<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 8-K/A NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 21, 1996
------------------------------------------------
Date of report (Date of earliest event reported)
--------------------------------------
K-V PHARMACEUTICAL COMPANY
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-9601 43-0618919
- -------------- -------------- ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2503 South Hanley Road, St. Louis, Missouri 63144
- ------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(314) 645-6600
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
Item 4. Changes in Registrant's Certifying Accountant.
-------------------------------------------------------
(a) Coopers & Lybrand L.L.P. (the "former accountant") resigned as
the certifying accountant of Registrant on May 21, 1996, for the reason
that the relationship between Registrant and the former accountant had
become incompatible. BDO Seidman LLP agreed on May 24, 1996 to become
Registrant's certifying accountant in connection with Registrant's
financial statements for the years ended March 31, 1996, 1995 and 1994.
(b) The former accountant's reports on the financial statements for
the two most recent fiscal years ended March 31, 1995 and 1994 did not
contain an adverse opinion or a disclaimer of opinion nor was it qualified
or modified as to uncertainty, audit scope or accounting principles.
(c) In connection with the audits of the financial statements of
Registrant for the two fiscal years ended March 31, 1995 and 1994 and
during the interim period preceding the resignation of the former
accountant, there were no disagreements with the former accountant on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of the former accountant would have caused the
former accountant to make reference in its report to the such matters.
(d) In connection with its resignation, the former accountant
indicated that it has withdrawn as the Registrant's accountant and that its
reports dated June 28, 1995 and June 28, 1994 related to the Registrant's
financial statements as of and for the years ended March 31, 1995 and March
31, 1994, respectively, should no longer be relied upon. In addition, the
former accountant has also indicated that its consents dated June 28, 1994,
June 28, 1995 and January 16, 1996 related to Forms S-8 have also been
withdrawn. The former accountant advised Registrant that it determined to
withdraw its reports and consents for such previous years because it
questioned, although it had not reached a conclusion regarding,
Registrant's amortization of "Deferred Improved Drug Entities" during such
years.
In connection with its resignation, the former accountant indicated
there were two reportable events.
First, in connection with preliminary work performed by the former
accountant relating to Registrant's fiscal year ended March 31, 1996, the
former accountant questioned the application of Registrant's accounting
policy concerning the amortization of "Deferred Improved Drug Entities" and
indicated a possible need for a restatement of the prior year financial
statements with respect thereto. Registrant has followed a policy of
amortizing "Deferred Improved Drug Entities" costs over a five to ten year
period commencing with the date of marketing of the applicable product. In
fiscal 1993, it was determined that the "five year" portion of such
amortization would commence after five years in any event. The former
accountant raised a question as to whether it was clearly
2
<PAGE> 3
understood that the amortization of such clinical costs was deferred until
the earlier of either the product being marketed or five years. The former
accountant did not inform Registrant as to its conclusion as to any specific
change required to be made in the application of Registrant's amortization
policies. Consequently, Registrant is not presently in a position to know
what quantifiable effect, if any, any change or restatement of either the
nature of such policies or their application would have had on Registrant's
financial statements. Such policies and their application are being
reviewed and discussed by Registrant with its new accountants.
Secondly, the former accountant questioned, but did not reach a
conclusion as to the appropriate revenue recognition accounting for a
transaction entered into and recorded by Registrant in the fourth quarter
of the fiscal year ended March 31, 1996, dealing with certain of
Registrant's technology and the fair market valuation of certain stock
purchase options issued in connection therewith. Under this transaction,
which was entered into between Registrant and a major drug marketer,
partially in consideration of and replacing certain other products,
the two companies entered into an agreement for future royalties
and product opportunities and Registrant gave the other company the right
to explore Registrant's drug delivery technologies with the possibility of
entering into agreements with respect to individual products and issued
certain Class A common stock purchase options to the other party.
Registrant received a total amount of $10,000,000 in the transaction, of which
$5,000,000 was paid for the purchase of the common stock purchase options.
The accounting treatment for the balance of the funds received was to
reimburse Registrant for, and eliminate from its balance sheet,
approximately $2,500,000 of Deferred Improved Drug Entities, receivables
and inventory of approximately $400,000, and patents and trademarks
relating to Registrant's technologies of approximately $200,000, with
approximately $1,700,000 allocated to agreement revenues and $200,000 as a
reimbursement of expenses. Of the funds received for the common stock
purchase options, $1,150,000 was allocated to a stock purchase option
providing the right to purchase Registrant's Class A common stock at a
minimum price of $35 per share, exercisable for a 30 day period ending
March 30, 1997, an additional $1,250,000 was allocated to an option to
purchase shares of Class A common stock at a minimum price of $40 per
share, exercisable for a 30 day period ending September 29, 1997, an
additional $1,300,000 was allocated to an option to purchase Class A common
stock at a minimum purchase price of $45 per share, exercisable for a 30
day period ending March 30, 1998, and an additional $1,300,000 was
allocated to an option to purchase Class A common stock at a minimum price
of $50 per share, exercisable for a 30 day period ending September 29,
1998. The actual exercise price and number of shares of Class A common
stock to be purchased are dependent on the fair market value of the stock
for a ten day period prior to exercise. At the date of the former
accountant's resignation, the revenue recognition and valuation issues were
unresolved. Registrant has authorized the former accountant to discuss
these issues with its new accountant. Registrant has provided information
with respect to the above matters to its new accountant and expects to
review the application thereof with its new
3
<PAGE> 4
accountant in connection with the audit and certification of Registrant's
financial statements.
(e) A letter from the former accountant, addressed to the
Commission, is filed as an exhibit hereto.
Item 7. Financial Statements, Pro Forma Financial Information and
------- ---------------------------------------------------------
Exhibits
--------
(a) Financial Statements - not applicable
(b) Pro Forma Financial Information - not applicable
(c) Exhibits - See Exhibit Index on page 6 hereof.
4
<PAGE> 5
SIGNATURE
---------
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 hereto duly authorized.
Date: June 27, 1996
K-V PHARMACEUTICAL COMPANY
By: /s/ Gerald R. Mitchell
--------------------------
Gerald R. Mitchell
Vice President-Finance
5
<PAGE> 6
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<C> <S>
16 Letter from the former accountant, addressed to the
Commission.
</TABLE>
6
<PAGE> 1
June 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attn: Maureen J. Dallman
RE: Form 8-K/A filed June 17, 1996
------------------------------
File No. 1-9601
---------------
Ladies and Gentlemen:
We have read the statements made by KV Pharmaceutical Company ("Company")
which we understand have been filed with the Commission, pursuant to Item 4
of Form 8-K/A No. 1 dated June 17, 1996 (copy attached). We have also read
the Company's supplemental letter to the Commission dated June 6, 1996 and the
Commission's comment letters dated May 30 and June 10, 1996. This letter
responds only to the above-mentioned Form 8-K/A.
Regarding the third paragraph of Item 4(d), in our discussions in 1996, we
advised the Company that we questioned the application of the amortization
policy. We discussed with the Company the fact that we believed it more
appropriate to commence amortization of the deferred costs after a relatively
short period of time from date of incurrence, for example, two years or less,
and that if approval was not received in, for example, five years, the
remaining costs should be written-off at that time, rather than only commencing
amortization at that time. The Company stated that the amortization policy
had been reviewed on two occasions with the Commission staff and that, in any
event, the deferred costs were reimbursed under the contract discussed in the
next paragraph. We recommended that this issue again be discussed with the
Commission staff. This issue was not resolved at the time of our resignation.
Regarding the fourth paragraph of Item 4(d), we questioned the accounting for
the transaction as discussed in this paragraph. We questioned what we believed
to be certain ambiguities in the language of the related contract with respect
to potential performance obligations; certain modifications to the contract
which were made subsequent to the Company's year-end; the appropriate revenue
recognition accounting; the economic relevance of amounts assigned in the
contract to various items including stock options; and a valuation as of
April 4, 1996 obtained by the Company of the stock options and the
appropriateness under SFAS No. 123 of the methodology and assumptions used in
such valuation. These questions were unresolved at the time of our
resignation, and we therefore are not in a position to comment on the
statements made by the Company on these matters. However, based on the limited
information available to us at the time of our resignation, it appears that the
options described by the Company were not in the original contract dated in
January 1996 which was made available to us, and instead reflect an amendment
made to the contract which, we believe, occurred after the Company's year-end.
