Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G Form 10Sb 42 216K
2: EX-3.(I) Certificate of Incorporation of Surviving 4 14K
3: EX-3.(II) Certificate of Merger 2 9K
4: EX-3.(III) Certificate of Amend of Certificate of Incorp 1 8K
5: EX-3.(IV) Amended Bylaws 8 28K
6: EX-10.(I) License Agreement 4 15K
7: EX-10.(II) Amended License Agreement 4 18K
8: EX-10.(III) Second Amended License Agreement 6 16K
9: EX-10.(IV) Research Funding Agreement 4 14K
10: EX-10.(V) Royalty Agreement 3 12K
11: EX-10.(VI) First Amended Royalty Agreement 2 10K
12: EX-27 ƒ Financial Data Schedule 1 10K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 (I.R.S. Employer
of Incorporation or Organization) Identification No.)
12000 Richmond Avenue, Houston, Texas 77082-2431
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(Address of Principal Executive Offices) (Zip Code)
(281) 597-0111
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(Issuer's Telephone No.)
Securities to be registered under Section 12(b) of the Act:
Title of each class: of Each Exchange on which
to be so Registered Each Class is to be Registered
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None N/A
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Securities to be Registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of Class)
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(Title of Class)
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.
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
2
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 Company'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.
3
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
4
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.
5
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
6
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
[Enlarge/Download Table]
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Number of
Number of Patients who
Title of Persons may Participate
Protocol Subject of Protocol and Date Enrolled in the Study
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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
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BL-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH CARCINOMA OF THE BLADDER; 3 40
Revised 7/20/96; Revised 9\28/96; Revised 4/14/97.
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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
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BR-12 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH CARCINOMA OF THE BREAST, 17 40
Revised 7/20/96; Revised 4/29/97.
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BR-14 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 CAPSULES IN PATIENTS WITH ADVANCED BREAST 6 40
CANCER; 8/26/96; Revised 12/10/96; Revised 4/12/97.
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BR-6 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN CHILDREN WITH HIGH GRADE GLIOMA; 9 40
March 1996.
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BT-7 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH GLIOBLASTOMA MULTIFORME; 34 40
March 1996;
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BT-8 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH ANAPLASTIC ASTROCYTOMA; 9 40
Revised 4/14/97; Revised 9/15/97.
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BT-9 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH BRAIN TUMORS; Revised 11 40
7/11/96; Revised 9/28/96; Revised 4/14/97.
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BT-10 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN CHILDREN WITH BRAIN TUMORS; Revised 5 40
7/11/96; Revised 9/28/96; Revised 4/14/97.
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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
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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
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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
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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
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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
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Number of
Number of Patients who
Title of Persons may Participate
Protocol Subject of Protocol and Date Enrolled in the Study
====================================================================================================================================
BT-16 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN ADULT PATIENTS WITH LOW GRADE ASTROCYTOMA; 5 40
Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
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BT-17 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN ADULT PATIENTS WITH OLIGODENDROGLIOMA; 5 40
Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
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BT-18 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN ADULT PATIENTS WITH MIXED GLIOMA; Revised 12 40
7/26/96; Revised 10/4/96; Revised 12/9/96; Revised 4/14/97.
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BT-19 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH NEUROFIBROMA AND SCHWANNOMA; 0 40
Revised 4/14/97.
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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
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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
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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
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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
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BT-24 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN PATIENTS WITH EPENDYMOMA; 7 40
5/15/96; Revised 11/18/96; Revised 4/14/97.
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BT-25 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN PATIENTS WITH CRANIOPHARYNGIOMA; 0 40
5/15/96; Revised 11/18/96; Revised 4/14/97.
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BT-26 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN PATIENTS WITH CHOROID PLEXUS 1 40
NEOPLASM; 5/15/96; Revised 11/18/96; Revised 4/14/97.
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BT-27 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN PATIENTS WITH GERM CELL TUMOR OF 0 40
THE BRAIN; 5/15/96; Revised 11/18/96; Revised 4/14/97.
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BT-28 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 INFUSIONS IN PATIENTS WITH MENINGIOMA; 2 40
5/17/96; Revised 9/10/96; Revised 4/14/97.
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CAN-1 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH REFRACTORY MALIGNANCIES; 133 133
Revised 7/11/96.
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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
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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
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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
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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
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8
====================================================================================================================================
Number of
Number of Patients who
Title of Persons may Participate
Protocol Subject of Protocol and Date Enrolled in the Study
====================================================================================================================================
HE-2 PHASE II STUDY OF ANTINEOPLASTONS A10 IN PATIENTS WITH PRIMARY LIVER CANCER; Origination date 1 40
2/12/97; Revised 5/28/97.
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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, 6 40
Revised 4/14/97.
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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
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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
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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
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LA-7 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH SMALL CELL CARCINOMA OF THE 2 40
LUNG; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
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LA-10 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 CAPSULES IN PATIENTS WITH NON SMALL CELL LUNG 9 40
CANCER; Revised 8/12/96; Revised 9/9/96; Revised 12/9/96.
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LY-3 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH NON-HODGKIN'S LYMPHOMA; 2 40
Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.
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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
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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; 10 40
Revised 4/14/97.
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LY-8 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH NON-HODGKIN'S LYMPHOMA, HIGH 1 40
GRADE; Revised 6/22/96; Revised 5/11/96.
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LY-9 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH MANTLE ZONE LYMPHOMA., Revised 4 40
6/22/96; Revised 9/10/96; Revised 4/14/97.
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LY-10 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 WITH CHRONIC MYELOGENOUS LEUKEMIA; Revised 0 40
10/4/96; Revised 4/14/97.
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LY-11 PHASE II STUDY OF ANTINEOPLASTON A10 AND AS2-1 IN PATIENTS WITH MYCOSIS FUNGOIDES - SEZARY 0 40
SYNDROME; Revised 9/10/96; Revised 4/14/97.
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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
------------------------------------------------------------------------------------------------------------------------------------
9
====================================================================================================================================
Number of
Number of Patients who
Title of Persons may Participate
Protocol Subject of Protocol and Date Enrolled in the Study
====================================================================================================================================
MA-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH MESOTHELIOMA; Revised 7/8/96; 4 40
Revised 9/10/96; Revised 4/14/97.
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ME-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH MALIGNANT MELANOMA; Revised 8 40
7/26/96; Revised 10/4/96; Revised 4/14/97.
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MF-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH MALIGNANT FIBROUS 0 40
HISTIOCYTOMA; June 1997.
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MM-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH MULTIPLE MYELOMA; Revised 5 40
7/26/96; Revised 10/2/96.
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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, 1 40
1996; Revised 2/13/97; Revised 4/14/97.
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NE-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH NEUROENDOCRINE TUMORS; 3 40
Revised 7/9/96; Revised 9/10/96; Revised 4/14/97.
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OV-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH CARCINOMA OF THE OVARY; 5 40
Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
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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
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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
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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 8 40
7/8/96; Revised 9/10/96; revised 4/14/97.
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SI-2 PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN PATIENTS WITH CARCINOMA OF THE SMALL 1 40
INTESTINE; Revised 7/9/96; Revised 9/10/96; Revised 4/14/97.
------------------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------------------------
10
====================================================================================================================================
Number of
Number of Patients who
Title of Persons may Participate
Protocol Subject of Protocol and Date Enrolled in the Study
====================================================================================================================================
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; 2 40
Revised 9/10/96; Revised 4/14/97.
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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.
11
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 OR PLAN OF OPERATION
The following discussion contains trend information and other forward
looking statements that involve a number of risks and uncertainties. The
Company's actual results could differ materially from the Company's historical
results of operations and those discussed in the forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to, those identified.
The Company is primarily engaged in the research and development of drugs
currently being tested for the use in the treatment of cancer, and provides
chemical consulting services. The Company also 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. The Company will not be
able to exercise such exclusive rights until the drug is approved for sale by
the FDA. The Company received the majority of its income from royalty, rent,
administrative service and supply agreements with Dr. Burzynski, which were
entered into January 23, 1992.
RESULTS OF OPERATIONS
Under the royalty agreement in effect at the time, the Company received
17% of Dr. Burzynski's gross clinic 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 Company received revenue from the royalty agreement amounting to $1,454,469
and $1,538,735 for the years ending February 28, 1997 and February 29, 1996,
respectively. The royalty revenue decreased $84,266 or 5.47% from 1996 to 1997.
Rental income was generated from (i) a personal property lease by the
Company to Dr. Burzynski covering equipment and maintenance of property located
12707 Trinity Drive, Stafford, Texas, (ii) a sublease by the Company to Dr.
Burzynski covering the premises leased by the Company at 12707 Trinity Drive,
Stafford, Texas, and (iii) a sublease by the Company to Dr. Burzynski of certain
equipment located at its Corporate offices in Houston, Texas, used by the
Company for its Department of Medicine and certain administrative functions.
Rental income was $397,719 and $478,219 for the
12
years ending in 1997 and 1996, respectively. The decrease in rental income of
$80,500 or 16.83% from 1996 to 1997 was due to Dr. Burzynski buying the building
located at 12707 Trinity Drive in July 1996 and the canceling of the related
sublease by the Company to Dr. Burzynski.
Under the administrative services agreement Dr. Burzynski agreed to pay
for (i) 60% of the Company's payroll, including IRS withholding and unemployment
taxes, and (ii) 60% of the Company's employees insurance, including medical,
dental, life, disability and worker's compensation. Revenue generated under this
agreement amounted to $930,266 and $916,817 for the years ending in 1997 and
1996. The increase in administrative services income of $13,449 or 1.47% was due
to the increase in personnel.
Cost of operations were $1,211,863 and $1,159,703 for the years ending in
1997 and 1996. The increase of $52,160 or 4.5% was due to the following: (i)
increase in personnel cost of $221,351, (ii) increase in analytical chemistry
supplies of $51,894, (iii) decrease in building rent of $105,257, (iv) decrease
in maintenance and repair cost of $68,483, and (v) decrease in other building
and equipment costs of $47,345.
General and administrative expenses were $884,288 and $1,096,867 for the
years ending in 1997 and 1996. The decrease of $212,579 or 19.38% was due to the
following: (i) increase legal fees of $133,571, (ii) decrease in personnel cost
of $360,061 and (iii) increase in other G&A expenses of $13,911.
Research and development costs were $993,947 and $461,094 for the years
ending in 1997 and 1996. The increase of $532,853 or 115.6% was mainly due to
the Company agreeing to pay 20% of the cost of chemicals used in Phase II
clinical trials conducted by Dr. Burzynski form March 1, 1996 to February 28,
1997.
FINANCIAL CONDITION
The Company had net losses of $541,825 and $50,499 for the years ending
February 28, 1997 and February 29, 1996. The increase in the net loss from 1996
and 1997 is mostly attributable to the increase in the research and development
cost mainly due to the payment of the 20% of the cost of chemicals used in the
Phase II clinical trials. As of February 28, 1997 the Company had a total
stockholders' deficit of $347,698.
The Company has generated substantially all of its revenues from
agreements between the Company and Dr. Burzynski. Effective March 1, 1997 the
Company entered into a research funding agreement with Dr. Burzynski and
terminated all of the royalty, rent, administrative services and supply
agreements entered into on January 23, 1992. Under this research funding
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 and other diseases. Dr. Burzynski agrees to pay the expenses
to conduct the clinical trials for the Company. Dr. Burzynski also 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 is
necessary at Trinity Drive and at 12000 Richmond Avenue facility, at no charge
to the Company. Dr. Burzynski may fulfill his obligation 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 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
13
expenses which the Company incurs.
The amounts which Dr. Burzynski is obligated to pay under the agreement
shall be reduced dollar for dollar by the following: (i) 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 (ii) 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
of 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.
In January, 1992 the Department of Health of the State of Texas filed a
lawsuit against the Company and Dr. Burzynski for injunctive relief and
statutory fines and costs relating to the use of Dr. Burzynski's treatment,
which was alleged to be a violation of state law. There has been very little
activity in the case. The case has been on trial calendar for the past year and
a half, but has continued by the agreement of the parties. The injunctive part
of the case is largely moot insofar as at the present time all of Dr.
Burzynski's patients are enrolled in FDA approved clinical trials or have FDA
approval under special exceptions. The only part of the case which is not moot
is the statutory damage claim, which is for attorney's fees, investigative
costs, and administrative fines. Although, the statute provides for
administrative fines up to $25,000 per day per violation, it is the opinion of
the Company's legal counsel that it is extremely unlikely that the maximum
statutory fine or anything close to it would be assessed by the trier of fact.
The Company intends to vigorously defend this case unless an amicable settlement
can be reached prior to trial.
The Company's independent auditors' report on the Company's financial
statements includes an explanation paragraph stating that the Company has
incurred losses from operations, and has a working capital deficiency that
raises substantial doubt about the Company's ability to continue as a going
concern. Further, the auditors' report does not include any adjustments that
might result from the outcome of this uncertainty.
IN REVIEWING MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE SHOULD BE
MADE TO THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED BELOW
AS PART F/S (FINANCIAL STATEMENTS) IN THIS FORM 10-SB.
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
14
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
[Enlarge/Download Table]
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. 160,000 shares .12%
Common Stock Carlton Hazelwood, Ph.D. 20,000 shares .015%
As of November 20, 1997, 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
15
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.
16
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
[Enlarge/Download Table]
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards
Annual Compensation ----------------------------------------
Fiscal -------------------- Restricted Stock Securities Underlying
Name / Position Year Salary Bonus 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
17
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.
The Company and Dr. Burzynski entered into the following agreements on
January 23, 1992:
o 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.
o A sublease by the Company to Dr. Burzynski of certain equipment
located at its Corporate offices in Houston, Texas,
o An arrangement pursuant Dr. Burzynski agreed to pay the Company the
following:
o 60% of the Company's payroll expenses;
o 60% of Company's employees' perquisites including medical,
dental, life, disability and worker's compensation insurance
o 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.
18
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:
o 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;
o 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;
o Dr. Burzynski agreed to pay the expenses to conduct the clinical trials
for the Company;
o 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;
o 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;
o 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;
o 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;
o 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;
o The amounts which Dr. Burzynski is obligated to pay under the agreement
shall be reduced dollar for dollar by the following:
o 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
o 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.
19
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 Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
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.
20
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 November 20, 1997, there were approximately 2061 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 2061 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.
21
ITEM 2. LEGAL PROCEEDINGS
The Company is currently a party to the following legal proceedings:
Department of Health, State of Texas v. Dr. Burzynski and the Burzynski Research
Institute.
In January, 1992 the Department of Health of the State of Texas filed a
lawsuit against the Company and Dr. Burzynski for injunctive relief and
statutory fines and costs relating to the use of Dr. Burzynski's treatment,
which was alleged to be a violation of state law. There has been very little
activity in the case. The case has been on trial calendar for the past year and
a half, but has continued by the agreement of the parties. The injunctive part
of the case is largely moot insofar as at the present time all of Dr.
Burzynski's patients are enrolled in FDA approved clinical trials or have FDA
approval under special exceptions. The only part of the case which is not moot
is the statutory damage claim, which is for attorney's fees, investigative
costs, and administrative fines. Although, the statute provides for
administrative fines up to $25,000 per day per violation, it is the opinion of
the Company's legal counsel that it is extremely unlikely that the maximum
statutory fine or anything close to it would be assessed by the trier of fact.
The Company intends to vigorously defend the litigation and believes that the
plaintiff will not prevail due to the fact that the Company's IND applications
have been approved by the FDA and the Company is now conducting FDA-approved
clinical trials.
Provident Life Insurance Company v. Stanislaw R. Burzynski and the Burzynski
Research Institute.
An action was filed by Provident Life, filed suit in Houston, Texas
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 November 24, 1997, 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 no recent sales of unregistered securities.
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.
22
PART F/S
FINANCIAL STATEMENTS
The Company's financial statements for the years ended February 29, 1996
and February 28, 1997, have been examined to the extent indicated in their
reports by Seitz and DeMarco, P.C., independent certified public accountants,
and have been prepared in accordance with generally accepted accounting
principles and pursuant to Regulation S-B as promulgated by the Securities and
Exchange Commission and are included herein.
23
SEITZ & DEMARCO, P.C.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Burzynski Research Institute, Inc.
We have audited the accompanying balance sheets of Burzynski Research Institute,
Inc. (a Delaware corporation) as of February 28, 1997 and February 29, 1996, and
the related statements of operations, retained 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 financial position of Burzynski Research Institute,
Inc. as of February 28, 1997 and February 29, 1996 and the results of its
operations and its 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
September 29, 1997
CERTIFIED PUBLIC ACCOUNTANTS
5625 FM 1960 West, Suite 505
Houston, Texas 77069-9969
Telephone: (281) 893-5657
Telephone: (800) 577-5657
Fax: (281) 893-2355
Members:
American Institute of Certified Public Accountants
Texas Society of Certified Public Accountants
F-1
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BURZYNSKI RESEARCH INSTITUTE, INC.
BALANCE SHEETS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
===========================================================================================================
1997 1996
----------- ------------
ASSETS
Current assets
Cash and cash equivalents (Note 1) .................................. $ 15,716 $ 5,945
Accounts receivable (Note 11) ....................................... 398,885 471,111
----------- -----------
Total current assets ............................................ 414,601 477,056
Property and equipment, net of accumulated depreciation
and amortization (Notes 1, 3 and 7) ................................... 653,799 699,818
Other assets ............................................................ 9,032 29,564
----------- -----------
Total assets .................................................... $ 1,077,432 $ 1,206,438
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable (Note 4) ................................................ $ 164,000 $ 164,000
Current maturities of long-term debt (Note 5 and 10) .................. 2,796 3,282
Current portion of capital lease obligations (Note 7) ................. 65,066 92,238
Accounts payable (Note 11) ............................................ 576,777 133,380
Accrued liabilities ................................................... 468,716 422,291
----------- -----------
Total current liabilities ....................................... 1,277,355 815,191
Long-term debt, less current maturities (Notes 5 and 10) ................ 10,280 13,076
Capital lease obligation, less current portion (Note 7) ................. 137,495 184,044
Commitments and contingencies (Notes 12 and 14) ......................... -- --
----------- -----------
Total liabilities ............................................... 1,425,130 1,012,311
Stockholders' equity (deficit)
Common stock, $.001 par value; 200,000,000 shares authorized,
131,289,444 shares issued and outstanding ........................... 131,289 131,289
Additional paid-in capital ............................................ 962,210 962,210
Retained deficit ...................................................... (1,441,197) (899,372)
----------- -----------
Total stockholders' equity (deficit) ............................ (347,698) 194,127
----------- -----------
Total liabilities and stockholders' equity .................... $ 1,077,432 $ 1,206,438
=========== ===========
The accompanying notes are an integral part of theses financial statements.
F-2
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BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
==============================================================================================================
1997 1996
----------- -----------
Revenue (Note 9)
Royalties ............................................................. $ 1,454,569 $ 1,538,735
Rental income ......................................................... 397,719 478,219
Administrative services and supplies .................................. 930,266 916,817
Other income .......................................................... 170 15,223
----------- -----------
Total revenue ..................................................... 2,782,724 2,948,994
Operating expenses
Cost of operations .................................................... 1,211,863 1,159,703
General and administrative ............................................ 884,288 1,096,867
Research and development (Notes 1and 11) .............................. 993,947 461,094
Depreciation (Note 3) ................................................. 234,451 262,179
----------- -----------
Total operating expenses .......................................... 3,324,549 2,979,843
----------- -----------
Net loss before provision for tax ..................................... (541,825) (30,849)
Provision for tax (Notes 1 and 8) ....................................... -- 19,650
----------- -----------
Net loss ........................................................... (541,825) (50,499)
Retained deficit - beginning of year .................................... (899,372) (848,873)
----------- -----------
Retained deficit - end of year ...................................... $(1,441,197) $ (899,372)
----------- -----------
Earnings per share information:
Net loss per share ...................................................... $ (0.0041) $ (0.0004)
----------- -----------
The accompanying notes are an integral part of theses financial statements.
F-3
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BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
===========================================================================================================
1997 1996
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .............................................................. $(541,825) $ (50,499)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ...................................................... 234,451 262,179
(Increase) decrease in
Accounts receivable ................................................. 72,226 (171,083)
Other current assets ................................................ -- 181,935
Other assets ........................................................ 20,532 (4,514)
Increase (decrease) in
Accounts payable .................................................. 443,397 74,705
Accrued liabilities ............................................... 46,425 (94,458)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................. 275,206 198,265
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ................................... (166,755) (127,496)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ................................. (166,755) (127,496)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt .......................................... -- 17,500
Payments on long-term debt ............................................ (3,282) (1,142)
Payments on short-term debt ........................................... -- (10,000)
Payments on capital lease obligations ................................. (95,398) (79,842)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES ................................. (98,680) (73,484)
--------- ---------
NET INCREASE (DECREASE) IN CASH ....................................... 9,771 (2,715)
CASH AT BEGINNING OF YEAR ............................................... 5,945 8,660
--------- ---------
CASH AT END OF YEAR ................................................... $ 15,716 $ 5,945
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash Paid During the Year For:
Income taxes ...................................................... $ 32,000 $ --
Interest .......................................................... $ 36,097 $ 41,926
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Equipment acquired under capital lease obligation ..................... $ 21,677 $ 194,674
The accompanying notes are an integral part of theses financial statements.
F-4
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE ONE
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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 and other diseases, 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
other diseases, and provides chemical analytical consulting services.
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.
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.
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.
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.
F-5
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE TWO
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
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 $863,000, an accumulated deficit
of approximately $1,440,000 and for the years ended February 28, 1997 and
February 29, 1996, the Company incurred losses of approximately $542,000
and $50,499, 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.
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.
F-6
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE THREE
--------------------------------------------------------------------------------
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.
F-7
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE FOUR
--------------------------------------------------------------------------------
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 production facilities, office space and equipment under
agreements which are classified as operating leases. Rent expense incurred
under these leases was approximately $206,399 and $312,878 for the years
ended February 28, 1997 and February 29, 1996, respectively. The leases for
the production facilities and the office space were terminated effective
March 1, 1997. All other lease agreements are all 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 ............................ $(184,220) $(10,489)
Nondeductible expenses ...................... 1,509 319
Change in valuation allowance ............... 182,711 10,170
State franchise tax ......................... -- 19,650
--------- --------
Income tax expense (benefit) ........... $ -- $ 19,650
========= ========
F-8
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE FIVE
--------------------------------------------------------------------------------
8. INCOME TAXES, CONTINUED:
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.
F-9
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE SIX
--------------------------------------------------------------------------------
9. ECONOMIC DEPENDENCY:
The Company received the majority of its income from royalty, rent,
administrative service and supply agreements with Stanislaw Burzynski,
M.D., Ph.D. The following is a summary of the revenue received from
Stanislaw Burzynski, M.D., Ph.D.:
1997 1996
----------- -----------
Royalties $ 1,454,569 $ 1,538,735
Rental income 397,719 478,219
Administrative services and supplies 930,266 916,817
----------- -----------
Total revenue received $ 2,782,554 $ 2,933,771
=========== ===========
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.
F-10
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE SEVEN
--------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS, CONTINUED:
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 other diseases, and also
provides chemical analytical consulting services.
In conjunction with the restructuring Dr. Burzynski entered into the
following agreements:
Personal property lease by the Company to Dr. Burzynski covering
equipment and maintenance of property located at 12707 Trinity Drive,
Stafford, Texas.
Sublease by the Company to Dr. Burzynski covering premises leased by
the Company at 12707 Trinity Drive, Stafford, Texas.
A Sublease by the Company to Dr. Burzynski of certain equipment
located at its Corporate offices in Houston, Texas, used by the
Company for its Department of Medicine and certain administrative
functions.
An agreement, whereby Dr. Burzynski agreed to pay for shared services
to the Company. The agreement consists of the following:
1. 60% of the Company's payroll, including IRS and unemployment
taxes;
2. 60% of Company's employees insurance, including medical,
dental, life, disability and worker's compensation;
3. 17% of gross clinic 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 summary of the transactions between the Company and
Dr. Burzynski:
1997 1996
----------- -----------
Royalties, rents, administrative
services and supplies bill to
Dr. Burzynski $ 2,782,554 $ 2,933,771
Amounts due from Dr. Burzynski for
billings recorded in accounts
receivable at year end 398,885 471,111
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 --
F-11
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE EIGHT
--------------------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS, CONTINUED:
1997 1996
------- ----
Company expenses paid by Dr. Burzynski
for legal fees, rent, and security services 345,500 --
Amounts due Dr. Burzynski for expense paid
record in accounts payable at year end 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 --
12. LITIGATION MATTERS:
In January, 1992 the Department of Health of the State of Texas (DOH) filed
a lawsuit against Burzynski Research Institute, Inc. and Dr. Burzynski for
injunctive relief and statutory fines and costs relating to the use of Dr.
Burzynski's treatment which was alleged to be a violation of state law.
There has been very little activity in the case. The case has been on the
trial calendar for the past year and a half, but has been continued by the
agreement of the parties. The injunctive part of the case is largely moot
insofar as at the present time all of Dr. Burzynski's patients are enrolled
in FDA approved clinical trials or have FDA approval under special
exceptions.
The only part of the case which is not moot is the statutory damage claim,
which is for attorney's fees, investigative costs, and administrative
fines. Although, the statute provides for administrative fines up to
$25,000 per day per violation, it is the opinion of the Company's legal
counsel that it is extremely unlikely that the maximum statutory fine or
anything close to it would be assessed by the trier of fact.
Management intends to vigorously defend this case unless an amicable
settlement can be reached prior to trial. It is the opinion of the
Company's legal counsel that the case will settled on favorable terms.
The Company is involved in other 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.
F-12
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE NINE
--------------------------------------------------------------------------------
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 all
of the agreements 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 and other diseases. 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
and other diseases.
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, at no charge to BRI.
5. SRB may fulfill its obligations in part by providing such
administrative staff as is necessary for BRI to manage its business,
at no cost to BRI.
6. SRB agrees to pay the full amount of the monthly and annual budget or
expenses for the operation of BRI, together with such other
unanticipated but necessary expenses which BRI incurs. Payments from
SRB to BRI of the monthly budget shall be made in two equal
installments on the first and fifteenth of each month
F-13
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE TEN
--------------------------------------------------------------------------------
13. SUBSEQUENT EVENTS, CONTINUED:
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
F-14
BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
PAGE ELEVEN
--------------------------------------------------------------------------------
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.
F-15
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT NAME
----------- ------------
(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: November 25, 1997
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: November 25, 1997
---------------------------------------------
Stanislaw R. Burzynski
President, Chairman of the Board and Director
/s/ TADEUSZ BURZYNSKI Date: November 25, 1997
---------------------------------------------
Tadeusz Burzynski
Senior Vice President and Director
/s/ DEAN MOUSCHER Date: November 25, 1997
---------------------------------------------
Dean Mouscher
Secretary
/s/ BARBARA BURZYNSKI Date: November 25, 1997
---------------------------------------------
Barbara Burzynski
Director
/s/ MICHAEL H. DRISCOLL Date: November 25, 1997
---------------------------------------------
Michael H. Driscoll
Director
/s/ CARLTON HAZELWOOD Date: November 25, 1997
---------------------------------------------
Carlton Hazelwood
Director
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
(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
i. License Agreement effective as of June 29, 1983 by and between
Dr. Burzynski and the Company
ii. Amended License Agreement dated April 2, 1984 by and between
Dr. Burzynski and the Company
iii. Second Amended License Agreement dated March 1, 1990 by and
between Dr. Burzynski and the Company
iv. Research Funding Agreement effective as of March 1, 1997 by and
between Dr. Burzynski and the Company
v. Royalty Agreement dated March 25, 1997 by and between Dr.
Burzynski and the Company
vi. 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
Dates Referenced Herein and Documents Incorporated by Reference
14 Subsequent Filings that Reference this Filing
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