KV Pharmaceutical Company Completes Unaudited Fiscal 2007 Results; Receives Trading Extension...(were required. Management agreed ...),Health

with the Committee's findings and, as a result, our consolidated

retained earnings as of March 31, 2006 incorporates an additional

$16.3 million of stock-based compensation expense, including related

payroll taxes, interest and penalties, net of $2.6 million in income

tax benefits.

In addition, and as a separate matter, consolidated retained earnings

as of March 31, 2006, incorporates an additional $5.4 million of

income tax expense to record additional liabilities associated with

tax positions claimed on tax returns filed for fiscal years 2004, 2005

and 2006 that should have been recorded in accordance with GAAP,

partially offset by certain expected tax refunds. This adjustment is

not related to the accounting for stock-based compensation expense

discussed above.

In addition, our consolidated retained earnings as of March 31, 2006,

incorporates a $0.4 million reduction of net income, not previously

reported, related primarily to misstatements of net revenues and cost

of sales resulting from improperly recognizing revenue prior to when

title and risk of ownership of the product transferred to the

customer.

(2) The following table reconciles the consolidated balance sheet

previously reported to the restated amounts as of March 31, 2006:

March 31, 2006

As Previously As

Reported Adjustments Restated

Current assets:

Cash and cash equivalents $100,706 $- $100,706

Marketable securities 106,763 - 106,763

Receivables, net 54,746 (1,175) (f) 53,571

Inventories, net
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