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Note 1 - Basis of Presentation
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9 Months Ended |
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Jun. 30, 2012
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| Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] |
NOTE
1 - Basis
of Presentation
The
accompanying condensed consolidated financial statements
are unaudited but in the opinion of management contain all
the adjustments (consisting of those of a normal recurring
nature) considered necessary to present fairly the
financial position and the results of operations and cash
flow for the periods presented in conformity with generally
accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by United
States generally accepted accounting principles for
complete financial statements.
Operating
results for the three and nine months ended June 30, 2012,
are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 2012. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended
September 30, 2011.
Principles
of Consolidation and Nature of Operations
The
consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, The Female
Health Company – UK, and its wholly owned
subsidiaries, The Female Health Company - UK, plc and The
Female Health Company (M) SDN.BHD. All significant
intercompany transactions and accounts have been eliminated
in consolidation. The Female Health Company ("FHC" or the
"Company") is currently engaged in the marketing,
manufacture and distribution of a consumer health care
product, the FC2 female condom ("FC2"). The
Female Health Company - UK, is the holding company of The
Female Health Company - UK, plc, which is located in a
6,400 sq. ft. leased office facility located in London,
England. The Female Health Company (M) SDN.BHD leases a
16,000 sq. ft. manufacturing facility located in Selangor
D.E., Malaysia.
The
FC2 female condom is currently sold or available in either
or both commercial (private sector) and public health
sector markets in 137 countries as compared to 120
countries at September 30, 2011. The product is marketed
directly to consumers in 16 countries by various
country-specific commercial partners.
The
Company also derives revenue from licensing its
intellectual property under an agreement with its
exclusive distributor in India, Hindustan Lifecare
Limited (“HLL”). HLL is authorized
to manufacture FC2 at HLL's facility in Kochi, India for
sale in India, and the Company receives a royalty based
on the number of units sold by HLL in
India. Such revenue appears as royalty income
on the Unaudited Condensed Consolidated Statements of
Income for the three and nine months ended June 30, 2012
and 2011, and is recognized in the period in which the
sale is made by HLL.
The
Company's standard credit terms vary from 30 to 90 days,
depending on the class of trade and customary terms within
a territory, so accounts receivable is affected by the mix
of purchasers within the quarter. As is typical
in the Company's business, extended credit terms may
occasionally be offered as a sales
promotion. For the past twelve months, the
Company's average days’ sales outstanding has
averaged approximately 46 days. Over the past five years,
the Company’s bad debt expense has been less than
.04% of product sales. The balance in the
allowance for doubtful accounts was approximately $52,000
at June 30, 2012 and $10,000 at September 30, 2011.
Restricted
cash
Restricted
cash relates to security provided to one of the
Company’s U.K. banks for performance bonds issued in
favor of customers. Such security has been extended
infrequently and only on occasions where it has been a
contract term expressly stipulated as an absolute
requirement by the funds’ provider. The expiration of
the bond is defined by the completion of the event such as,
but not limited to, delivery of goods or at a period of
time after product has been distributed.
Foreign
Currency and Change in Functional Currency
Prior
to October 1, 2009 the functional currency of the
Company’s subsidiaries was the local currency, in
accordance with Accounting Standards Codification (ASC)
Topic 830, Foreign
Currency Matters. Effective October 1,
2009, the Company determined that there were significant
changes in facts and circumstances and the Company's
subsidiaries adopted the U.S. dollar as their functional
currency. The Company recognized a foreign currency
transaction gain of $15,235 and loss of $69,294 for the
three and nine months ended June 30, 2012, respectively,
compared to a loss of $18,022 and $74,251 for the three and
nine months ended June 30, 2011,
respectively. The consistent use of the U.S.
dollar as functional currency across the Company reduces
its foreign currency risk and stabilizes its operating
results. As a result of the U.S. dollar being the
functional currency of the Company and all of its
subsidiaries, comprehensive income is equivalent to the
reported net income.
Reclassifications
Certain items in the June 30, 2011
consolidated financial statements have been reclassified to
conform to the June 30, 2012 presentation.
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