BURZYNSKI RESEARCH INSTITUTE INC - Quarter Report: 2014 May (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

For the quarterly period ended May 31, 2014

 

 

For the transition period from                  to                 

 

Commission file number 000-23425

 

Burzynski Research Institute, Inc.

(Exact name of Registrant as specified in its charter)

 

 

9432 Katy Freeway, 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

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 definition of “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

 

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 CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of May 31, 2014, 131,448,444 shares of the Registrant’s Common Stock were outstanding.

 

 

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BURZYNSKI RESEARCH INSTITUTE, INC.

 

Form 10-Q

 

Table of Contents

 

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	10
Item 4.	Controls and Procedures	12
PART II — OTHER INFORMATION		12
Item 1.	Legal Proceedings	12
Item 6.	Exhibits	12

 

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Item 1.  Financial Statements

 

BURZYNSKI RESEARCH INSTITUTE, INC.

BALANCE SHEETS

 

		May 31,			February 28,
		2014			2014
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	1,884		$	229
TOTAL CURRENT ASSETS		1,884			229
Property and equipment, net of accumulated depreciation of $20,534 and $20,363 at May 31, 2014 and February 28, 2014, respectively		1,881			2,052
TOTAL ASSETS		$	3,765		$	2,281
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable		$	108,420		$	114,320
Accrued liabilities		25,561			38,583
CURRENT AND TOTAL LIABILITIES		133,981			152,903
Commitments and contingencies		—			—
Stockholders’ deficit
Common stock, $.001 par value; 200,000,000 shares authorized, 131,448,444 issued and outstanding, at May 31, 2014 and February 28, 2014, respectively		131,449			131,449
Additional paid-in capital		112,950,887			112,089,593
Retained deficit		(113,212,552		)	(112,371,664		)
TOTAL STOCKHOLDERS’ DEFICIT		(130,216		)	(150,622		)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	3,765		$	2,281

 

See accompanying notes to financial statements.

 

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BURZYNSKI RESEARCH INSTITUTE, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended May 31,
		2014			2013
Operating expenses
Research and development		$	780,290		$	1,213,036
General and administrative		60,427			143,838
Depreciation		171			171
TOTAL OPERATING EXPENSES		840,888			1,357,045
Net loss before provision for income tax		(840,888		)	(1,357,045		)
Provision for income tax		—			—
NET LOSS		$	(840,888	)	$	(1,357,045	)
Loss per share information:
Basic and diluted loss per common share		$	(0.01	)	$	(0.01	)
Weighted average number of common shares outstanding		131,448,444			131,448,444

 

See accompanying notes to financial statements.

 

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BURZYNSKI RESEARCH INSTITUTE, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Three Months Ended May 31, 2014

(UNAUDITED)

 

													Total
		Common Stock					Additional						Stockholders’
		Shares		Amount			Paid-in Capital			Retained Deficit			Deficit
Balance February 28, 2014		131,448,444		$	131,449		$	112,089,593		$	(112,371,664	)	$	(150,622	)
Cash contributed by S.R. Burzynski, M.D., Ph.D. and related parties		—		—			130,675			—			130,675
FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D.		—		—			730,619			—			730,619
Net loss		—		—			—			(840,888		)	(840,888		)
Balance May 31, 2014		131,448,444		$	131,449		$	112,950,887		$	(113,212,552	)	$	(130,216	)

 

See accompanying notes to financial statements.

 

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BURZYNSKI RESEARCH INSTITUTE, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Three months Ended May 31,
		2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(840,888	)	$	(1,357,045	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		171			171
FDA clinical trial expenses paid directly by S.R. Burzynski, M.D., Ph.D.		730,619			1,145,660
Changes in operating assets and liabilities
Accounts payable		(5,900		)	(7,563		)
Accrued liabilities		(13,022		)	56,165
NET CASH USED IN OPERATING ACTIVITIES		(129,020		)	(162,612		)
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution of capital		130,675			162,700
NET CASH PROVIDED BY FINANCING ACTIVITIES		130,675			162,700
NET INCREASE IN CASH		1,655			88
CASH AT BEGINNING OF PERIOD		229			1,192
CASH AT END OF PERIOD		$	1,884		$	1,280

 

See accompanying notes to financial statements

 

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BURZYNSKI RESEARCH INSTITUTE, INC.

NOTES TO FINANCIAL STATEMENTS

 

NOTE A.               BASIS OF PRESENTATION

 

The financial statements of Burzynski Research Institute, Inc. (the “Company”), a Delaware corporation, include expenses incurred related to clinical trials, which were sanctioned by the U.S. Food and Drug Administration (“FDA”) in 1993, for Antineoplaston drugs used in the treatment of cancer.  These expenses are incurred directly by S.R. Burzynski, M.D., Ph.D. (Dr. Burzynski or “SRB”) on behalf of the Company and 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 approximately 81% of the outstanding common stock of the Company, and also is the inventor and original patent holder of certain drug products knows as “Antineoplastons,” which he has licensed to the Company.

 

The Company and Dr. Burzynski have entered into 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 for Antineoplaston drugs being tested for 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.

 

The accompanying unaudited 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, 2014 and February 28, 2014, results of operations for the three months ended May 31, 2014 and 2013, and cash flows for the three months ended May 31, 2014 and 2013.  All 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-K for the year ended February 28, 2014.

 

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.

 

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NOTE C.               STOCK OPTIONS AND WARRANTS

 

At May 31, 2014, 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 $0.35 per share, to an officer who is no longer with the Company.  The options vested as follows:

 

		Vesting Date
400,000 options		September 14, 1996
100,000 options		June 1, 1997
100,000 options		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 shares were issued during such 10-year periods from the grant dates.  None of the options have been exercised as of May 31, 2014.

 

The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 718, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee officers based on estimated fair values as of the date of grant. Compensation expense is recognized on a straight-line basis over the requisite service period.

 

The Company accounts for share-based payments to non-employees, with guidance provided by FASB ASC 505-50, Equity-Based Payments to Non-Employees.

 

The Company did not grant any options and no options previously granted vested in any of the periods presented in these financial statements. Thus, there was no effect on net loss or loss per share regarding the provisions of FASB ASC 718 or FASB ASC 505-50 in any of the periods presented.

 

Effective July 5, 2012, the Company entered into a Marketing and Consulting Agreement (the “Marketing Agreement”) with Worldwide Medical Consultants, Inc. (“WMC”) and CARIGEN, LTD (“SRB”), an entity wholly-owned and controlled by Dr. Burzynski, pursuant to which WMC will (i) provide SRB with various marketing and consulting services to assist SRB in locating and developing cancer or health related centers in certain foreign markets and (ii) make payments to the Company equal to 10% of each consulting fee received by WMC for the aforementioned services provided to SRB, net of certain expenses incurred by WMC (“WMC Payment”). In consideration of the WMC Payment, the Company agreed to grant to WMC warrants to acquire an aggregate of 2,000,000 shares of the Company’s Common Stock, exercisable at $0.10 per share with a ten year exercise period, with 1,000,000 shares vesting upon execution of the agreement and the remaining 1,000,000 shares to vest upon the first closing of a transaction by SRB as a result of the services provided by WMC under the Marketing Agreement. The fair market value of the vested warrants as of the date of grant was measured using the Black-Scholes option pricing model and totaled approximately $160,000 or $0.16 per warrant. As of May 31, 2014, none of the aforementioned warrants have been exercised and no events triggering the vesting of the remaining unvested warrants have occured.

 

NOTE D.               LOSS PER COMMON SHARE

 

The Company accounts for loss per common share in accordance with FASB ASC 260, Earnings per Share. Basic loss per share amounts are calculated by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding for the periods, including the dilutive effect of all common stock equivalents. Dilutive options and warrants that are issued during a period or that expire or are canceled during a period are reflected in the computations for the time they were outstanding during the periods being reported. During the three months ended May 31, 2014 and 2013, 1,600,000 warrants and stock options were excluded from the calculation of diluted loss per common share because their effect would be anti-dilutive.

 

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NOTE E.               INCOME TAXES

 

The Company follows the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes.  The Company is not aware of any material unrecognized tax uncertainties as a result of tax positions previously taken.

 

The Company recognizes interest and penalties as interest expense when they are accrued or assessed.

 

The federal income tax returns of the Company for 2013, 2012, and 2011 are subject to examination by the IRS, generally for three years after they are filed.

 

The actual provision for income tax for the three month periods ended May 31, 2014 and 2013, respectively, 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:

 

		Three Months Ended May 31,
		2014			2013
Expected income tax benefit		$	(285,902	)	$	(461,395	)
Effect of expenses deducted directly by Dr. Burzynski		285,902			461,395
Nondeductible expenses and other adjustments		(6,937		)	16,553
Change in valuation allowance		6,937			(16,553		)
State tax		—			—
Income tax expense		$	—		$	—

 

At May 31, 2014, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $275,259. 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 full valuation allowance for deferred tax assets has been provided.  At May 31, 2014, the Company had net operating loss carryforwards available to offset future taxable income in the amount of $679,329, which may be carried forward and will expire in varying amounts if not used between 2020 and 2034.

 

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

 

The following is a discussion of the financial condition of the Company as of May 31, 2014, and the results of operations comparing the three months ended May 31, 2014 and 2013.  It should be read in conjunction with the financial statements and the notes thereto included elsewhere in this report and in conjunction with the Annual Report on Form 10-K for the year ended February 28, 2014.

 

Introduction

 

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.  All clinical trials were closed for enrollment by the Company as of September 24, 2012. The Company is currently conducting one FDA approved clinical trial. 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.

 

On September 3, 2004, the FDA granted the Company’s request for “orphan drug designation” (“ODD”) for the Company’s Antineoplastons (A10 & AS2-1 Antineoplaston) for treatment of patients with brain stem glioma and, on October 30, 2008, the FDA granted the Company’s request for ODD for Antineoplastons (A10 and AS2-1 Antineoplaston) for the treatment of gliomas.

 

On January 13, 2009, the Company announced that the Company had reached an agreement with the FDA for the Company to move forward with a pivotal Phase III clinical trial of combination Antineoplaston therapy plus radiation therapy in patients with newly diagnosed diffuse, intrinsic brainstem gliomas (“DBSG”).  The agreement was made under the FDA’s Special Protocol Assessment procedure, meaning that the design and planned analysis of the Phase III study is acceptable to support a regulatory submission seeking new drug approval.  On February 23, 2010, the Company entered into an agreement with Cycle Solutions, Inc., dba ResearchPoint (“ResearchPoint”) to initiate and manage a pivotal Phase III clinical trial of combination Antineoplastons A10 and AS2-1 plus radiation therapy (“RT”) in patients with newly-diagnosed, diffuse, intrinsic brainstem glioma.  ResearchPoint has secured interest and commitments from a number of sites selected.  A randomized, international Phase III study will commence upon availability of funds.  The study’s objective is to compare overall survival of children with newly-diagnosed DBSG who receive combination Antineoplastons A10 and AS2-1 plus RT versus RT alone.

 

Partial Clinical Hold on Phase II and Phase III Clinical Trials

 

In a letter dated June 25, 2012, the Company informed the FDA of a serious adverse event which may have been related to the administration of Antineoplastons.  On July 30, 2012, the FDA placed a partial clinical hold for enrollment of new pediatric patients under single patient protocols or in any of the active Phase II or Phase III studies under investigational new drug application (“IND”) 43,742.  The FDA imposed this partial clinical hold because, according to the FDA, insufficient information had been submitted by the Company to allow the FDA to determine whether the potential patient benefit justifies the potential risks of treatment use, and that the potential risks are not unreasonable in the context of the disease or condition to be treated.  The FDA cited 21 C.F.R. § 312.42(b)(2)(i), 21 C.F.R. § 312.42(b)(1)(iv), and 21 C.F.R. § 312.42(b)(3)(i), as grounds for imposition of a clinical hold; and 21 C.F.R. § 312.305(a)(2), a criteria for expanded access use.  The FDA advised the Company that until it resolved the matter to FDA’s satisfaction, the Company could not enroll new pediatric patients in any protocol under such IND.  The Company later notified the FDA in a September 24, 2012 letter that it was closing pediatric protocol BT-10 (under IND 43,742) for enrollment effective September 25, 2012, and that it would also terminate the protocol once all active patients had completed the study.

 

In a teleconference on January 9, 2013 between the FDA and the Company, followed by a letter of the same date, the FDA notified the Company that the agency was placing IND 43,742 on partial clinical hold, due to a lack of a complete response to the issues raised by the FDA and what the FDA deemed a misleading, erroneous, and incomplete investigator brochure.  The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21 C.F.R. § 312.42(b)(1)(iii), as grounds for imposition of a clinical hold.  The FDA further advised the Company that until it resolved the matter to the FDA’s satisfaction, that the Company could not enroll new adult or pediatric patients in any protocol under such IND.  The FDA also placed protocols B-52 and B-54 on clinical hold due to what the FDA deemed to be an unreasonable and significant risk of illness or injury to human subjects.  The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21 C.F.R.§ 312.42(B)(1)(i), as grounds for imposition of a clinical hold.  The FDA advised the Company that until it resolved the matter to FDA’s satisfaction, the Company could not legally conduct the identified clinical studies under such IND.

 

In a letter dated April 9, 2013, the Company responded to the issues raised by the FDA in its January 9, 2013 letter to the Company.  In a letter dated May 9, 2013 from the FDA, the FDA advised the Company that the Company’s April 9, 2013 letter was not a complete response to all the issues listed in the FDA’s letter dated January 9, 2013, and the FDA also identified the issues that were not fully addressed by the Company’s response.  The FDA further advised the Company that until it satisfactorily addressed all the issues in the FDA’s letter dated January 9, 2013, that the FDA could not complete its review, and the clinical hold could not be removed.

 

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The amendment submitted to the IND by the Company dated August 29, 2013 was reviewed by the FDA and was determined to be a complete response to the issues raised but still needed further clarification.  Further analysis of all serious somnolence and overdose events in patients receiving Antineoplastons was requested by the FDA.  In a teleconference with the FDA on September 16, 2013 and pursuant to the Company’s notification letter dated September 17, 2013, the Company notified the FDA that protocol B-54 had been withdrawn.

 

A revised investigator’s brochure was submitted to the FDA on November 25, 2013.  After several submissions of additional data requested by the FDA and data regarding the partial clinical hold, Protocol BT-52 remains on clinical hold.

 

Results of Operations

 

Three Months Ended May 31, 2014 Compared to Three Months Ended May 31, 2013

 

Research and development costs were approximately $780,000 and $1,213,000 for the three months ended May 31, 2014 and 2013, respectively.  The decrease of $433,000 or 36% was due to decreases in personnel costs of $349,000, material costs of $100,000, and other research and development costs of $1,000, offset by an increase in facility and equipment costs of $17,000, as a result of cost cuts made due to a decrease in production related to clinical trial holds.

 

General and administrative expenses were approximately $60,000 and $144,000 for the three months ended May 31, 2014 and 2013, respectively.  The decrease of $84,000 or 58% was due to a decrease in legal and professional fees of $83,000 and other general and administrative costs of $1,000 as a result of cost cuts made due to a decrease in production related to clinical trial holds.

 

The Company had net losses of approximately $841,000 and $1,357,000 for the three months ended May 31, 2014 and 2013, respectively.  The decrease in the net loss from 2013 to 2014 is primarily due to an overall decrease in research and development costs and a decrease in general and administrative expenses of the Company as described above.

 

Liquidity and Capital Resources

 

The Company’s operations have been funded entirely by contributions from Dr. Burzynski and 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 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.

 

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 Research Funding Agreement, as amended, contains an annual automatic renewal provision providing for an additional one-year term, 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.  Subject to the foregoing, the term of the Research Funding Agreement was renewed and extended until February 28, 2015.  It is expected that the Research Funding Agreement will continue to renew each year prospectively unless terminated under the provisions of 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 $2,500,000 during the remaining three quarters of the fiscal year ending February 28, 2015.  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

 

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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 for at least the next year.  In addition, Dr. Burzynski’s medical practice has successfully funded the Company’s research activities over the last 25 years and, in 1997, his medical practice was expanded to include traditional cancer treatment options such as chemotherapy, gene-targeted therapy, 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.

 

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 and financial officers, 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 and financial officers concluded that the Company’s disclosure controls and procedures are effective in timely alerting them 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 over financial reporting that occurred during the fiscal quarter ended May 31, 2014 that have materially affected or are reasonably likely to materially affect our internal controls subsequent to that date.

 

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)).

 

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31.1		Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, filed herewith.
31.2		Certification of 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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2		Certification of 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.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

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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 and Chairman
		of the Board of Directors
		(Chief Executive Officer)
Date: July 15, 2014

 

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