<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, 2001

   [ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 000-23425

                       BURZYNSKI RESEARCH INSTITUTE, INC.
        (Exact name of small business issuer as specified in its charter)

              Delaware                                     76-0136810
   (State or other jurisdiction of                         (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)

       Registrant's telephone number, including area code: (713) 335-5697

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not 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/

         Registrant's revenues for its most recent fiscal year were $1,062.

         As of February 28, 2001, 131,389,444 shares of the Registrant's Common
Stock were outstanding, and the aggregate market value of the Common Stock held
by non-affiliates was approximately $1,463,115 based on the last reported sales
price on May 2, 2001.

                       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, 2001

                                                TABLE OF CONTENTS


<TABLE>

<S>                                                                                                              <C>
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

</TABLE>

<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, 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 geographical areas in
which Antineoplastons become registered. 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 73 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 treatment of
breast cancer using A10 capsules in combination with the FDA-approved drug
Methotrexate. Most of
                                       3
<PAGE>

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 December 2000, 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 24, 2001).


<TABLE>
<CAPTION>

    ----------------------------------------------------------------------------------------------------
    Protocol       Patients     Evaluable        Patients       Patients      Patients       Patients
     Number        Accrued      Patients         showing        showing      maintaining       with
                                                 Complete       Partial        Stable      Progressive
                                                 Response       Response       Disease       Disease
    ----------------------------------------------------------------------------------------------------
    <S>            <C>          <C>              <C>            <C>          <C>           <C>
     BT-9            19            12            2 (16.7%)      4 (33.3%)     5 (41.7%)      1 (8.3%)
    ----------------------------------------------------------------------------------------------------
     BT-11           24            18            3 (16.7%)      4 (22.2%)     5 (27.8%)      6 (33.3%)
    ----------------------------------------------------------------------------------------------------
     BT-13           10            8             3 (37.5%)      2 (25%)       3 (37.5%)      0 (0%)
    ----------------------------------------------------------------------------------------------------
     BT-15           23            15            2 (13.3%)      2 (13.3%)     5 (33.3%)      6 (40%)
    ----------------------------------------------------------------------------------------------------
     BT-18           14            11            3 (27.3%)      1 (9.1%)      2 (18.2%)      5 (45.5%)
    ----------------------------------------------------------------------------------------------------

</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 I 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.

         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.


                                       5


<PAGE>

ACTIVE PHASE II CLINICAL TRIALS


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------
<S>              <C>                                                                 <C>          <C>
AD-2             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         2             40
                 CARCINOMA OF 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         4             40
                 CARCINOMA OF THE  BLADDER; Revised 7/20/96; Revised 9/28/96;
                 Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------
BR-10            PROTOCOL FOR RANDOMIZED CONTROLLED TRIAL COMPARING METHOTREXATE         8             40
                 TREATMENT 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        18             40
                 CARCINOMA OF THE BREAST; Revised 7/20/96; Revised 4/29/97.
----------------------------------------------------------------------------------------------------------------
BR-14            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 CAPSULES IN              7             40
                 PATIENTS WITH 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             9             40
                 CHILDREN WITH HIGH GRADE GLIOMA; March 1996.
----------------------------------------------------------------------------------------------------------------
BT-7             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH        36             40
                 GLIOBLASTOMA MULTIFORME; March 1996.
----------------------------------------------------------------------------------------------------------------
BT-8             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH        12             40
                 ANAPLASTIC ASTROCYTOMA; Revised 4/14/97; Revised 9/15/97.
----------------------------------------------------------------------------------------------------------------
BT-9             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH        19             40
                 BRAIN TUMORS; 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        13             40
                 BRAIN TUMORS; 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        24             40
                 BRAIN STEM 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         8             40
                 PRIMITIVE NEUROECTODERMAL TUMORS; (PNET) Revised 7/11/96; Revised
                 9/28/96; Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------
BT-13            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH        10             40
                 LOW GRADE ASTROCYTOMA; Revised 7/11/96; Revised 9/28/96;
                 Revised 4/14/97; Revised 9/5/97.
----------------------------------------------------------------------------------------------------------------

                                                 6

<PAGE>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------
BT-14            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN CHILDREN WITH         3             40
                 RHABDOID 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        23             40
                 WITH 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         6             40
                 WITH LOW 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        10             40
                 WITH 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       14             40
                 WITH MIXED 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         3             40
                 NEUROFIBROMA AND SCHWANNOME; Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------
BT-20            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN ADULT PATIENTS       39             40
                 WITH 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       27             40
                 WITH PRIMARY 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         5             40
                 PRIMARY 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             8             40
                 CHILDREN WITH 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             9             40
                 PATIENTS WITH EPENDYMOMA; 5/15/96; Revised 11/18/96; Revised
                 4/14/97.
----------------------------------------------------------------------------------------------------------------
BT-25            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN             0             40
                 PATIENTS WITH CRANIOPHARYNGIOMA; 5/15/96; Revised 11/18/96;
                 Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------
BT-26            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 INFUSIONS IN             1             40
                 PATIENTS WITH 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             0             40
                 PATIENTS WITH 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             2             40
                 PATIENTS WITH MENINGIOMA; 5/17/96; Revised 9/10/96; Revised
                 4/14/97.
----------------------------------------------------------------------------------------------------------------

                                                 7

<PAGE>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------

CAN-1            PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH       133            133
                 REFRACTORY 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              9             40
                 PATIENTS WITH 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           3             40
                 LIVER CANCER; Origination dated 2/12/97; Revised 5/28/97.
----------------------------------------------------------------------------------------------------------------
HN-2             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         7             40
                 CARCINOMA OF 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         9             40
                 LARGE CELL, 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         3             40
                 BRONCHIAL 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         6             40
                 SQUAMOUS CELL 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         3             40
                 SMALL CELL 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               9             40
                 PATIENTS WITH NON SMALL CELL LUNG CANCER; Revised 8/12/96;
                 Revised 9/9/96; Revised 12/9/96.
----------------------------------------------------------------------------------------------------------------
LY-3             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         3             40
                 NONHODGKIN'S LYMPHOMA; Revised 7/11/96; Revised 9/28/96; Revised
                 4/14/97.
----------------------------------------------------------------------------------------------------------------

                                                 8

<PAGE>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------

LY-6             PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH         30             40
                 NONHODGKIN'S 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         12             40
                 NONHODGKIN'S 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          1             40
                 NONHODGKIN'S LYMPHOMA, HIGH GRADE; Revised 6/22/96; Revised
                 5/11/96.
----------------------------------------------------------------------------------------------------------------
LY-9             PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH          5             40
                 MANTLE ZONE 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              0             40
                 MYELOGENOUS LEUKEMIA; Revised 10/4/96; Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------
LY-11            PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH          0             40
                 MYCOSIS FUNGOIDES SEZARY SYNDROME; Revised 9/10/96; Revised
                 4/14/97.
----------------------------------------------------------------------------------------------------------------
LY-12            PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH          0             40
                 PRIMARY 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          0             40
                 PRIMARY 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              2             40
                 PATIENTS WITH 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         5             40
                 MESOTHELIOMA; 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         9             40
                 MALIGNANT 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         0             40
                 MALIGNANT FIBROUS HISTIOCYTOMA; June 1997.
----------------------------------------------------------------------------------------------------------------
MM-2             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         5             40
                 MULTIPLE 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          3             40
                 NEUROBLASTOMA; Orig: Dec. 6, 1996; Revised 2/13/97; Revised
                 4/14/97.
----------------------------------------------------------------------------------------------------------------

                                                 9

<PAGE>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------

NE-2             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         4             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         6             40
                 CARCINOMA OF 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        12             40
                 CARCINOMA OF 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         1             40
                 PRIMITIVE 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                  16             40
                 ANTINEOPLASTON A10 AND 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               1             40
                 COMBINATION WITH 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          1             40
                 WITH TOTAL ANDROGEN BLOCKADE IN PATIENTS WITH ADENOCARCINOMA OF
                 THE PROSTRATE.
----------------------------------------------------------------------------------------------------------------
PR-8             PHASE II STUDY OF ANTINEOPLASTON A10 AND AS21 IN PATIENTS WITH          0             40
                 ADENOCARCINOMA 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        14             40
                 CARCINOMA OF 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        12             40
                 SOFT TISSUE 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         1             40
                 CARCINOMA OF 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         8             40
                 CARCINOMA OF THE UTERINE  CERVIX  AND/OR VULVA; Revised 7/20/96;
                 Revised 9/28/96; Revised 4/14/97.
----------------------------------------------------------------------------------------------------------------

                                                10

<PAGE>

----------------------------------------------------------------------------------------------------------------
                                                                                                   Number of
                                                                                      Number        Patients
                                                                                        of            who
 Title of                           Subject of Protocol and Date                      Persons         may
 Protocol                                (as of 05/24/2001)                           Enrolled    Participate
                                                                                                 in the Study
----------------------------------------------------------------------------------------------------------------

UP-2             PHASE II STUDY OF ANTINEOPLASTONS A10 AND AS21 IN PATIENTS WITH         6             40
                 CARCINOMA OF 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          2             40
                 WILMS' TUMOR; 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

                                      11

<PAGE>

conducted to evaluate the effectiveness of the drug for a particular
indication in patients with the disease or 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 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 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 $72,000 per year on environmental
compliance matters and expects to spend an additional $50,000 for repairs and
upgrades during the year ending February 28, 2002.

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, 2001 and February 29, 2000 were approximately $4,356,000 and
$4,133,000, respectively.

INTELLECTUAL PROPERTY

         From 1984 through 2000, six 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
Antineoplaston drugs 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 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. The Company owns, pursuant to the License Agreement,
exclusive rights to six issued United States Patents and two issued Canadian
Patents. The Company has no patents in Mexico. The Company has two pending
patent applications in Canada and one pending patent application in Mexico. In
addition, the Company recently received a Notice of Allowance and Issue Fee Due
(the "Notice") from the United States Patent and Trademark Office regarding a
pending patent application (the "2001 U.S. Patent") for a treatment regimen for
the administration of phenylacetylglutamine, phenylacetylisoglutamine, and/or
phenylacetate. The Notice states that the 2001 U.S. Patent has been examined by
the United States Patent and Trademark Office and is "allowed for issuance as a
patent." It is the Company's understanding that the 2001 U.S. Patent should be
granted in the year 2001 following payment of an issue fee by the Company. Once
granted, the 2001 U.S. Patent will expire in the year 2018.

         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 May 14, 2017.

         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 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.

                                      14

<PAGE>

         The one 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.

EMPLOYEES

         As of May 25, 2001, the Company had 7 employees, all of whom were
full-time employees. None of the Company's employees are parties to a collective
bargaining agreement. The Company considers the relations with its employees to
be good.

                                      15

<PAGE>

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, 2001.














                                      16

<PAGE>

                                     PART II

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

         In recent years, the Common Stock of the Company has been listed on
the NASD Over-the-Counter Bulletin Board ("OTCBB") under the symbol "BZYR."
On July 25, 2000, the Company's Common Stock was removed from listing on the
OTCBB and, pursuant to instructions received from the Securities and Exchange
Commission (the "SEC"), the Company filed a Form 10-KSB covering the fiscal
years ended February 2000, 1999 and 1998 and interim Form 10-QSBs for the
quarters ended May 31, 2000, August 31, 2000 and November 30, 2000 in order
to bring the Company current in its SEC reporting obligations. The Company is
in the process of seeking approval of the trading of the Common Stock on the
OTCBB, although no assurance can be given that such approval will be
obtained. Since July 25, 2000 trading in the Company's Common Stock has been
occurring in the "Grey Market," 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, and such trading will continue until its
Common Stock is again listed on the OTCBB. 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).


<TABLE>
<CAPTION>

                  -----------------------------------------------
                                             High          Low
                                             ----          ---
                  -----------------------------------------------
                  <S>                        <C>           <C>
                   1999 First Quarter        0.28          0.15
                  -----------------------------------------------
                   1999 Second Quarter       0.18          0.125
                  -----------------------------------------------
                   1999 Third Quarter        0.15          0.05
                  -----------------------------------------------
                   1999 Fourth Quarter       0.79          0.1
                  -----------------------------------------------
                   2000 First Quarter        0.26          0.07
                  -----------------------------------------------

</TABLE>

         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).


<TABLE>
<CAPTION>

                  -----------------------------------------------
                                             High          Low
                                             ----          ---
                  -----------------------------------------------
                  <S>                        <C>           <C>
                   2000 Second Quarter       0.25          0.01
                  -----------------------------------------------
                   2000 Third Quarter        0.28125       0.01
                  -----------------------------------------------
                   2000 Fourth Quarter       0.15          0.01
                  -----------------------------------------------

</TABLE>

         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 February 28, 2001, there were approximately 2,053 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, 2001 and February 29, 2000 and the results of operations for
the fiscal years ended February 28, 2001 and February 29, 2000. It should be
read in conjunction with the financial statements and the notes thereto included
elsewhere in this report. The following discussion contains forward-looking
statements.

INTRODUCTION

         The Company 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 the use in the treatment of cancer, and
provides consulting services. The Company is currently conducting approximately
73 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, 2001 COMPARED TO FISCAL YEAR ENDED FEBRUARY 29,
2000

         Research and development costs were approximately $4,356,000 and
$4,133,000 for the fiscal years ended February 28, 2001 and February 29, 2000,
respectively. These increases generally reflected an overall increase in
research activities due to an increase in material costs and consulting costs
for the clinical trials. The increase of $223,000 or 5% was due to an increase
in material costs of $182,000 and, an increase in consulting costs of $93,000,
all of which were offset by a decrease in facility and equipment costs of
$42,000 and a decrease in other research and development costs of $10,000.

         General and administrative expenses were approximately $166,000 and
$147,000 for the fiscal years ended February 28, 2001 and February 29, 2000,
respectively. The increase of $19,000 or 13% was due to an increase in legal and
professional fees of $23,000, offset by a decrease in other general and
administrative expenses of $4,000.

         The Company had net losses of approximately $4,593,000 and $4,381,000
for the fiscal years ended February 28, 2001 and February 29, 2000,
respectively. The increase in the net loss from 2000 to 2001 was primarily due
to an overall increase in the research activities of the Company as described
above.

         As of February 28, 2001, the Company had a total stockholders' equity
of $28,642.

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. 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 $5,000,000 in
the fiscal year ending February 28, 2002. The Company estimates that of this
amount, $4,500,000 will be spent on research and development and the continuance
of FDA-approved clinical trials. While the Company anticipates that Dr.
Burzynski will continue to fund the Company's research and FDA-related costs,
there is no assurance that Dr. Burzynski will be able to continue to fund the
Company's operations pursuant to the Research Funding Agreement or otherwise.
However, because the net assets available to Dr. Burzynski from his medical
practice (including receivables aged 90 days or less) currently exceed the
Company's projected twelve-month funding requirements, the Company believes Dr.
Burzynski will be financially able to fund the Company's operations through the
fiscal year ending February 28, 2002. In addition, Dr. Burzynski's medical
practice has successfully funded the Company's research activities over the last
17 years and, in 1997, his medical practice was expanded to include traditional
cancer treatment options such as chemotherapy, immunotherapy and hormonal
therapy in response to FDA requirements that cancer patients utilize more
traditional cancer treatment options in order to be eligible to participate in
the Company's Antineoplaston clinical trials. As a result of the expansion of
Dr. Burzynski's medical practice, the financial condition of the medical
practice has improved Dr. Burzynski's ability to fund the Company's operations.

         The Company may be required to seek additional capital through equity
or debt financing or the sale of assets until the Company's operating revenues
are sufficient to cover operating costs and provide positive cash flow; however,
there can be no assurance that the Company will be able to raise such additional
capital on acceptable terms to the Company. In addition, there can be no
assurance that the Company will ever achieve positive operating cash flow.

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>    <C>
         Stanislaw R. Burzynski, M.D., Ph.D.             58     Director, President, Secretary, and Treasurer
        -------------------------------------------------------------------------------------------------------
         Barbara Burzynski, M.D.                         60     Director
        -------------------------------------------------------------------------------------------------------
         Michael H. Driscoll, Esq.                       55     Director
        -------------------------------------------------------------------------------------------------------
         Carlton Hazlewood, Ph.D.                        65     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 143 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.

         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. He has also 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

                                      20

<PAGE>

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, 2001 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

                                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                    Annual Compensation                     Long-Term Compensation Awards
----------------------------------------------------------------------------------------------------------------------
                                                                               Securities
                                                                 Restricted    Underlying                   All
     Name/Position             Fiscal                              Stock      Operations/     LTIP         Other
     -------------              Year      Salary       Bonus       Awards        SARs       Payouts     Compensation
                               ------     ------       -----     ----------   ------------  -------     ------------
----------------------------------------------------------------------------------------------------------------------
<S>                            <C>       <C>           <C>       <C>          <C>           <C>         <C>
Stanislaw R. Burzynski,         1999     $348,000       -0-         -0-          -0-          -0-           -0-
M.D., Ph.D., President,         2000     $348,050       -0-         -0-          -0-          -0-           -0-
Secretary and Treasurer         2001      $87,000       -0-         -0-          -0-          -0-           -0-
----------------------------------------------------------------------------------------------------------------------
Robert Waldbillig,              1999     $100,000       -0-         -0-          -0-          -0-           -0-
Ph.D., Vice President of        2000     $100,000       -0-         -0-          -0-          -0-           -0-
Research                        2001     $103,333       -0-         -0-          -0-          -0-           -0-
----------------------------------------------------------------------------------------------------------------------

</TABLE>

         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 February 28, 2001, 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.,        106,434,190 shares              81.01%
                        Ph.D
                        9432 Old Katy Road, Suite 200
                        Houston, Texas 77055
----------------------------------------------------------------------------------------------------------
Common Stock            Barbara Burzynski, M.D.              106,434,190 shares              81.01%
                        9432 Old Katy Road, Suite 200
                        Houston, Texas 77055
----------------------------------------------------------------------------------------------------------
Common Stock            Michael H. Driscoll, Esq.              570,000 shares                 0.43%
                        9432 Old Katy Road, Suite 200
                        Houston, Texas 77055
----------------------------------------------------------------------------------------------------------
Common Stock            Carlton Hazlewood                         0 shares                    0.00%
                        9432 Old Katy Road, Suite 200
                        Houston, Texas 77055
----------------------------------------------------------------------------------------------------------
Common Stock            All Current Directors and                107,004,190                 81.44%
                        Executive Officers as a group
----------------------------------------------------------------------------------------------------------

</TABLE>

(1)      Percentages shown are based upon 131,389,444 shares of Common Stock
         outstanding as of February 28, 2001. 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, Chairman of the Board, and 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
Antineoplaston drugs, in treatment and diagnosis of cancer, including but not
limited to any patent rights which may be granted in these countries. The
License 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, 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 he 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 use and 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

         On March 25, 1997 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 and distribution 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, the Company granted to Dr. Burzynski
the right to (i) either produce Antineoplaston products for use in his medical
practice to treat up to 1,000 patients, at any one time, without paying any fees
to the Company, or purchase from the Company enough Antineoplaston products to
treat up to 1,000 patients, at any one time, at a price equal to cost plus 10%
(ten percent); and (ii) lease or purchase all the manufacturing equipment
located at 12707 Trinity Drive, Stafford, Texas at a fair market price. The
Royalty Agreement further provided that the Company will have the right, when
and if Antineoplastons are approved for use and sale by them FDA, to (i) produce
all Antineoplaston products to be sold or distributed in the United States.,
Canada and Mexico for the treatment of cancer; and (ii) to lease from Dr.
Burzynski the entire premise located at 12707 Trinity Drive, Stafford, Texas at
terms and rates competitive with those available in the real estate market at
the time, provided that Dr. Burzynski does not need the facility for his use.

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

<TABLE>
<CAPTION>

EXHIBIT NO.     EXHIBIT NAME
-----------     ------------
<S>             <C>
3.1             Certificate of Incorporation of the Company, as amended (incorporated
                by reference from Exhibit 3(i) - (iii) to Form 10-KSB 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)

</TABLE>

         There were no reports on Form 8-K filed by the Company during the last
quarter of fiscal year ended February 28, 2001.










                                      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 25, 2001


























                                      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.

<TABLE>

<S>                                                                     <C>
/s/ Stanislaw R. Burzynski
--------------------------------------------------------------
Stanislaw R. Burzynski                                                  Date:  May 25, 2001
President, Secretary, Treasurer (Chief Financial Officer), and
Chairman of the Board and Directors


/s/ Barbara Burzynski
--------------------------------------------------------------
Barbara Burzynski                                                       Date:  May 25, 2001
Director


/s/ Michael H. Driscoll
--------------------------------------------------------------
Michael H. Driscoll                                                     Date:  May 25, 2001
Director


/s/ Carlton Hazlewood
--------------------------------------------------------------
Carlton Hazlewood                                                       Date:  May 25, 2001
Director

</TABLE>






                                      27


<PAGE>













                       BURZYNSKI RESEARCH INSTITUTE, INC.



                              FINANCIAL STATEMENTS



                               FOR THE YEARS ENDED
                    FEBRUARY 28, 2001, AND FEBRUARY 29, 2000



































                                        F-1

<PAGE>

                                    CONTENTS


<TABLE>
<CAPTION>

                                                                           Page
<S>                                                                        <C>
Independent Auditor's Report...............................................F-3

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

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

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

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

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

</TABLE>





















                                     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, 2001 and February 29, 2000, and the related statements
of operations, stockholders' deficit, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Burzynski Research Institute,
Inc. as of February 28, 2001 and February 29, 2000 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.





May 17, 2001                                      /s/ Fitts, Roberts & Co., P.C.
Houston, Texas










                                     F-3

<PAGE>

BURZYNSKI RESEARCH INSTITUTE, INC.
BALANCE SHEETS
FEBRUARY 28, 2001, AND FEBRUARY 29, 2000


--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                    2001                      2000
                                                                             ------------------        ------------------
<S>                                                                          <C>                       <C>
ASSETS

Current assets

    Cash and cash equivalents (Note 1)                                       $            7,244        $           20,099
                                                                             ------------------        ------------------

          Total current assets                                                            7,244                    20,099

Property and equipment, net of accumulated depreciation
  and amortization (Notes 1,3 and 6)                                                    105,864                   170,138

Other assets                                                                                600                     4,355
                                                                             ------------------        ------------------

          Total assets                                                       $          113,708        $          194,592
                                                                             ==================        ==================


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

    Current maturities of long-term debt (Note 4)                            $                -        $            5,461
    Current portion of capital lease obligations (Note 6)                                   757                    17,213
    Accounts payable                                                                     27,303                    48,151
    Accrued liabilities                                                                  57,006                   137,815
                                                                             ------------------        ------------------

        Total current liabilities                                                        85,066                   208,640

Capital lease obligation, less current portion (Note 6)                                       -                       381
                                                                             ------------------        ------------------

        Total liabilities                                                                85,066                   209,021

Commitments and contingencies (Note 9)

Stockholders' equity

    Common stock, $.001 par value; 200,000,000 shares authorized,
      131,389,444 shares issued and outstanding                                         131,389                   131,389
    Additional paid-in capital                                                       46,979,684                42,343,748
    Discount on common stock                                                               (100)                     (100)
    Retained deficit                                                                (47,082,331)              (42,489,466)
                                                                             ------------------        ------------------

        Total stockholders' equity (deficit)                                             28,642                   (14,429)
                                                                             ------------------        ------------------

          Total liabilities and stockholders' equity                         $          113,708        $          194,592
                                                                             ==================        ==================

</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, 2001, AND FEBRUARY 29, 2000


--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                   2001                      2000
                                                                            ------------------        ------------------
<S>                                                                         <C>                       <C>
Revenue
     Other income                                                           $           1,062         $          46,805

Operating expenses
    Research and development (Notes 1 and 2)                                        4,356,433                 4,132,854
    General and administrative                                                        165,705                   147,020
    Depreciation (Notes 1 and 3)                                                       69,737                   135,245
                                                                            ------------------        ------------------

        Total operating expenses                                                    4,591,875                 4,415,119
                                                                            ------------------        ------------------

    Net loss before provision for taxes                                            (4,590,813)               (4,368,314)

Provision for income tax (Notes 1 and 7)                                                2,052                    13,180
                                                                            ------------------        ------------------

    Net loss                                                                $      (4,592,865)        $      (4,381,494)
                                                                            ==================        ==================




Earnings per share information:
Basic and diluted
   (Loss) per common share                                                  $         (0.0350)        $         (0.0333)
                                                                            ==================        ==================

</TABLE>











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



                                           F-5

<PAGE>
BURZYNSKI RESEARCH INSTITUTE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2001, AND FEBRUARY 29, 2000


--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                             Additional         Discount on
                                                            Common             Paid-in            Common             Retained
                                                            Stock              Capital             Stock             Deficit
                                                       ----------------   -----------------   ---------------   ------------------
<S>                                                    <C>                <C>                 <C>               <C>
Balance February 28, 1999                              $        131,389   $      37,975,982   $         (100)   $     (38,107,972)

    Cash contributed by S.R. Burzynski M.D., Ph.D.                    -             918,500                -                    -

    FDA clinical trial expenses paid directly by
      S.R. Burzynski M.D., Ph. D.                                     -           3,449,266                -                    -

    Net loss                                                          -                   -                -           (4,381,494)
                                                       ----------------   -----------------   ---------------   ------------------

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)
                                                       ================   =================   ===============   ==================

</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, 2001, AND FEBRUARY 29, 2000


--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                    2001                      2000
                                                                             -------------------        ------------------
<S>                                                                          <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                 $       (4,592,865)        $      (4,381,494)
    Adjustments to reconcile net income to
    net cash provided by operating activities:
        Depreciation                                                                     69,737                   135,245
        FDA clinical trial expenses paid directly by
           S.R. Burzynski M.D., Ph. D.                                                3,964,936                 3,449,266
    Decrease in
        Other assets                                                                      3,755                     1,669
    Increase (decrease) in
        Accounts payable                                                                (20,848)                  (77,772)
        Accrued liabilities                                                             (80,809)                    5,158
                                                                             -------------------        ------------------

  NET CASH (USED) BY OPERATING ACTIVITIES                                              (656,094)                 (867,928)

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of property and equipment                                                  (5,463)                   (3,304)
                                                                             -------------------        ------------------

  NET CASH (USED) BY INVESTING ACTIVITIES                                                (5,463)                   (3,304)

CASH FLOWS FROM FINANCING ACTIVITIES
    Payments on long-term debt                                                           (5,461)                   (2,223)
    Payments on capital lease obligations                                               (16,837)                  (55,546)
    Additional paid-in capital                                                          671,000                   918,500
                                                                             -------------------        ------------------

  NET CASH PROVIDED BY FINANCING ACTIVITIES                                             648,702                   860,731
                                                                             -------------------        ------------------

  NET (DECREASE) IN CASH                                                                (12,855)                  (10,501)

CASH AT BEGINNING OF YEAR                                                                20,099                    30,600
                                                                             -------------------        ------------------

  CASH AT END OF YEAR                                                        $            7,244         $          20,099
                                                                             ===================        ==================


SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash Paid During the Year For:
        Income taxes                                                         $           22,602         $          20,680
        Interest                                                             $           93,629         $         105,622

</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.

         The Company'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. The Company is currently conducting clinical trials
         on various antineoplastons in accordance with FDA regulations, however,
         at this time none of the antineoplaston drugs have received FDA
         approval; further, there can be no assurance FDA approval will be
         granted.

         ECONOMIC DEPENDENCY

         The Company has generated no significant revenues since its inception.
         As of February 28, 2001, the Company had a working capital deficit of
         approximately $78,000 and accumulated deficit of approximately
         $47,082,000. For the years ended February 28, 2001 and February 29,
         2000 the Company incurred losses of approximately $4,593,000 and
         $4,381,000, respectively. Dr. Burzynski has funded the capital and
         operational needs of the Company


                                     F-8

<PAGE>

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


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

         since its inception from revenues generated through his medical
         practice pursuant to various agreements as described in Note 2.

         The Company is economically dependent on its funding through Dr.
         Burzynski's 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 the Company'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 is terminable at the option of Dr. Burzynski, if he is
         removed as Chairman of the Board or President of the Company, or if any
         shareholder or group of shareholders acting in concert becomes the
         beneficial owner of the Company's securities having voting power equal
         to or greater than the voting power of the securities owned by him.

         Under the license agreement, the Company currently owns exclusive
         rights to six (6) issued United States Patents and two (2) issued
         Canadian Patents. The Company has no patents in Mexico. The Company has
         one (1) pending patent application in the United States, two (2)
         pending patent applications in Canada and one (1) in Mexico.





                                    F-11

<PAGE>

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


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

         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 May 14, 2017.

         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.

         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.


                                    F-12

<PAGE>

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


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

         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 6. 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 2001 and
         2000 was $87,000 and $348,000, 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.


<TABLE>
<CAPTION>

                                                                       2001                2000
                                                                       ----                ----
         <S>                                                      <C>                <C>
         Capital contributed                                      $      671,000     $      918,500
         Clinical trial costs paid direct                         $    3,964,936     $    3,449,266

</TABLE>

3.       PROPERTY AND EQUIPMENT:

         Property and equipment consists of the following as of February 28th or
         29th:


<TABLE>
<CAPTION>

                                                          Estimated
                                                        Useful Lives                      2001             2000
                                                        ------------                      ----             ----
         <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                      619,044           613,581
         Equipment under capital lease                   4 - 5 years                      288,943           288,943
                                                                                    -------------     -------------
         Total property and equipment                                                   5,765,819         5,760,356

         Accumulated depreciation
           and amortization                                                            (5,659,955)       (5,590,218)
                                                                                    -------------     -------------

                                                                                    $     105,864     $     170,138
                                                                                    =============     =============

</TABLE>

         Depreciation and amortization expense for the years ended February 28,
         2001, and February 29, 2000 was $69,737 and $135,245, respectively.




                                    F-15

<PAGE>

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


4.       LONG-TERM DEBT:

         Long-term debt consisted of the following:


<TABLE>
<CAPTION>

                                                                                               2001            2000
                                                                                               ----            ----
         <S>                                                                             <C>               <C>
         Note payable to a bank dated November 25, 1994, unsecured, and bearing
           interest at the banks base rate plus 3.45% (approximately 12%) due in
           36 monthly installments beginning November 25, 1995 or 3% of the
           unpaid balance plus interest with any unpaid balance due November
           25, 1998. The note is guaranteed  by the Company's majority shareholder.      $       -         $      5,461

         Less:  Current maturities                                                               -                5,461
                                                                                         --------------    --------------

                                                                                         $       -         $        -
                                                                                         ==============    ==============

</TABLE>

5.       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 $215,111 for 2001 and $144,419 for 2000,
         which represents the sum of actual claims paid and an estimate of
         liabilities relating to claims, both asserted and unasserted, resulting
         from incidents that occurred during the year.








                                    F-16

<PAGE>

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



6.       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:


<TABLE>
<CAPTION>

                                                                             2/28/01           2/29/00
                                                                             -------           -------
         <S>                                                               <C>               <C>
         Equipment                                                         $  288,943        $  288,943
         Accumulated depreciation                                            (286,701)         (271,555)
                                                                           ----------        ----------

                   Equipment (Net)                                         $    2,242        $   17,388
                                                                           ==========        ==========

</TABLE>

         Only one lease remains payable at February 28, 2001, and its balance
         will be 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 $20,089 and $52,836 for the years ended
         February 28, 2001, and February 29, 2000, 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 $153,086 and
         $205,000 for 2001 and 2000, respectively.










                                    F-17


<PAGE>

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


7.       INCOME TAXES:

         The actual income tax expense attributable to the Company's losses for
         the years ended February 28, 2001 and February 29, 2000 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>

                                                                                     2001                2000
                                                                                     ----                ----
         <S>                                                                 <C>                <C>
         Expected benefit                                                    $     (1,560,876)  $     (1,485,227)
         Nondeductible expenses                                                            47             13,130
         Other adjustments                                                             (2,116)            (3,715)
         Taxed directly to Dr. Burzynski                                            1,576,218          1,493,621
         Change in valuation allowance                                                (13,273)           (17,809)
         Texas franchise tax, based on income                                           2,052             13,180
                                                                             ----------------   ----------------

         Income tax expense                                                  $          2,052   $         13,180
                                                                             ================   ================

</TABLE>

         The components of the Company's deferred income tax assets as of
         February 28, 2001 and February 29, 2000 are as follows:


<TABLE>
<CAPTION>

                                                                                     2001                2000
                                                                                     ----                ----
         <S>                                                                  <C>                 <C>
         Deferred tax assets:

         Net operating loss carryforwards                                     $       323,557     $      315,357
         Excess book depreciation                                                      71,080             72,481
         Accrued expenses                                                               9,219             25,765
         Investment tax credit carryforwards                                            4,458              7,984
         Alternative minimum tax credit
           carryforwards                                                               42,603             42,603
                                                                              ---------------     --------------

         Total deferred tax assets                                                    450,917            464,190
         Less valuation allowance                                                    (450,917)          (464,190)
                                                                              ---------------     --------------

         Net deferred tax assets                                              $          -        $         -
                                                                              ===============     ==============

</TABLE>


                                               F-18

<PAGE>


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


7.       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 $951,637 as of February 28, 2001. The
         net operating loss carryforwards expire as follows:


<TABLE>
<CAPTION>

                          Year ending
                       February 28, or 29,
                       -------------------
                       <S>                                 <C>
                              2008                         $   303,069
                              2011                         $    11,818
                              2012                         $   511,871
                              2013                         $    50,786
                              2020                         $    49,976
                              2021                         $    24,117

</TABLE>

         In addition, the Company has alternative minimum tax credit
         carryforwards of $42,603 and investment tax credit carryforward of
         $4,458. The investment tax credit carryforward expires February 28,
         2002.

8.       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-19

<PAGE>


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


8.       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:


<TABLE>

                          <S>                     <C>
                          400,000 options         September 14, 1996
                          100,000 options               June 1, 1997
                          100,000 options               June 1, 1998

</TABLE>

         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, 2001.

9.       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 116
         patients during the year ended February 28, 2001 and 130 for 2000.
         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 seventy-five and sixty percent of
         the chemicals used in producing antineoplastons from a single supplier
         during the years ended February 2001 and 2000, 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-20