<PAGE>
--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
      [X]            ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended February 28, 2002

      [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
           For the transition period from ___________ to ____________

                        Commission file number 000-23425

                       BURZYNSKI RESEARCH INSTITUTE, INC.
                 (Name of small business issuer in its charter)

              Delaware                                 76-0136810
   (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                 Identification No.)

      9432 Old Katy Road, Suite 200
             Houston, Texas                                   77055
  (Address of principal executive offices)                  (Zip Code)

                    Issuer's telephone number: (713) 335-5697

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                          Common Stock, $.001 par value

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
    ---       ----

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

      State issuer's revenues for its most recent fiscal year:  $3,000.

      As of May 14, 2002, 131,388,444 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was approximately $1,218,712 based on the last reported sales
price on May 10, 2002.


                       DOCUMENTS INCORPORATED BY REFERENCE

      Documents incorporated by reference: None.

      Transitional Small Business Disclosure Format (Check One): Yes __; No  X
                                                                           -----

<PAGE>

                       BURZYNSKI RESEARCH INSTITUTE, INC.

                                   FORM 10-KSB

                       FISCAL YEAR ENDED FEBRUARY 28, 2002

                                TABLE OF CONTENTS


PART I.......................................................................3

ITEM 1.  DESCRIPTION OF BUSINESS.............................................3
ITEM 2.  DESCRIPTION OF PROPERTY............................................16
ITEM 3.  LEGAL PROCEEDINGS..................................................16
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................16

PART II.....................................................................17

ITEM 5.  MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....17
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS..............................................18
ITEM 7.  FINANCIAL STATEMENTS...............................................19
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE...............................................19

PART III....................................................................20

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT..................20
ITEM 10. EXECUTIVE COMPENSATION.............................................21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................22
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...................................24

<PAGE>

                           FORWARD LOOKING STATEMENTS

      This report contains forward-looking statements, including statements
regarding future financial performance and results and other statements that are
not historical facts. Such statements are included in "Description of Business,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this report. When used in this report, words such
as "may," "will," "should," "could," "anticipate," "believe," "expect,"
"estimate," "intend," "plan," "predict," "potential," "continue" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in these forward-looking statements are
reasonable, there can be no assurance that actual results or developments
anticipated by the Company will be realized or, even if realized, that they will
have the expected effects on its business or operations. Actual results could
differ materially from those contemplated by the forward-looking statements as a
result of certain factors beyond the Company's control including: the ability to
develop safe and efficacious drugs, the failure to achieve positive clinical
trials, the failure to successfully commercialize our products, competition and
technological change and existing and future regulations affecting our business.






                                       2
<PAGE>

                                     PART I

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 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. 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. In the event
Antineoplastons receive such approval and are registered in the United States,
Canada, or Mexico, 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 United States, Canada, or Mexico. The Company
currently manufactures Antineoplastons solely for the use of Stanislaw R.
Burzynski, M.D., Ph.D. ("Dr. Burzynski") in clinical research.

      The Company has not generated any significant operating revenue since its
inception. The Company's sole source of funding for its operations has been and
continues to be payments made by Dr. Burzynski from funds generated from Dr.
Burzynski's medical practice pursuant to various arrangements between the
Company and Dr. Burzynski. SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The Company reports funds received by the Company pursuant to such arrangements
as additional paid-in capital. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The Company does not expect to
generate significant operating revenue until such time, if any, as
Antineoplastons are approved for use and sale by the FDA. However, the Company
may seek additional funding for operations through the sale of its securities.

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 bodily fluids of humans and were
initially isolated by Dr. Burzynski from normal human blood and urine. Dr.
Burzynski believes these substances counteract the development of cancerous
growth through a biochemical process which does not inhibit the growth of normal
tissues. 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 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 also conducting laboratory research
involving new generations of Antineoplastons A10 and AS2-1.

PHASE II CLINICAL TRIALS

      The Company began Phase II clinical studies in 1994 with four studies. At
that time, a number of patients were also receiving Antineoplastons at Dr.
Burzynski's clinic in Houston, Texas (the "Burzynski Clinic") outside these
clinical trials. On February 23, 1996, the FDA requested that all then current
patients of the Burzynski Clinic desiring to continue Antineoplaston treatment
be admitted to a Phase II Study, according to Protocol CAN-1. This action
resulted in the formation of 6 cohorts of patients in the CAN-1 study, with the
largest group suffering from primary brain tumors. New patients have been
admitted either to the CAN-1 study or have been admitted to one of the other
studies sponsored by the Company, as appropriate.

      The Company currently sponsors 72 ongoing Phase II clinical trials, which
are conducted pursuant to investigational new drug applications ("INDs") filed
with the FDA and approved by an Institutional Review Board ("IRB") designated
according to federal regulations. All clinical trials except one are for the
treatment of a wide variety of cancers using only a combination of
Antineoplastons A10 and AS2-1. The one exception involves the



                                       3
<PAGE>

treatment of breast cancer using A10 capsules in combination with the
FDA-approved drug Methotrexate. Most of the trials involve the use of
intravenous formulations of Antineoplastons; however, a few trials use oral
formulations. Dr. Burzynski acts as principal investigator for all clinical
trials pursuant to a Royalty Agreement between the Company and Dr. Burzynski.
See "Certain Relationships and Related Transactions." All of the clinical trials
are conducted at the Burzynski Clinic. Each trial provides for the admission of
up to 40 patients, except the CAN-1 study, in which 133 patients have been
accrued.

      Prior to approving a New Drug Application ("NDA"), the FDA requires that a
drug's safety and efficacy be demonstrated in "well-controlled" clinical trials.
Several types of controls are acceptable to the FDA. One of these is a "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 one, involve the use of
Historic Controls. Further, all trials except the CAN-1 study 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. In addition, 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 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 cancer drugs. For
that reason, the FDA may grant marketing approval for a new drug product on the
basis of adequate and well-controlled clinical trials establishing that the drug
has an effect on a surrogate endpoint ("Milestone") that is reasonably likely to
predict clinical benefit. Each of the Company's Phase II trials describes such
Milestones which are used to determine success or failure of the treatment
employed. In most of the trials, the Milestones are radiographic evidence of
tumor shrinkage by X-ray, computer aided tomography or magnetic resonance
imaging. Where appropriate, tumor markers such as Prostate Specific Antigen,
blood counts, or bone marrow biopsy are used in order to assess a tumor's
growth.

      Where tumor size is used as the Milestone, each clinical trial protocol
describes a "complete response" as a complete disappearance of all tumors with
no reoccurrence of tumors for at least four weeks. A "partial response" is
described as at least a 50% reduction in the size of the total tumor size, with
such reduction lasting at least four weeks. A "response" is described as either
a complete or partial response. "Stable disease" is described as less than 50%
reduction in size but no more than 50% increase in size of the tumor mass,
lasting for at least twelve weeks. "Progressive disease" is described as more
than 50% increase in total tumor mass or occurrence of new tumors.

      The protocols of the Company's clinical trials involve a two-stage design,
wherein the first stage proceeds until the Company admits twenty patients into
the trial. After a specified time period, if there are zero responses by 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.

      As of May 21, 2002, six of the clinical trials have reached a Milestone.
These are:

      o     Protocol BT-9, involving the study of Antineoplastons A10 and AS2-1
            in patients with brain tumors.

      o     Protocol BT-11, involving the study of Antineoplastons A10 and AS2-1
            in patients with brain stem glioma.

      o     Protocol BT-13, involving the study of Antineoplastons A10 and AS2-1
            in children with low grade astrocytoma, a type of PMBT.



                                       4

<PAGE>

      o     Protocol BT-15, involving the study of Antineoplastons A10 and AS2-1
            in adult patients with anaplastic astrocytoma, a type of PMBT

      o     Protocol BT-18, involving a study of intravenous administration of
            Antineoplastons A10 and AS2-1 in the treatment of "mixed glioma," a
            type of PMBT.

      o     CAN-1 Protocol, involving patients treated by Dr. Burzynski prior to
            and after February 23, 1996.

      There can be no assurance that the results of any of these trials can be
repeated or that the other clinical trials will result in the same or similar
responses.

      The results of the Protocols BT-09, BT-11, BT-13, BT-15 and BT-18 are set
forth below (as of May 21, 2002).

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------------------------------
                                                             Patients         Patients        Patients          Patients
                                                             showing          showing         showing             with
         Protocol           Patients        Evaluable        Complete         Partial         Stable           Progressive
         Number             Accrued         Patients         Response         Response        Disease            Disease
     ---------------------------------------------------------------------------------------------------------------------------
<S>      <C>                <C>             <C>              <C>              <C>             <C>               <C>
         BT-9               20              14               3 (21.43%)       4 (28.57%)      6 (42.86%)        1 (7.14%)
     ---------------------------------------------------------------------------------------------------------------------------
         BT-11              26              19               3 (15.79%)       4 (21.05%)      5 (26.32%)        7 (36.84%)
     ---------------------------------------------------------------------------------------------------------------------------
         BT-13              10              8                3 (37.5%)        2 (25%)         3 (37.5%)         0 (0%)
     ---------------------------------------------------------------------------------------------------------------------------
         BT-15              23              17               3 (17.65%)       2 (11.76%)      6 (35.29%)        6 (35.29%)
     ---------------------------------------------------------------------------------------------------------------------------
         BT-18              14              11               3 (27.27%)       1 (9.09%)       2 (18.18%)        5 (45.45%)
     ---------------------------------------------------------------------------------------------------------------------------
</TABLE>


      The Phase II Study according to Protocol CAN-1 included 35 evaluable
patients. Complete and partial responses were obtained in patients diagnosed
with glioblastoma multiforme, astrocytoma, oligodendroglioma, mixed glioma,
medulloblastoma, and malignant meningioma. The treatment with Antineoplastons
A10 and AS2-1 resulted in 48.6% of objective responses and 31.4% cases of stable
disease. Most of the surviving patients have now been alive for over six years
since the pathology diagnoses of their tumors were established. Two patients,
one suffering from oligodendroglioma and another from low grade astrocytoma,
have now been alive for over 14 years since pathology diagnosis. The largest
group of 14 patients involved in the study had glioblastoma multiforme. Six of
the cases were classified as complete and partial responses, four obtained
stabilization and four developed progression of the disease. One of the
glioblastoma patients is now alive and completely free from tumor for over eight
years after her pathology diagnosis.

      Notwithstanding the response results of the trials that have reached a
Milestone, management believes it is likely that the FDA may require that
additional clinical trials based upon such protocols be conducted by an
institution not affiliated with the Company or Dr. Burzynski before advising
that an NDA filing is warranted. In addition, the FDA has indicated it will not
accept the data generated by the Phase II Study according to Protocol CAN-1
because the trial was partially retrospective. 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 may require.
Further, there can be no assurance that an 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, that the results of such human clinical trials will prove that
Antineoplastons are safe or effective in the treatment of cancer or other
diseases, or that the FDA would approve the sale of Antineoplastons in the
United States.



                                       5
<PAGE>

      The following table sets forth the title of each active Protocol, the
subject of the Protocol with dates submitted to the FDA and approved by the IRB,
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

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>             <C>
AD-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         3               40
                    THE ADRENAL GLAND; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BL-2                PHASE II STUDY OF ANTINEOPLASTONS  A10 AND AS21 IN PATIENTS WITH CARCINOMA OF
                    THE BLADDER; .Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.                     4               40
-----------------------------------------------------------------------------------------------------------------------------------
BR-10               PROTOCOL FOR RANDOMIZED CONTROLLED TRIAL COMPARING METHOTREXATE TREATMENT            8               40
                    ALONE TO THE COMBINATION OF METHOTREXATE AND ANTINEOPLASTON A10; Revised
                    4/12/97; Revised 7/28/97.
-----------------------------------------------------------------------------------------------------------------------------------
BR-12               PHASE II STUDY OF  ANTINEOPLASTONS  A10 AND AS21 IN PATIENTS WITH CARCINOMA OF      18               40
                    THE BREAST; Revised 7/20/96; Revised 4/29/97.
-----------------------------------------------------------------------------------------------------------------------------------
BR-14               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 CAPSULES IN PATIENTS WITH             7               40
                    ADVANCED BREAST CANCER; 8/26/96; Revised 12/10/96; Revised 4/12/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-6                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN CHILDREN WITH            9               40
                    HIGH GRADE GLIOMA; March 1996.
-----------------------------------------------------------------------------------------------------------------------------------
BT-7                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH GLIOBLASTOMA        37               40
                    MULTIFORME; March 1996.
-----------------------------------------------------------------------------------------------------------------------------------
BT-8                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH ANAPLASTIC          12               40
                    ASTROCYTOMA; Revised 4/14/97; Revised 9/15/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-9                PHASE II STUDY OF ANTINEOPLASTONS  A10 AND AS21 IN PATIENTS WITH BRAIN TUMORS;      20               40
                    Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-10               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH BRAIN TUMORS;       13               40
                    Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-11               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH BRAIN STEM          26               40
                    GLIOMA; Revised 5/15/96; Revised 7/11/96; Revised 9/28/96; Revised 5/10/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-12               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH PRIMITIVE
                    NEUROECTODERMAL TUMORS; (PNET) Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.   10               40
-----------------------------------------------------------------------------------------------------------------------------------
BT-13               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN  WITH LOW GRADE
                    ASTROCYTOMA; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97; Revised 9/5/97.     10               40
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       6
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>             <C>
BT-14               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH RHABDOID             3               40
                    TUMOR OF THE CENTRAL NERVOUS SYSTEM; Revised 5/17/96; Revised 7/11/96;
                    Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-15               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN ADULT PATIENTS WITH                23               40
                    ANAPLASTIC ASTROCYTOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97;
                    Revised 9/5/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-16               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN ADULT PATIENTS WITH LOW             6               40
                    GRADE ASTROCYTOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-17               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN ADULT PATIENTS WITH                10               40
                    OLIGODENDROGLIOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-18               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN ADULT PATIENTS WITH MIXED         14               40
                    GLIOMA; Revised 7/26/96; Revised 10/4/96; Revised 12/9/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-19               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH NEUROFIBROMA         3               40
                    AND SCHWANNOME; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-20               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN ADULT PATIENTS WITH               39               40
                    GLIOBLASTOMA MULTIFORME; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-21               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN ADULT PATIENTS WITH PRIMARY       28               40
                    MALIGNANT BRAIN TUMORS; Partially Amended, pg. 9/5/95; Revised 9/10/96;
                    Revised 4/14/97; Revised 8/25/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-22               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH PRIMARY              5               40
                    MALIGNANT BRAIN TUMORS; Partially Amended, pg. 11/5/97; Revised 4/14/97;
                    Revised 9/10/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-23               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN CHILDREN WITH            8               40
                    VISUAL PATHWAY GLIOMA; 5/22/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-24               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN PATIENTS WITH            9               40
                    EPENDYMOMA; 5/15/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-25               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN PATIENTS WITH            1               40
                    CRANIOPHARYNGIOMA; 5/15/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-26               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN PATIENTS WITH            1               40
                    CHOROID PLEXUS NEOPLASM; 5/15/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-27               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN PATIENTS WITH            1               40
                    GERM CELL TUMOR OF THE BRAIN; 5/15/96; Revised 11/18/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
BT-28               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN PATIENTS WITH            2               40
                    MENINGIOMA; 5/17/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       7
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                <C>              <C>
CAN-1               PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH REFRACTORY         133              133
                    MALIGNANCIES; Revised 7/11/96.
-----------------------------------------------------------------------------------------------------------------------------------
CO-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                     13               40
                    ADENOCARCINOMA OF THE COLON; Revised 7/9/96; Revised 9/7/96; (RE2 was added
                    to this Protocol) Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
CO-3                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 CAPSULES IN PATIENTS WITH             9               40
                    ADENOCARCINOMA OF THE COLON; Revised 8/12/96; Revised 12/21/96.
-----------------------------------------------------------------------------------------------------------------------------------
ES-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                      8               40
                    ADENOCARCINOMA OF THE ESOPHAGUS; Revised 7/9/96; Revised 9/10/96; Revised
                    10/30/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
HB-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH                      0               40
                    HEPATOBLASTOMA; Revised 7/8/96; Revised 9/10/96; Revised 3/2/97; Revised
                    4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
HE-2                PHASE II STUDY OF ANTINEOPLASTON A10 IN PATIENTS WITH PRIMARY LIVER CANCER;          3               40
                    Origination dated 2/12/97; Revised 5/28/97.
-----------------------------------------------------------------------------------------------------------------------------------
HN-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         7               40
                    THE HEAD AND NECK; Revised 7/9/96; Revised 9/10/96; Revised 11/6/96; added
                    Children's Informed Consent, Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-3                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                     17               40
                    ADENOCARCINOMA OF THE LUNG; Revised 7/20/96; Revised  9/28/96; Revised
                    4/14/97; Revised 6/26/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-4                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH LARGE CELL,          9               40
                    UNDIFFERENTIATED CARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96;
                    Revised 12/11/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-5                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH BRONCHIAL            4               40
                    ALVEOLAR CARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96; Revised
                    12/11/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-6                PHASE II STUDY OF ANTINEOPLASTONS  A10 AND AS21 IN PATIENTS WITH SQUAMOUS CELL       6               40
                    CARCINOMA OF THE LUNG; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-7                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS  WITH SMALL CELL          3               40
                    CARCINOMA OF THE LUNG; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LA-10               PHASE II STUDY OF  ANTINEOPLASTON  A10 AND AS21 CAPSULES IN PATIENTS WITH NON        9               40
                    SMALL CELL LUNG CANCER; Revised 8/12/96; Revised 9/9/96; Revised 12/9/96.
-----------------------------------------------------------------------------------------------------------------------------------
                    PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH NONHODGKIN'S         3               40
LY-3                LYMPHOMA; Revised 7/11/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                       8

<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                 <C>              <C>
LY-6                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH NONHODGKIN'S         30               40
                    LYMPHOMA, LOW GRADE; Revised 6/22/96; Revised 8/12/96; Revised 9/28/96;
                    Revised 10/23/96; Revised 5/11/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-7                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH NONHODGKIN'S         12               40
                    LYMPHOMA, INTERMEDIATE GRADE; Revised 6/22/96; Revised 8/12/96; Revised
                    9/28/96; Revised 10/23/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-8                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH NONHODGKIN'S          1               40
                    LYMPHOMA, HIGH GRADE; Revised 6/22/96; Revised 5/11/96.
-----------------------------------------------------------------------------------------------------------------------------------
LY-9                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH MANTLE ZONE           5               40
                    LYMPHOMA., Revised 6/22/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-10               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 WITH CHRONIC MYELOGENOUS               0               40
                    LEUKEMIA; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-11               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH MYCOSIS               0               40
                    FUNGOIDES SEZARY SYNDROME; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-12               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH PRIMARY               0               40
                    CENTRAL NERVOUS SYSTEM LYMPHOMA; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-13               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH PRIMARY               0               40
                    LYMPHOMA OF THE GASTROINTESTINAL TRACT; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
LY-14               PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 INFUSIONS IN PATIENTS WITH             2               40
                    CHRONIC LYMPHOCYTIC LEUKEMIA; Revised 5/22/96; Revised 9/18/96; Revised
                    12/9/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
MA-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH MESOTHELIOMA;        5               40
                    Revised 7/8/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
ME-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH MALIGNANT           10               40
                    MELANOMA; Revised 7/26/96; Revised 10/4/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
MF-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH MALIGNANT            0               40
                    FIBROUS HISTIOCYTOMA; June 1997.
-----------------------------------------------------------------------------------------------------------------------------------
MM-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH MULTIPLE             5               40
                    MYELOMA; Revised 7/26/96; Revised 10/2/96.
-----------------------------------------------------------------------------------------------------------------------------------
MW-2                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH                       0               40
                    MACROGLOBULINEMIA  OF WALDESTROM; Revised 7/26/96; Revised 10/4/96; Revised
                    4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
NB-2                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH  NEUROBLASTOMA;       3               40
                    Orig: Dec. 6, 1996; Revised 2/13/97; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       9
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>             <C>
NE-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                      5               40
                    NEUROENDOCRINE TUMORS; Revised 7/9/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
OV-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         6               40
                    THE OVARY; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
PA-2                PHASE II STUDY OF  ANTINEOPLASTONS  A10 AND AS21 IN PATIENTS WITH CARCINOMA OF      12               40
                    THE PANCREAS; Revised 7/20/96; Revised 9/28/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
PN-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH PRIMITIVE            1               40
                    NEUROECTODERMAL TUMOR OUTSIDE THE CENTRAL NERVOUS SYSTEM; Orig: Dec. 6, 1996;
                    Revised 2/10/97; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
PR-4                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                     12               40
                    ADENOCARCINOMA OF THE PROSTATE; Revised 7/5/96; Revised 10/3/96; Revised
                    7/9/97; Revised 10/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
PR-5                PHASE II STUDY OF ADENOCARCINOMA OF THE PROSTATE WITH ANTINEOPLASTON A10 AND        16               40
                    AS21 CAPSULES; Revised 5/16/96; Revised 7/29/96; Revised 10/3/96; Revised
                    10/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
PR-6                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 CAPSULES IN COMBINATION WITH           1               40
                    TOTAL ANDROGEN BLOCKADE IN PATIENTS WITH ADENOCARCINOMA OF THE PROSTATE;
                    8/1/97; Revised 8/25/97.
-----------------------------------------------------------------------------------------------------------------------------------
PR-7                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS2-1 IN COMBINATION WITH TOTAL            1               40
                    ANDROGEN BLOCKADE IN PATIENTS WITH ADENOCARCINOMA OF THE PROSTATE.
-----------------------------------------------------------------------------------------------------------------------------------
PR-8                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH  ADENOCARCINOMA       0               40
                    OF THE PROSTATE; Revised 7/5/96; Revised 9/10/96; Revised 4/14/97; Revised
                    10/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
RN-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF        14               40
                    THE KIDNEY, Revised 7/20/96; Revised 9/28/96; Revised 10/25/96; Revised
                    4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
SA-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH SOFT TISSUE         12               40
                    SARCOMA; Revised 7/8/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
SI-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         1               40
                    THE SMALL INTESTINE; Revised 7/9/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
ST-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH                      7               40
                    ADENOCARCINOMA OF THE STOMACH; Revised 7/8/96; Revised 9/10/96; Revised
                    4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
UC-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         8               40
                    THE UTERINE CERVIX AND/OR VULVA; Revised 7/20/96; Revised 9/28/96; Revised
                    4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       10
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Number of
                                                                                                     Number of      Patients who
 Title of                             Subject of Protocol and Date                                   Persons      may Participate
 Protocol                                 (as of May 21, 2002)                                       Enrolled       in the Study

-----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>             <C>
UP-2                PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH CARCINOMA OF         6               40
                    AN UNKNOWN PRIMARY; Revised 7/8/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------
WT-2                PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH WILMS' TUMOR;         2               40
                    Revised 7/8/96; Revised 9/10/96; Revised 4/14/97.
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

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. To obtain FDA approval for Antineoplastons, we
must submit extensive preclinical and clinical data and supporting information
to the FDA to establish the safety and efficacy of Antineoplastons. The approval
process takes many years, requires the expenditure of substantial resources and
may involve ongoing requirements for post-marketing studies. Additional
government regulation may be established that could prevent or delay regulatory
approval of Antineoplastons. Moreover, 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. If regulatory approval is granted, the approval
may include significant limitations on the indicated uses for which
Antineoplastons may be marketed.

      The effect of the FDA drug approval process for Antineoplastons may impose
costly procedures upon the Company's activities which may furnish a competitive
advantage to the other companies that 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 is
governed by regulations established by the FDA which strictly control the use
and distribution of investigational drugs in the United States. The guidelines
require that 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 be
provided for the initial study of the new drug to be conducted on humans.

      In order to conduct a clinical trial of a new drug in humans, a sponsor
must prepare and submit to the FDA a comprehensive IND. Such application must
contain an investigator's brochure, a description of the composition,
manufacture and control of the drug substance and the drug product, sufficient
information 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, the general method of
preparation of the drug substance, a list of all components including
interactive ingredients, 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 and a summary of any previous human
experience with the drug. 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.

      The focal point of the IND is on the general investigational plan and the
protocols for specific human studies. The plan is carried out in three phases:
Phase I includes the initial introduction of an investigational new drug into
humans and may be conducted in patients or normal volunteer subjects. The
studies are closely monitored to determine the metabolism and pharmacologic
actions of the drug in humans, the potential side effects and, if possible, to
gain early evidence on effectiveness. During Phase I testing, sufficient
information about the drug is gathered to design well-controlled, scientifically
valid Phase II studies. Phase II includes controlled clinical studies conducted
to evaluate the effectiveness of the drug for a particular indication in
patients with the disease or


                                       11
<PAGE>

condition under study and to determine the common short-term side effects and
risks associated with the drug. Phase II studies are controlled, closely
monitored and conducted in a relatively small number of patients, usually
involving no more than several hundred subjects. Phase III includes expanded
controlled and uncontrolled trials and are intended to gather the additional
information about effectiveness and safety that is needed to evaluate the
overall benefit-risk relationship of the drug and to provide an adequate basis
for physician labeling. Phase III studies usually include anywhere from several
hundred to several thousand subjects.

      An IND will automatically become effective 30 days after receipt by the
FDA, unless before that time the FDA raises concerns about issues such as the
conduct of the trials as outlined in the IND. After the IND becomes 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. There can be no assurance that Phase I, Phase II or Phase
III testing will be completed successfully by the Company within any specified
period of time, if at all. Furthermore, the Company or the FDA may suspend
clinical trials at any time on various grounds, including a finding that the
subjects or patients are being exposed to an unacceptable health risk.

      Assuming successful completion of the clinical studies, the results of the
studies, together with other detailed information, including, among other
information, details concerning the manufacture and composition of the drug,
proposed labeling, environmental impact and the scientific rationale for the
drug, its intended use and the potential benefits of the drug product, are
submitted to the FDA in the form of an NDA requesting approval to market the
drug. If the FDA finds the NDA submission and the manufacturing process to be
acceptable, the FDA will issue an approval letter. If the FDA does not find the
NDA submission or the manufacturing process to be sufficient, it will issue a
"not approvable letter" describing the deficiencies in the NDA and allowing the
NDA applicant to either amend the NDA, withdraw the NDA or request a hearing.
Even if the NDA is amended or a hearing is held, the FDA ultimately may decide
that the NDA does not satisfy the regulatory criteria for approval. In addition,
as a result of the Company's use of Milestones to predict the benefits of
Antineoplastons, the FDA may subject any such approval to the requirement that
the Company study the drug further, to verify and describe its clinical benefit
(Phase IV testing). Further, the FDA may also impose post-marketing restrictions
on Antineoplastons. The FDA may withdraw approval of any drug if the Phase IV
trials fail to verify clinical benefit, use of the drugs demonstrates that
post-marketing restrictions are inadequate to assure safe use of the drug, the
Company fails to adhere to the post-marketing restrictions agreed upon, the
promotional materials are false or misleading or other evidence demonstrates
that the drug is not shown to be safe or effective under its conditions of use.

      The testing and approval process requires substantial time, effort and
financial resources, and there can be no assurance that any approval will be
granted for any product or that approval will be granted according to any
schedule. Moreover, if regulatory approval of a drug is granted, the approval
will be limited to specific indications, there can be no assurance that any of
the Company's product candidates will receive regulatory approvals for
commercialization.

      The FDA has implemented an accelerated review process for pharmaceutical
agents that treat serious or life-threatening disease and conditions, subject to
payment of user fees. Approval may be conditioned on a requirement that,
following product launch, a company continue to study the drug to verify and
describe its clinical benefit. Under "fast track" procedures, the FDA may
withdraw approval on an expedited basis if the company fails to show due
diligence in conducting post-marketing clinical trials or if the post-approval
clinical trials fail to demonstrate that the product is safe or effective. When
appropriate, the Company intends to pursue opportunities for accelerated review
of its products. The Company cannot predict the ultimate effect of this review
process on the timing or likelihood of FDA review of any of its products.

      Even if the regulatory approvals for the Company's products are obtained,
its products and its manufacturing facility are subject to continuous review and
periodic inspection. The FDA will require post-marketing reporting to monitor
the safety of the Company's products. The Company's drug manufacturing facility
must be inspected and approved by the FDA and must comply with the FDA's good
manufacturing practice regulations, which are strictly enforced. Full technical
compliance requires manufacturers to expend funds, time and effort in the area
of production and quality control. In addition, discovery of problems with a
product after approval or failure to comply with applicable FDA or other
applicable regulatory requirements may result in restrictions on a



                                       12

<PAGE>

product, manufacturer, or holder of an approved NDA, including restrictions on
the product, manufacturer or facility, including warning letters, suspension of
regulatory approvals, operating restrictions, delays in obtaining new product
approvals, withdrawal of the product from the market, product recalls, fines,
injunctions and criminal prosecution. New government requirements may be
established that could delay or prevent regulatory approval of the Company's
products under development.

      The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes its procedures for handling and disposing of those materials
comply with state and federal regulations, the risk of accidental contamination
or injury from these materials cannot be eliminated. If an accident of this type
occurs, the Company could be held liable for resulting damages, which could be
material to its financial condition and business. The Company is also subject to
numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures and the handling of biohazardous
materials. Additional federal, state and local laws and regulations affecting
the Company may be adopted in the future. Any violation of these laws and
regulations, and the cost of compliance, could materially and adversely affect
the Company. The Company spends approximately $58,000 per year on environmental
compliance matters and expects to spend an additional $80,000 for repairs and
upgrades during the year ending February 28, 2003.

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 biology, experimental therapeutics and animal models of cancer. At the
level of Phase II clinical studies, the Company believes the anticancer activity
of Antineoplastons is supported by preliminary results from ongoing, FDA
authorized, Phase II clinical trials.

      The cellular mechanism underlying the anticancer effects of
Antineoplastons continues to be investigated in both the Company's own basic
preclinical research program and in independent laboratories around the world. A
review of this work suggests several mechanisms that may underlie the
antineoplastic activity of Antineoplastons. For example, it has been found, in
cell culture experiments, that Antineoplastons induce pathologically
undifferentiated cancer cells to assume a more normal state of differentiation.
Cell culture experiments have also shown that Antineoplaston components can kill
some cancer cells by activating the cell's intrinsic "suicide" program. It must
be noted that data collected in cell culture experiments may or may not indicate
the mechanism of action of Antineoplastons in humans.

      At a more molecular or sub-cellular level, cell culture experiments have
shown that Antineoplastons can block biochemical pathways involving oncogenes
required to produce abnormal cell growth. In addition, cell culture experiments
have shown that Antineoplastons can increase the expression of anticancer tumor
suppressor genes. Although these experiments were conducted using human cancer
cells, they may or may not indicate the mechanism of Antineoplaston action in
humans.

      In addition to the original family of Antineoplaston compounds (the
"Parental Generation"), the Company continues its development of a second
generation of Antineoplastons. In cell culture experiments the second generation
Antineoplastons which were developed by the Company, have been shown to be at
least a thousand times more potent then the Parental Generation.

      The Company is also developing a third generation of structurally altered
Antineoplastons 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.


                                       13
<PAGE>

      The Company uses various scientific reagents from several different
suppliers to conduct its research activities.

      Total research and development costs for the fiscal years ended February
28, 2002 and February 28, 2001 were approximately $4,903,000 and $4,356,000,
respectively.

INTELLECTUAL PROPERTY

      Since 1984, eight patents involving the formulation, preparation,
manufacture, production, use, dosage and treatment of cancer with
Antineoplastons (the "Patents") have been issued by the United States Patent
Office and Patent Offices and Patent Officers of 28 other 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 in the United States, Canada, and Mexico (the "Territory") to
use, manufacture, develop, sell, distribute, sub-license and otherwise exploit
all of Dr. Burzynski's rights, title, and interests, including patent rights,
in Antineoplastons in the treatment and diagnosis of cancer. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." 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
License Agreement is to continue in effect until the expiration of the last
Patent that was licensed under the agreement or termination pursuant to certain
other provisions. The Company and Dr. Burzynski also entered into a Royalty
Agreement, dated March 25, 1997, and a First Amended Royalty Agreement, dated
September 29, 1997 (collectively, the "Royalty Agreement"), pursuant to which
Dr. Burzynski will receive a royalty interest from all future sales,
distribution, and manufacture of Antineoplastons by the Company. The Company
owns, pursuant to the License Agreement, exclusive rights to eight issued
United States Patents and two issued Canadian Patents. The Company has no
patents in Mexico. The Company has two pending patent applications in the
United States, two pending patent applications in Canada, and one pending
patent application in Mexico.

      The five initial 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); (iv) Administration of Antineoplastons to humans; and (v)
Methods of synthesizing A-10. The Initial Patents expire from September 11, 2001
to January 11, 2009, however the Company does not believe the expiration of any
of the Initial Patents will have a material adverse effect on the Company.

      The sixth United States Patent (the "2000 U.S. Patent") covers Liposomal
Antineoplaston therapies with markedly improved anti-cancer activity. The 2000
U.S. Patent expires on May 14, 2017.

      The seventh United States Patent (the "2001 U.S. Patent") is for a
treatment regimen for the administration of phenylacetylglutamine,
phenylacetylisoglutamine, and/or phenylacetate. The 2001 U.S. Patent expires on
July 23, 2018.

      The eighth United States Patent (the "2002 U.S. Patent") relates to the
synthesis of 4-Phenylbutric Acid. The 2002 U.S. Patent expires on May 21, 2021.

      The two 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 November
14, 2006 and June 4, 2002, respectively.

      The pending patent applications in the United States relate to the
formulation of amino acids and riboflavin useful to reduce toxic effects of
cytotoxic chemotherapy and a divisional application to the 2001 U.S. Patent.
Should these patents be granted, of which there can be no assurance, they would
expire in the years 2021 and 2018, respectively.


                                       14
<PAGE>

      The pending patent applications in Canada relate to Liposomal
Antineoplaston Therapy using a "second generation" of Antineoplastons and a
treatment regimen for the administration of phenylacetylglutamine. Should these
patents be granted, of which there can be no assurance, they would expire in the
years 2017 and 2019, respectively.

      The pending patent application in Mexico relates to a treatment regimen
for the administration of phenylacetylglutamine. Should this patent be granted,
of which there can be no assurance, it would expire in the year 2019.

      The Company also depends upon unpatented proprietary technology, and may
determine in appropriate circumstances that its interest would be better served
by reliance upon trade secrets or confidentiality agreements rather than
patents.

      The Company's success will depend in part on its ability to enforce patent
protection for its products, preserve its trade secrets, and operate without
infringing on the proprietary rights of third parties in the United States,
Canada, and Mexico. Because of the substantial length of time and expense
associated with bringing new products through development and regulatory
approval to the marketplace, the pharmaceutical and biotechnology industries
place considerable importance on obtaining and maintaining patent and trade
secret protection for new technologies, products and processes. There can be no
assurance that the Company will develop additional products and methods that are
patentable or that present or future patents will provide sufficient protection
to the Company's present or future technologies, products and processes. In
addition, there can be no assurance that others will not independently develop
substantially equivalent proprietary information, design around the 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.

COMPETITION

      There are many companies, universities, research teams and scientists,
both private and government-sponsored, that are engaged in research to produce
cancer treatment agents and that have 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, that 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.


                                       15
<PAGE>

EMPLOYEES

      As of May 21, 2002, the Company had 5 employees, all of whom were
full-time employees. None of the Company's employees is a party to a
collective bargaining agreement. The Company considers the relations with its
employees to be good.

ITEM 2.   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 conducts its business in premises owned by Dr. Burzynski and
his wife, Dr. Barbara Burzynski (the "Burzynskis"). Pursuant to arrangements
with the Burzynskis (see "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--RESEARCH FUNDING ARRANGEMENTS"), the Company occupies: (i) 675
square feet at 12707 Trinity Drive, Stafford, Texas for office, laboratory and
medical research purposes, and (ii) 540 square feet at 9432 Old Katy Road, Suite
200 for its executive offices. Management of the Company believes that each of
these properties are adequately covered by insurance.

ITEM 3.   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 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matter was submitted to a vote of security holders during the fiscal
year ended February 28, 2002.



                                       16

<PAGE>

                                     PART II

ITEM 5.   MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      After being removed from listing on the NASD Over-the-Counter Bulletin
Board ("OTCBB") on July 25, 2000, the Company's Common Stock began trading once
again on the OTCBB on October 15, 2001. Prior to that date, the Company's Common
Stock was trading in the "Grey Market" since July 25, 2000, which involves the
trading of a security that is not listed on any stock exchange or quoted on the
OTCBB or the National Quotation Bureau's Pink Sheets. A public trading market
having the characteristic of depth, liquidity and orderliness depends upon the
existence of market makers as well as the presence of willing buyers and
sellers, which are circumstances over which the Company does not have control.
There can be no assurance that the market will provide significant liquidity for
the Company's Common Stock. As a result, an investment in the Company's Common
Stock may be highly illiquid. Investors may not be able to sell their shares
readily or at all when the investor needs or desires to sell.

      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 Nasdaq
Trading and Market Services).

           ------------------------------------------------------
                                          HIGH             LOW
           ------------------------------------------------------
            2000 First Quarter            0.26             0.07
           ------------------------------------------------------

      The following table sets forth high and low sales prices of the shares of
Common Stock of the Company for the periods indicated (as reported by Pink
Sheets LLC).


           ------------------------------------------------------
                                          HIGH             LOW
           ------------------------------------------------------
            2000 Second Quarter           0.25             0.01
           ------------------------------------------------------
            2000 Third Quarter            0.28125          0.01
           ------------------------------------------------------
            2000 Fourth Quarter           0.15             0.01
           ------------------------------------------------------
            2001 First Quarter            .10              .01
           ------------------------------------------------------
            2001 Second Quarter           .15              .03
           ------------------------------------------------------
            2001 Third Quarter            .15              .03
           ------------------------------------------------------

      The following table sets forth closing high and low bid prices of the
shares of Common Stock of the Company for the periods indicated (as reported by
Pink Sheets LLC).

           ------------------------------------------------------
                                          HIGH             LOW
           ------------------------------------------------------
            2001 Third Quarter            .07              .02
           ------------------------------------------------------
            2001 Fourth Quarter           .06              .05
           ------------------------------------------------------

      The quotations set forth above reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.

      As of May 14, 2002, there were approximately 2,059 holders of record of
the Company's Common Stock, as shown on the records of the Transfer Agent and
Registrar of the Common Stock. Since many shares may be held by investors in
nominee names, such as the name of their broker or their broker's nominee, the
number of record holders often bears little relationship to the number of
beneficial owners of the Common Stock.

      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.



                                       17
<PAGE>

ITEM 6.   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 February 28, 2002 and February 28, 2001 and the results of operations for the
fiscal years ended February 28, 2002 and February 28, 2001. 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 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. SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." 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 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. SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

RESULTS OF OPERATIONS

FISCAL YEAR ENDED FEBRUARY 28, 2002 COMPARED TO FISCAL YEAR ENDED FEBRUARY 29,
2001

      Research and development costs were approximately $4,903,000 and
$4,356,000 for the fiscal years ended February 28, 2002 and February 28, 2001,
respectively. The increase of $547,000, or 13%, was due to an increase in
personnel costs of $444,000, an increase in material costs of $217,000, and an
increase in other research and development costs of $6,000, all of which were
reduced by a decrease in facility and equipment costs of $54,000 and a decrease
in consulting and quality control costs of $66,000.

      General and administrative expenses were approximately $239,000 and
$166,000 for the fiscal years ended February 28, 2002 and February 28, 2001,
respectively. The increase of $73,000, or 44%, was due to an increase in legal
and professional fees of $78,000, which was partially reduced by a decrease in
other general and administrative expenses of $5,000.

      The Company had net losses of approximately $5,176,000 and $4,593,000 for
the fiscal years ended February 28, 2002 and February 28, 2001, respectively.
The increase in the net loss from 2001 to 2002 was primarily due to an overall
increase in research and development costs of the Company, as described above.

      As of February 28, 2002, the Company had a total stockholders' equity of
$34,001.

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 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.


                                       18
<PAGE>

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 $5,300,000 in the
fiscal year ending February 28, 2003. The Company estimates that of this amount,
$5,000,000 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 at least through the fiscal
year ending February 28, 2003. In addition, Dr. Burzynski's medical practice has
successfully funded the Company's research activities over the last 18 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.

ITEM 7.   FINANCIAL STATEMENTS

      The Company's Annual Financial Statements, Notes to Financial Statements
and the reports of Fitts, Roberts & Co., P.C., independent certified public
accountants, with respect thereto, referred to in the Table of Contents to the
Financial Statements, appear elsewhere in this report beginning on Page F-1.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

      None.



                                       19
<PAGE>

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      Set forth below are the names, ages and positions of the Company's
directors and executive officers, including the directors and executive officers
of the Company since March 1, 1997:

<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------------------
           NAME                                        AGE     OFFICE
           -------------------------------------------------------------------------------------------------
<S>                                                     <C>
           Stanislaw R. Burzynski, M.D., Ph.D.          59     Director, President, Secretary, and Treasurer
           -------------------------------------------------------------------------------------------------
           Barbara Burzynski, M.D.                      61     Director
           -------------------------------------------------------------------------------------------------
           Michael H. Driscoll, Esq.                    56     Director
           -------------------------------------------------------------------------------------------------
           Carlton Hazlewood, Ph.D.                     66     Director
           -------------------------------------------------------------------------------------------------
</TABLE>

      STANISLAW R. BURZYNSKI, M.D., PH.D., has been the President and Chairman
of the Board of Directors of the Company since its inception in 1984. He also
serves as the Company's Secretary and Treasurer. Dr. Burzynski is a physician in
private practice in Houston, Texas specializing in the treatment of cancer. Dr.
Burzynski is the husband of Barbara Burzynski, M.D.

      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, the Society of Neuro-oncology and has privileges at Bayou City Medical
Center Hospitals located near the Burzynski Research Institute in Houston. He is
the author of 172 scientific publications, presenter of scientific papers at
major international conventions, and has been awarded 148 patents covering 35
countries for his Antineoplaston treatment. Other groups are working in
conjunction with him, including researchers at the University Kurume Medical
School in Japan.

      BARBARA BURZYNSKI, M.D., a Director since 1984 and the wife of Dr.
Burzynski, has been the Chairman of the Department of Pharmacy of the Burzynski
Clinic since 1977. 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 an M.D. in
1966 from the Medical Academy, Lublin, Poland, and has published three articles
on studies with Antineoplastons.

      MICHAEL H. DRISCOLL, ESQ. has been a Director of the Company since 1984.
Mr. Driscoll was formerly a judge and served as the County Attorney of Harris
County, Texas from 1981 until he retired in 1997.


                                       20

<PAGE>

      CARLTON HAZLEWOOD, PH.D. has been a Director of the Company since 1997.
Dr. Hazlewood is currently operating his own consulting company, Research
Consultant's International, and is president of Petroclean, L.L.C. He is also
the owner of Applied Advanced Technology and BRI-IRB of Houston. In addition,
Dr. Hazlewood has been employed in various capacities by the Baylor College of
Medicine from 1965 until December 31, 1997, when he was a professor of Molecular
Biology and Biophysics. Dr. Hazlewood 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.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16(a) - 3(e) during the fiscal year ended
February 28, 2002 and Form 5 and amendments thereto furnished to the Company
with respect to such period, the Company is not aware of any director, officer,
or beneficial owner of more than 10% of any class of equity securities of the
Company registered pursuant to Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") that has failed to file on a timely basis, as disclosed in
the above forms, reports required by Section 16(a) of the Exchange Act during
the Company's most recent fiscal year.

ITEM 10.  EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
                                          SUMMARY COMPENSATION TABLE

------------------------------------------------------------------------------------------------------------------------------------
                                          Annual Compensation                      Long-Term Compensation Awards
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Securities
                                                                         Restricted     Underlying                         All
                                  Fiscal                                    Stock       Operations/       LTIP            Other
    Name/Position                  Year         Salary        Bonus        Awards          SARs          Payouts       Compensation
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>              <C>           <C>            <C>            <C>              <C>
Stanislaw R. Burzynski, M.D.,      2000        $348,050        -0-           -0-            -0-            -0-              -0-
Ph.D., President, Secretary and    2001        $87,000         -0-           -0-            -0-            -0-              -0-
Treasurer (1)                      2002           $0           -0-           -0-            -0-            -0-              -0-
------------------------------------------------------------------------------------------------------------------------------------
Robert Waldbillig,                 2000        $100,000        -0-           -0-            -0-            -0-              -0-
Ph.D., Vice President of           2001        $103,333        -0-           -0-            -0-            -0-              -0-
Research                           2002        $110,512        -0-           -0-            -0-            -0-              -0-
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      (1)  In May of 2000, Dr. Burzynski began drawing his entire salary
           through his medical practice and is not currently compensated by
           the Company for his services.


      DIRECTORS DO NOT RECEIVE ANY COMPENSATION FOR SERVING AS DIRECTORS;]
HOWEVER, DIRECTORS ARE REIMBURSED FOR ALL ORDINARY AND NECESSARY EXPENSES
INCURRED IN ATTENDING MEETINGS OF THE BOARD OF DIRECTORS OR OTHERWISE INCURRED
IN THEIR CAPACITY AS DIRECTORS. IN ADDITION, ANY DIRECTOR ALSO SERVING AS A
DIRECTOR OF THE IRB, THE INDEPENDENT REVIEW BOARD FOR THE COMPANY'S CLINICAL
TRIALS DESIGNATED ACCORDING TO FEDERAL REGULATIONS, IS COMPENSATED BY THE IRB
APPROXIMATELY $1,200 ANNUALLY FOR SERVING AS A DIRECTOR OF THE IRB.



                                       21
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth, as of May 14, 2002, the number of
outstanding shares of Common Stock (the Company's only class of voting
securities) owned by (i) each person known by the Company to beneficially own
more than 5% of its outstanding Common Stock, (ii) each director, (iii) each
named executive officer, and (iv) all officers and directors as a group.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
TITLE OF CLASS             NAME AND ADDRESS OF                     AMOUNT AND NATURE OF             PERCENT OF CLASS (1)
                           BENEFICIAL OWNER                        BENEFICIAL OWNER
-----------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                           <C>                                   <C>
Common Stock               Stanislaw R. Burzynski, M.D., Ph.D            106,444,190 shares                    81.01%
                           9432 Old Katy Road, Suite 200
                           Houston, Texas 77055
-----------------------------------------------------------------------------------------------------------------------------
Common Stock               Barbara Burzynski, M.D.
                           9432 Old Katy Road, Suite 200
                           Houston, Texas 77055                          106,444,190 shares                    81.01%
-----------------------------------------------------------------------------------------------------------------------------
Common Stock               Michael H. Driscoll, Esq.
                           9432 Old Katy Road, Suite 200
                           Houston, Texas 77055                             570,000 shares                      0.43%
-----------------------------------------------------------------------------------------------------------------------------
Common Stock               Carlton Hazlewood
                           9432 Old Katy Road, Suite 200
                           Houston, Texas 77055                               0 shares                          0.00%
-----------------------------------------------------------------------------------------------------------------------------
Common Stock               All Current Directors and Executive               107,014,190                       81.45%
                           Officers as a group
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Percentages shown are based upon 131,388,444 shares of Common Stock
      outstanding as of May 14, 2002. Certain shares are deemed beneficially
      owned by more than one person listed in the table.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Dr. Burzynski is the President, Secretary, Treasurer and Chairman of the
Board of the Company, as well as the beneficial owner of 81.01% of the Company's
outstanding Common Stock. Since 1983, Dr, Burzynski has personally funded and
supported the Company's operations pursuant to various agreements with the
Company out of funds generated from his medical practice.

LICENSE AGREEMENT

      The Company entered into the License Agreement with Dr. Burzynski which
gives the Company the exclusive right in the Territory (composed of the United
States, Canada and Mexico) to use, manufacture, develop, sell, distribute,
sublicense and otherwise exploit all of his rights, title and interests in
Antineoplastons in the treatment and diagnosis of cancer, including but not
limited to any patent rights which may be granted in these countries. The
License Agreement will terminate upon the earlier of the expiration of the last
patent licensed to the Company, or termination by Dr. Burzynski, at his option,
if he is removed as a director or officer of the Company without his consent, if
the Company files for bankruptcy or is the subject of any proceeding under
applicable bankruptcy laws where such proceeding is not dismissed within 90 days
from the date a petition if filed, 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 Dr. Burzynski holds. Amendments to the License Agreement on April 24,
1984 and on March 1, 1990 granted Dr. Burzynski the limited right to
manufacture, use, and exploit Antineoplastons in the Company's exclusive
territory solely for the purpose of enabling Dr. Burzynski to treat patients in
his medical practice until such date that the FDA may approve the sale of
Antineoplastons for the treatment of cancer in the United States.


                                       22
<PAGE>

RESEARCH FUNDING ARRANGEMENTS

      Effective March 1, 1997, the Company entered into the Research Funding
Agreement with Dr. Burzynski and terminated all of the prior funding agreements
between the Company and Dr. Burzynski. 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,
            research space and office space as the Company needs 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.

      Effective March 1, 2001 the term of the Research Funding Agreement was
extended to March 1, 2002, and is automatically renewable for two additional
one-year terms thereafter, 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.


                                       23
<PAGE>

ROYALTY AGREEMENT

      The Company and Dr. Burzynski entered into the Royalty Agreement, 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 of Antineoplastons. The Company and Dr. Burzynski 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, Dr. Burzynski retains the right to
either (i) 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 (ii) purchase from the Company Antineoplaston products to treat up to
1,000 patients, at any one time, at a price equal to cost plus 10% (ten
percent). Dr. Burzynski has the right to lease or purchase all the manufacturing
equipment located at 12707 Trinity Drive, Stafford, Texas at a fair market
price. The Royalty Agreement further provides that the Company will have the
right, when and if Antineoplastons are approved for use and sale by the 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
that time, provided that Dr. Burzynski does not need the facility for his use.

OTHER TRANSACTIONS

      Since Tadeusz Burzynski's death on June 13, 1998, the Company has paid his
widow, Zofia Burzynski, $1,000 per month as death benefit payments. Tadeusz
Burzynski was formerly an officer and a director of the Company and the brother
of Dr. Burzynski.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT NO.     EXHIBIT NAME
-----------     ------------

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)).

10.1  License Agreement, effective as of June 29, 1983, by and between the
      Company and Dr. Stanislaw R. Burzynski (incorporated by reference from
      Exhibit 10(1) to Form 10-SB filed with the Securities and Exchange
      Commission on November 25, 1997 ( File No. 000-23425)).

10.2  Amended License Agreement, dated April 2, 1984, by and between the Company
      and Dr. Stanislaw R. Burzynski (incorporated by referenced from Exhibit
      10(2) to Form 10-SB filed with the Securities and Exchange Commission on
      November 25, 1997 (File No. 000-23425)).

10.3  Second Amended License Agreement, dated March 1, 1990, by and between the
      Company and Dr. Stanislaw R. Burzynski (incorporated by reference from
      Exhibit 10(3) to Form 10-SB filed with the Securities and Exchange
      Commission on November 25, 1997 (File No. 000-23425)).

10.4  Research Funding Agreement, effective as of March 1, 1997, by and between
      the Company and Dr. Stanislaw R. Burzynski (incorporated by reference from
      Exhibit 10(4) to Form 10-SB filed with the Securities and Exchange
      Commission on November 25, 1997 (File No. 000-23425)).


                                       24
<PAGE>

10.5  First Amendment to Research Funding Agreement, effective as of March 1,
      2001, by and between the Company and Dr. Stanislaw R. Burzynski
      (incorporated by reference from Exhibit 10.5 to Form 10-KSB filed with the
      Securities and Exchange Commission on May 2, 2001 (File No. 000-23425)).

10.6  Royalty Agreement, dated March 25, 1997, by and between the Company and
      Dr. Stanislaw R. Burzynski (incorporated by referenced from Exhibit 10(5)
      to Form 10-SB filed with the Securities and Exchange Commission on
      November 25, 1997 (File No. 000-23425)).

10.7  First Amended Royalty Agreement, dated September 29, 1997, by and between
      the Company and Dr. Stanislaw R. Burzynski (incorporated by referenced
      from Exhibit 10(6) to Form 10-SB filed with the Securities and Exchange
      Commission on November 25, 1997 (File No. 000-23425)).

24    Power of Attorney (Included with the Signature Page)

      There were no reports on Form 8-K filed by the Company during the last
quarter of fiscal year ended February 28, 2002.



                                       25
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant 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 (Chief Financial
                                          Officer) and Chairman of the
                                          Board of Directors

Date:  May 28, 2002




                                       26
<PAGE>

      Each person whose signature appears below constitutes and appoints Dr.
Stanislaw R. 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
to this report, 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 report
has been signed below by the following persons in the capacities and on the
dates indicated.


/s/ Stanislaw R. Burzynski
-----------------------------------------------
Stanislaw R. Burzynski                                      Date:  May 28, 2002
President, Secretary, Treasurer (Chief
Financial Officer), and Chairman of the
Board and Directors

/s/ Barbara Burzynski
-----------------------------------------------
Barbara Burzynski                                           Date:  May 28, 2002
Director


/s/ Michael H. Driscoll
-----------------------------------------------
Michael H. Driscoll                                         Date:  May 28, 2002
Director


/s/ Carlton Hazlewood
-----------------------------------------------
Carlton Hazlewood                                           Date:  May 28, 2002
Director


                                       27


<PAGE>



                       BURZYNSKI RESEARCH INSTITUTE, INC.


                              FINANCIAL STATEMENTS


                               FOR THE YEARS ENDED
                           FEBRUARY 28, 2002 AND 2001





<PAGE>

                                    CONTENTS

                                                                           Page

Independent Auditor's Report................................................F-3

Balance Sheets..............................................................F-4

Statements of Operations....................................................F-5

Statements of Stockholders' Equity..........................................F-6

Statements of Cash Flows....................................................F-7

Notes to Financial Statements...............................................F-8



                                      F-2
<PAGE>

                          Independent Auditor's Report



To the Board of Directors and Stockholders
   of Burzynski Research Institute, Inc.


We have audited the accompanying balance sheets of Burzynski Research Institute,
Inc. as of February 28, 2002 and 2001, and the related statements of operations,
stockholders' equity, 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001 and the results of their operations and
their cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.



/s/ Fitts, Roberts & Co., P.C.

May 24, 2002
Houston, Texas



                                      F-3
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
BALANCE SHEETS
FEBRUARY 28, 2002 AND 2001

================================================================================

<TABLE>
<CAPTION>
                                                                                        2002                   2001
                                                                                    ------------           ------------
<S>                                                                                 <C>                    <C>
ASSETS

Current assets

    Cash and cash equivalents (Note 1)                                              $     22,585           $      7,244
                                                                                    ------------           ------------
          Total current assets                                                            22,585                  7,244

Property and equipment, net of accumulated depreciation
  and amortization (Notes 1,3 and 5)                                                      69,252                105,864

Other assets                                                                                  --                    600
                                                                                    ------------           ------------

          Total assets                                                              $     91,837           $    113,708
                                                                                    ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

    Current portion of capital lease obligations (Note 5)                           $         --           $        757
    Accounts payable                                                                      11,366                 27,303
    Accrued liabilities                                                                   46,470                 57,006
                                                                                    ------------           ------------

        Total current liabilities                                                         57,836                 85,066

Capital lease obligation, less current portion (Note 5)                                       --                     --
                                                                                    ------------           ------------

        Total liabilities                                                                 57,836                 85,066

Commitments and contingencies (Note 8)

Stockholders' equity

    Common stock, $.001 par value; 200,000,000 shares authorized,
      131,388,444 shares issued and outstanding                                          131,389                131,389
    Additional paid-in capital                                                        52,160,847             46,979,684
    Discount on common stock                                                                (100)                  (100)
    Retained deficit                                                                 (52,258,135)           (47,082,331)
                                                                                    ------------           ------------

        Total stockholders' equity                                                        34,001                 28,642
                                                                                    ------------           ------------

          Total liabilities and stockholders' equity                                $     91,837           $    113,708
                                                                                    ============           ============

</TABLE>

The accompanying notes are an integral part of these financial statements.



                                      F-4

<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 2002 AND 2001

================================================================================

<TABLE>
<CAPTION>
                                                                      2002                  2001
                                                                  -----------           -----------
<S>                                                               <C>                   <C>
Revenue
     Other income                                                 $     3,000           $     1,062

Operating expenses
    Research and development (Notes 1 and 2)                        4,903,196             4,356,433
    General and administrative                                        238,621               165,705
    Depreciation (Notes 1 and 3)                                       36,874                69,737
                                                                  -----------           -----------
        Total operating expenses                                    5,178,691             4,591,875
                                                                  -----------           -----------
    Net loss before provision for taxes                            (5,175,691)           (4,590,813)

Provision for income tax (Notes 1 and 6)                                  113                 2,052
                                                                  -----------           -----------
     Net loss                                                     $(5,175,804)          $(4,592,865)
                                                                  ===========           ===========



Earnings per share information:
Basic and diluted
   (Loss) per common share                                        $   (0.0394)          $   (0.0350)
                                                                  ===========           ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.



                                      F-5
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 2002 AND 2001

================================================================================

<TABLE>
<CAPTION>
                                                                              Additional       Discount on
                                                              Common           Paid-in            Common            Retained
                                                              Stock            Capital            Stock              Deficit
                                                           ------------      ------------      ------------       ------------
<S>                                                        <C>               <C>               <C>                <C>
Balance February 29, 2000                                  $    131,389      $ 42,343,748      $       (100)      $(42,489,466)

    Cash contributed by S.R. Burzynski M.D., Ph.D                    --           671,000                --                 --

    FDA clinical trial expenses paid directly by
      S.R. Burzynski M.D., Ph. D                                     --         3,964,936                --                 --

    Net loss                                                         --                --                --         (4,592,865)
                                                           ------------      ------------      ------------       ------------
Balance February 28, 2001                                       131,389        46,979,684              (100)       (47,082,331)

    Cash contributed by S.R. Burzynski M.D., Ph.D                    --           699,000                --                 --

    FDA clinical trial expenses paid directly by
      S.R. Burzynski M.D., Ph. D                                     --         4,482,163                --                 --

    Net loss                                                         --                --                --         (5,175,804)
                                                           ------------      ------------      ------------       ------------
Balance February 28, 2002                                  $    131,389      $ 52,160,847      $       (100)      $(52,258,135)
                                                           ============      ============      ============       ============
</TABLE>





The accompanying notes are an integral part of these financial statements.




                                      F-6
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 2002 AND 2001

================================================================================

<TABLE>
<CAPTION>
                                                                                2002                 2001
                                                                            -----------          -----------
<S>                                                                         <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                $(5,175,804)         $(4,592,865)
    Adjustments to reconcile net income to
    net cash provided by operating activities:
        Depreciation                                                             36,874               69,737
        FDA clinical trial expenses paid directly by
           S.R. Burzynski M.D., Ph. D                                         4,482,163            3,964,936
    Decrease in
        Other assets                                                                600                3,755
    Increase (decrease) in
        Accounts payable                                                        (15,937)             (20,848)
        Accrued liabilities                                                     (10,536)             (80,809)
                                                                            -----------          -----------
  NET CASH (USED) IN OPERATING ACTIVITIES                                      (682,640)            (656,094)

CASH FLOWS FROM  INVESTING ACTIVITIES
    Purchases of property and equipment                                            (262)              (5,463)
                                                                            -----------          -----------

  NET CASH (USED) IN INVESTING ACTIVITIES                                          (262)              (5,463)

CASH FLOWS FROM FINANCING ACTIVITIES
    Payments on long-term debt                                                       --               (5,461)
    Payments on capital lease obligations                                          (757)             (16,837)
    Additional paid-in capital                                                  699,000              671,000
                                                                            -----------          -----------
  NET CASH PROVIDED BY FINANCING ACTIVITIES                                     698,243              648,702
                                                                            -----------          -----------
  NET INCREASE (DECREASE) IN CASH                                                15,341              (12,855)

CASH AT BEGINNING OF YEAR                                                         7,244               20,099
                                                                            -----------          -----------
  CASH AT END OF YEAR                                                       $    22,585          $     7,244
                                                                            ===========          ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash Paid During the Year For:
        Income taxes                                                        $    13,413          $    22,602
        Interest                                                            $    88,358          $    93,629

</TABLE>


The accompanying notes are an integral part of these financial statements.



                                      F-7

<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS


1.    BACKGROUND, BASIS OF PRESENTATION, ECONOMIC DEPENDENCY AND SIGNIFICANT
      ACCOUNTING POLICIES:

      BACKGROUND AND BASIS OF PRESENTATION

      The financial statements of Burzynski Research Institute, Inc. (BRI or the
      Company), a Delaware corporation, include expenses incurred related to
      clinical trials, which were sanctioned by the Federal Drug Administration
      (FDA) in 1993, for antineoplaston drugs used in the treatment of cancer.
      These expenses incurred directly by S.R. Burzynski, M.D., PhD (Dr.
      Burzynski) 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 knows as
      "antineoplastons", which he has licensed to the Company.

      The Company and Dr. Burzynski have entered various agreements, as further
      described in Note 2, 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.

      BRI's administrative offices are located in Houston, Texas; its research
      and production facilities in Stafford, Texas. The Company operates
      primarily as a research and development facility of drugs currently being
      tested for the use in the treatment of cancer, and provides consulting
      services. Segment information is not presented since all of the Company's
      operations are attributed to a single reportable segment. The Company has
      had no significant revenue from external sources. BRI 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 FDA
      approval will be granted.

      ECONOMIC DEPENDENCY

      BRI has generated no significant revenues since its inception. As of
      February 28, 2002, the Company had a working capital deficit of
      approximately $35,000 and accumulated deficit of approximately
      $52,300,000. For the years ended February 28, 2002 and 2001 the Company
      incurred losses of approximately $5,176,000 and $4,593,000, respectively.



                                      F-8
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


1.    BACKGROUND, BASIS OF PRESENTATION, ECONOMIC DEPENDENCY AND SIGNIFICANT
      ACCOUNTING POLICIES: (CONTINUED)

      Dr. Burzynski has funded the capital and operational needs of the Company
      since its inception from revenues generated through his medical practice
      pursuant to various agreements as described in Note 2.

      BRI is economically dependent on its funding from Dr. Burzynski through
      his medical practice. Approximately one-third 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 anytime 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 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 BRI's operating deficit until it achieves positive
      operating cash flow. However, there can be no assurance that the Company
      will be able to raise such additional capital.

      SIGNIFICANT ACCOUNTING POLICIES

      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.



                                      F-9
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


1.    BACKGROUND, BASIS OF PRESENTATION, ECONOMIC DEPENDENCY AND SIGNIFICANT
      ACCOUNTING POLICIES: (CONTINUED)

      INCOME TAXES

      The Company uses the liability method of accounting for income taxes,
      under which deferred income taxes are recognized for the tax consequences
      of temporary differences by applying the enacted statutory tax rate
      applicable to future years to differences between financial statement
      carrying amounts and the tax basis of existing assets and liabilities.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount expected to be realized. Income tax expense is the
      tax payable or refundable for the period plus or minus the change during
      the period in deferred tax assets and liabilities. The costs incurred
      related to the conduct of FDA approved clinical trials incurred directly
      by Dr. Burzynski within his medical practice are taxed directly to Dr.
      Burzynski and are not included in the Company's tax provision. The portion
      of the Texas franchise tax that is based on income is treated as income
      taxes and included in the income tax provision.

      LOSS PER COMMON SHARE

      Basic and diluted loss per common share information for all periods is
      presented under the requirements of FASB Statement No. 128, "Earnings per
      share". Basic loss per common share has been computed using the weighted
      average number of common shares outstanding during the period. Potentially
      dilutive securities have been excluded from the computation of diluted
      loss per common share as their inclusion would be antidilutive.

      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.

      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.



                                      F-10
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


2.    AGREEMENTS WITH, AND OTHER RELATED PARTY TRANSACTIONS:

      The Company has agreements with its majority shareholder and President Dr.
      Burzynski as further described below:

      LICENSE AGREEMENT

      Dr. Burzynski is the owner of 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-eight other
      countries. The Patents for cancer treatment and diagnosis in the United
      States and Canada are licensed to the Company pursuant to a License
      Agreement.

      The License Agreement 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 and the appropriate authority in Canada and Mexico.

      The Agreement gives Dr. Burzynski the right to distribute, use and
      otherwise exploit antineoplastons in connection with treatment of patients
      in his medical practice until such time as they are approved for sale by
      the FDA.

      The License Agreement will terminate upon the earlier of the expiration
      of the last patent licensed to the Company, or termination by Dr.
      Burzynski, at his option, if he is removed as a director or officer of
      the Company without his consent, if the Company files for bankruptcy, 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 Dr. Burzynski holds.

      Under the License Agreement, the Company currently owns exclusive rights
      to eight (8) issued United States Patents and two (2) issued Canadian
      Patents. The Company has no patents in Mexico. The Company has two (2)
      pending patent applications in the United States, two (2) pending patent
      applications in Canada and one (1) in Mexico.

      The five initial 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


                                      F-11
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


2.    AGREEMENTS WITH, AND OTHER RELATED PARTY TRANSACTIONS: (CONTINUED)

      urine; (iii) Processes for the synthetic production of Antineoplastons and
      methods of treating neoplastic disease (cancer); (iv) Administration of
      Antineoplastons to humans; and (v) Methods of synthesizing A-10. The
      Initial Patents expire from September 11, 2001 to January 11, 2009,
      however, the Company does not believe the expiration of any of the
      Initial Patents will have a material adverse effect on the Company.

      The sixth United States Patent (the "2000 U.S. Patent") covers Liposomal
      Antineoplaston therapies with markedly improved anti-cancer activity. The
      2000 U.S. Patent expires May 14, 2017.

      The seventh United States Patent (the "2001 U.S. Patent") is for a
      treatment regimen for the administration of phenylacetylglutamine,
      phenylacetylisoglutamine, and/or phenylacetate. The 2001 U.S. Patent
      expires on July 23, 2018.

      The eighth United States Patent (the "2002 U.S. Patent" relates to the
      synthesis of 4-Phenylburtric Acid. The 2002 U.S. Patent expires on May 21,
      2021.

      The two 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 November 14, 2006 and June 4, 2002, respectively.

      RESEARCH FUNDING AGREEMENT

      Effective March 1, 1997, Dr. Burzynski restructured his funding
      arrangement with the Company and entered into a Research Funding
      Agreement. Under this agreement the two parties agreed to the following:

      1.    BRI agrees to undertake all scientific research in connection with
            the development of new or improved antineoplastons for the treatment
            of cancer. BRI will hire such personnel as is required to fulfill
            its obligations under the agreement.

      2.    Dr. Burzynski agrees to fund in its entirety all basic research
            which BRI undertakes in connection with the development of other
            antineoplastons or refinements to existing antineoplastons for the
            treatment of cancer.

      3.    As FDA approval of antineoplastons will benefit both parties, Dr.
            Burzynski agrees to pay the expenses to conduct the clinical trials
            for BRI.



                                      F-12
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


2.    AGREEMENTS WITH, AND OTHER RELATED PARTY TRANSACTIONS: (CONTINUED)

      4.    Dr. Burzynski 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 his
            medical facility.

      5.    In the event the research described in the agreement results in the
            approval of any additional patents for the treatment of cancer, Dr.
            Burzynski shall own all such patents, but shall license to BRI the
            patents based on the same terms, conditions and limitations as is in
            the current license between the parties.

      6.    Dr. Burzynski shall have unlimited and free access to all equipment
            which BRI owns, so long as such use is not in conflict with BRI's
            use of such equipment, including without limitation to all equipment
            used in manufacturing of antineoplastons used in the clinical
            trials.

      7.    The amounts which Dr. Burzynski 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 engagement up to a
                  maximum of $1,000,000 in a given BRI fiscal year.

      8.    The initial term of the agreement expired March 1, 2001 and was
            extended until March 1, 2002. The agreement will be automatically
            renewable 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.

      9.    The agreement shall automatically terminate in the event that Dr.
            Burzynski 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 he notifies BRI in writing his intention to continue the
            agreement notwithstanding this automatic termination provision.



                                      F-13

<PAGE>


BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


2.    AGREEMENTS WITH, AND OTHER RELATED PARTY TRANSACTIONS: (CONTINUED)

      ROYALTY AGREEMENT

      The Company entered into a royalty agreement with Dr. Burzynski whereby
      upon receiving FDA approval for interstate marketing and distribution, the
      Company agrees to pay Dr. Burzynski a royalty interest equivalent to 10%
      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%. 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 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.

      The term of this agreement is indefinite and will continue until such time
      as both parties agree it is not in their mutual interest to continue.

      OTHER RELATED PARTY TRANSACTIONS

      Dr. Burzynski owns the production facility located at Trinity Drive. There
      is no formal lease agreement between Dr. Burzynski and BRI, however, the
      Research Funding Agreement described above provides that Dr. Burzynski
      will allow the Company the use of the building, in addition, the Royalty
      agreement states that after FDA approval is granted (though approval is
      not assured) the Company may rent the facility at competitive rates if Dr.
      Burzynski does not need the facility for his use. The actual facility
      costs are included in the financial statements as set forth in note 5. In
      addition, Dr. Burzynski's medical clinic performs certain administrative
      functions such as accounting, and allows BRI the use of some office space
      at no charge to the Company. In May of 2000, Dr. Burzynski began drawing
      his entire salary through his medical practice and is not currently
      compensated by BRI for his services. Compensation for Dr. Burzynski's
      services charged to BRI for the fiscal years ended February 2002 and 2001
      was $-0- and $87,000, respectively.




                                      F-14
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


2.    AGREEMENTS WITH, AND OTHER RELATED PARTY TRANSACTIONS: (CONTINUED)

      The Company has received all significant funding from Dr. Burzynski
      through either cash contributed to BRI or the payment of the cost to
      conduct FDA approved clinical trials through his medical practice, as
      disclosed in Note 1. Following is a summary of the capital contributed and
      clinical trial costs paid by Dr. Burzynski.


                                                     2002           2001
                                                ------------    -------------

      Capital contributed                       $    699,000    $     671,000
      Clinical trial costs paid direct          $  4,482,163    $   3,964,936



3.    PROPERTY AND EQUIPMENT:

      Property and equipment consists of the following as of February 28th:

<TABLE>
<CAPTION>
                                             ESTIMATED
                                            USEFUL LIVES                    2002               2001
                                          -----------------            ------------         ------------
<S>                                          <C>                       <C>                  <C>
     Production equipment                    5 - 10 years              $  3,314,342         $  3,314,342
     Leasehold improvements                 5 - 31.5 years                1,543,490            1,543,490
     Furniture and equipment                 5 - 10 years                   619,306              619,044
     Equipment under capital lease            4 - 5 years                   288,943              288,943
                                                                       ------------         ------------
     Total property and equipment                                         5,766,081            5,765,819

     Accumulated depreciation
       and amortization                                                  (5,696,829)          (5,659,955)
                                                                       ------------         ------------

                                                                       $     69,252         $    105,864
                                                                       ============         ============
</TABLE>

      Depreciation and amortization expense for the years ended February 28,
      2002, and 2001 was $36,874 and $69,737, respectively.



                                      F-15
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


4.    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
      lifetime 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 $218,662 for 2002 and $215,111 for 2001, 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.



5.    LEASE COMMITMENTS:

      The Company leases certain equipment under agreements, which are
      classified as capital leases. Cost and accumulated depreciation related to
      these leased assets are as follows:


                                                  2002               2001
                                               ---------         ---------

      Equipment                                $ 288,943         $ 288,943
      Accumulated depreciation                  (287,276)         (286,701)
                                               ---------         ---------

                Equipment (Net)                $   1,667         $   2,242
                                               =========         =========


      Only one lease remained payable at February 28, 2001, and its balance was
      paid off as of April 2001.

      The Company leases certain equipment under agreements which are classified
      as operating leases. Rent expense incurred under these leases was
      approximately $5,744 and $20,089 for the years ended February 28, 2002,
      and 2001, respectively. All lease agreements are on a month-to-month
      basis.

      In addition, as explained in Note 2, Dr. Burzynski owns the facility used
      by the Company to perform research and produce its drug products. There is
      currently no lease agreement, however, the facility's costs are included
      in the accompanying financial statements. Those costs include not only
      utilities and expenses normally incurred by a tenant but also mortgage
      interest, property taxes and building depreciation. Interest, property
      taxes and building depreciation totaled $146,395 and $153,086 for 2002 and
      2001, respectively.



                                      F-16
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued



6.    INCOME TAXES:

      The actual income tax benefit attributable to the Company's losses for the
      years ended February 28, 2002 and 2001 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:

<TABLE>
<CAPTION>
                                                         2002                   2001
                                                      -----------           -----------
<S>                                                   <C>                   <C>
      Expected benefit                                $(1,759,735)          $(1,560,876)
      Nondeductible expenses                                   --                    47
      Other adjustments                                    (8,428)              (23,589)
      Taxed directly to Dr. Burzynski                   1,761,595             1,576,218
      Change in valuation allowance                         6,568                 8,200
      Texas franchise tax, based on income                    113                 2,052
                                                      -----------           -----------

      Income tax expense                              $       113           $     2,052
                                                      ===========           ===========
</TABLE>

      The components of the Company's deferred income tax assets as of February
28, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                        2002                 2001
                                                     ---------            ---------
<S>                                                  <C>                  <C>
      Deferred tax assets:

      Net operating loss carryforwards               $ 330,124            $ 323,557
      Excess book depreciation                          66,590               71,080
      Accrued expenses                                   5,306                9,219
      Investment tax credit carryforwards                   --                4,458
      Alternative minimum tax credit
        carryforwards                                   42,603               42,603
                                                     ---------            ---------

      Total deferred tax assets                        444,623              450,917
      Less valuation allowance                        (444,623)            (450,917)
                                                     ---------            ---------

      Net deferred tax assets                        $      --            $      --
                                                     =========            =========
</TABLE>



                                      F-17

<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


6.    INCOME TAXES: - CONTINUED

      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 amount of $970,952 as of February 28, 2002. The net
      operating loss carryforwards expire as follows:


                    YEAR ENDING
                 FEBRUARY 28, OR 29,
                 --------------------

                        2008                   $   303,069
                        2011                   $    11,818
                        2012                   $   511,871
                        2013                   $    50,786
                        2020                   $    49,976
                        2021                   $    24,117
                        2022                   $    19,315

      In addition, the Company has alternative minimum tax credit carryforwards
      of $42,603.


7.    STOCK OPTIONS:

      Statement of Financial Accounting Standards No. 123, "Accounting for
      Stock-based Compensation" (FAS 123) defines a fair value based method of
      accounting for employee stock options or similar equity instruments and
      encourages all entities to adopt that method of accounting for all of
      their employee stock compensation plans. Under the fair value based
      method, compensation cost is measured at the grant date based on the value
      of the award and is recognized over the service period of the award, which
      is usually the vesting period. However, FAS 123 also allows entities to
      continue to measure compensation costs for employee stock compensation
      plans using the intrinsic value method of accounting prescribed by
      Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
      Issued to Employees" (APB 25). The Company has adopted FAS 123 and has
      elected to remain with the accounting prescribed by APB 25.



                                      F-18
<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
NOTES TO FINANCIAL STATEMENTS - continued


7.    STOCK OPTIONS: - CONTINUED

      On September 14, 1996 the Company granted 600,000 stock options, with an
      exercise price of $.35 per share, to an officer of the Company. The
      options vested as follows:

                   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 additional shares have been issued
      since September 14, 1996. None of the options have been exercised as of
      February 28, 2002.


8.    COMMITMENTS AND CONTINGENCIES AND SUPPLY SOURCE:

      As described in Note 2, the Company entered a Royalty Agreement with Dr.
      Burzynski. Under that agreement, upon FDA approval, the Company is
      obligated to provide Dr. Burzynski the right to produce antineoplaston
      products to treat up to 1,000 patients without paying any fees to the
      Company or the right to purchase antineoplaston products to treat up to
      1,000 patients at cost plus 10%.

      The Company produced antineoplaston products to treat approximately 90
      patients during the year ended February 28, 2002 and 116 for 2001.
      Management estimates the current production facilities have the capacity
      to produce product to treat approximately 1,500 patients. There is space
      available at the current site to expand the facility for increased
      capacity if necessary.

      The Company received approximately eighty two percent and sixty six
      percent of the chemicals used in producing antineoplastons from a single
      supplier during the years ended February 2002 and 2001, respectively. The
      Company has established an additional vendor to supply these chemicals.

      The Company is involved in various claims, legal actions and regulatory
      proceedings arising in the ordinary course of business. The Company
      believes it is unlikely that the final outcome of any of the claims or
      proceedings to which the Company is a party will have a material adverse
      effect on the Company's financial position or results of operations.
      However, due to the inherent uncertainty of litigation, there can be no
      assurance that the resolution of any particular claim or proceeding would
      not have a material adverse effect on the Company's results of operations
      for the period in which such resolution occurred.




                                      F-19