The Female Health Company Reports

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The Female Health Company: Second Quarter Fiscal Year 2004 Report

31 % Increase in Revenue
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Positive Cash Flow from Operations for 6 Month Period
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Successful Private Placement of $1.5 million in Convertible Preferred Shares

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Debt Reduced $1.0 Million from $2.9 Million to $1.9 Million

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Company Receives Commendation from Global Business Coalition on HIV/AIDS

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CHICAGO, May 17, 2004- The Female Health Company (OTC BB FHCO) reported net revenues of $2,205,565 and net loss attributable to common stockholders of $733,865 ($0.04 per diluted share) for the three months ended March 31, 2004 compared to revenues of $1,684,293 and a net loss attributable to common stockholders of $898,869 ($0.05 per diluted share) for three months ended March 31, 2003.

Net revenues increased $521,272 in the current quarter, or 31%, compared with the same period last year. The higher sales for the second quarter were attributable to an increase in shipments to global public customers.

This is consistent with the Company’s expectations and demonstrates the Female Health Company’s continued progress in executing its long-term strategies for growth. The Company expects significant quarter to quarter variation due to the timing of receipt of large orders, subsequent production scheduling, and shipping of products.

Gross profit increased $147,097, or 23%, to $796,792 for the three months ended March 31, 2004 from $649,695 for the three months ended March 31, 2003. This increase was a result of expanding net revenues more than offset by an increase in cost of products sold. The rise in cost of products sold is primarily a result of adverse exchange rate fluctuations and higher production costs.

Selling, general and administrative expenses decreased $13,689, or 1%, to $1,049,808 in the current quarter from $1,063,497 for the same period last year. This improvement is a result of a decrease in U.S. operating expenses offset in part by an overall increase in U.K. operating costs due to adverse exchange rate fluctuations.

Non-cash stock compensation costs decreased $144,242 to $47,899 for the current quarter compared to $192,141 for the same period last year. During the second quarter of the prior year the Company recorded charges for changes in stock option plans and investor relation services. During the second quarter of the current year the Company did not incur any charges for stock option plan changes and posted reduced charges for investor relation services.

Net interest and other expenses increased $85,719 to $350,923 for the current period from $265,204 for the same period last year. This increase is a result of incurring a larger amount of non-cash expenses related to the amortization of discounts on notes payable and credit facility than in same prior year period. This reflects the consistent utilization of the Effective Interest method of accounting which requires expensing a larger portion of the discount during the final portion of a note/credit facility’s life.

The Company had net revenues of $4,534,313 and a net loss attributable to common stockholders of $(1,389,157) or $(0.07) per share for the six months ended March 31, 2004 compared to net revenues of $3,928,233 and a net loss attributable to common stockholders of $(1,385,404) or $(0.07) per share for the six months ended March 31, 2003.

Net revenues increased $606,080 during for the six months ended March 31, 2004, or 15%, compared with the same period last year.

Gross profit remained relatively unchanged at $1,671,022 for the six months ended March 31, 2004 and $1,671,083 for the six months ended March 31, 2003 despite sales growth as a result of a disproportionate increase in the cost of goods sold, as a result of higher production costs triggered by adverse exchange rate fluctuations.

Selling, general and administrative expenses increased $192,949, or 10%, to $2,166,665 in the current quarter from $1,973,716 for the same period last year. This increase was primarily a result of non-cash expenses associated with implementation of the Company’s Executive Compensation program during fiscal 2004, a rise in outside consulting fees and an increase in UK operating expenses due to adverse exchange rate fluctuations.

Non-cash stock compensation costs decreased $420,317 to $95,797 for the six months ended March 31, 2004 compared to $516,114 for the six months ended March 31, 2003. This decrease was due to the elimination of charges related to accounting for changes in stock option plans and a reduction in investor relation services expense.

Net interest and other expenses increased $153,323 to $667,121 for the six months ended March 31, 2004 from $513,798 for the same period last year. This increase is primarily a result of the Company incurring a larger amount of non-cash expenses related to the amortization of discounts on notes payable and credit facility than for the first two quarters of the prior year.

The Company posted a positive cash flow from operations of $0.2 million for both the six months ended March 31, 2004 and 2003.

During the second quarter, the Company successfully completed a $1.5 million Private Placement of Convertible Preferred Shares. The funds received from this placement were in part used to pay down FHC’s debt by $1.0 million, from $2.9 million to $1.9 million.

In addition, the Company received a commendation from the Global Business Coalition on HIV/AIDS for its unique program which provides women with their own method of prevention at the community level. The Coalition is an alliance of 135 multinational companies dedicated to fighting HIV/AIDS.

The Female Health Company, based in Chicago, owns certain worldwide rights to FC Female Condom? including patents which have been issued in the United States, United Kingdom, Japan, France, Italy, Germany, Spain, The People’s Republic of China, Canada, New Zealand, South Korea and Australia. FC Female Condom? is the only available product controlled by a woman that protects against sexually transmitted diseases including HIV/AIDS, and unintended pregnancy.

“Safe Harbor” statement under the Private Securities Litigation Reform Action of 1995: The statements in this release which are not historical fact are forward-looking statements based upon the Company’s current plan and strategies, and reflect the Company’s current assessment of the risks and uncertainties related to its business, including such things as product demand and market acceptance; the economic and business environment and the impact of government pressures; currency risks; capacity; efficiency and supply constraints; and other risks detailed in the Company’s press releases, shareholder communication and Securities and Exchange Commission filings. Actual events affecting the Company and the impact of such events on the Company’s operations may vary from those currently anticipated.

For more information about the Female Health Company, dial toll-free via fax, 1-800-PRO-INFO and enter company code “FHCO”. Also, visit the Company’s web site at www.femalehealth.com and www.femalecondom.org. If you would like to be added to an e-mail alert list, please send an e-mail to FHCInvestor@aol.com .

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