ITEM 1 .                                   DESCRIPTION OF BUSINESS

General

The Burzynski Research Institute, Inc. (the “Company”) was incorporated under the laws of the State of Delaware in 1984 in order to engage in the research, production, marketing, promotion and sale of certain medical chemical compounds composed of growth-inhibiting peptides, amino acid derivatives and organic acids which are known under the trade name “Antineoplastons.”  The Company believes Antineoplastons are useful in the treatment of human cancer and is currently conducting Phase II clinical trials of Antineoplastons relating to the treatment of cancer.  Antineoplastons have not been approved for sale or use by the Food and Drug Administration of the United States Department of Health and Human Services (“FDA”) or anywhere in the world.  In the event Antineoplastons receive such approval and are registered in the United States, Canada, or Mexico, of which there can be no assurance, the Company will commence commercial operations, which shall include the production, marketing, promotion and sale of Antineoplastons in the United States, Canada, or Mexico.  The Company currently manufactures Antineoplastons solely for the use of Stanislaw R. Burzynski, M.D., Ph.D. (“Dr. Burzynski”) in clinical research.

The Company has not generated any significant operating revenue since its inception.  The Company’s sole source of funding for its operations has been and continues to be payments made by Dr. Burzynski from funds generated from Dr. Burzynski’s medical practice pursuant to various arrangements between the Company and Dr. Burzynski.  See “ Certain Relationships and Related Transactions .”  The Company reports funds 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 either were admitted to the CAN-1 study or have been admitted to one of the other studies sponsored by the Company, as appropriate.

The Company closed approximately half of its clinical trials during the past year due to low enrollment.  The Company currently

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sponsors 36 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 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 were enrolled, and the BT-34 and BT-35 studies, in which 20 patients will be enrolled.

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 total tumor size, with such reduction lasting at least four weeks.  An “objective response” is described as either a complete or partial response.  “Stable disease” is described as less than 50% reduction in size but no more than 50% increase in size of the tumor mass, lasting for at least twelve weeks.  “Progressive disease” is described as more than 50% increase in total tumor mass or occurrence of new tumors.

The protocols of the Company’s clinical trials involve a two-stage design, wherein the first stage proceeds until the Company admits twenty patients into the trial.  After a specified time period, if there are zero responses by the first twenty patients, the trial will be discontinued and the drug declared to have less than desired activity.  If there is at least one response, the trial will be continued until forty patients have been accrued.  If the study continues, the following conclusions according to protocols based on forty patients can be made:  If there are three or fewer responses, then there is less than desired activity.  If there are four or more responses, then there is sufficient evidence to conclude that the Antineoplaston regimen used shows beneficial activity.

As of May 21, 2004, six of the prospective clinical trials have reached a Milestone.  These are:

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

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

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

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

•                                           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.

•                                           Protocol BT-23, involving a study of intravenous administration of Antineoplastons A10 and A2-1 in children with visual pathway glioma.

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 Protocols BT-9, BT-11, BT-13, BT-15, BT-18 and BT-23 are set forth below (as of May 18, 2004).

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% cases of objective responses and 31.4% cases of stable disease.  Most of the surviving patients have now been alive for over eleven years since the pathology diagnoses of their tumors were established.  One patient, suffering from low grade astrocytoma, has now been alive for over 18 years since pathology diagnosis.  The largest group of evaluable 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 eleven 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 additional clinical trials based upon such protocols to be conducted by an institution not affiliated with the Company or Dr. Burzynski before advising that an NDA filing is warranted.  In addition, the FDA has indicated it will not accept the data generated by the Phase II Study according to Protocol CAN-1 because the trial was partially retrospective.   At the present time the Company cannot predict when the Company will submit an NDA to the FDA, nor can the Company estimate the number or type of additional trials the FDA may require.  Further, there can be no assurance that an NDA for Antineoplastons, as a treatment for cancer, will ever be approved by the FDA.

No assurance can be given that any new IND for clinical tests on humans will be approved by the FDA for human clinical trials on cancer or other diseases, that the results of such human clinical trials will prove that

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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.

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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

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Company can satisfy FDA requirements to gain approval for Antineoplastons in the United States or that FDA approval for the sale of Antineoplastons in the United States will be obtained.  If regulatory approval is granted, the approval may include significant limitations on the indicated uses for which Antineoplastons may be marketed.

The effect of the FDA drug approval process for Antineoplastons may impose costly procedures upon the Company’s activities which may furnish a competitive advantage to the other companies that compete with the Company in the field of cancer treatment drugs.  The extent of potentially adverse government regulations which might arise from future legislation or administrative action cannot be predicted.

The Investigational New Drug Application Process in the United States is governed by regulations established by the FDA which strictly control the use and distribution of investigational drugs in the United States.  The guidelines require that an IND, filed by a sponsor, contain sufficient information to justify administering the drug to humans, that the application include relevant information on the chemistry, pharmacology and toxicology of the drug derived from chemical, laboratory and animal or in vitro testing, and that a protocol be provided for the initial study of the new drug to be conducted on humans.

In order to conduct a clinical trial of a new drug in humans, a sponsor must prepare and submit to the FDA a comprehensive IND.  Such application must contain an investigator’s brochure, a description of the composition, manufacture and control of the drug substance and the drug product, sufficient information to assure the proper identification, quality, purity and strength of the investigational drug, a description of the drug substance, including its physical, chemical, and biological characteristics, the general method of preparation of the drug substance, a list of all components including interactive ingredients, adequate information about pharmacological and toxicological studies of the drug involving laboratory animals or in vitro tests on the basis of which the sponsor has concluded that it is reasonably safe to conduct the proposed clinical investigation and a summary of any previous human experience with the drug.  Where there has been widespread use of the drug outside of the United States or otherwise, it is possible in some limited circumstances to use well-documented clinical experience in place of some other pre-clinical work.

The focal point of the IND is on the general investigational plan and the protocols for specific human studies.  The plan is carried out in three phases:   Phase I includes the initial introduction of an investigational new drug into humans and may be conducted in patients or normal volunteer subjects.  The studies are closely monitored to determine the metabolism and pharmacologic actions of the drug in humans, the potential side effects and, if possible, to gain early evidence on effectiveness.  During Phase I testing, sufficient information about the drug is gathered to design well-controlled, scientifically valid Phase II studies.  Phase II includes controlled clinical studies conducted to evaluate the effectiveness of the drug for a particular indication in patients with the disease or condition under study and to determine the common short-term side effects and risks associated with the drug.  Phase II studies are controlled, closely monitored and conducted in a relatively small number of patients, usually involving no more than several hundred subjects.  Phase III includes expanded controlled and uncontrolled trials and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling.  Phase III studies usually include anywhere from several hundred to several thousand subjects.

An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns about issues such as the conduct of the trials as outlined in the IND.  After the IND becomes effective, the investigation is permitted to proceed, during which the sponsor must keep the FDA informed of new studies, including animal studies, make progress reports on the study or studies covered by the IND, and also be responsible for informing FDA and clinical investigators immediately of unforeseen serious side effects or injuries.  There can be no assurance that Phase I, Phase II or Phase III testing will be completed successfully by the Company within any specified period of time, if at all.  Furthermore, the Company or the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

Assuming successful completion of the clinical studies, the results of the studies, together with other detailed information, including, among other information, details concerning the manufacture and composition of the drug, proposed labeling, environmental impact and the scientific rationale for the drug, its intended use and the potential benefits of the drug product, are submitted to the FDA in the form of an NDA requesting approval to

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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.

In enacting the Orphan Drug Act of 1983, Congress sought to provide incentives to promote the development of drugs for the treatment of rare diseases.  A drug may be considered for orphan drug designation if the drug is intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States or, even if the drug treats a disease affecting more than 200,000 people in the United States, the drug is not expected to be profitable from sales in the United States.  Subject to applicable laws and regulations, the first sponsor to obtain FDA marketing approval for a drug with orphan drug designation for the designated disease or condition receives limited marketing exclusivity for seven years; no other sponsor may bring to market the “same drug” for the treatment of the same disease or condition for a period of seven years from the date the application is approved by the FDA.  The Company plans to apply to the FDA in 2004 for orphan drug designation of Antineoplastons A10 and AS2-1 for treating patients with brain stem gliomas.  A drug with orphan drug designation must meet the same criteria for safety and efficacy as a drug without orphan drug designation.  Due to numerous variables and uncertainties in this area, there can be no assurance that the Company will be able to complete an application for the orphan drug designation or if completed, that the FDA will approve such application.

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 current 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 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.

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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 $102,000 per year on environmental compliance matters and expects to spend an additional $30,000 for repairs and upgrades during the fiscal year ending February 28, 2005.

Research And Development

The Company’s principal research and development efforts currently focus on 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 than 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.

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 29, 2004 and February 28, 2003 were approximately $4,175,000 and $4,197,000, respectively.

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Intellectual Property

Since 1984, seven patents involving the formulation, preparation, manufacture, production, use, dosage and treatment of cancer with Antineoplastons (the “Patents”) have been issued to Dr. Burzynski by the United States Patent Office and the Patent Offices of 33 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 dated June 29, 1983, as superseded by an Amended License Agreement dated April 24, 1989 and a Second Amended License Agreement dated March 1, 1990 (collectively, the “License Agreement”).  Pursuant to the License Agreement, the Company holds an exclusive right in the United States, Canada, and Mexico (the “Territory”) to use, manufacture, develop, sell, distribute, sub-license and otherwise exploit all of Dr. Burzynski’s rights, title, and interests, including patent rights, in Antineoplastons in the treatment and diagnosis of cancer.  See “ Certain Relationships and Related Transactions. ”  The Company will not be able to exploit such rights until such time as Antineoplastons are approved, of which there can be no assurance, by the FDA for sale in the United States.  The License Agreement is to continue in effect until the expiration of the last Patent that was licensed under the agreement or termination pursuant to certain other provisions.  The Company and Dr. Burzynski also entered into a Royalty Agreement, dated March 25, 1997, and a First Amended Royalty Agreement, dated September 29, 1997 (collectively, the “Royalty Agreement”), pursuant to which Dr. Burzynski will receive a royalty interest from all future sales, distribution, and manufacture of Antineoplastons by the Company.   The Company owns, pursuant to the License Agreement, exclusive rights to seven issued United States Patents and three issued Canadian Patents.  The Company has no patents in Mexico.  The Company has one patent application pending in the United States, two patent applications pending in Canada, and one patent application pending in Mexico.

The five initial United States Patents (the “Initial Patents”) relate to: (i) Determination of Antineoplastons in body tissue or fluids as a testing procedure to aid in the diagnosis of cancer; (ii) Processes for the preparation of purified fractions of Antineoplastons from human urine; (iii) Processes for the synthetic production of Antineoplastons and methods of treating neoplastic disease (cancer); (iv) Administration of Antineoplastons to humans; and (v) Methods of synthesizing A-10.  The Initial Patents expire from September 11, 2001 to January 11, 2009, however the Company does not believe the expiration of any of the Initial Patents will have a material adverse effect on the Company.

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

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

The three Canadian Patents (the “Canadian Patents”) relate to: (i) Processes for the preparation of purified fractions of Antineoplastons from human urine, (ii) Processes for the synthetic production of Antineoplastons and methods of treating neoplastic disease (cancer) and (iii) Liposomal Formulation of Antineoplastons.  The Canadian Patents expire on November 14, 2006, June 4, 2002 and May 14, 2017, respectively; however, the Company does not believe the expiration of the Canadian Patents will have a material adverse effect on the Company.

The pending patent application in the United States relates to a divisional application to the 2001 U.S. Patent.  Should this patent be granted, of which there can be no assurance, it would expire in the year 2018.

The pending patent application in Canada 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.

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

The Company has previously reported the issuance of an eighth United States patent related to the synthesis of 4-Phenylbutric Acid, but has determined that such patent is not applicable to the formulation, preparation, manufacture, production, use, dosage and treatment of cancer with Antineoplastons.

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 26, 2004, the Company had 6 employees, all of whom were full-time employees.  None of the Company’s employees is a party to a collective bargaining agreement.  The Company considers the relations with its employees to be good.

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