-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A1AMk4vo1myMrtTRwDV97t98nGi9t6fHzX39fxKNbhbE/GXbZ6t+iO3x8fg8gkqC Aos1iH44bJ747ZcTdqauXg== 0000912057-01-523630.txt : 20010713 0000912057-01-523630.hdr.sgml : 20010713 ACCESSION NUMBER: 0000912057-01-523630 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURZYNSKI RESEARCH INSTITUTE INC CENTRAL INDEX KEY: 0000724445 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 760136810 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23425 FILM NUMBER: 1680231 BUSINESS ADDRESS: STREET 1: 12000 RICHMOND AVE CITY: HOUSTON STATE: TX ZIP: 77082 10QSB 1 a2054061z10qsb.txt 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB ------------------------- OMB APPROVAL ------------------------- OMB Number: 3235-0416 ------------------------- Expires: April 30, 2003 ------------------------- Estimated average burden hours per response: 32.00 ------------------------- (Mark One) /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ending May 31, 2001 / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 For the transition period from to ----------- ----------- Commission file number 000-23425 ---------------------------------- Burzynski Research Institute, Inc. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 76-0136810 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization 9432 Old Katy Road, Suite 200, Houston, Texas 77055 - -------------------------------------------------------------------------------- (Address of principal executive offices) (713) 335-5697 - -------------------------------------------------------------------------------- (Issuer's telephone number, including area code) - -------------------------------------------------------------------------------- (Former address, if changed since last report) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes / / No / / APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of February 28, 2001, 131,389,444 shares of the Registrant's Common Stock were outstanding. Transitional Small Business Disclosure Format (Check one): Yes / / No /X/ BURZYNSKI RESEARCH INSTITUTE, INC. FORM 10-QSB TABLE OF CONTENTS
PAGE NO. -------- PART I - FINANCIAL INFORMATION......................................................3 Item 1. Financial Statements.....................................................3 Item 2. Management's Discussion and Analysis or Plan of Operation...............10 PART II - OTHER INFORMATION........................................................12 Item 6. Exhibits and Reports on Form 8-K........................................12 SIGNATURES.........................................................................13
2 PART I - FINANCIAL INFORMATION CONDENSED BALANCE SHEETS BURZYNSKI RESEARCH INSTITUTE, INC.
May 31, February 28, 2001 2001 --------------- ----------------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 12,412 $ 7,244 --------------- ----------------- TOTAL CURRENT ASSETS 12,412 7,244 Property and equipment, net of accumulated depreciation and amortization, and other assets 95,780 106,464 --------------- ----------------- TOTAL ASSETS $ 108,192 $ 113,708 =============== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 57,432 $ 28,060 Accrued liabilities 54,087 57,006 --------------- --------------- CURRENT AND TOTAL LIABILITIES 111,519 85,066 --------------- --------------- COMMITMENTS AND CONTINGENCIES Stockholders' equity Common stock, $.001 par value; 200,000,000 shares authorized, 131,389,444 issued and outstanding 131,389 131,389 Additional paid-in capital 48,362,649 46,979,684 Discount on common stock (100) (100) Retained deficit (48,497,265) (47,082,331) --------------- --------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (3,327) 28,642 --------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 108,192 $ 113,708 =============== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 3 CONDENSED STATEMENTS OF OPERATIONS BURZYNSKI RESEARCH INSTITUTE, INC. (UNAUDITED)
THREE MONTHS ENDED ------------------------------ May 31, May 31, 2001 2000 --------- ------- Revenue Other income $ 3,000 $ 125 ---------------- ----------------- Operating expenses Research and development 1,296,310 1,043,260 General and administrative 110,501 21,893 Depreciation 11,010 17,550 ---------------- ----------------- Total operating expenses 1,417,821 1,082,703 ---------------- ----------------- Net (loss) before income tax (1,414,821) (1,082,578) Provision for income tax 113 1,702 ---------------- ----------------- NET (LOSS) $ (1,414,934) $ (1,084,280) ================ ================= Earnings per share information: Basic and diluted (loss) per common share $ (0.0108) $ (0.0083) ================ ================= Weighted average number of common shares outstanding 131,389,444 131,389,444 ================ =================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 4 STATEMENTS OF STOCKHOLDERS' DEFICIT BURZYNSKI RESEARCH INSTITUTE, INC. (UNAUDITED)
Additional Discount on Common Paid-in Common Retained Stock Capital Stock Deficit ----------- ------------ -------------- ------------ Balance, February 28, 2001 131,389 $46,979,684 $ (100) $(47,082,331) Cash contributed by S.R. Burzynski, M.D., Ph.D. - 204,000 - - FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D. - 1,178,965 - - Net loss - - - (1,414,934) ----------- ------------ -------------- ------------ Balance, May 31, 2001 131,389 $48,362,649 $ (100) $(48,497,265) =========== ============ ============== ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 5 STATEMENTS OF CASH FLOWS BURZYNSKI RESEARCH INSTITUTE, INC. (UNAUDITED)
Three Months Ended ------------------------------------ May 31, May 31, 2001 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $(1,414,934) $(1,084,280) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 11,010 17,550 FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D. 1,178,965 902,027 (Increase) decrease in other assets (326) 623 Increase (decrease) Accounts payable 30,129 (8,830) Accrued liabilities (2,919) (72,975) ----------- ----------- NET CASH (USED BY) OPERATING ACTIVITIES (198,075) (245,885) CASH FLOWS FROM INVESTMENT ACTIVITIES Purchase of equipment - (148) ----------- ----------- NET CASH (USED BY) INVESTMENT ACTIVITIES - (148) CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt and capital lease obligations (757) (7,714) Additional paid-in capital 204,000 246,000 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 203,243 238,286 ----------- ----------- NET INCREASE (DECREASE) IN CASH 5,168 (7,747) CASH AT BEGINNING OF PERIOD 7,244 20,099 ----------- ----------- CASH AT END OF PERIOD $ 12,412 $ 12,352 =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 6 NOTES TO CONDENSED FINANCIAL STATEMENTS BURZYNSKI RESEARCH INSTITUTE, INC. NOTE A. BASIS OF PRESENTATION The financial statements of Burzynski Research Institute, Inc. (BRI or the Company), a Delaware corporation, include expenses incurred directly by S.R. Burzynski, M.D., Ph.D. (Dr. Burzynski) within his medical practice, related to the conduct of Federal Drug Administration (FDA) approved clinical trials for antineoplaston drugs used in the treatment of cancer. These expenses have been reported as research and development costs and as additional paid-in capital. Other funds received from Dr. Burzynski have also been reported as additional paid-in capital. Expenses related to Dr. Burzynski's medical practice (unrelated to the clinical trials) have not been included in these financial statements. Dr. Burzynski is the President, Chairman of the Board and owner of over 80% of the outstanding stock of Burzynski Research Institute, Inc., and also is the inventor and original patent holder of certain drug products known as "antineoplastons", which he has licensed to the Company. The Company and Dr. Burzynski have entered various agreements which provide the Company the exclusive right in the United States, Canada and Mexico to use, manufacture, develop, sell, distribute, sublicense and otherwise exploit all the rights, titles and interest in antineoplaston drugs used in the treatment of cancer, once the drug is approved for sale by the FDA. The Company is primarily engaged as a research and development facility of drugs currently being tested for the use in the treatment of cancer, and provides consulting services. The Company is currently conducting clinical trials on various antineoplastons in accordance with FDA regulations, however, at this time none of the antineoplaston drugs have received FDA approval; further, there can be no assurance of FDA approval will be granted. The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Certain disclosures and information normally included in financial statements have been condensed or omitted. In the opinion of management of the Company, these financial statements contain all adjustments necessary for a fair presentation of financial position as of May 31, 2001 and February 28, 2001, and results of operations for the three months May 31, 2001 and 2000, and cash flows for the three months ended May 31, 2001 and 2000. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. These statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended February 28, 2001. 7 NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED BURZYNSKI RESEARCH INSTITUTE, INC. NOTE B. ECONOMIC DEPENDENCY The Company has not generated significant revenues since its inception and has suffered losses from operations, has a working capital deficit and an accumulated deficit. Dr. Burzynski has funded the capital and operational needs of the Company through his medical practice since inception, and has various agreements to continue such funding. The Company is economically dependent on its funding through Dr. Burzynski's medical practice. A significant portion of Dr. Burzynski's patients are admitted and treated as part of the clinical trial programs which are regulated by the FDA. The FDA imposes numerous regulations and requirements regarding these patients and the Company is subject to inspection at any time by the FDA. These regulations are complex and subject to interpretation and though it is management's intention to comply fully with all such regulations, there is the risk that the Company is not in compliance and is thus subject to sanctions imposed by the FDA. In addition, as with any medical practice, Dr. Burzynski is subject to potential claims by patients and other potential claimants commonly arising out of the operation of a medical practice. The risks associated with Dr. Burzynski's medical practice directly affect his ability to fund the operations of BRI. It is also 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. 8 NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED BURZYNSKI RESEARCH INSTITUTE, INC. NOTE C. INCOME TAXES The actual provision for income tax for the three months ended differ from the amounts computed by applying the U.S. federal income tax rate of 34% to the pretax income as a result of the following:
May 31, May 31, 2001 2000 ------------ ------------ Expected expense (benefit) $ (481,039) $ (368,077) Nondeductible expenses and other adjustments (24) 47 Taxed directly to Dr. Burzynski 470,208 373,385 Change in valuation allowance 10,855 (5,355) State franchise tax on income 113 1,702 ----------- ----------- Provision for income tax $ 113 $ 1,702 =========== ===========
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. The following is a discussion of the financial condition of the Company for the three months ended May 31, 2001, and the results of operations for the three months ended May 31, 2001 and May 31, 2000. It should be read in conjunction with the financial statements and the notes thereto included elsewhere in this report. The following discussion contains forward-looking statements. INTRODUCTION 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 Antineoplastons are useful in the treatment of human cancer and other diseases of the body and is currently conducting Phase II clinical trials of Antineoplastons. BRI has generated no significant revenue since its inception, and does not expect to generate any operating revenues until such time, if any, as Antineoplastons are approved for use and sale by the FDA. The Company's sole source of funding is Dr. Burzynski, who funds the Company's operations from his medical practice pursuant to certain agreements between Dr. Burzynski and the Company. Funds received by the Company from Dr. Burzynski are reported as additional paid-in capital to the Company. The Company is primarily engaged as a research and development facility of drugs currently being tested for the use in the treatment of cancer, and provides consulting services. The Company is currently conducting approximately 72 FDA approved clinical trials. The Company holds the exclusive right in the United States, Canada and Mexico to use, manufacture, develop, sell, distribute, sublicense and otherwise exploit all the rights, titles and interest in Antineoplaston drugs used in the treatment of cancer, once the drug is approved for sale by the FDA. RESULTS OF OPERATIONS THREE MONTHS ENDED MAY 31, 2001 COMPARED TO THREE MONTHS ENDED MAY 31, 2000 Research and development costs were approximately $1,296,000 and $1,043,000 for the three months ended May 31, 2001 and 2000, respectively. The increase of $253,000 or 24% was due to increases in personnel cost of $181,000, material costs of $82,000, consulting and quality control costs of $13,000 and other research and development costs of $6,000, all of which were partially offset by a decrease in facility and equipment costs of $29,000. General and administrative expenses were approximately $111,000 and $22,000 for the three months ended May 31, 2001 and 2000, respectively. The increase of $89,000 or 405% was due to an increase in legal and professional fees of $86,000, and an increase in other general and administrative expenses of $3,000. The Company had net losses of approximately $1,415,000 and $1,084,000 for the three months ended May 31, 2001 and 2000, respectively. The increase in the net loss from 2000 to 2001 is due to increased research and development costs related to increases in personnel and material costs and the increase in general and administrative expenses primarily due to increases in professional fees. As of May 31, 2001, the Company had a total stockholders' deficit of $3,327. LIQUIDITY AND CAPITAL RESOURCES The Company's operations have been funded entirely by Dr. Burzynski from funds generated from Dr. Burzynski's medical practice. Effective March 1, 1997, the Company entered into a Research Funding Agreement with Dr. Burzynski (the "Research Funding Agreement"), pursuant to which the Company agreed to undertake all scientific research in connection with the development of new or improved Antineoplastons for the treatment of 10 cancer and Dr. Burzynski agreed to fund the Company's Antineoplaston research. Under the Research Funding Agreement, the Company hires such personnel as is required to conduct Antineoplaston research, and Dr. Burzynski funds the Company's research expenses, including expenses to conduct the clinical trials. Dr. Burzynski also provides the Company laboratory and research space as needed to conduct the Company's research activities. The Research Funding Agreement also provides that Dr. Burzynski may fulfill his funding obligations in part by providing the Company such administrative support as is necessary for the Company to manage its business. Dr. Burzynski pays the full amount of the Company's monthly and annual budget or expenses for the operation of the Company, together with other unanticipated but necessary expenses which the Company incurs. In the event the research results in the approval of any additional patents for the treatment of cancer, Dr. Burzynski shall own all such patents, but shall license to the Company the patents based on the same terms, conditions and limitations as is in the current license between Dr. Burzynski and the Company. Dr. Burzynski has unlimited and free access to all equipment which the Company owns, so long as such use does not conflict with the Company's use of such equipment, including without limitation, to all equipment used in the manufacturing of Antineoplastons used in the clinical trials. The amounts which Dr. Burzynski is obligated to pay under the agreement shall be reduced dollar for dollar by the following: (1) any income which the Company receives for services provided to other companies for research and/or development of other products, less such identifiable marginal or additional expenses necessary to produce such income, or (2) the net proceeds of any stock offering or private placement which the Company receives during the term of the agreement up to a maximum of $1,000,000 in a given Company fiscal year. Effective March 1, 2001, the Company and Dr. Burzynski extended the term of the Research Funding Agreement until March 1, 2002, with an automatic renewal for two 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 Research Funding 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 his intention to continue the agreement notwithstanding this automatic termination provision. The Company estimates that it will spend approximately $5,000,000 in the fiscal year ending February 28, 2002. The Company estimates that of this amount, $4,500,000 will be spent on research and development and the continuance of FDA-approved clinical trials. While the Company anticipates that Dr. Burzynski will continue to fund the Company's research and FDA-related costs, there is no assurance that Dr. Burzynski will be able to continue to fund the Company's operations pursuant to the Research Funding Agreement or otherwise. However, because the net assets available to Dr. Burzynski from his personal assets and the assets of his medical practice currently exceed the Company's projected twelve-month funding requirements, the Company believes Dr. Burzynski will be financially able to fund the Company's operations through the fiscal year ending February 28, 2002. In addition, Dr. Burzynski's medical practice has successfully funded the Company's research activities over the last 17 years and, in 1997, his medical practice was expanded to include traditional cancer treatment options such as chemotherapy, immunotherapy and hormonal therapy in response to FDA requirements that cancer patients utilize more traditional cancer treatment options in order to be eligible to participate in the Company's Antineoplaston clinical trials. As a result of the expansion of Dr. Burzynski's medical practice, the financial condition of the medical practice has improved Dr. Burzynski's ability to fund the Company's operations. The Company may be required to seek additional capital through equity or debt financing or the sale of assets until the Company's operating revenues are sufficient to cover operating costs and provide positive cash flow; however, there can be no assurance that the Company will be able to raise such additional capital on acceptable terms to the Company. In addition, there can be no assurance that the Company will ever achieve positive operating cash flow. 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Exhibits -------- 3.1 Certificate of Incorporation of the Company, as amended (incorporated by reference from Exhibit 3(i) - (iii) to Form 10-SB filed with the Securities and Exchange Commission on November 25, 1997 (File No. 000-23425)). 3.2 Amended Bylaws of the Company (incorporated by reference from Exhibit (3)(iv) to Form 10-SB filed with the Securities and Exchange Commission on November 25, 1997 (File No. 000-23425)). 4.1 Form of Certificate Representing Common Stock (incorporated by reference from Exhibit 4.1 to Form 10-KSB filed with the Securities and Exchange Commission on May 2, 2001 (File No. 000-23425)). Reports on Form 8-K ------------------- None. 12 SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Burzynski Research Institute, Inc. ------------------------------------------------ (Registrant) Date: July 11, 2001 By: /s/ Stanislaw R. Burzynski --------------------------------------------- Stanislaw R. Burzynski, President, Secretary, Treasurer (Chief Financial Officer) and Chairman of the Board of Directors 13 -----END PRIVACY-ENHANCED MESSAGE-----