87,644 | $ | 6.60 | 87,644 | ||||||||||
Total
|
1,843,805
|
(1)
|
$ | 3.25 | 1,843,805 | 1,156,195 |
(1)
|
Includes
152,644 shares repurchased pursuant to the authorization to repurchase
shares issued to directors, employees and other service providers under
the Company's equity incentive plans. The other shares were
purchased in the open market pursuant to the Share Repurchase
Program.
|
●
|
The
Company sold the FC1 female condom to the global public sector under the
umbrella of its agreement with UNAIDS. This agreement
facilitated the availability and distribution of the female condom at a
reduced price based on the Company's cost of
production. The
most recent price per unit ranged between £0.42 and £0.445 (British pounds
sterling), or approximately $0.76 to $0.81, depending on contractual
volumes. With the completion of the transition from FC1 to FC2,
the Company's agreement with UNAIDS to supply FC1 to developing countries
will not be renewed. The Company has elected not to enter into
long-term agreements to supply FC2 to global agencies, and instead intends
to provide uniform, volume-based pricing to such
agencies.
|
●
|
During
fiscal 2009 and fiscal 2008, the Company sold FC1 female condoms to the
U.S. Agency for International Development (USAID) for use in USAID
prevention programs in developing countries. In the fourth
quarter of fiscal 2009, USAID transitioned to FC2 and, through its
procurement agent, John Snow, Inc, placed its first FC2 order for 12
million units.
|
●
|
The
Company has sold the FC female condoms (FC1 and FC2) in the United States
to city and state public health clinics as well as not-for-profit
organizations such as Planned
Parenthood.
|
For
the Years Ended
September
30
|
||||||||
2009
|
2008
|
|||||||
Operating
income exclusive of restructuring charge
|
$ | 6,214,638 | $ | 3,183,725 | ||||
Less:
Restructuring charge
|
$ | 1,496,624 | - | |||||
Operating
income
|
$ | 4,718,014 | $ | 3,183,725 |
(i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
(ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | |
(iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. |
NAME
|
POSITION
|
AGE
|
O.B.
Parrish
|
Chairman
of the Board, Chief Executive Officer, acting President and
Director
|
76
|
Mary
Ann Leeper, Ph.D.
|
Senior
Strategic Adviser and Director
|
69
|
William
R. Gargiulo, Jr.
|
Secretary
and Director
|
81
|
Michael
Pope
|
Vice
President and General Manager of The Female Health Company (UK)
Plc
|
52
|
Donna
Felch
|
Vice
President and Chief Financial Officer
|
62
|
Janet
Lee
|
Controller
|
45
|
David
R. Bethune
|
Director
|
69
|
Stephen
M. Dearholt
|
Director
|
63
|
Michael
R. Walton
|
Director
|
72
|
Richard
E. Wenninger
|
Director
|
62
|
Mary
Margaret Frank
|
Director
|
40
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
(1)
|
Stock
Awards
(2)
|
Nonequity
Incentive
Plan
Compensation
(3)
|
All
Other
Compensation
(4)
|
Total
|
|||||||||||||||||||||
O.B.
Parrish,
Chief
Executive
Officer
and
Acting
President
|
2009
2008
|
$
$
|
152,825
145,100
|
$
$
|
31,250
93,750
|
$
|
-
66,063
|
$
$
|
555,500
366,000
|
$
$
|
25,426
22,073
|
$
$
|
765,001
692,986
|
|||||||||||||||
Donna
Felch,
Vice
President
and
Chief
Financial
Officer
|
2009
2008
|
$ $ |
191,244
185,000
|
-
-
|
$
$
|
63,849
15,188
|
$
$
|
151,500
122,000
|
$
$
|
12,610
9,504
|
$
$
|
419,203
331,692
|
||||||||||||||||
Mike
Pope, Vice
President
and
General
Manager
of
Female Health
Company
(UK)
Plc.
|
2009
2008
|
$
$
|
171,900
211,725
|
(5)
(5)
|
-
-
|
$
$
|
63,849
15,188
|
$
$
|
151,500
122,000
|
$
$
|
28,870
34,468
|
(5)
(5)
|
$
$
|
416,119
383,381
|
(1) | Bonus amount for 2008 represents a retention bonus payable monthly to Mr. Parrish based on continued service from January 1, 2008 through September 30, 2008. Bonus amount for 2009 represents the last three months of the retention bonus paid to Mr. Parrish for his continued service through calendar-year end 2008. |
(2) |
These
amounts reflect the dollar value of the compensation cost of all
outstanding restricted stock awards and outstanding rights to receive
shares of common stock recognized over the requisite service period,
computed in accordance with Accounting Standards Codification Topic 718-10
(formerly FAS No. 123R). The stock awards are valued at the closing market
price of the Company's common stock on the date of
grant.
|
(3) |
Amounts
for 2009 represent payouts under the Company’s Key Executive Incentive
Program based on achieving net income objectives for
2009. Under this program, each named executive officer is
entitled to a payout based on the Company exceeding a target amount of net
income for 2009, with the amount of the payout based on the value of the
Company’s common stock on September 30, 2009. Amounts for 2008
represent payouts under the Company's Key Executive Incentive Program
based on achieving net income objectives for 2008. Under this program,
each named executive officer is entitled to a payout based on the Company
exceeding a target amount of net income for 2008 and an additional payout
for exceeding 110% of such target amount, with the amount of the payout
based on the value of the Company's common stock on September 30,
2008.
|
(4) | The amount of "All Other Compensation" for Mr. Parrish consists of premiums paid by the Company for term life insurance and disability insurance under which Mr. Parrish or his designee is the beneficiary; for Ms. Felch consists of matching contributions by the Company under the Company's Simple Individual Retirement Account plan for its employees and disability insurance; and for Mr. Pope consists of an automobile allowance. |
(5) | Mr. Pope's salary and automobile allowance are paid in U.K. pounds. Amounts shown for Mr. Pope's salary are based on the 12-month average exchange rate for the year, which was 1.5516 U.S. dollars per U.K. pound in fiscal 2009 and 1.9756 U.S. dollars per U.K. pound in fiscal 2008. |
Option Awards | Stock Awards | |||||||||||||||||||
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Number
of
Shares
of
Stock that
have not vested
|
Market
Value
of
Shares of
Stock
that
have not vested
|
|||||||||||||||
O.B.
Parrish
|
464,000 | $ | 1.40 |
04/22/13
|
|
- | - | |||||||||||||
Donna
Felch
|
- | - | - | 60,000 | (1) | $ | 303,000 | (2) | ||||||||||||
Michael
Pope
|
185,000 | $ | 1.40 |
04/22/13
|
|
60,000 | (3) | $ | 303,000 | (4) |
(1)
|
30,000
shares vest on each December 10, 2010 and December 10,
2011.
|
(2)
|
Market
value equals the number of shares of restricted stock that have not vested
multiplied by the closing price of the Company's common stock on
September 30, 2009, which was $5.05 per
share.
|
(3)
|
Represents
the right to receive 30,000 shares on December 10, 2010 and 30,000
shares on December 10, 2011.
|
(4)
|
Market
value equals the number of shares of common stock that Mr. Pope has the
right to receive multiplied by the closing price of the Company's common
stock on September 30, 2009, which was $5.05 per
share.
|
● |
a
lump sum payment equal to the sum of the executive's base salary through
the termination date, a prorated payment of bonus which the executive is
eligible to receive and any compensation previously deferred by the
executive;
|
|
● |
a
lump sum payment equal to three times the sum of the executive's base
salary and the amount of the executive's prorated
bonus;
|
|
● |
continuation
of health and other similar benefits for a period of three years after the
termination date; and
|
|
● |
a
"gross-up" payment which will, in general, effectively reimburse the
executive for any amounts paid under federal excise taxes relating to
change of control benefits.
|
Name
|
Fees
Earned
or
Paid in
Cash
(1)
|
Stock
Awards
(2)
|
Option
Awards
(3)
|
Nonequity
Incentive
Plan
Compensation
(4)
|
All
Other
Compensation
(5)
|
Total
|
||||||||||||
Mary
Ann Leeper
|
– | $ | 63,849 | – | $ | 151,500 | $ | 187,600 | $ | 402,949 | ||||||||
William
R. Gargiulo, Jr.
|
– | – | – | $ | 101,000 | $ | 60,000 | $ | 161,000 | |||||||||
David
R. Bethune
|
$ | 10,000 | – | $ | 15,555 | – | – | $ | 25,555 | |||||||||
Stephen
M. Dearholt
|
– | – | $ | 15,555 | – | – | $ | 15,555 | ||||||||||
Mary
Margaret Frank
|
$ | 12,000 | – | $ | 15,555 | – | – | $ | 27,555 | |||||||||
Michael
R. Walton
|
– | – | $ | 15,555 | – | – | $ | 15,555 | ||||||||||
Richard
E. Wenninger
|
– | – | $ | 15,555 | – | – | $ | 15,555 | ||||||||||
(1)
|
The
amounts in this column reflect fees paid to board members for their
committee participation.
|
|
(2)
|
On
December 10, 2008, Dr. Leeper was issued 60,000 shares of restricted
common stock by the Company’s Board of Directors. The shares
vest pro-rata over a three year period, such that 30,000 shares vest on
each December 10, 2010 and December 10, 2011. None of the
shares were vested on September 30, 2009. The closing
price of the Company’s common stock on December 10, 2008 was $3.16 per
share. As of September 30, 2009, the value of Dr. Leeper’s
restricted stock was $303,000 based on a value of $5.05 per share, the
closing price of the Company’s common stock on that date. The shares of
restricted stock have all the rights of the Company’s common stock,
including voting and dividend rights. The amount in the table
reflects the dollar value of the compensation cost of the restricted stock
award recognized over the requisite service period, computed in accordance
with Accounting Standards Codification Topic 718-10 (formerly FAS No.
123R). The stock award is valued at the closing market price of the
Company's common stock on the date of
grant.
|
(3)
|
The
amounts in this column reflect the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended September 30, 2009,
in accordance with Accounting Standards Codification Topic 718-10
(formerly FAS No. 123R), of stock option awards granted to the listed
directors both in 2009 and prior to fiscal 2009 that vested in fiscal
2009. The assumptions made in valuing the stock option awards are included
under "Note 7, Share-based Payments" in the Notes to Consolidated
Financial Statements, included herein.
|
|
On
October 12, 2006, each of the directors of the Company other than
O.B. Parrish, Mary Ann Leeper and William Gargiulo, Jr. received a
grant of options to purchase 30,000 shares of common stock with an
exercise price of $1.27 per share. All such stock options vest
on the 12th of each month commencing on November 12, 2006 and ending
on October 12, 2009 and have a ten year term.
|
||
In
May, 2009, the Company granted 150,000 stock options under the 2008 Stock
Incentive plan to its independent board members. The options
will vest evenly over 36 months, at a rate of 1/36 of the grant per
month. The options have a ten year life.
|
||
(4)
|
Amounts
for 2009 represent payouts under the Company's Key Executive Incentive
Program based on achieving net income objectives for
2009. Under this program, each participant is entitled to a
payout based on the Company exceeding a target amount of net income for
the fiscal year and an additional payout for exceeding 110% of such target
amount, with the amount of the payout based on the value of the Company's
common stock as of fiscal year end. In 2009, the Key Executive
Incentive Program payment was based on achieving at least 100% of the
annual goal.
|
|
(5)
|
The
amount of "All Other Compensation" for Dr. Leeper consists of salary of
$164,237 as well as $8,587 in matching contributions by the Company under
the Company's Simple Individual Retirement Account plan for its employees
and $14,776 of premiums paid by the Company for term life insurance and
disability insurance under which Dr. Leeper or her designee is the
beneficiary. Dr. Leeper is employed as a Senior Strategic
Advisor. She had specific responsibility for the preparation, submission
and presentation of the FC2 PMA to the FDA. She is presently
responsible for the FC2 launch in the United States. In
addition, she participates as a member of the Executive Operation
Committee. Dr. Leeper's compensation is for the execution of these
responsibilities. She does not receive compensation for her role as a
director of the Company. Mr. Gargiulo is a consultant to the Company and
serves as the Corporate Secretary. In this role, he is responsible
for scheduling all board and board committee meetings and distribution of
material and preparation and approval of minutes for each
meeting. In addition, he is responsible for the Company's
relationship with its transfer agent and the issuance of
shares. Mr. Gargiulo also assists Ms. Felch with investor
relations. Mr. Gargiulo's compensation for the execution of
these responsibilities was $60,000. He does not receive compensation
for being a director of the
Company.
|
Shares
Beneficially Owned
|
||||||||
Name and Address of Beneficial Owner
(1)
|
Number
|
Percent | ||||||
O.B.
Parrish (2)
|
1,295,401 | 4.8 | % | |||||
William
R. Gargiulo, Jr. (3)
|
137,500 | * | ||||||
Mary
Ann Leeper, Ph.D. (4)
|
1,009,500 | 3.7 | % | |||||
Stephen
M. Dearholt (5)
|
3,444,079 | 12.6 | % | |||||
David
R. Bethune (6)
|
209,167 | * | ||||||
Michael
R. Walton (7)
|
864,723 | 3.2 | % | |||||
Richard
E. Wenninger (8)
|
2,819,838 | 10.6 | % | |||||
Mary
Margaret Frank (9)
|
66,667 | * | ||||||
Michael
Pope (10)
|
186,350 | * | ||||||
Donna
Felch (11)
|
125,000 | * | ||||||
Red
Oak Partners (12)
|
1,637,621 | 6.2 | % | |||||
All
directors and executive officers
as
a group (10 persons) (2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
|
10,158,225 | 34.6 | % |
(1) | Unless otherwise indicated, the address of each beneficial owner is 515 North State Street, Suite 2225, Chicago, IL 60654; the address of Mr. Dearholt is 36365 Trail Ridge Road, Steamboat Springs, CO 80488; the address of Mr. Walton is 929 North Astor, Unit 2101, Milwaukee, WI 53202; the address of Mr. Wenninger is 14000 Gypsum Creek Road, Gypsum, CO 81637; the address of Dr. Frank is P.O. Box 6550, Charlottesville, VA 22906; and the address of Red Oak Partners is 654 Broadway, Suite 5, New York, NY 10012. |
(2) | Includes 233,501 shares owned by Phoenix of Illinois. Under the rules of the SEC, Mr. Parrish may be deemed to have voting and dispositive power as to such shares since Mr. Parrish is an officer, director and the majority shareholder of Phoenix of Illinois. Also includes 346,400 shares of common stock owned directly by Mr. Parrish, 225,000 shares of common stock owned by the Geneva O. Parrish 1996 Living Trust of which Mr. Parrish is beneficiary and for which Mr. Parrish may be deemed to share voting and investment power, 464,000 shares of common stock subject to stock options held by Mr. Parrish and 26,500 shares subject to warrants held by Mr. Parrish. |
(3) | Consists of 37,500 shares of common stock owned directly by Mr. Gargiulo and 100,000 shares of common stock subject to stock options held by Mr. Gargiulo. |
(4) | Consists of 219,500 shares of common stock owned directly by Dr. Leeper and 790,000 shares of common stock subject to stock options held by Dr. Leeper. |
(5) | Includes 1,875,492 shares owned directly by Mr. Dearholt. Also includes 69,500 shares held by the Dearholt, Inc. Profit Sharing Plan, 28,500 shares held in a self-directed IRA, 275,820 shares held by the Mary C. Dearholt Trust of which Mr. Dearholt, a sibling and his mother are trustees, and 418,100 shares held by the John W. Dearholt Trust of which Mr. Dearholt is a co-trustee with a sibling. Mr. Dearholt shares the power to vote and dispose of 693,920 shares of common stock held by the Mary C. Dearholt Trust and the John W. Dearholt Trust. Mr. Dearholt has sole power to vote and dispose of the remaining shares of common stock. Also includes 176,667 shares of common stock subject to stock options held by Mr. Dearholt and 1,000,000 shares of common stock subject to warrants held by Mr. Dearholt. |
(6) | Consists of 32,500 shares of common stock owned directly by Mr. Bethune and 176,667 shares of common stock subject to stock options held by Mr. Bethune. |
(7) | Consists of 748,056 shares of common stock owned directly by Mr. Walton and 116,667 shares of common stock subject to stock options held by Mr. Walton. |
(8) | Consists of (a) 2,468,923 shares of common stock owned directly by Mr. Wenninger, (b) 34,248 shares of common stock held by Mr. Wenninger's spouse (Mr. Wenninger disclaims beneficial ownership of the shares held by his spouse), (c) 250,000 shares of Common Stock held by a trust of which Mr. Walton is trustee, and (d) 66,667 shares of common stock subject to stock options held by Mr. Wenninger. |
(9) | Consists of 66,667 shares of common stock subject to stock options held by Dr. Frank. |
(10) | Consists of 1,350 shares of common stock owned directly by Mr. Pope and 185,000 shares of common stock subject to stock options held by Mr. Pope. |
(11) | Consists of 125,000 shares of common stock owned directly by Ms. Felch. |
(12) | Red Oak Partners and certain affiliates filed a Schedule 13G dated February 5, 2009 reporting that Red Oak Partners, as general partner of Red Oak Fund LP, beneficially owned 1,637,621 shares of common stock with shared voting and investment power over such shares. |
EQUITY
PLAN CATEGORY
|
NUMBER
OF COMMON
SHARES
TO BE ISSUED
UPON
EXERCISE OF
OUTSTANDING
O
PTIONS,
WARRANTS,
AND
RIGHTS
|
NUMBER
OF
WEIGHTED-AVERAGE
EXERCISE
PRICE OF
OUTSTANDING
OPTIONS,
WARRANTS,
AND
RIGHTS
|
COMMON
SHARES
AVAILABLE
FOR
FUTURE
ISSUANCE
UNDER
COMPENSATION
PLANS
|
|||||||||
Equity
compensation plans approved by shareholders
|
238,250 | (1) | $ | 3.92 | 1,626,750 | |||||||
Equity
compensation plans not approved by shareholders
|
2,229,000 | $ | 1.40 | - | ||||||||
Total
|
2,467,250 | $ | 1.56 | 1,626,750 |
Service
Type
|
Fiscal
2009
|
Fiscal
2008
|
||||||
Audit
Fees (1)
|
$ | 259,075 | $ | 287,017 | ||||
Audit-Related
Fees (2)
|
12,025 | 12,211 | ||||||
Tax
Fees (3)
|
46,083 | 12,481 | ||||||
All
Other Fees
|
- | - | ||||||
Total Fees
|
$ | 317,183 | $ | 311,709 |
(1)
|
Consists
of fees for professional services rendered in connection with the audit of
the Company's financial statements for the fiscal years ended September
30, 2009 and September 30, 2008; the reviews of the financial statements
included in each of the Company's quarterly reports on Form 10-Q’s during
those fiscal years; and consents and assistance with documents filed by
the Company with the SEC.
|
(2)
|
Consists
of costs incurred for consultation on various accounting matters in
support of the Company's financial statements and comment letters from the
SEC.
|
(3)
|
For
the fiscal years ended September 30, 2008 and September 30, 2009 consists
of fees for professional services rendered in connection with preparation
of federal and state income tax returns, including foreign tax filings,
and assistance with foreign tax
structuring.
|
The
following consolidated financial statements of the Company are included in
Item 8 of this report:
|
Report
of Independent Registered Public Accounting
Firm
|
Consolidated
Balance Sheets as of September 30, 2009 and
2008
|
Consolidated
Statements of Income for the Years Ended September 30, 2009 and
2008
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended September 30, 2009
and 2008
|
Consolidated
Statements of Cash Flows for the Years Ended September 30, 2009 and
2008
|
Notes
to Consolidated Financial
Statements
|
EXHIBIT NO.
|
DESCRIPTION
|
|
3.1
|
Amended
and Restated Articles of Incorporation of the Company.
(1)
|
|
3.2
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation of the
Company increasing the number of authorized shares of common stock to
27,000,000 shares. (2)
|
|
3.3
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation of the
Company increasing the number of authorized shares of common stock to
35,500,000 shares. (3)
|
|
3.4
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation of the
Company increasing the number of authorized shares of common stock to
38,500,000 shares. (4)
|
|
3.5
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation of the
Company designating the terms and preferences for the Class A Preferred
Stock – Series 3. (5)
|
|
3.6
|
Amended
and Restated By-Laws of the Company. (6)
|
|
4.1
|
Amended
and Restated Articles of Incorporation, as amended (same as
Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5).
|
|
4.2
|
Articles
II, VII and XI of the Amended and Restated By-Laws of the Company
(included in Exhibit 3.6).
|
|
10.1
|
Trademark
License Agreement for Reality Trademark. (7)
|
|
10.2
|
Outside
Director Stock Option Plan. (8)
|
|
10.3
|
Lease
dated November 2, 2009, among O&T Properties Limited, the Company
and The Female Health Company (UK) Plc. (9)
|
|
10.4
|
Deed
of Surrender dated November 2, 2009, among O&T Properties
Limited, the Company, The Female Health Company (UK) Plc. and The Female
Health Company Limited. (9)
|
|
10.5
|
Rent
Deposit Deed dated November 2, 2009, between O&T Properties
Limited and The Female Health Company (UK) Plc. (9)
|
|
10.6 | 1997 Stock Option Plan, as amended. |
10.7
|
Amended
and Restated Change of Control Agreement between the Company and O.B.
Parrish dated October 1, 2005. (10)
|
10.8
|
Amended
and Restated Change of Control Agreement between the Company and Mary Ann
Leeper dated October 1, 2005. (10)
|
10.9
|
Amended
and Restated Change of Control Agreement between the Company and Michael
Pope dated October 1, 2005. (10)
|
10.10
|
Change
of Control Agreement between the Company and Donna Felch dated February 8,
2006. (11)
|
10.11
|
Employment
Agreement between the Company and Mary Ann Leeper dated effective as of
May 1, 2006. (12)
|
10.12
|
The
Female Health Company 2008 Stock Incentive Plan. (13)
|
10.13 | Form of Nonstatutory Stock Option Grant Agreement for The Female Health Company 2008 Stock Incentive Plan. |
21
|
Subsidiaries
of Registrant.
|
23.1
|
Consent
of McGladrey & Pullen, LLP
|
24.1
|
Power
of Attorney (included as part of the signature page
hereof).
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of Chief Executive Officer and Principal Financial Officer pursuant to 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002.
(14)
|
(1)
|
Incorporated
herein by reference to the Company's Form SB-2 Registration Statement
filed with the Securities and Exchange Commission on October 19,
1999.
|
(2)
|
Incorporated
herein by reference to the Company's Form SB-2 Registration Statement
filed with the Securities and Exchange Commission on September 21,
2000.
|
(3)
|
Incorporated
by reference herein to the Company's Form SB-2 Registration Statement
filed on September 6, 2002.
|
(4)
|
Incorporated
herein by reference to the Company's March 31, 2003 Form
10-QSB.
|
(5)
|
Incorporated
herein by reference to the Company's March 31, 2004 Form
10-QSB.
|
(6)
|
Incorporated
herein by reference to the Company's Registration Statement on Form S-18,
Registration No. 33-35096, as filed with the Securities and Exchange
Commission on May 25, 1990.
|
(7)
|
Incorporated
herein by reference to the Company's 1992 Form 10-KSB.
|
(8)
|
Incorporated
herein by reference to the Company's Form S-1 Registration Statement filed
with the Securities and Exchange Commission on April 23,
1996.
|
(9)
|
Incorporated
herein by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on November 6, 2009.
|
(10)
|
Incorporated
herein by reference to the Company's September 30, 2005 Form
10-KSB.
|
(11)
|
Incorporated
herein by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on February 8, 2006.
|
(12)
|
Incorporated
hereby by reference to the Company's Form 8-K/A filed with the Securities
and Exchange Commission on February 21, 2006.
|
(13)
|
Incorporated
hereby by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on March 31, 2008.
|
(14)
|
This
certification is not "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the
Securities Exchange Act of 1934, as
amended.
|
Signature
|
Title
|
Date
|
|
/s/ O. B. Parrish | Chairman of the Board, Chief Executive Officer | December 17, 2009 | |
O.B.
Parrish
|
and
Director (Principal Executive Officer)
|
|
|
/s/ Mary Ann Leeper, Ph.D. | Director | December 17, 2009 | |
Mary
Ann Leeper, Ph.D.
|
|
|
/s/ Donna Felch | Vice President and Chief Financial Officer (Principal | December 17, 2009 | |
Donna
Felch
|
Accounting
and Financial Officer)
|
|
|
/s/ William R. Gargiulo |
Secretary
and Director
|
December 17,
2009
|
|
William
R. Gargiulo
|
|||
|
|
||
/s/ David R. Bethune |
Director
|
December 17,
2009
|
|
David
R. Bethune
|
|||
|
Director
|
December 17,
2009
|
|
Stephen
M. Dearholt
|
|||
/s/ Michael R. Walton |
Director
|
December 17,
2009
|
|
Michael
R. Walton
|
|||
|
Director
|
December 17,
2009
|
|
Richard
E. Wenninger
|
|||
Director
|
December 17,
2009
|
||
Mary
Margaret Frank
|
Document | Page No. | |
Audited Consolidated Financial Statements. | ||
Report
of McGladrey & Pullen, LLP, Independent Registered Public Accounting
Firm.
|
F-1
|
|
Consolidated
Balance Sheets as of September 30, 2009 and 2008
|
F-2
|
|
Consolidated
Statements of Income for the years ended September 30, 2009 and
2008.
|
F-3 | |
|
|
|
Consolidated
Statements of Stockholders’ Equity
for
the years ended September 30, 2009 and 2008.
|
F-4 and F-5 | |
|
|
|
Consolidated
Statements of Cash Flows for the years ended
September
30, 2009 and 2008
|
F-6 | |
|
|
|
Notes
to Consolidated Financial Statements.
|
F-7
through F-24
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
Class
A
|
Class
A
|
Other
|
||||||||||||||||||||||||||||||||||
Series
1
|
Series
3
|
Preferred
|
Additional
|
Comprehensive
|
Cost
of
|
|||||||||||||||||||||||||||||||
Preferred
|
Preferred
|
Stock
|
Common
|
Paid-in
|
(Loss)
|
Accumulated
|
Treasury
|
|||||||||||||||||||||||||||||
Stock
|
Stock
|
Class
B
|
Stock
|
Capital
|
Income
|
Deficit
|
Stock
|
Total
|
||||||||||||||||||||||||||||
Balance
at September 30, 2007
|
$ | 560 | $ | 4,734 | $ | - | $ | 264,379 | $ | 64,954,610 | $ | 1,051,156 | $ | (58,428,233 | ) | $ | (399,747 | ) | $ | 7,447,459 | ||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Share-based
compensation
|
- | - | - | 800 | 264,002 | - | - | - | 264,802 | |||||||||||||||||||||||||||
Amortization
of unearned consulting fees
|
- | - | - | - | 57,000 | - | - | - | 57,000 | |||||||||||||||||||||||||||
Issuance
of 290,000 shares of Common Stock for
|
||||||||||||||||||||||||||||||||||||
warrants
exercised
|
- | - | - | 2,900 | 419,600 | - | - | - | 422,500 | |||||||||||||||||||||||||||
Issuance
of 291,000 shares of Common Stock for
|
||||||||||||||||||||||||||||||||||||
options
exercised
|
- | - | - | 2,910 | 299,340 | - | - | - | 302,250 | |||||||||||||||||||||||||||
Issuance
of 14,000 shares of Common Stock and
|
||||||||||||||||||||||||||||||||||||
cash
payment for 42,000 shares for redemption
|
||||||||||||||||||||||||||||||||||||
56,000
shares preferred stock Class A ,Series 1
|
(560 | ) | - | - | 140 | (104,580 | ) | - | - | - | (105,000 | ) | ||||||||||||||||||||||||
Repurchase
165,773 shares preferred stock Class A,
|
||||||||||||||||||||||||||||||||||||
Series
3
|
- | (1,658 | ) | - | - | (523,842 | ) | - | - | - | (525,500 | ) | ||||||||||||||||||||||||
Stock
repurchase – 667,600 Treasury Shares
|
- | - | - | - | - | - | - | (1,769,710 | ) | (1,769,710 | ) | |||||||||||||||||||||||||
Preferred
Stock dividends
|
- | - | - | - | - | - | (137,506 | ) | - | (137,506 | ) | |||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | 4,966,768 | - | 4,966,768 | |||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | - | (1,213,861 | ) | - | - | (1,213,861 | ) | |||||||||||||||||||||||||
Comprehensive
income
|
3,752,907 | |||||||||||||||||||||||||||||||||||
Balance
at September 30, 2008
|
$ | - | $ | 3,076 | $ | - | $ | 271,129 | $ | 65,366,130 | $ | (162,705 | ) | $ | (53,598,971 | ) | $ | (2,169,457 | ) | $ | 9,709,202 | |||||||||||||||
See
Notes to Consolidated Financial Statements.
|
||||||||||||||||||||||||||||||||||||
Class
A
Series
3
Preferred
|
Class
A
Series
1
|
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
(Loss)
Income
|
Accumulated
Deficit
|
Cost
of
Treasury
|
|
Total
|
||||||||||||||||||||
Balance
at September 30, 2008
|
$ | 3,076 | - | - | $ | 271,129 | $ | 65,366,130 | $ | (162,705 | ) | $ | (53,598,971 | ) | $ | (2,169,457 | ) | $ | 9,709,202 | ||||||||||
Share-based
compensation
|
- | - | - | 1,733 | 297,430 | - | - | - | 299,163 | ||||||||||||||||||||
Issuance of 67,524 shares of Common Stock upon | |||||||||||||||||||||||||||||
warrants
cashless exercised
|
- | - | - | 675 | (675 | ) | - | - | - | - | |||||||||||||||||||
Issuance of 400,000 shares of Common Stock | |||||||||||||||||||||||||||||
upon
exercise of warrants
|
- | - | - | 4,000 | 285,000 | - | - | - | 289,000 | ||||||||||||||||||||
Issuance of 320,980 shares of Common Stock | |||||||||||||||||||||||||||||
for
option exercised
|
- | - | - | 3,210 | 446,162 | - | - | - | 449,372 | ||||||||||||||||||||
Issuance
of 500 shares of Common Stock
|
- | - | - | 5 | 1,855 | - | - | - | 1,860 | ||||||||||||||||||||
Issuance of 307,604 shares of Common Stock | |||||||||||||||||||||||||||||
upon
conversion of 307,604 shares Preferred Stock Series 3
|
(3,076 | ) | - | - | 3,076 | - | - | - | - | - | |||||||||||||||||||
Stock
repurchase – Total 1,002,805 Treasury Shares
|
- | - | - | - | - | - | - | (3,831,054 | ) | (3,831,054 | ) | ||||||||||||||||||
Preferred
Stock dividends
|
- | - | - | - | - | - | (79,717 | ) | - | (79,717 | ) | ||||||||||||||||||
Comprehensive
income:
|
- | - | - | - | - | - | - | - | - | ||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | 6,535,379 | - | 6,535,379 | ||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | - | (418,814 | ) | - | - | (418,814 | ) | ||||||||||||||||||
Comprehensive
income
|
- | - | - | - | - | - | - | - | 6,116,565 | ||||||||||||||||||||
Balance
at September 30, 2009
|
$ | - | $ | - | $ | - | $ | 283,828 | $ | 66,395,902 | $ | (581,519 | ) | $ | (47,143,309 | ) | $ | (6,000,511 | ) | 12,954,391 | |||||||||
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Manufacturing
equipment
|
5 -
10 years
|
|
Office
equipment
|
3
years
|
|
Furniture
and fixtures
|
7 -
10 years
|
● | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities. | |
● | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. | |
● | Level 3: Unobservable inputs reflecting managment's own assumptions abou the inputs used in pricing the asset or liability. |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Note
1.
|
Nature
of Business and Significant Accounting Policies
(Continued)
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
September
30,
|
||||||||
2009
|
2008
|
|||||||
Denominator:
|
||||||||
Weighted
average common shares outstanding - basic
|
25,651,915 | 26,116,499 | ||||||
Net
effect of dilutive securities:
|
||||||||
Options
|
1,405,169 | 755,600 | ||||||
Warrants
|
526,566 | 757,060 | ||||||
Convertible
preferred stock
|
- | 307,604 | ||||||
Unvested
restricted shares
|
223,182 | 46,500 | ||||||
Total
net effect of dilutive securities
|
2,154,917 | 1,866,764 | ||||||
Weighted
average common shares outstanding - diluted
|
27,806,832 | 27,983,263 | ||||||
Income
per common share – basic
|
$ | 0.25 | $ | 0.18 | ||||
Income
per common share – diluted
|
$ | 0.24 | $ | 0.18 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
2009
|
2008
|
|||||||
Raw
material
|
$ | 519,046 | $ | 910,130 | ||||
Work
in process
|
305,778 | 135,020 | ||||||
Finished
goods
|
474,239 | 323,502 | ||||||
Inventory,
gross
|
1,299,063 | 1,368,652 | ||||||
Less:
inventory reserves
|
(96,000 | ) | (46,000 | ) | ||||
Inventory,
net
|
$ | 1,203,063 | $ | 1,322,652 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
September
30,
|
||||||||
2009
|
2008
|
|||||||
Operating
Lease Expense:
|
||||||||
Factory
and office leases
|
$ | 871,235 | $ | 1,052,918 | ||||
Other
|
52,872 | 23,038 | ||||||
$ | 924,107 | $ | 1,075,956 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
|
||||||||
Operating
leases
|
Capital
leases
|
|||||||
2010
|
$ | 649,936 | $ | 36,095 | ||||
2011
|
89,317 | 23,929 | ||||||
2012
|
11,231 | 13,615 | ||||||
2013
|
2,974 | - | ||||||
Total
minimum lease payments
|
$ | 753,458 | 73,639 | |||||
Less
amounts representing interest
|
( 8,150 | ) | ||||||
Present
value of net minimum lease payments
|
65,489 | |||||||
Less
current obligations
|
(31,061 | ) | ||||||
Long-term
obligations
|
$ | 34,428 |
September
30
|
||||||||
2009
|
2008
|
|||||||
Income
tax expense at statutory rates
|
$ | 1,717,000 | $ | 1,429,000 | ||||
State
income tax, net of federal benefits
|
267,000 | 222,000 | ||||||
Effect
of AMT expense
|
112,284 | - | ||||||
Non-deductible
expenses
|
33,000 | (76,000 | ) | |||||
Effect
of foreign income tax
|
- | 12,138 | ||||||
Utilization
of NOL carryforwards
|
(1,331,340 | ) | (1,087,000 | ) | ||||
Decrease
in valuation allowance
|
(2,283,212 | ) | (1,263,000 | ) | ||||
Income
tax benefit
|
$ | (1,485,268 | ) | $ | (762,862 | ) |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
2009
|
2008
|
|||||||
Deferred
– U.S.
|
$ | (508,000 | ) | $ | (697,500 | ) | ||
Deferred
– U.K.
|
(1,089,552 | ) | $ | (77,500 | ) | |||
Current
– U.S.
|
112,284 | - | ||||||
Current
– Malaysia
|
- | 12,138 | ||||||
Income
tax benefit
|
$ | (1,485,268 | ) | $ | (762,862 | ) |
September
30
|
||||||||
Deferred Tax
Assets:
|
2009
|
2008
|
||||||
Federal
net operating loss carryforwards
|
$ | 12,714,000 | $ | 14,144,000 | ||||
State
net operating loss carryforwards
|
2,258,000 | 1,771,000 | ||||||
AMT
credit carryforward
|
103,000 | - | ||||||
Foreign
net operating loss carryforwards – UK
|
19,261,000 | 23,907,000 | ||||||
Foreign
capital allowance – UK
|
500,000 | 1,010,000 | ||||||
Foreign
net operating loss carryforwards – Malaysia
|
99,149 | 104,000 | ||||||
Foreign
capital allowance – Malaysia
|
559,000 | - | ||||||
Other,
net
|
55,000 | 31,000 | ||||||
Gross
deferred tax assets
|
35,549,149 | 40,967,000 | ||||||
Valuation
allowance for deferred tax asset
|
(32,340,000 | ) | (39,367,000 | ) | ||||
Deferred
income taxes
|
$ | 3,209,149 | $ | 1,600,000 |
2009
|
2008
|
|||||||
Current
assets – U.S.
|
$ | 1,417,000 | $ | 1,440,000 | ||||
Current
assets – U.K.
|
764,000 | 160,000 | ||||||
Long-term
assets – U.S.
|
531,000 | - | ||||||
Long-term
assets – U.K.
|
497,149 | - | ||||||
$ | 3,209,149 | $ | 1,600,000 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Year ended
September 30,
2009
|
||||
Weighted Average Assumptions: | ||||
Expected
Volatility
|
42.19 | % | ||
Expected
Dividend Yield
|
0 | % | ||
Risk-free
Interest Rate
|
3.06 | % | ||
Expected
Term (in years)
|
6.5 | |||
Fair
Value of Options Granted
|
$ 1.83 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Weighted
Average
|
||||||||||
Shares
|
Exercise
Price
Per
Share
|
Remaining
Contractual
Term
(years)
|
Aggregate
Intrinsic
Value
|
|||||||
Outstanding
at September 30, 2007
|
2,745,980 | $ | 1.37 | |||||||
Granted
|
- | - | ||||||||
Exercised
|
(291,000 | ) | 1.04 | |||||||
Forfeited
|
(15,000 | ) | 1.27 | |||||||
Outstanding
at September 30, 2008
|
2,439,980 | 1.41 | ||||||||
Granted
|
150,000 | 3.92 | ||||||||
Exercised
|
(320,980 | ) | 1.40 | |||||||
Forfeited
|
- | - | ||||||||
Outstanding
at September 30, 2009
|
2,269,000 | $ | 1.58 |
4.30
|
$
7,884,000
|
|||||
Exercisable
on September 30, 2009
|
2,135,667 | $ | 1.43 |
3.97
|
$
7,734,000
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Non-vested
awards summary:
|
Shares
|
Weighted
Average
Grant
-Date
Fair
Value
|
||||||
Outstanding
at September 30, 2007
|
113,333 | $ | 1.53 | |||||
Stock
granted
|
46,500 | 2.32 | ||||||
Vested
|
(157,278 | ) | 1.75 | |||||
Forfeited
|
- | - | ||||||
Total
Outstanding September 30, 2008
|
2,555 | $ | 2.65 | |||||
Stock
granted
|
223,182 | 3.14 | ||||||
Vested
|
(100,913 | ) | 2.93 | |||||
Cancelled
|
(5,235 | ) | 2.45 | |||||
Total
Outstanding September 30, 2009
|
119,589 | $ | 3.16 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Number
Outstanding
|
||||
Warrants
issued in connection with:
|
||||
Investor
relations
|
110,000
|
|||
Notes
payable, related party
|
626,500
|
|||
Total
Outstanding September 30, 2009
|
736,500
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Issuer
Purchases of Equity Securities:
|
Details
of Treasury Stock Purchases to Date through September 30,
2009
|
|||||||||||||||
Period:
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
Per
Share
|
Total
Number
of
Shares Purchased
As
Part of Publicly
Announced
Program
|
Maximum
Number
of
Shares that May
Yet
be Purchased
Under
the Program
|
||||||||||||
January
1, 2007 – September 30, 2007
|
173,400 | $ | 2.12 | 173,400 | 826,600 | |||||||||||
October
1, 2007 – September 30, 2008
|
667,600 | 2.65 | 841,000 | 1,159,000 | ||||||||||||
October
1, 2008 – September 30, 2009
|
1,002,805 | 3.82 | 1,843,805 | 1,156,195 | ||||||||||||
Total
|
1,843,805 | $ | 3.25 | 1,843,805 | 1,156,195 |
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Product
Sales to External Customers for the Year Ended
|
Long-Lived
Asset As Of
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
South
Africa
|
$ | 2,436 | (2) | $ | 4,302 | (1) | $ | - | $ | - | ||||||
Zimbabwe
|
8,909 | (1)(3) | 4,084 | (1) | - | - | ||||||||||
United
States
|
2,491 | 2,356 | 342 | 194 | ||||||||||||
Brazil
|
1,157 | 2,239 | - | - | ||||||||||||
Tanzania
|
1,141 | 1,460 | - | - | ||||||||||||
Papua
New Guinea
|
937 | 1,292 | - | - | ||||||||||||
DR
of Congo
|
883 | * | - | - | ||||||||||||
Zambia
|
969 | * | - | - | ||||||||||||
Netherlands
|
891 | * | - | - | ||||||||||||
India
|
* | * | 133 | 174 | ||||||||||||
United
Kingdom
|
* | * | 214 | 171 | ||||||||||||
Malaysia
|
* | * | 2,220 | 1,011 | ||||||||||||
Other
|
7,569 | 9,795 | - | - | ||||||||||||
$ | 27,383 | $ | 25,528 | $ | 2,909 | $ | 1,550 | |||||||||
*
Less than 3% and 5% percent of total net sales in 2009 and 2008
respectively.
|
||||||||||||||||
(1)
Comprised of a single customer considered to be a major customer (exceeds
10 percent of net sales).
|
||||||||||||||||
(2)
This customer had approximately $401,000 of outstanding accounts
receivable at September 30, 2009. All of the receivable was paid by
the date of this filing.
|
||||||||||||||||
(3)
This customer had approximately $3,753,000 of outstanding accounts
receivable at September 30, 2009. All of the receivable was paid by
the date of this filing.
|
The
Female Health Company and Subsidiaries
Notes
to Consolidated Financial
Statements
|
Accrual
at September 30, 2008
|
$ | - | ||
Provision
of restructuring costs
|
1,496,624 | |||
Settlement | (379,713 | ) | ||
Accrual
at September 30, 2009
|
$ | 1,116,911 |
1. | Purpose . The purpose of the 1997 Stock Option Plan (the "Plan") is to provide a special incentive to employees, officers and key executives of The Female Health Company (the "Company") and its subsidiaries to promote the Company's business. The Plan is designed to accomplish this purpose by offering such employees, officers and key executives an opportunity to purchase shares of the common stock of the Company and thereby share in the Company's long-term success. For purposes of the Plan, a subsidiary is any corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock or over which the Company has effective operating control. | |
2. | Administration . The Plan shall be administered by the Board of Directors of the Company or by a stock option committee established by the Board of Directors and consisting of two or more non-employee directors qualified to serve on such committee pursuant to Section 16 of the Securities Exchange Act of 1934 and the rules promulgated thereunder (the Board of Directors and the stock option committee collectively and individually referred to herein as the "Administrator"). The Administrator shall have authority, consistent with the Plan: | |
(a) | to determine which employees shall be granted options; | |
(b) | to determine the time or times when options shall be granted and the number of shares of common stock to be subject to each option; | |
(c) | to determine the option price of option shares and the method of payment of such price; | |
(d) | to determine the time or times when each option becomes exercisable and the duration of the exercise period, subject to the limitations contained in paragraph 6(b); | |
(e) | to prescribe, from time to time, the form of the instruments evidencing any options granted under the Plan and of any other instruments required under the Plan; | |
(f) | to adopt, amend and rescind rules and regulations for the administration of the Plan and the options and for its own acts and proceedings; and |
(g) | to decide all questions and settle all controversies and disputes which may arise in connection with the Plan. | ||
All decisions, determinations and interpretations of the Administrator shall be binding on all parties concerned. | |||
3. | Participants . The participants in the Plan shall be employees, officers and key executives of the Company or its subsidiaries, as may be selected from time to time by the Administrator in its discretion. Directors who are not employees shall not be eligible to participate in the Plan. | ||
4. | Limitations . No option shall be granted under the Plan after December 31, 2006 but options theretofore granted may extend beyond that date. Subject to adjustment as provided in section 8, the number of shares of common stock of the Company which may be issued under the Plan shall not exceed 600,000 shares in the aggregate nor shall any one participant be granted more than 120,000 options under the Plan. To the extent that any option granted under the Plan shall expire or terminate unexercised or for any reason become unexercisable as to any shares subject thereto, such shares shall thereafter be available for further grants under the Plan. No participant may exercise any option if, for any reason, the exercise of such options would cause the participant to have any compensation from the Company which is nondeductible by the Company under Section 162(m) of the Internal Revenue Code of 1986. The exercise of any such options shall be deferred and exercised by the participant at such time, if ever, that the resulting compensation will be fully deductible by the Company. | ||
5. |
Stock To Be
Issued
. Stock to be issued under the Plan may constitute
an
original
issue of authorized stock or may consist of previously issued stock
acquired by the Company, as shall be determined by the Board of
Directors. The Board of Directors and the proper officers of
the Company shall take any appropriate action required for such
issuance.
|
||
6. | Terms and Conditions of Options . All options granted under the Plan shall be subject to the following terms and conditions (except as provided in section 7) and to such other terms and conditions as the Administrator shall determine to be appropriate to accomplish the purposes of the Plan: | ||
(a) | Exercise Price . The exercise price shall be determined by the Administrator. |
(b) | Period of Options . The period of an option shall not exceed ten years from the date of grant. Any option which has not vested pursuant to section 6(c) below within ten years from the date of its grant shall expire. | ||
(c) | Vesting of Options . Options issued to a participant under the Plan shall vest as determined by the Administrator and as specified in the Participant's grant agreement. | ||
(d) | Exercise of Options . | ||
(i) | Each option shall be exercisable at any time after it has vested. | ||
(ii) | A person electing to exercise an option shall give written notice to the Company, as specified by the Administrator, of such person's election and of the number of shares elected to be purchased. Such notice shall be accompanied by such other instruments or documents as may be required by the administrator. | ||
(e) | Payment for Shares . Upon exercise of any option granted hereunder, payment in full shall be made at the time of such exercise for all such shares then being purchased. The exercise price of an option shall be paid in cash or, in the sole discretion of the Administrator, by permitting the holder of the option to elect to direct the Company to withhold a sufficient number of shares otherwise deliverable upon exercise to satisfy the exercise price (valuing the shares for this purpose at their Fair Market Value). In the event that the exercise price is paid by withholding shares otherwise deliverable upon exercise to satisfy the exercise price (or to satisfy any tax withholding requirements pursuant to section 11), no fractional shares shall be issued, and the Company shall in lieu thereof, at its option, either make payment to the holder of the option of cash in the amount of such fraction multiplied by the Fair Market Value of the shares or round such fraction to the nearest whole share. | ||
For purposes of this Plan, "Fair Market Value" shall mean the value of the Company's common stock determined as follows as of the business day immediately preceding the date of exercise of the option: (i) if the common stock is listed on any established stock exchange or a national market system, including, without limitation, the NASDAQ Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable, (ii) if the common stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of common stock shall be the mean between the high bid and low asked prices for the common stock for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) in the absence of an established market for the common stock, the Fair Market Value shall be determined in good faith by the Administrator. |
The Company shall not be obligated to issue any shares unless and until, in the opinion of the Company's counsel, all applicable laws and regulations have been complied with and, in the event the outstanding common stock is at the time listed upon any stock exchange, unless and until the shares to be issued have been listed or authorized to be added to the list upon official notice of issuance upon such exchange, and unless and until all other legal matters in connection with the issuance and delivery of the shares have been approved by the Company's counsel. Without limiting the generality of the foregoing, the Company may require from the participant such investment representation or such agreement, if any, as counsel for the Company may consider necessary in order to comply with the Securities Act of 1933 as then in effect, and may require that the participant agree that any sale of the shares will be made only in such manner as is permitted by the Administrator and that the participant will notify the Company when the participant intends to make any disposition of the shares whether by sale, gift or otherwise. The participant shall take any action reasonably requested by the Company in such connection. A participant shall have the rights of a stockholder only as to shares actually acquired by the participant under the Plan. | |||
(f) | Nontransferability of Options . No option may be transferred by a participant otherwise than by will or by the laws of descent and distribution, and during the participant's lifetime the option may be exercised only by the participant. | ||
(g) | Termination of Employment . Except as otherwise determined by the Administrator, if the employment of a participant is terminated by the Company or any of its subsidiaries for cause, the Company shall have the right, in the discretion of the Administrator, to rescind any unexercised options. If the Company does not rescind such unexercised stock options the participant shall have ten days from the date of such termination to exercise any options which were vested as of the date of termination and all nonvested options and options not exercised in such ten day period shall be forfeited. If a participant's employment with the Company or any of its subsidiaries is terminated by the Company or any of its subsidiaries without cause, the participant shall have six months from the date of such termination to exercise any vested options as of the date of such termination and any options which become vested during such six month period. If a participant voluntarily terminates employment with the Company or any of its subsidiaries, the participant shall have ten days to exercise any options which are vested as of the date of termination and any options which become vested during such ten-day period. Notwithstanding the foregoing, a participant shall not be deemed to have terminated employment if the participant serves as a director of or consultant to the Company or any of its subsidiaries. |
For purposes of the Plan, "cause" shall mean fraud, dishonesty, acts of gross negligence in the course of employment, misrepresentation to shareholders or directors of the Company, a material breach of the terms of any written employment agreement between the participant and the Company or the commission of a felony. In no event, however, may a participant exercise an option at a time when the option would not be exercisable had the participant remained an employee. | |||
For
purposes of this section (g), a participant's employment shall not
be
considered terminated in the case of sick leave or other bona fide leave
of absence approved by the Company, or in the case of a transfer to the
employment of a subsidiary or to the employment of the
Company.
|
|||
(h) | Death . If a participant's employment terminates due to death, the participant's executor or administrator or the person or persons to whom the option is transferred by will or the applicable laws of descent and distribution shall have 12 months from the date of death to exercise any options which were vested as of the date of death and any options which become vested during such 12-month period. | ||
(i) | Disability . If the participant's employment terminates due to Permanent Disability (defined below), the participant shall have 12 months from the date of notice of termination to exercise any options which are vested as of the date of termination and any options which become vested during such 12-month period. For purposes of this Plan, "Permanent Disability" shall be a disability which, in the sole and absolute discretion of the Administrator, is likely to prevent the participant's return to work within 6 months after the onset of such disability. The determination of Permanent Disability and the date of termination shall be determined by the Administrator in its sole and absolute discretion. |
7. | Replacement Options . The Company may grant options under the Plan on terms differing from those provided for in section 6 where such options are granted in substitution for options held by employees of other corporations who become employees of the Company or a subsidiary as the result of a merger, consolidation or other reorganization of the employing corporation with the Company or a subsidiary, or the acquisition by the Company or a subsidiary of the business, property or stock of the employing corporation. | ||
The Administrator may direct that the substitute options be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. | |||
8. | Changes in Stock . In the event of a stock dividend, stock split or merger in which the Company is the surviving corporation, or other similar capital change, the number and kind of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted thereunder, the maximum number of shares or securities which may be issued or sold under the Plan, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors of the Company, the determination of which shall be binding on all persons. | ||
9. | Employment Rights . The adoption of the Plan does not confer upon any employee of the Company or a subsidiary any right to continue employment with the Company or a subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or a subsidiary to terminate the employment of any of its employees at any time. | ||
10. | Change of Control . Notwithstanding anything to the contrary contained herein, all outstanding stock options under this Plan shall become fully exercisable immediately upon a “change of control” without regard to any holding period limitations or other requirements for vesting thereof. The term “change of control” for the purposes hereof means (i) a third party, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 but excluding the current directors of the Company, becoming the beneficial owner of shares of the Company having twenty-five percent (25%) or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a “Transaction”), (A) the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company, or (B) there is the sale, exchange or other disposition of all or substantially all of the Company’s assets to a third party. |
11. | Tax Withholding . Whenever shares are to be issued in satisfaction of of options exercised under this Plan, the Company shall have the power to require the recipient of the shares to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements. The Administrator may, in its sole discretion, in lieu of all or any portion of such cash payment regarding such withholding taxes, permit the holder of the option to elect to direct the Company to withhold a sufficient number of shares otherwise deliverable upon exercise to satisfy all or a portion of such withholding taxes (valuing the shares for this purpose at the Fair Market Value). | ||
12. | Amendments . The Administrator may at any time discontinue granting options under the Plan. The Board of Directors of the Company may at any time or times amend the Plan or amend any outstanding option or options for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that except to the extent permitted under the Plan no amendment shall, without the consent of the participant, void or diminish options previously granted, nor increase or accelerate the conditions and actions required for the exercise of the same, except if the participant shall be discharged from the Company's employment for cause. |
Grant Agreement
|
Options Exercised
|
Date____________________
Grant
No._________________
|
Number____________________
Per
Share
Option
Price_________________
Option
Price
Enclosed____________________
|
Date____________________
|
Name_______________________________
(Please
print name exactly as it should appear
on
your stock certificate)
|
Signature______________________________
|
Name
|
Jurisdiction
of Organization
|
|
The
Female Health Company Limited
|
United
Kingdom
|
|
The
Female Health Company (UK) Plc.
|
United
Kingdom
|
|
The
Female Health Company (M) SDN.BHD
|
Malaysia
|