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BURZYNSKI RESEARCH INSTITUTE INC - Quarter Report: 2008 August (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended August 31, 2008

 

 

o

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 Registrant as specified in its charter)

 

Delaware

 

76-0136810

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

9432 Old Katy Road, Suite 200, Houston, Texas  77055

(Address of principal executive offices)

 

(713) 335-5697

(Registrant’s telephone number)

 

 

(Former name, former address, and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

Non-accelerated filer x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes  o    No  x

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  o    No  o

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:  As of August 31, 2008, 131,388,444 shares of the Registrant’s Common Stock were outstanding.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 



 

BURZYNSKI RESEARCH INSTITUTE, INC.

 

Form 10-Q

 

Table of Contents

 

PART I — FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

 

 

 

Item 4.

Controls and Procedures

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

 

 

 

Item 5.

Other Information

 

 

 

 

Item 6.

Exhibits

 

 

2



 

CONDENSED BALANCE SHEETS

BURZYNSKI RESEARCH INSTITUTE, INC.

 

 

 

August 31,

 

February 29,

 

 

 

2008

 

2008

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

12,339

 

$

3,161

 

TOTAL CURRENT ASSETS

 

12,339

 

3,161

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

6,202

 

7,150

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

18,541

 

$

10,311

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

74,190

 

$

33,430

 

Accrued liabilities

 

14,291

 

35,127

 

CURRENT AND TOTAL LIABILITIES

 

88,481

 

68,557

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

Common stock, $.001 par value; 200,000,000 shares authorized, 131,388,444 issued and outstanding

 

131,389

 

131,389

 

Additional paid-in capital

 

81,825,075

 

79,264,295

 

Discount on common stock

 

(100

)

(100

)

Retained deficit

 

(82,026,304

)

(79,453,830

)

 

 

 

 

 

 

TOTAL STOCKHOLDERS’ (DEFICIT)

 

(69,940

)

(58,246

)

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

 

$

18,541

 

$

10,311

 

 

See accompanying notes to financial statements.

 

3



 

CONDENSED STATEMENTS OF OPERATION

BURZYNSKI RESEARCH INSTITUTE, INC.

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

August 31,

 

August 31,

 

 

 

2008

 

2007

 

Operating expenses

 

 

 

 

 

Research and development

 

$

1,254,049

 

$

1,109,535

 

General and administrative

 

35,427

 

43,032

 

Depreciation

 

474

 

498

 

Total operating expenses

 

1,289,950

 

1,153,065

 

 

 

 

 

 

 

Net (loss) before income tax

 

(1,289,950

)

(1,153,065

)

 

 

 

 

 

 

Provision for income tax

 

 

 

 

 

State tax

 

391

 

 

 

 

 

 

 

 

NET (LOSS)

 

$

(1,290,341

)

$

(1,153,065

)

 

 

 

 

 

 

 

 

Earnings per share information:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) per common share

 

$

(0.01

)

$

(0.01

)

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

131,388,444

 

131,388,444

 

 

 

 

Six Months Ended

 

 

 

August 31,

 

August 31,

 

 

 

2008

 

2007

 

Operating expenses

 

 

 

 

 

Research and development

 

$

2,466,859

 

$

2,126,987

 

General and administrative

 

101,465

 

86,151

 

Depreciation

 

948

 

996

 

Total operating expenses

 

2,569,272

 

2,214,134

 

 

 

 

 

 

 

Net (loss) before income tax

 

(2,569,272

)

(2,214,134

)

 

 

 

 

 

 

Provision for income tax

 

 

 

 

 

State tax

 

3,202

 

 

 

 

 

 

 

 

NET (LOSS)

 

$

(2,572,474

)

$

(2,214,134

)

 

 

 

 

 

 

Earnings per share information:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) per common share

 

$

(0.02

)

$

(0.02

)

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

131,388,444

 

131,388,444

 

 

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 29, 2008

 

$

131,389

 

$

79,264,295

 

$

(100

)

$

(79,453,830

)

 

 

 

 

 

 

 

 

 

 

Cash contributed by S.R. Burzynski, M.D., Ph.D.

 

 

185,000

 

 

 

 

 

 

 

 

 

 

 

 

 

FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D.

 

 

2,375,780

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

 

 

 

 

(2,572,474

)

 

 

 

 

 

 

 

 

 

 

Balance August 31, 2008

 

$

131,389

 

$

81,825,075

 

$

(100

)

$

(82,026,304

)

 

See accompanying notes to financial statements.

 

5



 

STATEMENTS OF CASH FLOWS

BURZYNSKI RESEARCH INSTITUTE, INC.

(UNAUDITED)

 

 

 

Six Months Ended

 

 

 

August 31,

 

August 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net (loss)

 

$

(2,572,474

)

$

(2,214,134

)

Adjustments to reconcile net income to net cash (used in) operating activities:

 

 

 

 

 

Depreciation

 

948

 

996

 

FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D.

 

2,375,780

 

2,021,290

 

Increase (decrease)

 

 

 

 

 

Accounts payable

 

40,760

 

3,057

 

Accrued liabilities

 

(20,836

)

19,767

 

 

 

 

 

 

 

NET CASH (USED IN) OPERATING ACTIVITIES

 

(175,822

)

(169,024

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchase of property and equipment

 

 

(6,838

)

 

 

 

 

 

 

NET CASH (USED) BY INVESTING ACTIVITES

 

 

(6,838

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Additional paid-in capital

 

185,000

 

170,000

 

 

 

 

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVTIES

 

185,000

 

170,000

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

9,178

 

(5,862

)

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

3,161

 

10,650

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$

12,339

 

$

4,788

 

 

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for state taxes

 

$

2,211

 

$

 

 

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., a Delaware corporation (the “Company”), include expenses incurred directly by S.R. Burzynski, M.D., Ph.D. (“Dr. Burzynski”) within his medical practice, related to the conduct of U.S. Food and 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 the Company, 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 an Antineoplaston drug is approved for sale by the FDA.

 

The Company is primarily engaged as a research and development facility for Antineoplaston drugs being tested for the use in the treatment of cancer.  The Company is currently conducting clinical trials on various Antineoplastons in accordance with FDA regulations.  At this time, however, none of the Antineoplaston drugs have received FDA approval; further, there can be no assurance that FDA approval will be granted.  In September 2004, the Company announced that the FDA awarded orphan drug status to Antineoplastons A10 and AS2-1 for the treatment of brain stem glioma.

 

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 August 31, 2008 and February 29, 2008, and results of operations for the three months and six months ended August 31, 2008 and 2007, and cash flows for the six months ended August 31, 2008 and 2007.  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 29, 2008.

 

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 has an accumulated deficit.  Dr. Burzynski has funded the capital and operational needs of the Company through his medical practice since inception, and has entered into various agreements to continue such funding.

 

The Company is economically dependent on its funding through Dr. Burzynski’s medical practice.  A 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 the Company.

 

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.

 

NOTE  C.      STOCK OPTIONS

 

At August 31, 2008, the Company had one stock-based employee compensation plan, which is described below.

 

On September 14, 1996 the Company granted 600,000 stock options, with an exercise price of $.35 per share, to an officer who is no longer with the Company.  The options vested as follows:

 

400,000 options

 

September 14, 1996

 

100,000 options

 

June 1, 1997

 

100,000 optons

 

June 1, 1998

 

 

The options are valid in perpetuity.  In addition, for a period of 10 years from the grant date, they increase in the same percentage of any new shares of stock issued; however, no additional shares have been issued since September 14, 1996.  None of the options have been exercised as of August 31, 2008.

 

8



 

NOTES TO CONDENSED FINANCIAL STATEMENTS - continued

BURZYNSKI RESEARCH INSTITUTE, INC.

 

NOTE  C.      STOCK OPTIONS - continued

 

Effective March 1, 2006, the company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified-prospective-transition method.  Under that transition method, compensation cost recognized after March 1, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of March 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to March 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement 123(R).

 

The company did not grant any options and no options previously granted vested in any of the periods presented in these financial statements.  Due to this fact there was no effect on net income and earnings per share if the company had applied the fair value recognition provisions of Statement 123 to options granted under the company’s stock option plan in all periods presented.

 

NOTE  D.      INCOME TAXES

 

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on March 1, 2007.  As of March 1, 2007 the total amount of unrecognized tax benefits was $-0-.  As a result of the implementation of Interpretation 48, the Company had no material change in the amounts of unrecognized tax benefits as a result of tax positions taken during a prior period or the current period.

 

The federal income tax returns of the Company for 2007, 2006, and 2005 are subject to examination by the IRS, generally for three years after they are filed.

 

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

 

9



 

NOTES TO CONDENSED FINANCIAL STATEMENTS - continued

BURZYNSKI RESEARCH INSTITUTE, INC.

 

NOTE  D.      INCOME TAXES - continued

 

The actual provision for income tax for the three and six 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:

 

 

 

Three Months

 

 

 

August 31,

 

August 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Expected (benefit)

 

$

(438,583

)

$

(392,043

)

Taxed directly to Dr. Burzynski

 

438,716

 

392,043

 

Nondeductible expenses and other adjustments

 

3,442

 

3,693

 

Change in valuation allowance

 

(3,575

)

(3,693

)

State taxes

 

391

 

 

 

 

 

 

 

 

Provision for income tax

 

$

391

 

$

 

 

 

 

Six Months

 

 

 

August 31,

 

August 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Expected (benefit)

 

$

(873,552

)

$

(752,806

)

Taxed directly to Dr. Burzynski

 

874,641

 

752,806

 

Nondeductible expenses and other adjustments

 

6,510

 

7,767

 

Change in valuation allowance

 

(7,599

)

(7,767

)

State taxes

 

3,202

 

 

 

 

 

 

 

 

Provision for income tax

 

$

3,202

 

$

 

 

10



 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

The following is a discussion of the financial condition of the Company as of August 31, 2008, and the results of operations comparing the three and six months ended August 31, 2008 and August 31, 2007.  It should be read in conjunction with the financial statements and the notes thereto included elsewhere in this report.

 

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 is currently conducting Phase II clinical trials of Antineoplastons relating to the treatment of cancer.  The Company 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 S.R. Burzynski, M.D., Ph.D. (“Dr. Burzynski”), the Company’s President and Chief Executive Officer.  Dr. Burzynski 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 19 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 and diagnosis of cancer, once an Antineoplaston drug is approved for sale by the FDA.

 

In September 2004, the Company announced that the FDA awarded orphan drug status to Antineoplastons A10 and AS2-1 for treating patients with brain stem gliomas.

 

Results of Operations

 

Three Months Ended August 31, 2008 Compared to Three Months Ended August 31, 2007

 

Research and development costs were approximately $1,254,000 and $1,110,000 for the three months ended August 31, 2008 and 2007, respectively.  The increase of $144,000 or 13% was due to increases in material costs of $147,000 and facility and equipment costs of $66,000 offset by decreases in personnel cost of $62,000, consulting and quality control costs of $4,000 and other research and development costs of $3,000.

 

General and administrative expenses were approximately $35,000 and $43,000 for the three months ended August 31, 2008 and 2007, respectively.  The decrease of $8,000 or 19% was due to decreases in legal and professional fees of $9,000, offset by an increase in other general and administrative expenses of $1,000.

 

The Company had net losses of approximately $1,290,000 and $1,153,000 for the three months ended August 31, 2008 and 2007, respectively.  The increase in the net loss from 2007 to 2008 is primarily due to the increases in research and development costs due to increases in material costs and facility and equipment costs offset by decreases in research and development costs due to decreases in personnel cost, consulting and quality control costs and other research and development costs; and decreases in general and administrative expenses due to decreases in legal and professional fees and offset by increases in other general and administrative cost.

 

Six Months Ended August 31, 2008 Compared to Six Months Ended August 31, 2007

 

Research and development costs were approximately $2,467,000 and $2,127,000 for the six months ended August 31, 2008 and 2007, respectively.  The increase of $340,000 or 16% was due to increases in material costs of $357,000 and facility and equipment costs of $107,000 offset by decreases in personnel cost of $111,000, consulting and quality control costs of $8,000 and other research and development costs of $5,000.

 

General and administrative expenses were approximately $101,000 and $86,000 for the six months ended August 31, 2008 and 2007, respectively.  The increase of $15,000 or 17% was due to increases in legal and professional fees of $11,000, and in other general and administrative expenses of $4,000.

 

11



 

The Company had net losses of approximately $2,572,000 and $2,214,000 for the six months ended August 31, 2008 and 2007, respectively.  The increase in the net loss from 2007 to 2008 is primarily due to the increases in research and development costs due to increases in material costs and facility and equipment costs offset by decreases in research and development costs due to decreases in personnel cost, consulting and quality control costs and other research and development costs; and increases in general and administrative expenses due to increases in legal and professional fees and other general and administrative cost and increases in the provision for state income tax.

 

Liquidity and Capital Resources

 

The Company’s operations have been funded entirely by Dr. Burzynski with 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 cancer and Dr. Burzynski agreed to fund the Company’s Antineoplaston research for that purpose.  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 of 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 are 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, 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.

 

The Company entered into a third amendment to the Research Funding Agreement, effective March 1, 2007, whereby the Company and Dr. Burzynski extended the term thereof until February 29, 2008, with an automatic renewal for additional one-year terms, unless one party notifies the other party at least thirty days prior to the expiration of the then current 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 of his intention to continue the agreement notwithstanding this automatic termination provision.

 

The Company estimates that it will spend approximately $2,600,000 during the remaining two quarters of the fiscal year ending February 28, 2009.  The Company estimates that ninety-five percent (95%) of this amount 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.  The Company believes Dr. Burzynski will be financially able to fund the Company’s operations at least through the fiscal year ending February 28, 2009.  In addition, Dr. Burzynski’s medical practice has successfully funded the Company’s research activities over the last 22 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.

 

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Forward-Looking Statements

 

Certain matters discussed in this quarterly report, except for historical information contained herein, may constitute “forward-looking statements” that are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.  Forward-looking statements provide current expectations of future events based on certain assumptions.  These statements encompass information that does not directly relate to any historical or current fact and often may be identified with words such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” “plans,” “projects” and other similar expressions.  Management’s expectations and assumptions regarding Company operations and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements.

 

Item 4.   Controls and Procedures

 

Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer (who is also the Company’s principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.  Based on that evaluation, the Company’s principal executive officer (who is also the Company’s principal financial officer) concluded that the Company’s disclosure controls and procedures are effective in timely alerting him to material information required to be included in periodic filings with the Securities and Exchange Commission.  A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.  There were no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of evaluation above.

 

PART II — OTHER INFORMATION

 

Item 1.   Legal Proceedings

 

The Company’s activities are subject to regulation by various governmental agencies, including the FDA, which regularly monitor the Company’s operations and often impose requirements on the conduct of its clinical trials and other aspects of the Company’s business operations.  The Company’s policy is to comply with all such regulatory requirements.  From time to time, the Company is also subject to potential claims by patients and other potential claimants commonly arising out of the operation of a medical practice.  The Company seeks to minimize its exposure to claims of this type wherever possible.

 

Currently, the Company is not a party to any material pending legal proceedings.  Moreover, the Company is not aware of any such legal proceedings that are contemplated by governmental authorities with respect to the Company or any of its properties.

 

Item 6.   Exhibits

 

3.1

 

Certificate of Incorporation of the Company, as amended (incorporated by reference from Exhibits 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)).

 

 

 

31.1

 

Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, filed herewith.

 

 

 

32.1

 

Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

BURZYNSKI RESEARCH INSTITUTE, INC.

 

 

 

By:

/s/ Stanislaw R. Burzynski

 

 

Stanislaw R. Burzynski,

 

 

President, Secretary, Treasurer and

 

 

Chairman of the Board of Directors

 

 

(Chief Executive Officer and

 

 

Principal Financial Officer)

 

 

Date: October 15, 2008

 

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