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FHC May 2005 Correspondence

May 24,
2005

SENT VIA
EDGAR

Mr. John
Cash

Accounting
Branch Chief

United
States Securities and Exchange Commission

Division
of Corporation Finance

Washington,
D.C. 20549

Re:
The
Female Health Company Form 10-KSB for the year ended September 30,
2004

File No. 1-13602

Dear Mr.
Cash:

The
following are the responses of The Female Health Company (the "Company") to the
comments in the letter of the staff of the Securities and Exchange Commission
dated May 10, 2005 relating to the Company's Form 10-KSB for the year ended
September 30, 2005. For reference purposes, the text of the staff's comment
letter has been reproduced below with responses below for each numbered
paragraph.

Form
10-KSB for the Year Ended September 30, 2004

Note 1
- Nature of Business and Significant Accounting Policies - Revenue
Recognition

Comment
No. 1

As
indicated in your accounts receivable policy, we note that you offer a right of
product returns from customers in connection with unsold product which has
expired or is expected to expire before it is sold. Address for us
supplementally how you have determined that you can reasonably estimate the
amount of future returns as required by paragraph 6f of SFAS 48. In this regard,
address the factors set forth in paragraph 8 of SFAS 48 and address whether
those factors impair your ability to make a reasonable estimate of returns. In
particular, please tell us how you estimate the returns of new customers which
you have no previous relationship. Also tell us what the estimated life of your
product is and how you determine whether items may be returned due to
expiration. Clarify in your revenue recognition policy that revenue is recorded
net of such estimated returns.

Response
to Comment No. 1

The
Company’s policy related to product returns from customers in connection with
unsold product which has expired or is expected to expire before it is sold was
established to cover specific retail industry condom sales.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
2

Factors
stated in paragraph 8 of SFAS 48 such as susceptibility of the product to
significant external factors, absence of historical experience, changes in the
selling enterprise’s marketing policies or relationships with its customers, or
absence of a large volume of relatively homogenous transactions do not apply
and, therefore, the Company concluded that it has the ability to make a
reasonable estimate of future returns.

In 1997,
the Center for Devices and Radiological Health of the Food and Drug
Administration approved the estimated life of the Company's product to be five
years. The Company labels each product sold with the month and date the product
was manufactured and its expiration date, which is exactly five years subsequent
to the manufactured date.

The
Company’s estimate of current year sales returns is based on a 3 year rolling
average of actual returns as a percentage of sales. The Company utilized the
estimate for all related business regardless of whether it was transacted with
an existing customer or a new customer with whom it had no previous
relationship.

Historically,
a significant majority (90%+) of the Company’s trade sales were made up of U.S.
trade sales. Beginning in fiscal 2001 the Company entered into a seven year
exclusive arrangement with Mayer Laboratories, Inc. ("Mayer") to be the
exclusive distributor of the Company's U.S. trade sales. As part of this
arrangement Mayer agreed to accept the sole responsibility (after the first 12
months of the agreement) for returns of U.S. trade sales and thereby eliminated
nearly all of the Company’s risk of sales returns for the duration of the
arrangement with Mayer.

Presently,
the Company derives over 95% of its total sales from public sector sales where
the aforementioned sales return policy applies only to damaged goods, not
returns in connection with unsold product which has expired or is expected to
expire before it is sold.

For the
remaining trade business which is of a nominal value, the Company accrues the
estimated sales returns and records the related revenue net of such estimated
returns.

The
Company will expand the discussion of its accounts receivable and credit risk
accounting policy, and will clarify in the discussion of the revenue recognition
policy that revenue is recorded net of estimated returns, in the notes to the
financial statements in future filings.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
3

Comment
No. 2

Address
for us supplementally and revise your disclosures as appropriate to address
those instances where you have recognized revenue other than at
shipment.

Response
to Comment No. 2

The
Company recognizes revenue from product sales when products are shipped to
customers, when an arrangement exists, delivery has occurred, there is a fixed
price, and collectibility is reasonably assured. There are no instances that the
Company has recognized revenue other than at shipment. The Company will expand
the discussion of its revenue recognition accounting policy in the notes to the
financial statements in future filings.

Note 1
- Nature of Business and Significant Accounting Policies - Earnings per
Share.

Comment
No. 3

In
future filings disclose the number of incremental common shares issuable upon
conversion of your convertible preferred stock or convertible debt and the
exercise of stock options and warrants that were not included in diluted
earnings per share because their effect would be anti-dilutive. Refer to
paragraph 40c of SFAS 128.

Response
to Comment No. 3

Beginning
with the Form 10-QSB for the quarterly period ended March 31, 2005, filed with
the SEC on May 16, 2005, the Company disclosed diluted earnings per share
and weighted average common shares outstanding within the Company’s unaudited
condensed consolidated statement of operations for the three months and six
months ended March 31, 2005 and 2004.

The
calculations of the diluted earnings per share and weighted average common
shares outstanding includes the number of incremental common shares issuable
upon conversion of the Company’s convertible preferred stock, convertible debt
and the exercise of stock options and warrants in accordance with SFAS
128.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
4

Note 1
- Nature of Business and Significant Accounting Policies - Other Comprehensive
Income

Comment
No. 4

Tell
us supplemtentally and revise future filings to address the $249,555 adjustment
to other comprehensive loss. Tell us the nature of the adjustment, the terms and
parties to the intercompany debt and the appropriateness of reflecting this
adjustment in other comprehensive income.

Response
to Comment No. 4

The
Company’s consolidated financial statements include the accounts of The Female
Health Company (Parent Company and U.S. corporation) and the accounts of its
wholly owned foreign subsidiaries, The Female Health Company - UK, which is the
holding company of The Female Health Company, plc. (located in the United
Kingdom).

Over the
years, the Company has financed the operations of its subsidiaries through an
intercompany loan with The Female Health Company, plc. which was eliminated upon
consolidation. The Company has designated the intercompany loan to be long-term
in nature as prescribed by SFAS 52. Further, the Company followed the guidance
of SFAS 52 paragraph 20.b. when translating the subsidiary’s balance sheet for
consolidation purposes. This paragraph states that: "Gains and losses on
intercompany foreign currency transactions that are of a long-term-investment
nature (that is, settlement is not planned or anticipated in the foreseeable
future), should not be included in the computation of net income when the
entities to the transaction are consolidated." In other words, any foreign
currency effects of the long-term intercompany loan were included in accumulated
other comprehensive income on the balance sheet and flowed through other
comprehensive income or loss on the Consolidated Statement of Stockholders’
Equity.

During
the year ended September 30, 2005, the Company forgave a portion of this
loan and needed to adjust accumulated other comprehensive income on the balance
sheet for the cumulative amount of foreign currency adjustments relating to this
portion of the intercompany loan. In essence, there was a portion of trapped
currency translation that needed to be recognized through a reclassification
within equity.

Since the
currency effect of the change in the intercompany debt flowed through
comprehensive income (loss) as income while the debt was outstanding, it appears
appropriate to flow the currency effect of the debt forgiveness through
comprehensive income (loss) as an expense when the debt was forgiven. What this
in effect does is makes the cumulative comprehensive income (loss) related to
this portion of the intercompany loan zero.

The
Company will expand the disclosure of this transaction in future
filings.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
5

Note 8
- Common Stock - Stock Options Plans

Comment
No. 5

As
indicated by transactions reflected within your Consolidated Statements of
Stockholders' Equity, we note that you issued stock through the cashless
exercise of stock options and warrants. Please address supplementally and revise
future filings to clarify your accounting for stock and warrants granted with
cashless exercise features. Your response should identify the accounting
literature you relied on and address the guidance in Issue 48 of EITF 00-23:
Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25
and FASB Interpretation No. 44.

Response
to Comment No. 5

During
the year ended September 30, 2002, the Company re-priced the majority of its
outstanding stock options; and accordingly, under APB Opinion No. 25, utilized
variable-plan accounting for these options. Also during this time, the Company
implemented an immaculate cashless exercise feature for these options. Since the
options were already being accounted for under variable-plan guidance, no
additional accounting treatment was deemed necessary.

In
September 2002, the majority the Company’s stock options were exchanged for the
right to receive new options at least six months and a day later. The exercise
prices of these new options were equal to the fair market value of the common
stock on the grant date. These options are being accounted for in accordance
with fixed plan accounting guidance as provided in APB Opinion No. 25. Options
covering a total of 320,000 shares did not participate in the exchange and the
Company continued to account for these options under variable-plan accounting
until exercised. As of September 30, 2004, none of these options were
outstanding.

The
Company has certain warrant agreements that have a cashless exercise feature.
For all of the Company’s warrant agreements, the Company has utilized the
accounting guidance of SFAS 123 since the warrants were issued to non-employees.
The Company computed the fair value of the warrants via the Black-Scholes
pricing model. Therefore, the fair value of the warrants was expensed over their
vesting periods and the fact that a cashless feature existed did not create any
additional accounting ramifications.

The
Company did not apply the accounting guidance discussed in Issue 48 of EITF
00-23: Issues Related to the Accounting for Stock Compensation under APB Opinion
No. 25 and FASB Interpretation No. 44 since the cashless exercise was not
effected through a broker.

The
Company will expand the disclosure in future filings to describe how the Company
accounts for stock options and warrants granted with cashless exercise
features.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
6

Item
8A. Controls and Procedures

Comment
No. 6

We
note your statement that the chief executive officer and the principal
accounting officer have concluded that the company's disclosure controls and
procedures are effective "except as discussed below." Given the exceptions
noted, it remains unclear whether your chief executive officer and principal
accounting officer have concluded that your disclosure controls and procedures
are effective. Please revise your disclosure to state, in clear and unqualified
language, the conclusions reached by your chief executive officer and your
principal accounting officer on the effectiveness of your disclosure controls
and procedures. For example, if true, you can state that your disclosure
controls and procedures are effective including consideration of the identified
matters, so long as you provide appropriate disclosure explaining how the
disclosure controls and procedures were determined to be effective in light of
the identified matters. Or, if true, you can state that given the identified
matters, your disclosure controls and procedures are not effective. You should
not, however, state the conclusion in your current disclosure, which appears to
state that your disclosure controls and procedures are effective except to the
extent that they are not effective.

Response
to Comment No. 6

The
Company’s Chief Executive Officer and Principal Accounting Officer concluded
that the Company’s disclosure controls and procedures were effective despite the
two material weaknesses because the material weaknesses involved isolated
matters affecting relatively discreet transactions and account balances which
the Company deemed not to have a material impact on the overall financial
statements. Management believes the issues were promptly brought to its
attention and acted upon. Beginning with the Form 10-QSB for the quarterly
period ended March 31, 2005, filed with the SEC on May 16, 2005, the
Company revised the disclosure in the section addressing controls and procedures
section to reflect this conclusion.

Comment
No. 7

Disclose
in greater detail the nature of the material weaknesses identified in your
disclosure. In this regard, also revise to disclose the specific steps that the
company has taken, if any, to remediate the material
weaknesses.

Mr. John
Cash

Accounting
Branch Chief

May 24,
2005

Page
7

Response
to Comment No. 7

The first
material weakness identified in the disclosure relates to the timeliness of
accounting for certain transactions. Equity transactions pertaining to outside
consultants and new employees were not communicated in a timely manner to the
Principal Accounting Officer by senior management.

During
the quarter following the discovery of each issue the Company discussed setting
up a procedure to eliminate the possibility of future exceptions. No new
weaknesses relating to the specific equity transactions have subsequently
occurred.

The
second weakness relates to the adequacy of supervisory reviews. The lack of
reviews resulted in adjustments being proposed during the year-end field work by
the Company’s external auditors.

To
remediate this weakness, beginning with the first quarter of the current fiscal
year, the Principal Accounting Officer began reviewing all of the components of
the U.K. financial statements. No new adjustments have been proposed by the
Company’s external auditors during the first two quarters of the current fiscal
year related to the U.K. financials. In the U.S., the Company has begun the
process of hiring a consultant to function as an accounting manager and allow
the Principal Accounting Officer to serve in a supervisory review function. The
Company believes the supervisory review function will begin in earnest during
the third quarter of the current fiscal year.

Beginning
with the Form 10-QSB for the quarterly period ended March 31, 2005, filed with
the SEC on May 16, 2005, the Company included additional disclosure in the
section addressing disclosure controls and procedures to describe the nature and
remediation of these material weaknesses.

Comment
No. 8