George Whiteside - SWS Financial Services Jack Wallace - Sidoti & Co.

Hello and welcome the Female Health Company, second quarter fiscal year 2014 conference call. All participants will be in listen-only mode. (Operator Instructions). Please note, this event is being recorded. The statements made on this conference call, which are not historical facts, are forward-looking statements based upon the company’s current plans and strategies. Such forward-looking statements reflect the company’s current assessment of the risks and uncertainties related to its business. The company’s actually results and future development could differ materially form the results or developments in such forward-looking statements. Factors that may cause actual results or developments to differ materially including such things as product demand and market acceptance, the timing of the statement of shipment of large orders, competition, economic and business environment, and the impact of government pressures, currency risks, capacities, efficiency and supply constraints and other risks detailed in the company’s press releases, shareholder communication and Securities and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Karen King. Please go ahead.

Good morning to all participants. This is Karen King, President and CEO of the Female Health Company and I would like to welcome you all to The Female Health Company’s second quarter fiscal 2014 conference call. With me here in Chicago is OB Parrish, the Chairman of the Board of FHC; Michele Greco, our VP and CFO and joining us from his London office is Mike Pope, our VP of our U.K. and Malaysia Operations. Those of you on last quarters call will remember that I had just joined FHC at the time of the last call, so O.B. kindly led that session. Today I will do so following a similar pattern than O.B. established, first making some general comments and reviewing the financial results for the quarter and half year, then I’ll provide some commentary on key factors that may impact future results and my views on the company outlook. Afterwards Michele, Mike and I will take your questions. Please note that when I refer to years I’m referring to FHCs fiscal year, which ends September 30, unless otherwise stated. So first some general comments about the quarter and first half-year performance. During the second quarter and first half of 2014, the company experienced a significant decrease in unit volume, revenues and earnings per share, compared to the priors years second quarter and first half yeah results. This decrease can be primarily attributed to the volatility of the ordering patters in the global public sector, which has been experienced throughout the company history and discussed extensively on previous investor calls. As an example, following a robust full year in 2009, the company had continued profitable positive cash flow years in 2010 and 2011, but also had success of decreases in revenue and volume. This was then followed by a…

(Operator Instructions) And our first question comes from Mark Williamson who is a private investor. Please go ahead sir. Mark Williamson – Private Investor :

So Mark, great question, I can tell you that this is the highest priority for us. We are always working very closely with our distributors and agents in these regions or directly with the customers to try to move these efforts forward. Tenders are quite a challenge. These large orders that come through tender processes are subject to many influences and factors within the country and we see almost with every tender there is a new experience that’s developed. What we will try to do to address this for the future is to continue to develop close relationships and mange these accounts on a key account basis where we work very closely to understand their needs and that we’re better positioned to be able to respond in exactly the way that would be most optimal for these tenders. But I can tell you that right now it is our top priority. Mark Williamson – Private Investor : Okay, just another comment. From a resource standpoint, is there anything that could be done to support getting these bids resolved in the localities of Brazil and South Africa?

Well, I think that we already have a team operating that we’ve been working with for a number of years in both Brazil and South Africa for example, who really again, know the processes and procedures and are involved in multiple tenders for multiple products to the government and really are the experts on how to make this happen. What we’re going to do though as I mentioned in my prepared comments is, we’re adding to our marketing and sales focus. Have brought on a very experienced individual to work with us on a consulting basis right now and are looking to make that a permanent position in the coming months, so that we can put some additional focus on it as well. Mark Williamson – Private Investor : Thanks Karen. Continue with the success.

Thank you.

And our next question comes from George Whiteside of SWS Financial Services. Please go ahead sir.

Good morning. First, I wanted to make the observation that it is impressive that you have been able to increase your cash position in this past quarter, given the operational challenges that you faced. Kudos.

Thank you.

On the questions; in the past you, and even now you confirm the fact that you are going to expand your manufacturing capacity in Malaysia and I would be interested in what gives you the confidence at this point that your going to have demand ramped up in order to take advantage of that increased capacity.:

Yes, okay, thank you George. The basis for us looking to have additional capacity is the figures that I mentioned in terms of the overall growth, if you look at the compounded annual growth rate of female condoms from 2005 to 2013. So even though we have these swings and obviously we’ve had a down quarter right now, we do continue to see growth in this area and then because of all of the other factors that I mentioned, the importance of HIV/AIDS, particularly in sub-Saharan Africa with women now and other factors like the focus on family planning, we see that there will be a continued and growing need for female condoms. I also point to this country where we are spending an enormous amount on healthcare costs related to sexually transmitted diseases and I think that could be one of the areas that we could look to see if we can develop increased demand here in the U.S.

Excellent. Second question, have you started to see or had any indications of orders generated by your FP2020 plan?

Yes George, a good question. We definitely have now some better insights into how the mechanism will work around the FP2020, having spent some time meeting its key individuals in the organization and the way this will work is through the normal channels, how programming is established and how procurement of goods will take place, that what will happen related to the family planning efforts as well. So what we are seeing now is countries that are starting new female condom programming efforts or renewed female condom programming efforts as a result of the FP2020 and I can give you one example. We don’t discuss a lot of things going on individual countries typically, but in Zimbabwe there is a very large new program starting up as a result of FP2020, focusing on education and programming for female condoms. So we are staring to see us in multiple countries.

So in that particular case, the educational process is being ramped up and you would expect that there would be orders coming out of that particular country as a result of that educational effort.

Exactly, yes, exactly.

Thank you very much.

Okay, thank you.

And our next question comes from Russell Mollen of Bares Capital. Please go ahead sir.

Hi, a couple of questions and maybe they might be for Michele and for O.B. as well, because I know Karen’s only been there for five or six months or whatever its been. But has anything changed in the conversations that you had with some of the big tenders over the past nine months? Obviously we’ve experienced delays in the past and running through that and the long term has done okay and I was just curious on, has anything changed from nine, 10 months ago when things started slowing down and nothing was getting pushed through to today in terms of the conversations your having.

Well, I’ll start and then if Michele or O.B. wants to jump in, that’s fine. I am very aware of the last tender processes and have been brought up to speed. I don’t believe anything has changed. I think what we continue to see is very typical developments in how these tenders materializes and a few things. First is, as I mentioned in my comments, there’s always different factors impacting the tenders. It could be political, it could be in election years or when people are changing office can impact it. There are things regarding budget timing, etcetera that can impact it, so these are very typical things that we have always experienced in the company. But what we do see is for those countries that have the ability to purchase female condoms through their own tender process, we see a continued use and interest and development of female condoms. So we see no slowdown there in terms of the usage or interests in female condoms. So either Michele or O.B., anything you wanted to add to that.

I guess just one thing I really have. Based on the historical perspective, we get involved with some of the key countries on these tender projects when they are interested in female condoms and we get involved with this ongoing, some of these issues that Karen has described. We have that (inaudible) where after that process is over, where the initial concept of buying female condoms just disappeared. In other words, the parties ultimately come through with the orders for the female condoms. So the pattern is the same and we haven’t yet experienced cases where people who bought up something that they ultimately decided not to buy at all.

Got it. And how about just the progression from this most recent slowdown or issues with the tender process. Has there been progression from nine months ago when this started happening to today?

Now I’m not sure that I can specifically say – progression regarding tenders?

Well, progression regarding, yes the fulfillment of those tenders.

Okay. So one thing Russ is that we are not really able to be in a position to discuss too much about tenders until they have been awarded and until we have the okay to speak to them. The countries specifically state they do not want these things discusses while you’re in process. So I think again the best thing that I can describe is just that the countries that have operated and go through a tender process for female condoms continues to be very interested in continuing those programs and supporting them and growing those programs further and that’s probably the only thing I can say.

Got it, okay, okay. Thanks.

(Operator Instructions) Our next question comes from Jack Wallace of Sidoti. Please go ahead. Jack Wallace - Sidoti & Co.: Good morning Karen, Michele, O.B., thanks for taking my questions.

Good morning. Jack Wallace - Sidoti & Co.: I just wanted to talk about some of the bigger customers who have historically, again so a little more detail here. Do you think there’s going to be any potential impact with a potential leadership change in Brazil? Ms. Rousseff had been a nice ally of your upsize in the last tender that was ultimately won in Brazil. Would loosing her in Brazil be a potential negative for the company.

Well, you’re correct that Dilma Rousseff has been a big supporter of female condoms. The one thing that I can say about Brazil is probably of all of the countries that we deal with, it is the country that is most dedicated to this idea of supporting prevention and promoting prevention to all their citizens and they put up billboards and they do advertisings and they speak to condoms, because they want people to use protections and be safe. So I would not expect that that overall attitude towards prevention would change with a change in leadership, but of course I can’t really speak to what could happen as a result of the elections. Jack Wallace - Sidoti & Co.: Okay, thank you and then while we’re on the Brazil topic, is there any piece of the elevated inventory levels this quarter that is earmarked for Brazil, potentially in an order specifically for the World Cup.

I really can’t speak to that I’m afraid. Jack Wallace - Sidoti & Co.: Okay. And then how about on this one, who are your 5% or more customers by country this quarter, specifically where Brazil or South Africa won.

You know we issued the Q Jack. You will see the details there, but the countries will be Angola, South Africa, Tanzania, Uganda, those will be the main countries. Jack Wallace - Sidoti & Co.: So the U.S. didn’t make the list of store at it.

Well, and the U.S. Jack Wallace - Sidoti & Co.: And the U.S, okay.

And of course the US. Jack Wallace - Sidoti & Co.: We seem to be on main stage, which is good news.

Right, right. Jack Wallace - Sidoti & Co.: Okay great and I think you answered the progress on the organization of 2020 initiative. It looks like – again, a little bit longer than anticipated, but it sounds like they are really starting to get the ball rolling there and I would assume that there are other countries outside of just Zimbabwe that are staring to have more concentrated efforts on education and training and basically sowing the seeds for potential order flow. Is that a pretty fair assumption there?

Yes, that’s correct. But again, because we don’t speak to a lot of specific country activities, I just gave Zimbabwe as an example. But yes, there is many others. Jack Wallace - Sidoti & Co.: Okay great. Thank you and then just a quick accounting question here. The fourth quarter last year, revenues were $4.8 million in operating. SG&A expense was just a touch over $0.5 million. In this quarter we had a little over $4.3 million operating expenses. We’re just underneath $1.6 million. Now it was discussed in the fourth quarter that there was some incentive based compensation that wasn’t triggered in that quarter and I was wondering if there was a similar or to a lesser extent trigger in this quarter that would have led to higher operating expenses and a lower revenue quarter.

There’s no incentive compensation expense in this quarter Jack. Jack Wallace - Sidoti & Co.: Okay, okay. So I guess what expenses were in this quarter from the SG&A standpoint that weren’t in the fourth quarter of last year.

A lot of it had to do with the timing of our training and education program and in the fourth quarter of last year, some of those programs were trading off versus where some of them are kind of in height right now. Jack Wallace - Sidoti & Co.: Okay, that’s certainly helpful. Thanks and I’ll take additional questions offline. Thank you.

(Operator Instructions) As there appears to be no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ms. King for any closing remarks.

Okay. Well, thank you very much to everyone for your participation today and for your questions. We certainly are available if you have some additional questions that you would like to reach out to us offline, Michele or I today, we’re happy to take those calls and also I wanted to let you know that we will be presenting at the Sidoti Conference on May 9 and the B. Riley Conference in California on May 19. So we hope to see some of you there as well. Thank you again very much and have a good day. Bye-bye.

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