As Filed with the Securities and Exchange Commission on April 27, 1998
File No. 000-23425
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES ACT OF 1934
BURZYNSKI RESEARCH INSTITUTE, INC.
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(Name of small business issuer in its Charter)
Delaware 76-0136810
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(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer
Identification No.)
12000 Richmond Avenue, Houston, Texas
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77082-2431
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(Address of Principal Executive Offices)
(Zip Code)
(281) 597-0111
----------------------
(Issuer's Telephone No.)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of Each Exchange on which
to be so Registered Each Class is to be
---------------------- ------------------------
Registered
------
None N/A
- --------------------------- -----------------------------
Securities to be Registered under Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------------------------------
(Title of Class)
(Title of Class)
1
2
PART I
BUSINESS OF THE COMPANY
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Burzynski Research Institute, Inc. (the "Company") was incorporated
under the laws of the State of Delaware in 1984 in order to engage in the
research, production, marketing, promotion and sale of certain medical
chemical compounds composed of growth-inhibiting peptides, amino acid
derivatives and organic acids which are known under the trade name
"Antineoplastons." The Company believes that Antineoplastons are useful in
the treatment of human cancer and other diseases of the body. Antineoplastons
have not been approved for sale or use by the Food and Drug Administration of
the United States Department of Health and Human Services ("FDA") or anywhere
in the world, although the Company is currently conducting Phase II clinical
trials of Antineoplastons. In the event Antineoplastons are registered and/or
approved by the FDA, of which there can be no assurance, the Company will
commence commercial operations, which shall include the production, marketing,
promotion and sale of Antineoplastons in the part or parts of the Territory
(as defined below) in which Antineoplastons become registered.
The Company's sole source of revenue has been and continues to be
payments made by Stanislaw R. Burzynski, M.D., Ph.D. ("Dr. Burzynski")
pursuant to various arrangements between the Company and Dr. Burzynski. The
Company does not expect to obtain revenue from any other source until such
time as Antineoplastons are approved for use and sale by the FDA. However,
the Company may obtain funds for operations in the event that it is successful
in raising capital through the sale of its securities, of which there can be
no assurance. (See Item 7 herein)
ANTINEOPLASTONS
Dr. Burzynski commenced his cancer research in 1967 focusing on the
isolation of various biochemicals produced by the human body as part of the
body's possible defense against cancer. In the course of his research, Dr.
Burzynski identified certain peptides, amino acid derivatives and organic
acids in these biochemicals which appear to inhibit the growth of cancer
cells. These derivatives were given the name "Antineoplastons" by Dr.
Burzynski.
Antineoplastons are found in the body fluids of humans. Dr. Burzynski
believes that these substances counteract the development of cancerous growth
by a biochemical process which does not inhibit the growth of normal tissues.
Antineoplastons were initially isolated by Dr. Burzynski from normal
human blood and urine. To date, Dr. Burzynski has developed six formulations
of natural Antineoplastons and six synthetic formulations of Antineoplastons.
All of the Phase II clinical trials currently being sponsored by the Company
involve the use of four formulations of synthetic Antineoplastons known as A10
and AS2-1 in capsules and injections. The Company is currently conducting
laboratory research involving a new generation of Antineoplastons A10 and
AS2-1.
INTELLECTUAL PROPERTY
From 1982 through 1997, fifty-two patents involving the formulation,
preparation, manufacture, production, use, dosage and treatment with
Antineoplastons (the "Patents") have been issued by the United States Patent
Office and Patent Offices and Patent Officers of twenty-seven countries to Dr.
Burzynski. The Patents for cancer treatment and diagnosis in the United
States and Canada are licensed to the Company pursuant to a License Agreement
dated June 29, 1983, as superseded by Amended License Agreement dated April
24, 1989 and Second Amended License Agreement dated March 1, 1990
(collectively, the "License Agreement"). Pursuant to the License Agreement,
the Company holds an exclusive right to make, use, sell, distribute and
otherwise exploit Antineoplastons in the United States, Canada and Mexico (the
"Territory"). SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The Company has entered into a license agreement with Dr. Burzynski which
grants to the Company the exclusive right, in the United States, Canada, and
Mexico, to use, manufacture, develop, sell, distribute, sub-license and
otherwise exploit all of Dr. Burzynski's rights, title, and interests,
including patent rights, in Antineoplaston drugs in the treatment and
diagnosis of cancer. The Company will not be able to exploit such rights
until such time as Antineoplastons are approved, of which there can be no
assurance, by the FDA for sale in the United States. The Company owns,
pursuant to the license agreement, exclusive rights to five (5) issued United
States Patents and two (2) issued Canadian Patents. The Company has no
patents in Mexico. The Company has one (1) pending patent application in the
United States and one (1) pending patent application in Canada.
The initial four (4) United States Patents (the "Initial Patents") relate
to: (i) Determination of Antineoplastons in body tissue or fluids as a testing
procedure to aid in the diagnosis of cancer; (ii) Processes for the
preparation of purified fractions of Antineoplastons from human urine; (iii)
Processes for the synthetic production of Antineoplastons and methods of
treating neoplastic disease (cancer); and, iv) Administration of
Antineoplastons to humans. The fifth United States patent relates to methods
of synthesizing A-10. The Initial Patents expire from September 11, 2001 to
December 17, 2002. The fifth United States patent expires January 11, 2009.
The two (2) Canadian Patents (the "Canadian Patents") relate to: (i)
Processes for the preparation of purified fractions of Antineoplastons from
human urine and (ii) Processes for the synthetic production of Antineoplastons
and methods of treating neoplastic disease (cancer). The Canadian Patents
expire on June 4, 2002 and November 14, 2006, respectively.
Both of the pending patent applications, one in the United States and the
other in Canada, relate to Liposomal Antineoplaston Therapy using a "second
generation" of Antineoplastons. Should these patents be granted, of which
there can be no assurance, they would expire in the year 2017.
The Company also depends upon unpatented proprietary technology, and may
determine in appropriate circumstances that its interest would be better
served by reliance upon trade secrets or confidentiality agreements rather
than patents.
The Company's success will depend in part on its ability to enforce
patent protection for its products, preserve its trade secrets, and operate
without infringing on the proprietary rights of third parties, in the United
States, Canada, and Mexico. Because of the substantial length of time and
expense associated with bringing new products through development and
regulatory approval to the marketplace, the pharmaceutical and biotechnology
industries place considerable importance on obtaining and maintaining patent
and trade secret protection for new technologies, products and processes.
There can be no assurance that the Company will develop additional products
and methods that are patentable or that present or future patents will provide
sufficient protection to the Company's present or future technologies,
products and processes. In addition, there can be no assurance that others
will not independently develop substantially equivalent proprietary
information, design around the Com-pany's patents or obtain access to the
Company's know-how or that others will not successfully challenge the validity
of the Company's patents or be issued patents which may prevent the sale of
one or more of the Company's product candidates, or require licensing and the
payment of significant fees or royalties by the Company to third parties in
order to enable the Company to conduct its business. Legal standards relating
to the scope of claims and the validity of patents in the fields in which the
Company is pursuing research and development are still evolving, are highly
uncertain and involve complex legal and factual issues. No assurance can be
given as to the degree of protection or competitive advantage any patents
issued to the Company will afford, the validity of any such patents or the
Company's ability to avoid violating or infringing any patents issued to
others. Further, there can be no guarantee that any patents issued to or
licensed by the Company will not be infringed by the products of others.
Litigation and other proceedings involving the defense and prosecution of
patent claims can be expensive and time consuming, even in those instances in
which the outcome is favorable to the Company, and can result in the diversion
of resources from the Company's other activities. An adverse outcome could
subject the Company to significant liabilities to third parties, require the
Company to obtain licenses from third parties or require the Company to cease
any related research and development activities or sales.
The Company depends upon the knowledge, experience and skills (which are
not patentable) of its key scientific and technical personnel. To protect its
rights to its proprietary information, the Company requires all employees,
consultants, advisors and collaborators to enter into confidentiality
agreements which prohibit the disclosure of confidential information to anyone
outside the Company and require disclosure and assignment to the Company of
their ideas, developments, discoveries and inventions. There can be no
assurance that these agreements will effectively prevent the unauthorized use
or disclosure of the Company's confidential information.
GOVERNMENT REGULATION
The FDA imposes substantial requirements upon, and conditions precedent
to, the introduction of therapeutic drug products through lengthy and detailed
laboratory and clinical testing procedures, sampling activities and other
costly and time consuming procedures. There can be no assurance that the
Company can satisfy FDA regulatory protocol to gain approval for
Antineoplastons in the United States or that FDA approval for the sale of
Antineoplastons in the United States will be obtained.
The effect of the FDA drug approval process for Antineoplastons may
impose costly procedures upon the Company's activities and to furnish a
competitive advantage to the other companies which may compete with the
Company in the field of cancer treatment drugs. The extent of potentially
adverse government regulations which might arise from future legislation or
administrative action cannot be predicted.
The Investigational New Drug Application Process in the United States
The Investigational New Drug Application Process in the United States is
governed by regulations established by the FDA which strictly control the use
and distribution of investigational drugs ("IND"s) in the United States. The
guidelines require that an application for an IND, filed by a sponsor, contain
sufficient information to justify administering the drug to humans, that the
application include relevant information on the chemistry, pharmacology and
toxicology of the drug derived from chemical, laboratory and animal or in
vitro testing, and that a protocol (the "Protocol") be provided for the
initial study of the new drug to be conducted on humans.
In order to conduct a clinical trial of a new drug in humans, a sponsor
must prepare and submit to the FDA a comprehensive IND application. The focal
point of the IND is a description of the overall plan for investigating the
drug product and a comprehensive protocol for each planned study. The plan is
carried out in three phases: Phase I, in which the pharmacological effects and
possible toxicity are evaluated in a small number of volunteers or patients;
Phase II, in which the drug is carefully evaluated in a small population of
patients for the effectiveness of the drug and short-term side effects in
controlled clinical trials; and Phase III, in which greater numbers of
patients are employed and broader information is gathered to provide the basis
for the drug's proper use by physicians.
An investigator's brochure must be included in the IND and the IND must
commit the sponsor to obtain initial and continual review and approval of the
clinical investigation. A section describing the composition, manufacture and
control of the drug substance and the drug product is included. Sufficient
information is required to be submitted to assure the proper identification,
quality, purity and strength of the investigational drug. A description of
the drug substance, including its physical, chemical, and biological
characteristics, must also be included in the IND. The general method of
preparation of the drug substance must be included. A list of all components
including interactive ingredients must also be submitted. There must be
adequate information about pharmacological and toxicological studies of the
drug involving laboratory animals or in vitro tests on the basis of which the
sponsor has concluded that it is reasonably safe to conduct the proposed
clinical investigation. Where there has been widespread use of the drug
outside of the United States or otherwise, it is possible in some limited
circumstances to use well-documented clinical experience in place of some
other pre-clinical work.
After the FDA approves the IND or allows it to become effective, the
investigation is permitted to proceed, during which the sponsor must keep the
FDA informed of new studies, including animal studies, make progress reports
on the study or studies covered by the IND, and also be responsible for
informing FDA and clinical investigators immediately of unforeseen serious
side effects or injuries.
When the clinical testing has been completed and analyzed, final manufacturing
processes and procedures are in place, and other information required to be in
a New Drug Application (an "NDA") is available to the manufacturer, a
manufacturer may submit an NDA to the FDA. An NDA must be approved by the FDA
covering the drug before its manufacturer can commence commercial distribution
of the drug. The NDA contains a section describing the clinical
investigations of the drug which section includes, among other things, the
following: a description and analysis of each controlled clinical study
pertinent to a proposed use of the drug; a description of each uncontrolled
clinical study including a summary of the results and a brief statement
explaining why the study is classified as uncontrolled; and a description and
analysis of any other data or information relevant to an evaluation of the
safety and effectiveness of the drug product obtained or otherwise received by
the applicant from any source foreign or domestic. The NDA also includes an
integrated summary of all available information about the safety of the drug
product including pertinent animal and other laboratory data, demonstrated or
potential adverse effects of the drug, including clinical significant
potential adverse effects of administration of the drug contemporaneously with
the administration of other drugs and other related drugs. A selection is
included describing the statistical controlled clinical study and the
documentation and supporting statistical analysis used in evaluating the
controlled clinical studies.
Another section of the NDA describes the human pharmacokinetic data and
human bioavailability data (or information supporting a waiver of the
submission of in vivo bioavailability data). Also included in the NDA is a
section describing the composition, manufacture and specification of the drug
substance including the following: a full description of the drug substance,
its physical and chemical characteristics; its stability; the process controls
used during manufacture and packaging; and such specifications and analytical
methods as are necessary to assure the identity, strength, quality and purity
of the drug substance as well as the bioavailability of the drug products made
from the substance. NDAs contain lists of all components used in the
manufacture of the drug product and a statement of the specifications and
analytical methods for each component. Also included are studies of the
toxicological actions of the drug as they relate to the drug's intended uses.
The data in the NDA must establish that the drug has been shown to be
safe for the use under its proposed labeling conditions and that there is
substantial evidence that the drug is effective for its proposed use(s).
Substantial evidence is defined by statute and FDA regulation to mean evidence
consisting of adequate and well-controlled investigations, including clinical
investigations by experts qualified by scientific training and experience, to
evaluate the effectiveness of the drug involved.
PHASE II CLINICAL TRIALS CURRENTLY BEING CONDUCTED BY THE COMPANY
The Company is currently sponsoring seventy-two Phase II clinical trials,
which are being conducted pursuant to INDs filed with the FDA of which all are
currently ongoing. Dr. Burzynski is acting as principal investigator during
the clinical trials pursuant to a March 25, 1997 Royalty Agreement between the
Company and Dr. Burzynski (see Item 7 herein.) All of the clinical trials are
conducted at the offices of Dr. Burzynski in Houston, Texas.
One of the clinical trials is for the treatment of breast cancer using
Antineoplaston A10 capsules in combination with the FDA-approved drug
Methotrexate. All other clinical trials are for the treatment of a wide
variety of cancers using only a combination of Antineoplastons A10 and AS2-1.
In most of these trials the intravenous formulations of Antineoplastons are
used. In a few other trials, the oral formulations of Antineoplastons are
used.
Prior to approving an NDA ,the FDA requires only that a drug's safety and
efficacy be demonstrated in "well-controlled" clinical trials. Several
different types of controls are acceptable to the FDA. One of these is
"Historic Control." If the course of a disease is well-known, the response of
patients taking a drug can be compared to a historic group of patients with
that disease who have not had medical intervention. For example, it is known
that the tumors of patients suffering from primary malignant brain tumors
("PMBT") will continue to grow, eventually causing the patient's death. If a
drug is administered to a patient with PMBT and the tumors of the patient
disappear or shrink significantly, an assumption is made that there has been a
response to the drug. All of the Company's clinical trials, except the study
with Antineoplaston A10 and Methotrexate involve the use of Historic Controls.
Further, all trials except one are "prospective clinical trials" ("PCT").
A PCT is a clinical trial wherein patients are accrued into and follow the
clinical trial protocol from the very beginning of the trial. A retrospective
trial, is a trial in which data from patients treated prior to the start of a
clinical trial is considered. Results of retrospective trials are, in most
instances, not acceptable to the FDA.
The ultimate goal of any treatment for cancer is patient survival.
However, the FDA has determined that requiring exhaustive data showing
improved patient survival may unnecessarily delay the approval of new drugs.
For that reason, the FDA permits sponsors of potential cancer treatment drugs
to submit data showing benefit using "Surrogate Endpoints" (Milestone{s}),
which correlate to patient benefit and probable improved survival. Each of
the Company's Phase II trials describes such Milestones used to determine
success or failure of the treatment employed. In most of the trials the
Milestones used are radiographic evidence of tumor shrinkage by X-ray,
computer aided tomography ("CT Scan") or magnetic resonance imaging ("MRI").
Where appropriate, tumor markers such as Prostate Specific Antigen ("PSA"),
blood counts, or bone marrow biopsy are used in order to assess a tumor's
growth.
Where tumor size is used as the Milestone, each clinical trial Protocol
describes a "complete response" as a complete disappearance of all tumors with
no reoccurrence of tumors for at least four weeks. A "partial response" is
described as at least a 50% reduction in the size of the total tumor size,
with such reduction lasting at least four weeks. A "response" is described as
either a complete or partial response. "Stable disease" is described as less
than 50% reduction in size but no more than 50% increase in size of the tumor
mass, lasting for at least twelve weeks. "Progressive disease" is described
as more than 50% increase in total tumor mass or occurrence of new tumors.
The protocols of the Company's clinical trials are of a two-stage design,
wherein twenty patients are initially to be accrued. After a specified time
period, if there are zero responses by patients after the first twenty
patients, the trial will be discontinued and the drug declared to have less
than desired activity. If there is at least one response, the trial will be
continued until forty patients have been accrued. If the study continues, the
following conclusions according to protocols based on forty patients can be
made: If there are three or fewer responses, then there is less than desired
activity. If there are four or more responses , then there is sufficient
evidence to conclude that the Antineoplaston regimen used shows beneficial
activity.
There are no clinical trials being conducted that involve "double blind"
studies and all but one clinical trial involve no randomization into multiple
treatment groups. The one randomized trial is of A10 capsules plus
Methotrexate, a proven chemotherapy agent, in the treatment of breast cancer.
In this trial, persons are randomized into one of two groups; one group
receives Methotrexate alone and one group receives Methotrexate and A10
capsules.
As of October 1997, only two of the clinical trials have reached a Milestone.
These are "Clinical Trial BT-18" and "Clinical Trial BT-11." Clinical Trial
BT-18 is a trial involving the use of intravenous administration of
Antineoplastons A10 and AS2-1 in the treatment of "mixed glioma", a type of
PMBT. This trial was approved by the FDA in March of 1996, and the results
have been evaluated after nine patients had been accrued. Of these there have
been two complete responses and two partial responses. Another trial of
Clinical Trial BT-11 involves patients with brain stem glioma. This trial was
approved by the FDA in May 1996. After accrual of twelve patients there was
one complete and three partial responses. However, there can be no assurance
that the results of Clinical Trial BT-18 or Clinical Trial BT-11 can be
repeated or that the other clinical trials will result in the same or similar
responses . The Company intends to release updated information when it
becomes available.
The one trial that is retrospective is the CAN-1 Clinical Trial, which is
a clinical trial of patients treated by Dr. Burzynski through February 23,
1996. An analysis has been made of the patients with PMBT in the CAN-1 trial.
Of forty evaluable patients, seventeen have experienced more than 50%
reduction in the size of their tumors, of whom seven had complete
disappearance of tumor. The FDA has indicated it will not accept the data
generated by this trial since it was not a wholly prospective one.
Notwithstanding the response results of Clinical Trial BT-18 and Clinical
Trial BT-11, management believes that it is likely that the FDA may require
that additional clinical trials based upon the Clinical Trial BT-18 and
Clinical Trial BT-11 Protocols be conducted by an institution not affiliated
with the Company or Dr. Burzynski before advising that an NDA filing is
warranted. At the present time the Company cannot predict when the Company
will submit an NDA to the FDA, nor can the Company estimate the number or type
of additional trials the FDA will require. Further, there can be no assurance
that a NDA for Antineoplastons, as a treatment for cancer, will ever be
approved by the FDA.
No assurance can be given that any new IND for clinical tests on humans
will be approved by the FDA for human clinical trials on cancer or other
diseases, or that the results of such human clinical trials will prove that
Antineoplastons are safe or effective in the treatment of cancer, or other
diseases, or that the FDA would approve the sale of Antineoplastons in the
United States if any application were to be made by the Company.
The following table sets forth the title of the Protocol, the subject of
the Protocol with dates submitted to the FDA, the number of persons currently
enrolled in each study, and the number of persons who may ultimately
participate in each study.
ACTIVE PHASE II CLINICAL TRIALS
NUMBER OF PERSONS ENROLLED NUMBER OF PATIENTS WHO MAY
PARTICIPATE IN THE STUDY
TITLE OF PROTOCOL SUBJECT OF PROTOCOL AND DATE
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AD-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF THE ADRENAL GLAND; Revised 7/20/96; Revised 9/28/96; Revised
4/14/97.
2 40
BL-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
CARCINOMA OF THE BLADDER; Revised 7/20/96; Revised 9\28/96; Revised 4/14/97.
--------------------------------------------------------------------------
3 40
- --
BR-10 PROTOCOL FOR RANDOMIZED CONTROLLED TRIAL COMPARING METHOTREXATE
TREATMENT ALONE TO THE COMBINATION OF METHOTREXATE AND ANTINEOPLASTON A10;
Revised 4/12/97, Revised 7/28/97.
7 40
- --
BR-12 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
CARCINOMA OF THE BREAST, Revised 7/20/96; Revised 4/29/97. 17 40
------------------------------------------------------- -- --
BR-14 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 CAPSULES IN PATIENTS
-------------------------------------------------------------------
WITH ADVANCED BREAST CANCER; 8/26/96; Revised 12/10/96; Revised 4/12/97. 6
- ------------------------------------------------------------------------ -
40
--
BR-6 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN CHILDREN
---------------------------------------------------------------------
WITH HIGH GRADE GLIOMA; March 1996. 9 40
----------------------------------- - --
BT-7 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
GLIOBLASTOMA MULTIFORME; March 1996; 34 40
-------------------------------- -- --
BT-8 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
ANAPLASTIC ASTROCYTOMA; Revised 4/14/97; Revised 9/15/97. 9 40
----------------------------------------------------- - --
BT-9 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
BRAIN TUMORS; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97. 11 40
------------------------------------------------------------ -- --
BT-10 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH
----------------------------------------------------------------
BRAIN TUMORS; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97. 5 40
------------------------------------------------------------- - --
BT-11 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
BRAIN STEM GLIOMA; Revised 5/15/96; Revised 7/11/96; Revised 9/28/96; Revised
5/10/97.
15 40
-- --
BT-12 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH
PRIMITIVE NEUROECTODERMAL TUMORS; (PNET), Revised 7/11/96, Revised 9/28/96;
Revised 4/14/97.
5 40
- --
BT-13 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH LOW
GRADE ASTROCYTOMA; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97; Revised
9/5/97.
7 40
- --
BT-14 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH
RHABDOID TUMOR OF THE CENTRAL NERVOUS SYSTEM; Revised 5/17/96; Revised
7/11/96; Revised 9/28/96; Revised 4/14/97.
3 40
- --
BT-15 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN ADULT PATIENTS
WITH ANAPLASTIC ASTROCYTOMA; Revised 7/26/96; Revised 10/4/96; Revised
4/14/97; Revised 9/5/97.
17 40
-- --
BT-16 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN ADULT PATIENTS
----------------------------------------------------------------
WITH LOW GRADE ASTROCYTOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
---------------------------------------------------------------------------
5 40
- --
BT-17 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN ADULT PATIENTS
----------------------------------------------------------------
WITH OLIGODENDROGLIOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
---------------------------------------------------------------------------
5 40
- --
BT-18 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN ADULT PATIENTS
-----------------------------------------------------------------
WITH MIXED GLIOMA; Revised 7/26/96; Revised 10/4/96; Revised 12/9/96; Revised
----------------------------------------------------------------------------
4/14/97. 12 40
-------- -- --
BT-19 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
NEUROFIBROMA AND SCHWANNOMA; Revised 4/14/97. 0 40
------------------------------------------ - --
BT-20 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN ADULT PATIENTS
WITH GLIOBLASTOMA MULTIFORME; Revised 7/26/96; Revised 10/4/96; Revised
4/14/97.
35 40
-- --
BT-21 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN ADULT PATIENTS
WITH PRIMARY MALIGNANT BRAIN TUMORS; Partially Amended, pg. 9/5/95; Revised
9/10/96; Revised 4/14/97; Revised 8/25/97.
19 40
-- --
BT-22 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH
PRIMARY MALIGNANT BRAIN TUMORS; Partially Amended, pg. 11/5/97; Revised
4/14/97; Revised 9/10/97.
4 40
- --
BT-23 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
CHILDREN WITH VISUAL PATHWAY GLIOMA; 5/22/96; Revised 11/18/96; Revised
4/14/97.
2 40
- --
BT-24 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
---------------------------------------------------------------
PATIENTS WITH EPENDYMOMA; 5/15/96; Revised 11/18/96; Revised 4/14/97. 7
-------------------------------------------------------------- -
40
--
BT-25 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
---------------------------------------------------------------
PATIENTS WITH CRANIOPHARYNGIOMA; 5/15/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------
0 40
- --
BT-26 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
PATIENTS WITH CHOROID PLEXUS NEOPLASM; 5/15/96; Revised 11/18/96; Revised
4/14/97. 1 40
BT-27 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
---------------------------------------------------------------
PATIENTS WITH GERM CELL TUMOR OF THE BRAIN; 5/15/96; Revised 11/18/96; Revised
-----------------------------------------------------------------------
4/14/97. 0 40
-------- - --
BT-28 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN
---------------------------------------------------------------
PATIENTS WITH MENINGIOMA; 5/17/96; Revised 9/10/96; Revised 4/14/97. 2
------------------------------------------------------------- -
40
--
CAN-1 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
REFRACTORY MALIGNANCIES; Revised 7/11/96. 133 133
--------------------------------------- --- ---
CO-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE COLON; Revised 7/9/96; Revised 9/7/96; (RE-2 was added
to this Protocol) Revised 4/14/97.
12 40
-- --
CO-3 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 CAPSULES IN PATIENTS
WITH ADENOCARCINOMA OF THE COLON; Revised 8/12/96; Revised 12/2196.
4 40
- --
ES-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE ESOPHAGUS; Revised 7/9/96; Revised 9/10/96; Revised
10/30/96; Revised 4/14/97.
4 40
- --
HB-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH
HEPATOBLASTOMA; Revised 7/8/96; Revised 9/10/96; Revised 3/2/97; Revised
4/14/97.
0 40
- --
HE-2 PHASE II STUDY OF ANTINEOPLASTONS A10 IN PATIENTS WITH PRIMARY LIVER
--------------------------------------------------------------------
CANCER; Origination date 2/12/97; Revised 5/28/97. 1 40
-------------------------------------------------- - --
HN-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF THE HEAD AND NECK; Revised 7/9/96; Revised 9/10/96; Revised
11/6/96; added Children's Informed Consent, Revised 4/14/97.
6 40
- --
LA-3 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97;
Revised 6/26/97.
13 40
-- --
LA-4 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
LARGE CELL, UNDIFFERENTIATED CARCINOMA OF THE LUNG Revised 7/20/96; Revised
9/28/96, Revised 12/11/96; Revised 4/14/97.
4 40
- --
LA-5 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
BRONCHIAL ALVEOLAR CARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96;
Revised 12/11/96; Revised 4/14/97.
1 40
- --
LA-6 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
SQUAMOUS CELL CARCINOMA OF THE LUNG; Revised 7/26/96; Revised 10/4/96; Revised
4/14/97.
5 40
- --
LA-7 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
SMALL CELL CARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96; Revised
--------------------------------------------------------------------------
4/14/97. 2 40
------ - --
LA-10 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 CAPSULES IN PATIENTS
-------------------------------------------------------------------
WITH NON SMALL CELL LUNG CANCER; Revised 8/12/96; Revised 9/9/96; Revised
- ------------------------------------------------------------------------------
12/9/96. 9 40
-------- - --
LY-3 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
NON-HODGKIN'S LYMPHOMA ; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.
--------------------------------------------------------------------------
2 40
- --
LY-6 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
NON-HODGKIN'S LYMPHOMA, LOW GRADE; Revised 6/22/96; Revised 8/12/96; Revised
9/28/96; Revised 10/23/96; Revised 5/11/97.
18 40
-- --
LY-7 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
NON-HODGKIN'S LYMPHOMA, INTERMEDIATE GRADE; Revised 6/22/96; Revised 8/12/96;
Revised 9/28/96; Revised 10/23/96; Revised 4/14/97.
10 40
-- --
LY-8 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
NON-HODGKIN'S LYMPHOMA, HIGH GRADE; Revised 6/22/96; Revised 5/11/96. 1
---------------------------------------------------------------- -
40
--
LY-9 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
MANTLE ZONE LYMPHOMA., Revised 6/22/96; Revised 9/10/96; Revised 4/14/97.
--------------------------------------------------------------------
4 40
- --
LY-10 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 WITH CHRONIC
---------------------------------------------------------------
MYELOGENOUS LEUKEMIA; Revised 10/4/96; Revised 4/14/97. 0 40
----------------------------------------------- - --
LY-11 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
---------------------------------------------------------------
MYCOSIS FUNGOIDES - SEZARY SYNDROME; Revised 9/10/96; Revised 4/14/97. 0
------------------------------------------------------------------ -
40
--
LY-12 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
PRIMARY CENTRAL NERVOUS SYSTEM LYMPHOMA; Revised 9/10/96; Revised 4/14/97.
0 40
- --
LY-13 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
PRIMARY LYMPHOMA OF THE GASTROINTESTINAL TRACT; Revised 9/10/96; Revised
4/14/97.
0 40
- --
LY-14 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 INFUSIONS IN PATIENTS
WITH CHRONIC LYMPHOCYTIC LEUKEMIA; Revised 5/22/96; Revised 9/18/96; Revised
12/9/96; Revised 4/14/97.
2 40
- --
MA-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
MESOTHELIOMA; Revised 7/8/96; Revised 9/10/96; Revised 4/14/97. 4 40
----------------------------------------------------------- - --
ME-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
MALIGNANT MELANOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97. 8
------------------------------------------------------------------ -
40
--
MF-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
MALIGNANT FIBROUS HISTIOCYTOMA; June 1997. 0 40
-------------------------------------- - --
MM-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
MULTIPLE MYELOMA; Revised 7/26/96; Revised 10/2/96. 5 40
----------------------------------------------- - --
MW-2 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
MACROGLOBULINEMIA OF WALDESTROM; Revised 7/26/96; Revised 10/4/96; Revised
4/14/97.
0 40
- --
NB-2 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
NEUROBLASTOMA; Orig: Dec 6, 1996; Revised 2/13/97; Revised 4/14/97. 1
-------------------------------------------------------------- -
40
--
NE-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
NEUROENDOCRINE TUMORS; Revised 7/9/96; Revised 9/10/96; Revised 4/14/97. 3
-------------------------------------------------------------------- -
40
--
OV-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
CARCINOMA OF THE OVARY; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
--------------------------------------------------------------------------
5 40
- --
PA-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF THE PANCREAS; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
11 40
-- --
PN-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
PRIMITIVE NEUROECTODERMAL TUMOR OUTSIDE THE CENTRAL NERVOUS SYSTEM; Orig: Dec
6, 1996; Revised 2/10/97; Revised 4/14/97.
1 40
- --
PR-4 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE PROSTATE; Revised 7/5/96; Revised 10/3/96; Revised
7/9/97; Revised 10/14/97.
11 40
-- --
PR-5 PHASE II STUDY OF ADENOCARCINOMA OF THE PROSTATE WITH ANTINEOPLASTON
A10 AND AS2-1 CAPSULES; Revised 5/16/96; Revised 7/29/96; Revised 10/3/96;
Revised 10/14/97.
16 40
-- --
PR-6 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 CAPSULES IN
COMBINATION WITH TOTAL ANDROGEN BLOCKADE IN PATIENTS WITH ADENOCARCINOMA OF
THE PROSTATE. 8/1/97; Revised 8/25/97.
0 40
- --
PR-8 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE PROSTATE; Revised 7/5/96; Revised 9/10/96; Revised
4/14/97; Revised 10/14/97.
0 40
- --
RN-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF THE KIDNEY, Revised 7/20/96; Revised 9/28/96; Revised 10/25/96;
Revised 4/14/97.
9 40
- --
SA-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH SOFT
---------------------------------------------------------------------
TISSUE SARCOMA; Revised 7/8/96; Revised 9/10/96; revised 4/14/97. 8 40
- ----------------------------------------------------------------- - --
SI-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
----------------------------------------------------------------
CARCINOMA OF THE SMALL INTESTINE; Revised 7/9/96; Revised 9/10/96; Revised
--------------------------------------------------------------------------
4/14/97. 1 40
----- - --
ST-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
ADENOCARCINOMA OF THE STOMACH; Revised 7/8/96; Revised 9/10/96; Revised
4/14/97.
6 40
- --
UC-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF THE UTERINE CERVIX AND/OR VULVA; Revised 7/20/96; Revised
9/28/96; Revised 4/14/97.
8 40
- --
UP-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH
CARCINOMA OF AN UNKNOWN PRIMARY; Revised 7/8/96; Revised 9/10/96; Revised
4/14/97.
6 40
WT-2 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH
WILMS' TUMOR. Revised 7/8/96; Revised 9/10/96; Revised 4/14/97. 2 40
COMPETITION
There are many companies, universities, research teams and scientists,
both private and government-sponsored, which are engaged in research aimed at
producing cancer treatment agents and which have far greater financial
resources and larger research staffs and facilities than the Company. In
addition, there are other companies and entities, both private and
government-sponsored, which are engaged in research aimed at compounds similar
or related to the Company's Antineoplastons. To the extent that the United
States Government also conducts research or supports other companies or
individuals in their research, such companies or individuals may have a
competitive advantage over the Company.
RESEARCH AND DEVELOPMENT
The Company's principal research and development efforts conducted on
behalf of Dr. Burzynski are currently diverted toward Antineoplastons. The
anticancer activity of these compounds has been documented in preclinical
studies employing the methods of cell culture, pharmacology, cell biology,
molecular oncology, experimental therapeutics and animal models of cancer. At
the level of Phase II clinical studies, the Company believes that the
anticancer activity of Antineoplastons is supported by preliminary results
from ongoing, FDA authorized, Phase II clinical trials.
The cellular mechanism underlying the anticancer effects of Antineoplastons
continues to be investigated in both the Company's own basic preclinical
research program and in independent laboratories around the world. A review
of this work suggests several mechanisms that may underlie the antineoplastic
activity of Antineoplastons. For example, it has been found, in cell culture
experiments, that Antineoplastons induce pathologically undifferentiated
cancer cells to assume a more normal state of differentiation. Cell culture
experiments have also shown that Antineoplaston components can kill some
cancer cells by activating the cell's intrinsic "suicide" program. It must be
noted that data collected in cell culture experiments may or may not indicate
the mechanism of action of Antineoplastons in humans.
At a more molecular or sub-cellular level, cell culture experiments have
shown that Antineoplastons can block biochemical pathways involving oncogenes
required to produce abnormal cell growth. In addition, cell culture
experiments have shown that Antineoplastons can increase the expression of
anticancer tumor suppressor genes. Although these experiments were conducted
using human cancer cells, they may or may not indicate the mechanism of
Antineoplaston action in humans.
In addition to the original family of Antineoplaston compounds (the
"Parental Generation"), the Company continues its development of a second
generation of Antineoplastons. In cell culture experiments the second
generation Antineoplastons which were developed by the Company, have been
shown to be at least a thousand times more potent then the Parental
Generation.
The Company is also developing a third generation of structurally altered
Antineoplaston that the Company believes will exhibit markedly improved
anticancer activity in human cancer cell lines that have been resistant to the
Parental Generation. However, increases of antineoplastic activity in cell
culture experiments may or may not translate into increased efficacy in
humans.
The Company is also involved in ongoing studies examining the
pharmacokinetics (absorption, distribution, metabolism, and excretion) and
pharmacodynamics (dose-response) of Antineoplastons in patients with
neoplastic disease.
Total research and development expense for 1997 and 1996 were
approximately $993,947 and $461,094, respectively. The Company's 1998
research and development plan calls for approximately $700,000 in development
costs. For the six months ended August 31, 1997, the Company incurred
approximately $364,000 in research and development costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company is primarily engaged as a research and development facility of
drugs currently being tested for the use in the treatment of cancer, and
provides consulting services. The Company is currently conducting
approximately 74 FDA approved clinical trials. The Company holds the
exclusive right in the United States, Canada and Mexico to use, manufacture,
develop, sell, distribute, sublicense and otherwise exploit all the rights,
titles and interest in antineoplaston drugs used in the treatment of cancer,
once the drug is approved for sale by the United States Federal Drug
Administration. The Company receives the majority of its funding from
Stanislaw Burzynski, M.D., Ph.D. (Dr. Burzynski), who is President, Chairman
of the Board and owner of over 80% of the Company's outstanding stock.
RESULTS OF OPERATIONS
- -----------------------
Research and development costs were $6,735,605 and $5,713,241 for the years
ending in 1997 and 1996. The increase of $1,022,364 or 17.9% was due to a
$801,000 increase in product material costs, a $101,000 increase in water
production costs and a $120,000 increase in wages.
General and administrative expenses were $983,154 and $1,206,326 for the years
ending in 1997 and 1996. The decrease of $223,172 or 18.5% was due to the
following: (1) increase in legal fees of $133,571, (2) decrease in personnel
cost of $398,700 and (3) increase in other G&A expenses of $41,900.
FINANCIAL CONDITION
- --------------------
The Company had net losses of $7,953,040 and $7,186,523 for the years ended
February 28, 1997 and February 29, 1996. The increase in the net loss from
1996 to 1997 is mostly attributable to the increase in the research and
development cost mainly due to increases in material and production costs. As
of February 28, 1997 the Company has a total stockholders' deficit of
$963,234.
The Company's operations have been fund entirely by Dr. Burzynski. Effective
March 1, 1997 the Company entered into a research funding agreement with Dr.
Burzynski agreement the Company agrees to undertake all scientific research in
connection with the development of new or improved antineoplastons for the
treatment of cancer and other diseases. The Company will hire such personnel
as is required to fulfill this obligation. Dr. Burzynski agrees to fund in
its entirety all basic research, which the Company undertakes in connection
with the development of other antineoplastons or refinements to existing
antineoplastons for the treatment of cancer. Dr. Burzynski agrees to pay the
expenses to conduct the clinical trials for the Company. Dr. Burzynski agrees
to provide the Company such laboratory and research space as the Company needs
at the Trinity Drive facility in Stafford, Texas and such office space as are
necessary at Trinity Drive facility and at 12000 Richmond Avenue facility.
Dr. Burzynski may fulfill his obligation in part by providing such
administrative staff as is necessary for the Company to manage its business.
Dr. Burzynski agrees to pay the full amount of the monthly and annual budget
or expenses for the operation of the Company, together with such other
unanticipated but necessary expenses which the Company incurs. In the event
the research results in the approval of any additional patents, Dr. Burzynski
shall own all such patents, but shall license to the Company the patents based
on the same terms, conditions and limitations as is in the current license
between the parties. Dr. Burzynski shall have unlimited and free access to
all equipment which the Company owns, so long as such use in not in conflict
with the Company's use of such equipment, including without limitation to all
equipment used in manufacturing of antineoplastons used in the clinical
trials. The amounts which Dr. Burzynski is obligated to pay under the
agreement shall be reduced dollar for dollar by the following: (1) any income
which the Company receives for services provided to other companies for
research and/or development of other products, less such identifiable marginal
or additional expenses necessary to produce such income, or (2) the net
proceeds of any stock offering or private placement which the Company receives
during the term of the agreement up to a maximum of $1,000,000 in a given
Company fiscal year. The initial term of the agreement is one year, and will
be automatically renewed for three additional one year terms, unless one party
notifies the other party at least ninety days prior to the expiration of the
term of the agreement of its intention not to renew the agreement. The
agreement shall automatically terminate in the event that Dr. Burzynski owns
less than fifty percent of the outstanding shares of the Company, or is
removed as President and or Chairman of the Board of the Company, unless Dr.
Burzynski notifies the Company in writing his intention to continue the
agreement notwithstanding this automatic termination provision. There is no
assurance that Dr. Burzynski will be able to fulfill his part of this research
funding agreement.
It is the Company's intention to seek additional capital through the sale of
securities. The proceeds from such sales will be used to fund the Company's
operating deficit until it achieves positive operating cash flow. There can
be no assurance that the Company will be able to raise such additional
capital.
IMPACT OF THE YEAR 2000 ISSUE
- ----------------------------------
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has not assessed the impact of the year 2000 issue. The Company
plans to assess this issue during 1998 and to formulate a plan to deal with
the issue.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not own or invest in real estate, interests in real
estate, real estate mortgages or securities of or interests in persons
primarily engaged in real estate activities.
The Company maintains its laboratory in premises owned by Dr. Burzynski
and his wife, Dr. Barbara Burzynski (the "Burzynskis"). Pursuant to
arrangements with the Burzynskis (see Item 7 herein), the Company occupies
certain premises located at (i) 12707 Trinity Drive, Stafford, Texas for
office, laboratory and medical research purposes (comprised of a total of 675
square feet); and (ii) 12000 Richmond Avenue, Houston, Texas for its executive
offices (comprised of a total of 1569 square feet).
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Amount and nature
Title of class Name / address of beneficial owner of beneficial
- ---------------- ---------------------------------- -------------
owner Percent of class
- ----- ------------------
Common Stock Stanislaw R. Burzynski, M.D., Ph.D. 105,000,000
shares 79.92%
SECURITY OWNERSHIP OF MANAGEMENT.
Amount and nature
Title of class Name / address of beneficial owner of beneficial
- ---------------- ---------------------------------- -------------
owner Percent of class
- ----- ------------------
Common Stock Stanislaw R. Burzynski, M.D., Ph.D. 105,000,000
shares 79.92%
Common Stock Tadeusz Burzynski, M.Sc., .E.E. 712,506
shares .54%
Common Stock Dean Mouscher 206,000 shares
.16%
Common Stock Barbara Burzynski, M.D. 50,000 shares
.038%
Common Stock Michael H. Driscoll, Esq. 275,000 shares
.21%
As of April 27, 1998, there were 131,389,444 shares of the Company's
Common Stock outstanding.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the Company are as follows:
Name Age Office
---- --- ------
Stanislaw R. Burzynski, M.D., Ph.D. 54 Director and
President
Tadeusz Burzynski, M.Sc., E.E. 65 Senior Vice President and
Director
Dean Mouscher 45 Secretary
Barbara Burzynski, M.D. 57 Director
Michael H. Driscoll, Esq. 51 Director
Carlton Hazelwood, Ph.D. 62 Director
STANISLAW R. BURZYNSKI, M.D., PH.D. , has been a Director, President, and
Chairman of the Board of Directors of the Company since its inception in 1984.
Dr. Burzynski is a physician in private practice in Houston, Texas
specializing in the treatment of cancer. Dr. Burzynski is the husband of
Barbara Burzynski, M.D. and the brother of Tadeusz Burzynski, M.Sc., E.E.
Currently listed in Who's Who In The World, and a member in good standing
with both the American and World Medical Associations, Dr. Burzynski, is an
internationally recognized physician and scientist who has pioneered the
development and use of biologically active peptides in diagnosing, preventing,
and treating cancer since 1967. In 1967, Dr. Burzynski graduated from the
Medical Academy in Lublin Poland, with an M.D. degree with distinction,
finishing first in his class of 250, and subsequently earned his Ph.D. in
Biochemistry.
From 1970 to 1977, he was a researcher and Assistant Professor at Baylor
College of Medicine in Houston, at Baylor, Dr. Burzynski's research was
sponsored and partially funded by the National Cancer Institute. Also at
Baylor, he authored and co-authored sixteen publications, including five
concerning his research on peptides and their effect on human cancer. Four of
these publications were also co-authored by other doctors associated with M.D.
Anderson Hospital and Tumor Institute, and Baylor College of Medicine. In
May, 1977, Dr. Burzynski received a Certificate of Appreciation from Baylor
College of Medicine and in that same year founded the Company.
Dr. Burzynski is a member of the American Medical Association, American
Association for Cancer Research, Harris County Medical Society, New York
Academy of Sciences, Society for Neuroscience, Texas Medical Association, the
Society of Sigma Xi, and has privileges at Twelve Oaks Hospital located near
the Burzynski Research Institute in Houston. He is the author of 170
scientific publications, presenter of scientific papers at major international
conventions, and has been awarded fifty-two patents covering twenty-seven
countries for his Antineoplaston treatment. Other groups are working in
conjunction with him, including researchers at the University Kurume Medical
School in Japan.
TADEUSZ BURZYNSKI, M.SC., E.E., Vice President in Charge of Technical
Operations and a Director of Burzynski since 1981, is the brother of Dr.
Burzynski. Mr. Burzynski has been project manager for the construction of
several medically related facilities around the world including a biological
research center at the University of Cracow, Cracow, Poland, three hospitals
and a medical center. Mr. Burzynski has also lived approximately six years in
Brazil, during which time he was engaged in various capacities including
design and technical supervisor for the construction of various chemical
refineries. He received his Bachelor of Science in Electrical Engineering
from the Academy of Mining and Metallurgy in Cracow, Poland in 1958, and
Master of Science from the Federal University in Santa Maria, Brazil in 1981.
Mr. Burzynski is primarily responsible for the design, assembly, installation
and operation of Burzynski's processing and manufacturing facilities.
DEAN MOUSCHER has been a Secretary of the Company since 1995 and is
employed by Dr. Burzynski's medical practice in the capacity of Director of
Clinical Trials. Prior to his Directorship, Mr. Mouscher was self-employed as
a floor trader at the Chicago Board of Trade, trading for his own account.
Currently, he owns The English Center, a corporation in Chicago, Illinois
which employs individuals to teach the English language to people whose first
language is Polish.
BARBARA BURZYNSKI, M.D., a Director and the wife of Dr. Dr. Burzynski,
has been the Chairman of the Department of Pharmacy of Burzynski and the
predecessor sole proprietorship since inception. From January 1976, to July
1977, she was a Research Assistant in the Department of Pediatrics at Baylor
College of Medicine and from 1970 to 1975, was a Resident Physician in the
Department of Obstetrics and Gynecology at the Medical Academy, Lublin,
Poland. Dr. Burzynski graduated with and M.D. in 1966 from the Medical
Academy, Lublin, Poland, and has published three articles on studies with
Antineoplastons.
MICHAEL H. DRISCOLL, ESQ. has been a Director of the Company since 1984.
Mr. Driscoll is a former judge and the County Attorney of Harris County,
Texas. Mr. Driscoll is also a Director, Vice Chairman, Secretary and
Treasurer of Brittan Communications International Corp.
CARLTON HAZELWOOD, PH.D. has been a Director of the Company since 1997.
Dr. Hazelwood is currently employed as a professor at the Baylor College of
Medicine and received his Ph.D. in Medical Physiology from the University of
Tennessee. Dr. Hazelwood is a prolific writer on medical topics and has been
recognized for his research with numerous awards, honors and research grants.
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term Compensation
Annual Compensation Awards
Fiscal Securities
Name / Position Year Salary Bonus
- ----------------- ---- ------ -----
Restricted Stock Underlying Awards
- --- ------
Options/SARs
- --- --
Stanislaw R. Burzynski, M.D., Ph.D. 1997 $ 290,000 -0-
- -0- -0-
President
Tadeusz Burzynski, M.Sc., E.E. 1997 $ 158,000 -0-
- -0- -0-
Senior Vice President
Robert Waldbillig, Ph.D. 1997 $ 100,000 -0- -0-
- -0-
Vice President of Research
Dean Mouscher 1997 $ 60,000 -0- -0-
- -0-
Secretary
Mohammad K. Sheikh, Ph.D. 1997 $ 55,000 -0- -0-
- -0-
Chairman, Dept. Of Organic Chemistry
Andrzej Czerwinski, Ph.D. 1997 $ 45,000 -0- -0-
- -0-
Research and Development Manager
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Burzynski, is President, Chairman of the Board and owner of 79.92% of
the Company's outstanding Common Shares. The Company has entered into a
license agreement with Dr. Burzynski which gives the Company the exclusive
right in the United States, Canada and Mexico to use, manufacture, develop,
sell, distribute, sublicense and otherwise exploit all of his rights, title
and interests in Antineoplaston drugs, in treatment and diagnosis of cancer,
including but not limited to any patent rights which may be granted in these
countries. The license is terminable at the option of Dr. Burzynski, if he is
removed as Chairman of the Board or President of the Company, or if any
shareholder or group of shareholders acting in concert becomes the beneficial
owner of the Company's securities having voting power equal to or greater than
the voting power of the securities held by him. This license agreement was
amended on April 24, 1984 and on March 2, 1990 whereby the Company modified
its rights it holds from Dr. Burzynski by granting to Dr. Burzynski the
limited right to manufacture, use, and exploit Antineoplastons in the
Company's exclusive territory solely for the purpose of enabling Dr. Burzynski
to treat patients in his medical practice until such date that the FDA may
approve the use and sale of Antineoplastons for the treatment of cancer in the
United States.
19
The Company and Dr. Burzynski entered into the following agreements on
January 23, 1992:
A personal property lease between the Company and Dr. Burzynski pursuant
to which the Company leased equipment located at 12707 Trinity Drive,
Stafford, Texas to Dr. Burzynski.
A sublease by the Company to Dr. Burzynski of certain equipment located
at its Corporate offices in Houston, Texas,
An arrangement pursuant Dr. Burzynski agreed to pay the Company the
following:
60% of the Company's payroll expenses;
60% of Company's employees' perquisites including medical, dental, life
, disability and worker's compensation insurance
17% of gross clinical revenues for treatment in the U.S., Canada and
Mexico, excluding consultations, office visits, sales and rental of
pharmaceutical equipment and medicine and chemicals produced for the Company.
The following is a list of transactions that occurred during the fiscal
year ended February 28, 1997:
Royalties, rents, administrative services and
supplies paid by Dr. Burzynski. $ 2,782,554
Amounts due from Dr. Burzynski for billings
recorded in accounts receivable at year end. $ 398,885
Payments made to Dr. Burzynski for 20% of the
cost of chemicals used in clinical trials being
conducted by Dr. Burzynski from March 1, 1996
to February 28, 1997. $ 593,242
Company expenses paid by Dr. Burzynski for
legal fees, rent, and security services. $ 345,500
Short term loans made to the Company by
Dr. Burzynski during the year. $ 24,300
Repayment of short term loans made by
Dr. Burzynski during the year. $ 24,300
Interest paid to Dr. Burzynski for short term
loans during the year. $ 178
Effective March 1, 1997, the Company entered into a research funding
agreement with Dr. Burzynski (the "Research Funding Agreement") and terminated
all of the aforementioned agreements. The term of the Research Funding
Agreement is for one year, and is automatically renewable for three additional
one year terms, unless one party notifies the other party at least ninety days
prior to the expiration of the term of the agreement of its intention not to
renew the agreement. In addition to the foregoing termination provisions, the
agreement automatically terminates in the event that Dr. Burzynski owns less
than fifty percent of the outstanding shares of the Company, or is removed as
President and/or Chairman of the Board of the Company, unless Dr. Burzynski
notifies the Company in writing of his intention to continue the agreement
notwithstanding this automatic termination provision. Pursuant to the Research
Funding Agreement:
The Company agreed to undertake all scientific research in connection
with the development of new or improved Antineoplastons for the treatment of
cancer and other diseases. The Company will hire such personnel as is
required to fulfill its obligations under the agreement;
Dr. Burzynski agreed to fund in its entirety all basic research which the
Company undertakes in connection with the development of other Antineoplastons
or refinements to existing Antineoplastons for the treatment of cancer and
other diseases;
Dr. Burzynski agreed to pay the expenses to conduct the clinical trials
for the Company;
Dr. Burzynski agreed to provide the Company such laboratory and research
space as the Company needs at the Trinity Drive facility in Stafford, Texas,
and such office space as is necessary at Trinity Drive and at 12000 Richmond
Avenue facility, at no charge to the Company;
The parties agreed that Dr. Burzynski may fulfill his obligations in part
by providing such administrative staff as is necessary for the Company to
manage its business, at no cost to the Company;
Dr. Burzynski agreed to pay the full amount of the monthly and annual
budget or expenses for the operation of the Company, together with such other
unanticipated but necessary expenses which the Company incurs. Payments from
Dr. Burzynski to the Company of the monthly budget shall be made in two equal
installments on the first and fifteenth of each month;
In the event the research described in the agreement results in the
approval of any additional patents, Dr. Burzynski shall own all such patents,
but shall license to the Company the patents based on the same terms,
conditions and limitations as provided by the License Agreement;
Dr. Burzynski shall have unlimited and free access to all equipment which
the Company owns, so long as such use is not in conflict with the Company's
use of such equipment, including without limitation to all equipment used in
manufacturing of Antineoplastons used in the clinical trials;
21
The amounts which Dr. Burzynski is obligated to pay under the agreement
shall be reduced dollar for dollar by the following:
Any income which the Company receives for services provided to other
companies for research and/or development of other products, less such
identifiable marginal or additional expenses necessary to produce such income
(such as purchase of chemicals, products or equipment solely necessary to
engage in such other research and development activity); and
The net proceeds of any stock offering or private placement which the
Company receives during the term of the agreement up to a maximum of
$1,000,000 in a given Company fiscal year.
On March 25, 1997 the Company and Dr. Burzynski entered into a Royalty
Agreement, which was amended on September 29, 1997, pursuant to which Dr.
Burzynski agreed to act as the principal clinical investigator of the clinical
trials necessary for obtaining FDA approval for interstate marketing and
distribution of Antineoplastons. The parties agreed that in the event the
Company receives FDA approval for interstate marketing and distribution, of
which there can be no assurance, the Company shall pay Dr. Burzynski a royalty
of 10% (ten percent) of the Company's gross income, which royalty shall be
paid on all gross receipts from all future sales, distributions and
manufacture of Antineoplastons.
Pursuant to the Royalty Agreement, the Company granted to Dr. Burzynski
the right to (i) either produce Antineoplaston products for use in his medical
practice to treat up to 1,000 patients, at any one time, without paying any
fees to the Company, or purchase from the Company enough Antineoplaston
products to treat up to 1000 patients, at any one time, at a price equal to
cost plus 10% (ten percent); and (ii) lease or purchase all the manufacturing
equipment located at 12707 Trinity Drive, Stafford, Texas at a fair market
price. The Royalty Agreement further provided that the Company will have the
right, when and if Antineoplastons are approved for use and sale by them FDA,
to (i) produce all Antineoplaston products to be sold or distributed in the
United States., Canada and Mexico for the treatment of cancer; and (ii) to
lease from Dr. Burzynski the entire premise located at 12707 Trinity Drive,
Stafford, Texas at terms and rates competitive with those available in the
real estate market at the time, provided that Dr. Burzynski does not need the
facility for his use.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 200,000,000 shares of Common Stock,
par value $.001 per share. The holders of Common Stock are entitled to one
vote for each share held of record on all matters to be voted on by
stockholders. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors then up
for election. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, the holders of Com-mon Stock are entitled to share ratably in all
assets remaining which are available for distribution to them after pay-ment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the Com-mon Stock. Holders of shares of Common
Stock, as such, have no conversion, preemptive or other subscription rights,
and there are no redemption provisions applicable to the Common Stock. All of
the outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby when issued against the consideration set forth in this
Prospectus will be, fully paid and nonassessable.
Section 203 of the Delaware General Corporation Law provides that if a
person acquires 15% or more of the stock of a Delaware corporation, the person
becomes an "interested stockholder" and may not engage in a "business
combination" with that corporation for a period of three years. The term
"business combination" includes a merger, a sale of assets or a transfer of
stock. The three year moratorium may be terminated if any of the following
conditions are met: (1) the Board of Directors approved the acquisition of
stock or the business combination before the person became an interested
stockholder, (2) the interested stockholder acquired 85% of the outstanding
voting stock, excluding in the determination of outstanding stock any stock
owned by individuals who are officers and directors of the corporation and any
stock owned by certain employee stock plans, or (3) the business combination
is approved after the person became an interested stockholder by voting stock
which is not owned by the interested stockholder. Dr. Burzynski owns, either
directly or beneficially, 15% or more of the Common Stock of the Company and
may be an interested stockholder.
II-23
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Common Stock of the Company is traded on the OTC Bulletin Board under
the symbol "BZYR." The following table sets forth high and low "Bid" prices
of the shares of Common Stock of the Company for the periods indicated (as
reported by the National Quotation Bureau).
Bid Prices
High Low
---- ---
1996 First Quarter .05 .02
1996 Second Quarter .04 .04
1996 Third Quarter .04 .03
1996 Fourth Quarter .03 .03
1997 First Quarter .3125 .03
1997 Second Quarter .125 .125
1997 Third Quarter .125 .0625
1997 Fourth Quarter .4375 .09
1998 First Quarter .5625 .125
1998 Second Quarter .25 .125
The quotations set forth above reflect the inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.
As of March 3, 1998, there were approximately 2,061 holders of record of
the Company's Common Stock including those shares held in "street name." The
Company believes that it has in excess of 2,061 shareholders.
The Company has never paid cash dividends on its Common Stock and the
Board of Directors intends to retain all of its earnings, if any, to finance
the development and expansion of its business. However, there can be no
assurance that the Company can successfully expand its operations, or that
such expansion will prove profitable. Future dividend policy will depend upon
the Company's earnings, capital requirements, financial condition and other
factors considered relevant by the Company's Board of Directors.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently a party to the following legal proceeding:
Provident Life Insurance Company v. Stanislaw R. Burzynski and the Burzynski
Research Institute.
An action was filed by Provident Life in the U.S. District Court,
Southern District of Texas, Houston Division, against Dr. Burzynski and the
Company for the recovery of monies which Provident has paid to Dr. Burzynski
for treatment of six of its insured. Provident is seeking to recover the
funds plus attorneys' fees and other expenses. The amount of the claim,
exclusive of attorneys' fees, is approximately $200,000. The trial of this
action was completed on October 27, 1997. As of April 27, 1998, the trial
judge has not rendered a verdict.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not had any disagreement with its independent auditors on
any matter of accounting principles or practices or financial statement
disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has granted the following options to Dean Mouscher, Secretary
of the Company and Director of Clinical Trials:
DATE OF GRANT NUMBER OF SHARES EXERCISE PRICE
------------- ---------------- --------------
September 14, 1996 400,000 $.35
June 1, 1997 100,000 $.35
June 1, 1998(1) 100,000 $.35
_________________________
(1) Conditioned upon employment by the Registrant as of such date.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes
corporations organized thereunder, such as the Company, to indemnify directors
and officers against liabilities which they may incur in their capacities as
such, including judgments, fines, expenses and amounts paid in settlement of
litigation. Said section provides that the indemnification authorized thereby
is not exclusive of any other rights to which a director or officer may be
entitled under any by-law, agreement, vote of shareholders or otherwise. The
Company's by-laws provide for indemnification of the Company's directors and
officers to the fullest extent permitted by law against any liabilities they
may incur in their capacities as such.
F-6
--ooOoo--
C 0 N T E N T S
----------------------
Page
----
Report of Independent Auditors 2
Combined Balance Sheet 3
Combined Statements of Operations 4
Combined Statements of Stockholders' Deficit 5
Combined Statements of Cash Flows 6
Notes to Combined Financial Statements 7-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Burzynski Research Institute, Inc.
We have audited the accompanying combined balance sheets of Burzynski Research
Institute, Inc. and S.R. Burzynski, M.D., Ph.D., Clinical Trials (the Company)
as of February 28, 1997 and February 29, 1996, and the related combined
statements of operations, stockholders' deficit, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Burzynski Research
Institute, Inc. and S.R. Burzynski, M.D., Ph.D., Clinical Trials as of
February 28, 1997 and February 29, 1996 and the results of their combined
operations and their combined cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred losses from operations, has a
working capital deficit and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Seitz & DeMarco, P.C.
- ------------------------------
Seitz & DeMarco, P.C.
Certified Public Accountants
Houston, Texas
April 14, 1998
<PAGE>
[GRAPHIC OMITED]
<PAGE>
[GRAPHIC OMITED]
The accompanying notes are an integral part of these combined financial
statements
<PAGE>
[GRAPHIC OMITED]
The accompanying notes are an integral part of these combined financial
statements
<PAGE>
[GRAPHIC OMITED]
The accompanying notes are an integral part of these combined financial
statements
<PAGE>
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
1. Summary of Significant Accounting Policies:
Basis of Combination
The combined financial statements of Burzynski Research Institute, Inc. (the
Company) include the accounts of Burzynski Research Institute, Inc., a
Delaware corporation; and those of S.R. Burzynski, M.D., Ph.D. (Dr. Burzynski)
related to the conduct of FDA approved clinical trials for antineoplaston
drugs used in the treatment of cancer and other diseases. Accounts related to
Dr. Burzynski's medical practice have not been included in these financial
statements. Dr. Burzynski is the President, Chairman of the Board and owner
of over 80% of the outstanding stock of Burzynski Research Institute, Inc.,
and also is the inventor and original patent holder of certain drug products
known as "antineoplastons". All significant intercompany transactions and
balances have been eliminated.
Business Activity
The Company holds the exclusive right in the United States, Canada and Mexico
to use, manufacture, develop, sell, distribute, sublicense and otherwise
exploit all the rights, titles and interest in antineoplaston drugs used in
the treatment of cancer, once the drug is approved for sale by the United
States Federal Drug Administration. The Company is primarily engaged as a
research and development facility of drugs currently being tested for the use
in the treatment of cancer, and provides consulting services.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets which range
from 5 to 31.5 years. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are capitalized; maintenance
and repairs are charged against earnings as incurred. Upon disposal of
assets, the related cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized currently.
Research and Development
Research and development cost are charged to operations in the year incurred.
Equipment used in research and development activities, which have alternative
uses, are capitalized.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Income Taxes
The Company uses the liability method of accounting for income taxes, under
which deferred income taxes are recognized for the tax consequences of
temporary differences by applying the enacted statutory tax rate applicable to
future years to differences between financial statement carrying amounts and
the tax basis of existing assets and liabilities. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax
assets and liabilities. The accounts of S.R. Burzynski, M.D., Ph.D., related
to the conduct of FDA approved clinical trials are taxed directly to Dr.
Burzynski and are not included in the Company's tax provision.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses during
the reported periods. Actual results could differ from those estimates.
2. Basis of Presentation:
The Company has prepared its financial statements on the basis that it will
continue as a going concern. As of February 28, 1997, the Company had a
working capital deficit of approximately $1,480,000, an accumulated deficit of
approximately $25,945,000. For the years ended February 28, 1997 and February
29, 1996, the Company incurred losses of approximately $7,953,000 and
$7,186,000, respectively. Effective March 1, 1997 the Company entered into an
agreement with Stanislaw R. Burzynski M.D., Ph.D. in which Dr. Burzynski
agreed to fund the basic research costs, FDA related costs and provide
research and lab space for one year. Also, it is the intention of the
directors and management to seek additional capital through the sale of
securities. The proceeds from such sales will be used to fund the Company's
operating deficit until it achieves positive operating cash flow. There can
be no assurance that the Company will be able to raise such additional
capital, or that Dr. Burzynski will be able to continue to fund the basic
research and FDA related cost.
3. Property and Equipment:
Property and equipment consisted of the following:
Estimated
Useful Lives 1997
----
1996
-
Production equipment 5 - 10 years $ 3,259,622 $
3,259,622
Leasehold improvements 5 - 31.5 years 1,568,442
1,528,780
Furniture and equipment 5 - 10 years 603,367
321,691
Equipment under capital lease 4 - 5 years 288,943
---------------
422,019
- --------------
Total property and equipment 5,720,374
5,532,112
Accumulated depreciation and amortization (5,066,575)
--------------
(4,832,294)
- ----------
$ 653,799 $ 699,818
==================== =============
Depreciation and amortization expense for the years ended February 28, 1997
and February 29, 1996 was $234,451 and $262,179, respectively.
4. Notes Payable:
Notes payable consisted of the following:
1997 1996
---- ----
Note payable to an individual dated April 27,
1992, unsecured, bearing interest of 6.75% due
annually. The note is due on demand. $ 100,000 $
100,000
Note payable to an individual dated August 11,
1992, unsecured, bearing no interest due on
demand, with monthly principal payments of
$2,000 if funds are available. 64,000
----------------
64,000
- ------
$ 164,000 $ 164,000
==================== =============
5. Long-Term Debt:
Long-term debt consisted of the following:
1997 1996
---- ----
Note payable to a bank dated November 25,
1994, unsecured, and bearing interest at the
banks base rate plus 3.45% (approximately
12%) due in 36 monthly installments beginning
November 25, 1995 of 3% of the unpaid balance
plus interest with any unpaid balance due
November 25, 1998. The note is guaranteed by
the Company's majority shareholder. $ 13,076 $
16,358
Less : Current maturities 2,796
----------------
3,282
- -----
$ 10,280 $ 13,076
===================== =====================
6. Employee Benefits:
The Company has a self funded employee benefit plan providing health care
benefits for all its employees. It also provides for them group dental
insurance, short-term and long-term disability insurance, and life insurance.
The Company pays 100% of the cost for its employees and 50% of any dependent
coverage. The plan has a $200 deductible and a maximum life time benefit of
$1,000,000 per covered participant. Due to stop-loss insurance, benefits
payable by the Company are limited to $12,500 per person during the policy
year. The Company charged to operations a provision of $97,257 for 1997 and
$97,073 for 1996, which represents the sum of actual claims paid and an
estimate of liabilities relating to claims, both asserted and unasserted,
resulting from incidents that occurred during the year.
7. Leases Commitments:
The Company leases certain equipment under agreements which are classified as
capital leases. Cost and accumulated amortization of such assets totaled
$288,943 and $422,019; $144,571 and $185,613, respectively, as of February
28, 1997 and February 29, 1996. Future minimum lease payments under
noncancelable lease agreements are as follows:
Fiscal year ending
February 28 or 29:
1998 $ 84,260
1999 76,775
2000 60,932
2001 16,348
2002 386
--------------
Total future minimum lease payments 238,701
Less amount representing interest 36,140
------------
Present value of future minimum lease payments 202,561
Less current portion of capital lease obligations 65,066
------------
Long-term capital lease obligations $ 137,495
==========
The Company leases laboratory facilities, office space and equipment under
agreements which are classified as operating leases. Rent expense incurred
under these leases was approximately $297,680 and $316,324 for the years ended
February 28, 1997 and February 29, 1996, respectively. All lease agreements
are on a month to month basis.
8. Income Taxes:
The actual income tax benefit attributable to the Company's losses for the
years ended February 28, 1997 and February 29, 1996, differ from the amounts
computed by applying the U.S. federal income tax rate of 34% to the pretax
loss as a result of the following:
1997 1996
- ---- ----
Expected benefit $ (2,704,034) $ (2,436,618)
Nondeductible expenses 1,509
319
Taxed directly to Dr. Burzynski 2,519,814
2,426,129
Change in valuation allowance 182,711
10,170
State franchise tax -
---------------
19,650
- ------
Income tax expense (benefit) $ - $ 19,650
================ ===============
The components of the Company's deferred income tax assets as of February 28,
1997 and February 29, 1996 were as follows:
1997 1996
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 317,738 $
140,702
Excess book depreciation 26,416
21,501
Accrued expenses 90,615
89,855
Alternative minimum tax credit carryforwards 42,603
----------------
42,603
- ------
Total deferred tax assets 477,372
294,661
Less valuation allowance (477,372)
---------------
(294,661)
-------
Net deferred tax assets $ - $ -
============ =============
_
The Company's ability to utilize net operating loss carryforwards and
alternative minimum tax credit carryforwards will depend on its ability to
generate adequate future taxable income. The Company has no historical
earnings on which to base an expectation of future taxable income.
Accordingly, a valuation allowance for the total deferred tax assets has been
provided.
The Company has net operating loss carryforwards available to offset future
income in the amounts of $925,699 as of February 28, 1997. The net operating
loss carryforwards expire as follows:
Year ending
February 28, or 29,
2007 $ 18,371
2008 383,639
2011 11,818
2012 511,871
The Company has alternative minimum tax credit carryforwards of $42,603 and
investment tax credit carryforwards of $22,757. The investment tax credit
carryforwards expire between February 28, 1999 and February 28, 2001.
9. Economic Dependency:
The Company received the majority of its funding from Stanislaw Burzynski,
M.D., Ph.DDr. Burzynski contributed capital to fund costs over and above the
income received by the Company. The following is a summary of the capital
contributed by Stanislaw Burzynski, M.D., Ph.D.:
1997 1996
---- ----
Capital contributed $ 7,577,241 $
============ =
6,755,764
=
10. Fair Value of Financial Instruments:
Information regarding those financial instruments with fair values not equal
to their carrying value, none of which are held for trading purposes, are as
follows:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Noninterest bearing note payable $ 64,000 $ 58,420 $ 64,000
========== ========== ==========
$ 58,420
=============
11. Related Party Transactions:
Stanislaw Burzynski, M.D., Ph.D., is President, Chairman of the Board and
owner of over 80% of the Company's outstanding stock. Dr. Burzynski also is
the inventor and original patent holder of certain drug products known as
"antineoplastons". The Company has entered into a license agreement with Dr.
Burzynski which gives the Company the exclusive right in the United States,
Canada and Mexico to use, manufacture, develop, sell, distribute, sublicense
and otherwise exploit all of his rights, titles and interests in
antineoplaston drugs used in the treatment of cancer, including but not
limited to any patent rights which may be granted in these countries. The
license is terminable at the option of Dr. Burzynski, if he is removed as
Chairman of the Board or President of the Company, or if any shareholder or
group of shareholders acting in concert becomes the beneficial owner of the
Company's securities having voting power equal to or greater than the voting
power of the securities held by him. This license agreement was amended on
March 1, 1990 by granting to Dr. Burzynski the limited right to manufacture,
use, and exploit antineoplastons in the Company's exclusive territory solely
for the purpose of enabling Dr. Burzynski to treat patients in his medical
practice until the date on which the United States Federal Drug Administration
approves the sale of antineoplastons for the treatment of cancer in the United
States.
Effective January 23, 1992, the Company restructured its relationship with Dr.
Burzynski. As a result of the restructuring, all manufacturing was
transferred to Dr. Burzynski's medical practice and the Company began
operating solely as a research and development facility of antineoplastons for
the use in the treatment of cancer and also provides consulting services.
12. Litigation Matters:
The Company is involved in lawsuits arising in the ordinary course of
business. In the opinion of the Company's legal counsel and management, any
liability resulting from such litigation would not be material in relation to
the Company's financial position.
13. Subsequent Events:
Effective March 1, 1997 the Company ("BRI") entered into a research funding
agreement with Stanislaw R. Burzynski, M.D.Ph.D.("SRB") and terminated the
royalty agreement entered into on January 23, 1992 more fully described in
note 11. The research funding agreement states that SRB is the inventor and
original patent holder of certain drug products known as "antineoplastons" and
BRI owns the rights to exploit "antineoplastons" for the treatment of cancer
in the United States, Canada and Mexico. It also states that none of the drug
formulations are currently approved for interstate marketing by the U.S. Food
and Drug Administration, ("FDA") but SRB is currently the principal
investigator of approximately 74 FDA approved clinical trials, the purpose of
the clinical trials is to obtain said FDA approval; and it is mutually
advantageous that basic science research continue to develop, refine and
improve antineoplastons. BRI is willing to undertake such research but does
not currently have sufficient funds to conduct the research, and SRB is
willing to fund such research until a permanent source of financing is
obtained.
The parties agreed to the following:
1. BRI agrees to undertake all scientific research in connection with the
development of new or improved antineoplastons for the treatment of cancer.
BRI will hire such personnel as is required to fulfill its obligations under
the agreement.
2. SRB agrees to fund in its entirety all basic research which BRI
undertakes in connection with the development of other antineoplastons or
refinements to existing antineoplastons for the treatment of cancer.
3. As FDA approval of antineoplastons will benefit both parties, SRB
agrees to pay the expenses to conduct the clinical trials for BRI.
4. SRB agrees to provide BRI such laboratory and research space as BRI
needs at the Trinity Drive facility in Stafford, Texas, and such office space
as is necessary at Trinity Drive and at 12000 Richmond Avenue facility.
5. In the event the research described in the agreement results in the
approval of any additional patents, SRB shall own all such patents, but shall
license to BRI the patents based on the same terms, conditions and limitations
as is in the current license between the parties.
6. SRB shall have unlimited and free access to all equipment which BRI
owns, so long as such use is not in conflict with BRI's use of such equipment,
including without limitation to all equipment used in manufacturing of
antineoplastons used in the clinical trials.
7. The amounts which SRB is obligated to pay under the agreement shall be
reduced dollar for dollar by the following:
a. Any income which BRI receives for services provided to other companies
for research and/or development of other products, less such identifiable
marginal or additional expenses necessary to produce such income (such as
purchase of chemicals, products or equipment solely necessary to engage in
such other research and development activity).
b. The net proceeds of any stock offering or private placement
which BRI receives during the term of the agreement up to a maximum of
$1,000,000 in a given BRI fiscal year.
8. The initial term of the agreement is one year. The agreement will be
automatically renewable for three additional one year terms, unless one party
notifies the other party at least ninety days prior to the expiration of the
term of the agreement of its intention not to renew the agreement.
9. The agreement shall automatically terminate in the event that SRB owns
less than fifty percent of the outstanding shares of BRI, or is removed as
President and or Chairman of the Board of BRI, unless SRB notifies BRI in
writing his intention to continue the agreement notwithstanding this automatic
termination provision.
On February 10, 1998 Burzynski Research Institute, Inc. and Stanislaw R.
Burzynski settled their lawsuit with the Department of Health of the State of
Texas (DOH) which had been file in January 1992. The Company and Dr.
Burzynski agreed to pay reasonable attorneys fees and investigative expenses
in the amount of $50,000.
14. Commitments:
On March 25, 1997 the Company entered into a royalty agreement with Stanislaw
R. Burzynski, M.D.,Ph.D., whereby Dr. Burzynski will undertake to continue to
be the principal clinical investigator of FDA approved clinical trials, which
trials are necessary for obtaining FDA approval for interstate marketing and
distribution of antineoplastons. Upon receiving FDA approval for interstate
marketing and distribution, the Company agrees to pay to Dr. Burzynski a
royalty interest equivalent to 10% (ten percent) of the Company's gross
income, which royalty interest shall include gross receipts from all future
sales, distributions and manufacture of antineoplastons. Dr. Burzynski will
have the right to either produce antineoplaston products for use in his
medical practice to treat up to 1,000 patients without paying any fees to the
Company, or purchase from the Company antineoplaston products for use in his
medical practice to treat up to 1,000 patients at a price of the Company's
cost to produce the antineoplaston products plus 10% (ten percent). Dr.
Burzynski will also have the right to either lease or purchase all the
manufacturing equipment located at 12707 Trinity Drive, Stafford, Texas at a
fair market price. The Company will have the right to produce all
antineoplaston products to be sold or distributed in the U.S., Canada and
Mexico for the treatment of cancer. The Company will also have the right to
lease from Dr. Burzynski the entire premise located at 12707 Trinity Drive,
Stafford, Texas at arms-length terms at rates competitive with those available
in the market at that time, provided that Dr. Burzynski does not need the
facility for his use.
III-1
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT NAME
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(3) i. Certificate of Incorporation of Surviving Corporation
ii. Certificate of Merger
iii. Certificate of Amendment of Certificate of Incorporation
iv. Amended By-laws
(10) Material Contracts
1. License Agreement effective as of June 29, 1983 by and between Dr.
Burzynski and the Company
2. Amended License Agreement dated April 2, 1984 by and between Dr.
Burzynski and the Company
3. Second Amended License Agreement dated March 1, 1990 by and between Dr.
Burzynski and the Company
4. Research Funding Agreement effective as of March 1, 1997 by and between
Dr. Burzynski and the Company
5. Royalty Agreement dated March 25, 1997 by and between Dr. Burzynski and
the Company
6. First Amended Royalty Agreement dated September 29, 1997 by and between
Dr. Burzynski and the Company
(24) Power of Attorney (Included with the Signature Page)
(27) Financial Data Schedules
There were no reports on Form 8-K filed by the Company during the last
quarter of the year ended February 28, 1996.
ITEM 2. DESCRIPTION OF EXHIBITS
See Item 1 set forth above.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, hereunto duly authorized.
Burzynski Research Institute, Inc.
by: /s/Stanislaw R. Burzynski
---------------------------
Stanislaw R. Burzynski, President,
Chairman of the Board and Director
Date: April 23, 1998
Each person whose signature appears below constitutes and appoints Dr.
Burzynski his/her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, severally, for him/her in his/her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/Stanislaw R. Burzynski Date: April 23, 1998
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Stanislaw R. Burzynski
President, Chairman of the Board and Director
/s/Tadeusz Bruzynski Date: April 23, 1998
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Tadeusz Burzynski
Senior Vice President and Director
/s/Dean Mouscher Date: April 23, 1998
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Dean Mouscher
Secretary
/s/Barbara Burzynski Date: April 23, 1998
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Barbara Burzynski
Director
/s/Michael H. Driscoll Date: April 23, 1998
- ------------------------
Michael H. Driscoll
Director
/s/Carlton Hazelwood Date: April 23, 1998
- ---------------------
Carlton Hazelwood
Director
