Chantal Pharmaceutical Reports Second and Third Quarter.

LOS ANGELES--(BUSINESS WIRE)--May 22, 1996--Chantal Pharmaceutical Corporation (NASDAQ: CHTLE) today reported its results for the second and third quarters of fiscal 1996. In filing the Company's Quarterly Reports on Form 10-Q for the three months ended December 31, 1995 and March 31, 1996, the Company adopted a cash basis revenue recognition policy with respect to sales of the Company's products to be distributed on an autoship basis.

The Company noted that late last week NASDAQ notified it that failure to file its 10-Qs on or before May 20, 1996 would result in delisting from NASDAQ SmallCap stock market. In February, 1996, the Company sought the advice of its independent accountants as to whether its then existing revenue recognition policy was in compliance with generally accepted accounting principles with respect to recognizing its second quarter sales of its Ethocyn products which are subject to autoship distribution. To date, the accountants have not yet completed the procedures that are required in order to render such advice.

Chantal Burnison, Chairman and Chief Executive Officer, commented that "We have continuously stated that we would not allow Chantal Pharmaceutical Corporation to be delisted from the NASDAQ SmallCap market and these filings enable us to fulfill our obligations to NASDAQ and maintain our listing. Upon notice of NASDAQ's communication regarding delisting, the accountants advised the Company to, at this time, adopt a cash basis revenue recognition policy with respect to the autoship sales of Ethocyn products, recognizing that their view may be different upon completion of the procedures." Ms. Burnison further noted that the Company determined to immediately adopt the recommended cash basis revenue recognition policy, complete the financial statements and file the Reports on Forms 10-Q, pursuant to the NASDAQ deadline.

The Company further noted that as a result of reporting revenues on a cash basis, the Company has incurred losses for the nine month period, as opposed to realizing income which would have been the result had the Company reported revenues pursuant to its historical revenue recognition policy.

For the second quarter ended December 31, 1995, the Company reported revenues of $1,168,090 with a net loss of $4,037,150 or $.23 per share. During this same quarter, the Company shipped $21,662,831 of product under the autoship basis to its distributor. This includes $5,955,000 of product that had originally been shipped and recorded as product sales in the first quarter and which were the subject of changes in package UPC labeling in the second quarter.

For the third quarter ended March 31, 1996, the Company reported revenues of $2,023,546 with a net loss of $3,417,010 or $.19 per share. During this quarter, the Company has received purchase orders for product that will be distributed pursuant to the autoship method.

For the nine months ended March 31, 1996, the Company reported revenues of $8,392,212, with a net loss of $6,908,377 or $.39 per share.

Ms. Burnison stated, "Management has confirmed that Stanson has shipped more than $20 million in product to its customers, the majority of which has been sold to customers on the autoship basis." Stanson's customers include Drug Emporiums, Eckerd Drugs, Longs Drug Stores, Meijers, Thrift Drugs, Vartels, Walgreen Drug Stores, Walmarts. Payments of amounts due the Company from such autoship sales, less Stanson's markup, will be reflected in the Company's fourth quarter of fiscal 1996 and first quarter of fiscal 1997. Ms. Burnison stressed that consumer sales of the products are very strong and market channels of product distribution continue to expand. Extraordinarily low number of returns of product exist. Retailers continue to aggressively reorder, with many chains reordering open stock of individual products, confirming satisfaction and repeat purchases by consumers.

Chantal Pharmaceutical Corporation has executive offices, telemarketing and warehouse facilities in Los Angeles, with a laboratory in Kaiserslautern, Germany. In addition to marketing the Chantal Ethocyn Skin Care line, the Company is engaged in the research and development of androgen mediated disorders such as acne, hirsutism, male pattern baldness, benign prostate hypertrophy and treatment of certain cancers.

CONTACT: Martin E. Janis & Company, Inc.

Bev Jedynak, 312/943-1100