DRAFT: 8/12/96
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) August 5, 1996
CHANTAL PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-13304 22-2276346
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
12121 Wilshire Boulevard, Los Angeles, California 90025
(Address of prinicpal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 207-1950
Item 4. Changes in Registrant's Certifying Accountant
On August 5, 1996, Coopers & Lybrand L.L.P. notified the registrant that it
was resigning as the registrant's independent accountant with respect to the
audit of the Company's June 30, 1996 financial statements. After further
discussions with the registrant, Coopers & Lybrand advised the Company that it
will not complete its pending separate engagement with respect to the
shipments, orders and returns of the Company's distributor, but will release
its report on the audit of the June 30, 1995 financial statements of the
Company's 90% owned subsidiary, Chantal Skin Care Corporation, upon meeting
certain conditions.
In the registrant's first quarter ended September 30, 1995, $10,543,637 of
product was shipped to the registrant's distributor and was originally
recorded as revenue. The registrant, during the second fiscal quarter ended
December 31, 1995, took back a portion of the products previously shipped to
the distributor to redo uniform product code labeling, and reshipped. In
consideration and accommodation to the registrant's distributor for the
redoing of uniform product code labeling, the distributor's payment terms for
subject products was extended. Coopers & Lybrand advised the registrant that
according to generally accepted accounting principles these events made it
necessary to offset the original shipment as if products were returned in the
first quarter. The registrant announced that it would, and is in the process
of, restating the financial statements as of and for the three months ended
September 30, 1995 to reflect this accounting treatment. The registrant
advised Coopers & Lybrand that it disagreed with the accounting treatment
recommended by Coopers & Lybrand.
In addition, the registrant, in February 1996, sought the advice of Coopers &
Lybrand as to whether its then existing revenue recognition policy was in
compliance with generally accepted accounting principles, with respect to
recognizing second quarter auto ship sales to its distributor. To date,
Coopers & Lybrand have not yet completed the procedures they require in order
to render such advice. However, the NASDAQ Stock Market Inc., on May 14, 1996
advised the registrant that if its Quarterly Reports on Form 10-Q for the
quarters ended December 31, 1995 and March 31, 1996 were not filed with the
Securities and Exchange Commission and NASDAQ prior to May 20, 1996, the
registrant's common stock would be delisted from the NASDAQ's Small-Cap
Market. Coopers & Lybrand, recognizing that its view could be different upon
completion of the aforementioned procedures, then advised the registrant to
adopt a cash basis revenue recognition policy with respect to products subject
to auto ship distribution for the purposes of filing the reports on Form 10-Q,
which advice the registrant followed under the circumstances in order to avoid
such NASDAQ delisting. The registrant completed the financial statements and
filed the aforementioned reports on Form 10-Q. No final advice has been
rendered to date on the autoship accounting issue by Coopers & Lybrand. As the
registrant sought the advice of Coopers & Lybrand at the outset of the autoship
accounting treatment question having arisen, and as the registrant followed,
and would have followed the advice it received from Coopers & Lybrand, the
registrant does not deem the discussions with Coopers & Lybrand on the
autoship subject as a "disagreement"; Coopers & Lybrand has informed the
registrant that it does consider these discussions as a "disagreement" within
the Form 8-K requirements.
With respect to the issues referred to above, the officers and directors
discussed the subject matter of each of the accounting issues with Coopers &
Lybrand. In addition, the registrant has authorized Coopers & Lybrand to
respond fully to the inquiries of the accounting firm to be engaged to report
on the financial statements of the registrant for the fiscal year ended June
30, 1996.
The report of Coopers & Lybrand on the registrant's financial statement as of
and for the year ended June 30, 1994 contains an explanatory paragraph with
respect to the registrant's ability to continue as a going
concern. No such explanatory paragraph was included in the report or the June
30, 1995 financial statements.
Item 7. Financial Statement, Proforma Financial Information and Exhibits.
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(c) The following Exhibit is filed with this report on Form 8-K:
16. Letter from Coopers & Lybrand L.L.P. - to be filed by amendment.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHANTAL PHARMACEUTICAL CORPORATION
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(Registrant)
By s/CHANTAL BURNISON
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Chantal Burnison
Chairman and Chief Executive Officer
Dated: August 12, 1996