U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
JULY 31, 1995 0-11088
For the fiscal year ended Commission file number
ALFACELL CORPORATION
(Name of small business issuer in its charter)
DELAWARE 22-2369085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 BELLEVILLE AVENUE, BLOOMFIELD, NEW JERSEY 07003
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (201) 748-8082
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Issuer's revenues for the fiscal year ended July 31, 1995, were $20,992.
The aggregate market value of the Common Stock, par value $.001 per
share, held by non-affiliates based upon the average of the bid and asked
prices as reported by the National Quotation Bureau on September 22, 1995 was
$41,023,208. As of September 22, 1995 there were 11,472,793 shares of Common
Stock, par value $.001 per share, outstanding.
The Index to Exhibits appears on page 10.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on December 6, 1995, to be filed with the
Commission not later than 120 days after the close of the registrant's fiscal
year, has been incorporated by reference, in whole or in part, into Part III,
Items 9, 10, 11 and 12 of this Annual Report on Form 10-KSB.
Transitional Small Business Disclosure Format: YES No X
Table of Contents
PART I PAGE
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security
Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters 6
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
Item 9. Directors and Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act 10
Item 10. Executive Compensation 10
Item 11. Security Ownership of Certain Beneficial Owners
and Management 10
Item 12. Certain Relationships and Related Transactions 10
Item 13. Exhibits and Reports on Form 8-K 10
The following trademark appears in this Annual Report: ONCONASE is a registered
trademark of Alfacell Corporation.
Part I
Item 1.BUSINESS
OVERVIEW
Alfacell Corporation ("Alfacell" or the "Company") is a biopharmaceutical
company organized in 1981 to engage in the discovery, investigation and
development of a new class of anti-cancer drugs isolated from leopard frog eggs
and early embryos. The Company's first product under development is ONCONASE
which targets solid tumors, most of which are known to be resistant to other
chemotherapeutic drugs. To date, the most significant clinical results with
ONCONASE have been observed in pancreatic, non-small cell lung, mesothelioma
and metastatic breast cancer. In 1995, the American Cancer Society estimates
that 377,000 people in the United States will be diagnosed with lung, breast
and pancreatic cancer and approximately 231,000 will die.
ONCONASE has been used to treat over 245 cancer patients on a weekly basis,
including 115 patients with advanced stages of pancreatic, non-small cell lung,
mesothelioma and metastatic breast cancer. Encouraging results have been
observed in Phase I and II clinical trials. Side effects associated with
ONCONASE have been modest, are primarily renal and are reversible upon
reduction of dose or discontinuation of treatment. Patients treated with
ONCONASE have shown no evidence of myelosuppression (bone marrow suppression),
alopecia (hair loss) or other severe toxicities frequently observed after
treatment with most other chemotherapeutic drugs. Alfacell expects to begin a
randomized multi-center Phase III clinical trial testing ONCONASE in advanced
pancreatic cancer patients in the second half of 1995.
The Company believes that ONCONASE may also be used as an anti-viral agent.
The National Institutes of Health ("NIH") has performed an independent IN VITRO
screen of ONCONASE against the HIV virus type 1 ("HIV virus"). The results
showed ONCONASE to inhibit replication of the HIV virus 99.9% after a four day
incubation period at concentrations not toxic to uninfected H9 leukemic cells.
The Company has expanded its collaborative studies for cancer and anti-HIV
activity with the NIH. There can be no assurance that ONCONASE will show any
level of anti-HIV activity in humans.
Beyond the development of ONCONASE, Alfacell has also discovered a series of
biologically active proteins from the same natural source from which ONCONASE
was discovered. These proteins appear to be involved in the regulation of
early embryonic and malignant cell growth. However, significant additional
research will be required in order to develop these proteins into therapeutics.
There can be no assurance that the development of these proteins will be
accomplished.
ONCONASE
Originally, the Company developed an unpurified biological extract from early
stage leopard frog embryos and eggs. This extract was found to possess a
unique bioactive profile and to be of a unique nature. In 1987, the Company
isolated a specific protein, P-30 Protein, (herein referred to by its
registered tradename ONCONASE). Based upon the complete amino acid sequence
analysis (comparison of the amino acid sequence of ONCONASE with that of over
10,000 protein sequences registered with the National Biomedical Research
Foundation Protein Identification Resource, Georgetown University, Washington,
DC), it has been established that ONCONASE has a novel structure. It has also
been determined that, thus far, ONCONASE is the smallest member belonging to
the superfamily of pancreatic ribonucleases.
POSTULATED MECHANISM OF ACTION
Although all of the mechanisms of ONCONASE's anti-tumor activity have not been
fully delineated, the following processes have been identified experimentally:
Binding of ONCONASE to cell surface receptors followed by:
<circle>Cellular internalization;
<circle>Ribonucleolytic degradation of RNAs;
<circle>Inhibition of protein synthesis;
<circle>Inhibition of the cell growth; and
<circle>Cell death
Pre-clinical and clinical data to date has shown that ONCONASE has the capacity
to enter chemotherapy resistant cells, overcome multiple drug resistance
("MDR") and other mechanisms of drug resistance, and is synergistic with many
other chemotherapies against numerous tumor cell lines.
CLINICAL TRIALS
Alfacell has tested ONCONASE in over 245 patients in its Phase I and II
clinical trials. ONCONASE as a single agent was tested in 194 patients with a
variety of solid tumors and 51 advanced pancreatic cancer patients were treated
with ONCONASE in combination with tamoxifen. Alfacell expects to begin a
randomized multi-center Phase III clinical trial testing the combination of
ONCONASE and tamoxifen in advanced pancreatic cancer patients in the second
half of 1995. IN VITRO results showed ONCONASE to be synergistic with
tamoxifen in inhibiting pancreatic carcinoma tumor cell growth.
Reported toxicities in Phase I and II clinical trials, after treating more than
245 patients, were primarily renal, dose-related and reversible. There has
been no evidence of myelosuppression (bone marrow suppression), alopecia (hair
loss) or other severe toxicities frequently observed after treatment with most
other chemotherapeutic drugs. Results from Phase II clinical trials indicate
that expanded clinical trials should be performed in other solid tumors such as
non-small cell lung, mesothelioma, and metastatic breast cancers.
RESEARCH AND DEVELOPMENT
Research and development expenses for the fiscal years ended July 31, 1995,
1994 and 1993 were $1,205,523, $1,114,455, and $1,091,762, respectively.
During fiscal 1995, the Company's focus was in clinical and regulatory affairs
which included the preparation of chemistry, manufacturing and clinical
submissions to the Food and Drug Administration (the "FDA") in preparation for
Phase III clinical trials. In January 1995, the FDA agreed to the Company's
Phase III protocol design for advanced pancreatic cancer.
The Company has a Cooperative Research and Development Agreement ("CRADA") with
the NIH. Areas of research include studies of anti-HIV activity; the study of
the mechanism of action of ONCONASE at the cellular and subcellular levels;
tests of the anti-tumor activities of ONCONASE conjugates; ONCONASE gene
therapy; investigation of anti-tumor activity of ONCONASE against primary brain
tumors; and pharmacological studies of ONCONASE.
The Company also has a CRADA with the National Cancer Institute's ("NCI")
Biological Response Modifier and Developmental Therapeutics Programs. Areas of
research include characterization of the inhibition of tumor cell growth by
ONCONASE in animal models and IN VITRO and IN VIVO studies of chemical
conjugates of ONCONASE with anti-tumor antibodies.
Management of the Company believes it has discovered a family of proteins from
the same source as ONCONASE which plays a role in cell maturation and cell
proliferation and may play a role in developing other treatments for cancer.
At present, the Company is defining a number of active proteins from the
natural source material, in addition to ONCONASE, which may exhibit cytotoxic,
cytostatic, and other pharmacological effects.
RAW MATERIALS AND MANUFACTURING
The major active ingredient in the original extract derived from early stage
leopard frog embryos and eggs is the protein, ONCONASE. Although Alfacell
currently acquires its natural source material from a single supplier,
management believes that it is abundantly available from other sources. In
addition, the Company is conducting research concerning the alternative of
manufacturing ONCONASE through recombinant technology. However, there can be
no assurance that alternative manufacturing methods will be viable.
The Company has signed a letter of intent with Scientific Protein Laboratories
("SPL"), a subsidiary of American Home Products Corp., which will perform the
intermediary manufacturing process which entails purifying ONCONASE.
Subsequently, the intermediate product is sent to a contract filler for the
final manufacturing step and vial filling. Both of these facilities follow
current Good Manufacturing Practices which is a requirement for product
manufactured for use in Phase III clinical trials and for commercial sale.
GOVERNMENT REGULATION
The manufacture and marketing of pharmaceutical products in the United States
requires the approval of the FDA under the Federal Food, Drug and Cosmetic Act.
Similar approvals by comparable agencies are required in most foreign
countries. The FDA has established mandatory procedures and safety standards
which apply to the clinical testing, manufacture and marketing of
pharmaceutical products. Obtaining FDA approval for a new therapeutic
generally takes many years and involves substantial expenditures.
Pharmaceutical manufacturing facilities are also regulated by state, local and
other authorities.
As an initial step in the FDA regulatory approval process, pre-clinical studies
are conducted in animal models to assess the drug's efficacy and to identify
potential safety problems. The results of these studies are submitted to the
FDA as a part of the Investigational New Drug Application ("IND"), which is
filed to obtain approval to begin human clinical testing. The human clinical
testing program may involve up to three phases. Data from human trials in
support of the marketing approval are submitted to the FDA in a New Drug
Application ("NDA") or Product License Application ("PLA"). Preparing an NDA
or PLA involves considerable data collection, verification and analysis.
The Company has not received FDA marketing approval for any products.
Difficulties or unanticipated costs may be encountered by the Company in its
effort to secure necessary governmental approvals, which could delay or
preclude the Company from marketing its products. There can be no assurance
that any of the Company's products will be approved by the FDA.
With respect to patented products, delays imposed by the governmental approval
process may materially reduce the period during which the Company may have the
exclusive right to exploit them. See --"Patents."
PATENTS
The Company presently owns two (2) U.S. Patents: No. 4,882,421 issued November
21, 1989 and No. 4,888,172 issued December 19, 1989. The Company has decided
that U.S. Patent No. 4,882,421 does not benefit the Company and accordingly
intends to disclaim the presently-undisclaimed claims therein. The Company
also owns five other patent applications that are pending in the United States
Patent and Trademark Office ("USPTO").
The Company presently owns two (2) European Patents: No. 0 440 633 filed March
31, 1989 and No. 0 500 589 filed October 26, 1990. Both European patents have
been validated in selected European nations. For each of these European
patents, the Company has filed a counterpart application in Japan; both
Japanese patent applications are presently pending.
The Company owns a European patent application covering certain combination
therapies that use ONCONASE in addition to other approved pharmaceuticals. The
Company has requested examination of this European patent application. A
Japanese counterpart to this European patent application has been filed and is
presently pending.
The Company owns an interest in an application which is pending in the USPTO
and that relates to a Subject Invention (as that term is defined in a CRADA to
which the Company and the National Institutes of Health/Alcohol, Drug Abuse and
Mental Health Administration are parties).
The Company pursues a policy of filing patent applications in the United States
and in selected foreign countries for certain of its proprietary technology.
The scope of protection afforded by patents to biotechnological inventions is
uncertain and the Company is subject to this uncertainty. There can be no
assurance that any of the Company's patent applications will be approved, that
any issued patents will provide the Company with competitive advantages or will
not be challenged by others, or that the patents of others will not have an
adverse effect on the ability of the Company to do business. Furthermore,
there can be no assurance that others will not independently develop similar
products, will not duplicate any of the Company's products or, if patents are
issued to the Company, will not design around the Company's existing patent
rights or patents that may issue in the future, if any.
The Company also relies on trade secrets, proprietary know-how and continuing
technological innovation to develop and maintain its competitive position.
There can be no assurance that others will not independently develop such know-
how or otherwise obtain access to Alfacell's technology. While the Company's
employees and consultants with access to proprietary information are generally
required to enter into confidentiality agreements, there can be no assurance
that these agreements will be honored or can be enforced.
Pursuant to the Term Loan Agreement (as hereinafter defined), the Company's
bank acquired a security interest in the Company's patent portfolio. The bank
has agreed, however, to subordinate its interest to licensees of the Company if
certain conditions are met.
COMPETITION
There are several companies, universities, research teams and scientists, both
private and government-sponsored, which engage in research similar to that
performed by the Company. Many of such entities and associations have far
greater financial resources, larger research staffs and more extensive physical
facilities than the Company. Such entities and associations may succeed in
their research and development of products which are more effective than any
developed by the Company and may be more successful than the Company in their
production and marketing of such products. The Company is not aware, however,
of any product currently being marketed which is similar to the Company's
proposed anti-tumor agent, ONCONASE. A search by the Company of scientific
literature reveals no published information which would indicate that others
are currently employing its methods or producing such an anti-tumor agent.
There are several chemotherapeutic agents currently used to treat the forms of
cancer which ONCONASE is being used to treat. There can be no assurance that
ONCONASE will prove to be as safe and as effective as currently used drugs or
that new treatments will not be developed which are more effective than
ONCONASE.
EMPLOYEES
As of September 22, 1995, Alfacell employed nine persons, of whom five were
engaged in research and development activities and four were engaged in
administration and management. The Company has three employees who hold Ph.D.
or M.D. degrees. All of the Company's employees are covered by confidentiality
agreements. Alfacell considers relations with its employees to be very good.
None of the Company's employees are covered by a collective bargaining
agreement.
ENVIRONMENTAL MATTERS
The Company's operations are subject to comprehensive regulation with respect
to environmental, safety and similar matters by the United States Environmental
Protection Agency ("EPA") and similar state and local agencies. Failure to
comply with applicable laws, regulations and permits can result in injunctive
actions, damages and civil and criminal penalties. If the Company expands or
changes its existing operations or proposes any new operations, it may be
required to obtain additional or amended permits or authorizations. The
Company spends time, effort and funds in operating its facilities to ensure
compliance with environmental and other regulatory requirements. Such efforts
and expenditures are common throughout the biotechnology industry and generally
should have no material adverse effect on the Company. The principal
regulatory requirements and matters known to the Company requiring or
potentially requiring capital expenditures by the Company do not appear likely,
individually or in the aggregate, to have a material adverse effect on the
Company's financial condition. The Company believes that it is in compliance
with all current laws and regulations.
Item 2.PROPERTIES.
The Company owns no real property. The Company subleases a total of
approximately 12,600 square feet in an industrial and office building located
in Bloomfield, New Jersey. The Company subleases its facility under a five
year operating sublease which was due to expire October 31, 1993, but was
extended to November 11, 1996 at a reduced annual rental obligation commencing
April 1, 1993 of $66,000. In addition to the basic rent, the Company pays its
pro rata share of increases in municipal real estate taxes and utilities over
the base year 1988. The Company believes that the facility is sufficient for
its current needs.
Item 3.LEGAL PROCEEDINGS.
None.
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Part II
Item 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded under the symbol "ACEL". At the present
time the Company's Common Stock is not quoted on NASDAQ and is not consistently
quoted on the Bulletin Board. On September 22, 1995, the high bid and low
asked quotations for the Company's Common Stock were $4-5/16 and $4-3/8,
respectively. As of September 22, 1995, there were approximately 1544
stockholders of record of the Company's Common Stock.
The following table sets forth the range of high and low closing bid quotations
obtained from the National Quotations Bureau for the Common Stock for the two
fiscal years ended July 31, 1994 and 1995. These quotes are believed to be
representative of inter-dealer quotations, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C> <C>
Year Ended July 31, 1994:
First Quarter 5-3/4 2-1/4
Second Quarter 3-11/16 1-1/2
Third Quarter 3-1/4 1-1/2
Fourth Quarter 5 1-1/2
Year Ended July 31, 1995:
First Quarter 3-1/8 1-5/8
Second Quarter 4 1
Third Quarter 4 1-1/2
Fourth Quarter 2-3/4 1-3/8
</TABLE>
The Company has paid no dividends on its Common Stock since its inception and
does not plan to pay dividends on its Common Stock in the foreseeable future.
Any earnings which the Company may realize will be retained to finance the
growth of the Company. Pursuant to the term loan agreement dated May 31, 1993
entered into between the Company and its bank in connection with the
restructuring of the Company's bank loan, for so long as any portion of the
note representing the indebtedness under the loan agreement remains unpaid, the
Company may not declare or pay any dividends or set apart any sum for the
payment of dividends without the prior written consent of the bank.
Item 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED JULY 31, 1995, 1994 AND 1993
REVENUES
The Company is a development stage company as defined in the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No. 7.
As such, the Company is devoting substantially all of its present efforts to
establishing a new business and developing new drug products. The Company's
planned principal operations of marketing and/or licensing of new drugs have
not commenced and, accordingly, no significant revenue has been derived
therefrom. The Company continues to marshall all its productive and financial
resources to proceed with its development of ONCONASE and as such has not had
any sales in fiscal 1995, 1994 and 1993.
RESEARCH AND DEVELOPMENT
Research and development expense for fiscal 1995 was $1,206,000 compared to
$1,114,000 for fiscal 1994, an increase of $92,000 or 8%. This increase was
primarily due to an increase in consulting fees for the preparation of
chemistry, manufacturing and clinical submissions to the FDA in preparation for
Phase III clinical trials and a write-off of previously capitalized patent
costs, which were partially offset by a decrease in non-cash compensation
expense attributable to the amortization of expense related to stock awards
made in prior years to the Company's President and Chief Executive Officer and
Executive Vice President and Medical Director.
Research and development expense for fiscal 1994 was $1,114,000 compared to
$1,092,000 in fiscal 1993, an increase of $22,000 or 2%. The increase in
fiscal 1994 can be attributed to an increase in expenses for collection and
analysis of the ONCONASE Phase I and II clinical trial data which was partially
offset by a decrease in fiscal 1994 as compared to fiscal 1993 in non-cash
compensation expense attributable to the amortization of expenses related to
stock awards made in prior years to the Company's President and Chief Executive
Officer and Executive Vice President and Medical Director.
GENERAL AND ADMINISTRATIVE
General and administrative expense for fiscal 1995 was $664,000 compared to
$903,000 for fiscal 1994, a decrease of $239,000 or 26%. This decrease was
primarily due to a decrease in legal and accounting fees and a decrease in non-
cash compensation expense attributable to the amortization of expenses related
to stock awards made in prior years to the Company's President and Chief
Executive Officer.
General and administrative expense remained constant at approximately $904,000
for fiscal 1994 and fiscal 1993. An increase in legal fees was offset by a
decrease in fiscal 1994 as compared to fiscal 1993 in non-cash compensation
expense attributable to the amortization of expenses related to stock awards
made in prior years to the Company's President and Chief Executive Officer.
INTEREST
Interest expense for fiscal 1995 was $144,000 compared to $223,000 in fiscal
1994, a decrease of $79,000 or 35%. The decrease in fiscal 1995 was primarily
due to the conversion of convertible subordinated debentures to common stock
which took place in fiscal 1994.
Interest expense for fiscal 1994 was $223,000 compared to $362,000 in fiscal
1993, a decrease of $139,000 or 38%. The decrease in fiscal 1994 was
primarily due to the conversion of convertible subordinated debentures to
common stock which took place in fiscal 1994.
NET LOSS
The Company has incurred net losses during each year since its inception. The
net loss for fiscal 1995 was $1,993,000 as compared to $2,234,000 in fiscal
1994 and $2,357,000 in fiscal 1993. The cumulative loss from the date of
inception, August 24, 1981, to July 31, 1995 amounted to $37,449,000. Such
losses are attributable to the fact that the Company is still in the
development stage and accordingly has not derived sufficient revenues from
operations to offset the development stage expenses.
LIQUIDITY AND CAPITAL RESOURCES
Alfacell has financed its operations since inception primarily through equity
and debt financing, research product sales and interest income. During fiscal
1995, the Company had a net increase in cash of $445,000. This increase
resulted from net cash provided by financing activities of $2,678,000, which
resulted primarily from private placements of common stock and common stock
warrants during fiscal 1995, and proceeds from stock options exercised during
fiscal 1995, offset by net cash used in operating activities of $1,702,000 and
net cash used in investing activities of $531,000, principally due to the
purchase of marketable securities.
The Company's term loan agreement with its bank (the "Term Loan Agreement")
requires payment of the entire unpaid balance of the loan (the "Term Loan") on
May 31, 1996. It is estimated that the outstanding balance on that date will
be $1,456,000. The Company intends to refinance the loan or raise sufficient
equity to pay off the unpaid balance. The Company is currently in discussions
with the bank to refinance such loan. However, there can be no assurance that
the Company will be able to successfully conclude a refinancing or raise
sufficient equity to pay off the unpaid balance.
The Company's continued operations will depend on its ability to raise
additional funds through a combination of equity or debt financing,
collaborative agreements, strategic alliances and revenues from the commercial
sale of ONCONASE. In addition, the Company expects that its cash needs in the
future will increase due to the commencement of Phase III clinical trials.
Taking into account the net proceeds received in the private placement
completed in September 1995, the Company believes that its current resources
will be sufficient to meet its anticipated cash needs through August 1996
(assuming the bank debt is refinanced on or before May 1996). To date, a
significant portion of the Company's financing has been provided by its
President and Chief Executive Officer and through private placements of common
stock, the issuance of common stock for services rendered and debt financing.
The Company's long-term liquidity will depend on its ability to raise
substantial additional funds. There can be no assurance that such funds will
be available to the Company on acceptable terms, if at all.
Pursuant to the terms of the Company's Term Loan Agreement with its bank,
without the bank's consent, the Company is prohibited from incurring any
additional indebtedness except as follows: (i) additional indebtedness to the
bank, (ii) indebtedness having a priority of payment which is expressly junior
to and inferior in right of payment to the prior payment in full to the bank
except for certain advances of $118,350 which may be repaid in certain
situations, (iii) indebtedness arising as a result of obligations of the
Company over the life of its leases which in the aggregate do not exceed
$200,000, and (iv) unsecured indebtedness arising in the ordinary course of the
Company's business which at no time exceeds $400,000. Pursuant to the Term
Loan, the Company is required to make prepayments to the extent its gross
revenues exceed certain levels. Pursuant to a pledge agreement, the Company's
President and CEO has pledged the shares of the Company's Common Stock owned by
her to secure the repayment of the Term Loan. The pledgor may from time to
time request that the bank release a portion of the pledged stock when market
conditions are favorable in order to permit the sale of such stock whereupon
the proceeds will be used to make payments under the Term Loan. The Term Loan
Agreement prohibits the issuance of any shares, or right to purchase any shares
of the Company's stock if the result of such issuance would be to decrease the
ratio of the market value of the pledged stock to the aggregate outstanding
debt of the Company and its President and Chief Executive Officer to the bank,
below 1:1.
The Company's working capital and capital requirements may depend upon numerous
factors including the progress of the Company's research and development
programs, the timing and cost of obtaining regulatory approvals, and the levels
of resources that the Company devotes to the development of manufacturing and
marketing capabilities.
Item 7.FINANCIAL STATEMENTS
The response to this Item is submitted as a separate section of this report
commencing on Page F-1.
Item 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
Part III
The information required by Item 9 - Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a) of the Exchange Act; Item 10
- - Executive Compensation; Item 11 - Security Ownership of Certain Beneficial
Owners and Management; and Item 12 - Certain Relationships and Related
Transactions is incorporated into Part III of this Annual Report on Form 10-KSB
by reference to the Company's Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on December 6, 1995.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B).
<TABLE>
<CAPTION>
Exhibit ITEM TITLE Exhibit No. or
NO. Incorporation BY
REFERENCE
<S> <C> <C>
3.1 Certificate of Incorporation *
3.2 By-Laws *
3.3 Amendment to Certificate of Incorporation #
4.1 Form of Convertible Debenture **
10.1 Employment Agreement dated as of July 1, 1994 with Kuslima Shogen ++
10.2 Lease, as amended - 225 Belleville Avenue, Bloomfield, New Jersey **
10.3 Amendment to Lease - 225 Belleville Avenue, Bloomfield, New Jersey #
10.4 Term Loan Agreement dated as of May 31, 1993 by and between the **
Company and First Fidelity Bank, N.A., New Jersey
10.5 Term Note dated as of May 31, 1993 issued by the Company to First **
Fidelity Bank, N.A., New Jersey
10.6 Patent Security Agreement dated as of May 31, 1993 by and between **
the Company and First Fidelity Bank, N.A., New Jersey
10.7 Security Agreement dated as of May 31, 1993 by and between the **
Company and First Fidelity Bank, N.A., New Jersey
10.8 Subordination Agreement dated as of May 31, 1993 by and among the **
Company, Kuslima Shogen, and First Fidelity Bank, N.A., New Jersey
10.9 Amendment to Subordination Agreement dated as of May 31, 1993 by #
and among the Company, Kuslima Shogen, and First Fidelity Bank,
N.A., New Jersey dated June 30, 1995
10.10 Form of Stock Purchase Agreement and Certificate used in ***
connection with private placements
10.11 Form of Stock and Warrant Purchase Agreement and Warrant Agreement ***
used in Private Placement completed on March 21, 1994
10.12 The Company's 1993 Stock Option Plan and Form of Option Agreement *****
10.13 Debt Conversion Agreement dated March 30, 1994 with Kuslima Shogen ****
10.14 Accrued Salary Conversion Agreement dated March 30, 1994 with ****
Kuslima Shogen
10.15 Accrued Salary Conversion Agreement dated March 30, 1994 with ****
Stanislaw Mikulski
10.16 Debt Conversion Agreement dated March 30, 1994 with John Schierloh ****
10.17 Option Agreement dated March 30, 1994 with Kuslima Shogen ****
10.18 Option Agreement dated March 30, 1994 with Kuslima Shogen ****
10.19 Amendment No. 1 dated June 20, 1994 to Option Agreement dated ****
March 30, 1994 with Kuslima Shogen
10.20 Amendment No. 1 dated June 17, 1994 to Term Loan Agreement dated ****
May 31, 1993 between Kuslima Shogen and First Fidelity Bank, N.A.,
New Jersey
10.21 Second Pledge Agreement dated June 17, 1994 by and among the ****
Company, Kuslima Shogen and First Fidelity Bank, N.A., New Jersey
10.22 Form of Amendment No. 1 dated June 20, 1994 to Option Agreement *****
dated March 30, 1994 with Kuslima Shogen
10.23 Form of Amendment No. 1 dated June 20, 1994 to Option Agreement *****
dated March 30, 1994 with Stanislaw Mikulski
10.24 Form of Stock and Warrant Purchase Agreement and Warrant Agreement +
used in Private Placement completed on September 13, 1994
10.25 Employment Agreement dated as of July 31, 1994 with Gail E. Fraser ++
10.26 Form of Subscription Agreements and Warrant Agreement used in #
Private Placements closed in October 1994 and September 1995.
21.0 Subsidiaries of Registrant **
23.1 Consent of KPMG Peat Marwick LLP #
23.2 Consent of Armus, Harrison & Co. #
27.0 Financial Data Schedule #
</TABLE>
* Previously filed as exhibit to the Company's Registration Statement on
Form S-18 (File No. 2-79975-NY) and incorporated herein by reference
thereto.
** Previously filed as exhibits to the Company's Annual Report on Form 10-K
for the year ended July 31, 1993 and incorporated herein by reference
thereto.
*** Previously filed as exhibits to the Company's Quarterly Report on Form
10-QSB for the quarter ended January 31, 1994 and incorporated herein by
reference thereto.
**** Previously filed as exhibits to the Company's Quarterly Report on Form
10-QSB for the quarter ended April 30, 1994 and incorporated herein by
reference thereto.
***** Previously filed as exhibits to the Company's Registration Statement Form
SB-2 (File No. 33-76950) and incorporated herein by reference thereto.
# Filed herewith.
+ Previously filed as exhibits to the Company's Registration Statement on
Form SB-2 (File No. 33-83072) and incorporated herein by reference
thereto.
++ Previously filed as exhibits to the Company's Quarterly Report on Form
10-QSB for the quarter ended April 30, 1995 and incorporated herein by
reference thereto.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALFACELL CORPORATION
Dated:October 6, 1995 By: /S/ KUSLIMA SHOGEN
Kuslima Shogen, President, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated:October 6, 1995 /S/ KUSLIMA SHOGEN
Kuslima Shogen, President, Chief
Executive Officer and Director
Dated:October 6, 1995 /S/ GAIL E. FRASER
Gail E. Fraser, Chief Financial
Officer, Vice President of Finance,
(Principal Financial Officer and
Principal Accounting Officer) and
Director
Dated:October 6, 1995 /S/ STANISLAW M. MIKULSKI
Stanislaw M. Mikulski, M.D., Executive
Vice President and Director
Dated:October 6, 1995 /S/ ALLEN SIEGEL
Allen Siegel, DD.S., Director
Dated:October 6, 1995 /S/ ALAN BELL
Alan Bell, Director
Dated:October 6, 1995 /S/ ROBERT R. HENRY
Robert R. Henry, Director
<PAGE>
ALFACELL CORPORATION
(A Development Stage Company)
Index
PAGE
Independent Auditors' Report of KPMG Peat Marwick LLP..................F-2
Independent Auditors' Report of Armus, Harrison & Co. .................F-4
Financial Statements:
Balance Sheets - July 31, 1995 and 1994.........................F-5
Statements of Operations - Years ended July 31, 1995, 1994
and 1993 and the Period from August 24, 1981 (Date of
Inception) to July 31, 1995...................................F-6
Statement of Stockholders' Deficiency - Period from
August 24, 1981 (Date of Inception) to July 31, 1995...........F-7
Statements of Cash Flows - Years ended July 31, 1995, 1994
and 1993 and the Period from August 24, 1981 (Date of
Inception) to July 31, 1995.................................. F-11
Notes to Financial Statements - Years ended July 31, 1995,
1994 and 1993 and the Period from August 24, 1981
(Date of Inception) to July 31, 1995..........................F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Alfacell Corporation:
We have audited the accompanying balance sheets of Alfacell Corporation (a
development stage company) as of July 31, 1995 and 1994, and the related
statements of operations, stockholders' deficiency, and cash flows for each of
the years in the three-year period ended July 31, 1995 and the period from
August 24, 1981 (date of inception) to July 31, 1995. 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. The financial statements of Alfacell Corporation (a development
stage company) for the period from August 24, 1981 (date of inception) to July
31, 1992 were audited by other auditors whose report dated December 9, 1992,
except as to note 18 which is July 19, 1993 and note 3 which is October 28,
1993, expressed an unqualified opinion on those statements with an explanatory
paragraph regarding the Company's ability to continue as a going concern.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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
also 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, based on our audits and, for the effect on the period from
August 24, 1981 (date of inception) to July 31, 1995 of the amounts for the
period from August 24, 1981 (date of inception) to July 31, 1992, on the report
of other auditors, the financial statements referred to above present fairly,
in all material respects, the financial position of Alfacell Corporation (a
development stage company) as of July 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended July 31, 1995 and the period from August 24, 1981 (date of inception) to
July 31, 1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Alfacell
Corporation (a development stage company) will continue as a going concern. As
discussed in note 1 to the financial statements, the Company's recurring losses
from operations, its working capital deficiency and net capital deficiency
raise substantial doubt about the entity's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/S/KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
September 29, 1995
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Alfacell Corporation
Bloomfield, New Jersey
We have audited the balance sheets of Alfacell Corporation (a Development Stage
Company) as of July 31, 1992 and 1991, as restated, and the related statements
of operations, stockholders' deficiency, and cash flows for the three years
ended July 31, 1992, as restated, and for the period from inception August 24,
1981 to July 31, 1992, as restated. In connection with our audit of the 1992
and 1991 financial statements, we have also audited the 1992, 1991 and 1990
financial statement schedules as listed in the accompanying index. These
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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
also 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 audit provides 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 Alfacell Corporation as of July
31, 1992 and 1991, as restated, and for the three years ended July 31, 1992, as
restated, and for the period from inception August 24, 1981 to July 31, 1992,
as restated, and the results of operations and cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the statement of
operations, the Company has incurred substantial losses in each year since its
inception. In addition, the Company is a development stage company and its
principal operation for production of income has not commenced. The Company's
working capital has been reduced considerably by operating losses, and has a
deficit net worth. These factors, among others, as discussed in Note 2 of the
Notes to Financial Statements, indicates the uncertainties about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts and the amount of classification of liabilities that
might be necessary should the Company be unable to continue its existence.
/S/ARMUS, HARRISON & CO.
Armus, Harrison & Co.
Mountainside, New Jersey
December 9, 1992
Except as to Note 18 which
is July 19, 1993 and Note 3
which is October 28, 1993
Balance Sheets
July 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C> <C> <C>
Current assets:
Cash $ 648,027 $ 202,654
Marketable securities 750,000 251,209
Prepaid expenses 38,607 68,667
Total current assets 1,436,634 522,530
Property and equipment, net of accumulated depreciation 104,301 94,367
and
amortization of $666,261 in 1995 and $644,316 in 1994
Other assets:
Patents, net - 82,562
Deferred debt costs, net 31,500 73,500
Other 43,735 6,804
75,235 162,866
Total assets $ 1,616,170 $ 779,763
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 1,602,974 $ 88,359
Loans payable, other - 44,000
Loans and interest payable, related party 138,638 203,723
Accounts payable 183,222 413,025
Accrued payroll and expenses, related parties 414,996 158,265
Accrued expenses 101,777 52,833
Total current liabilities 2,441,607 960,205
Long-term debt, less current portion 7,129 1,593,976
Total liabilities 2,448,736 2,554,181
Commitments and contingencies
Stockholders' deficiency:
Preferred stock, $.001 par value. Authorized and - -
unissued,
1,000,000 shares at July 31, 1995 and 1994
Common stock $.001 par value. Authorized 25,000,000 10,319 9,125
shares;
issued and outstanding 10,319,187 shares in 1995
and
9,124,681 shares in 1994
Capital in excess of par value 36,262,427 33,680,954
Common stock to be issued, 139,080 shares in 1995 343,808 50,000
and 20,000
shares in 1994
Deficit accumulated during development stage (37,449,120) (35,455,997)
(832,566) (1,715,918)
Deferred compensation, restricted stock -
(58,500)
Total stockholders' deficiency (832,566) (1,774,418)
Total liabilities and stockholders' deficiency $ 1,616,170 $ 779,763
See accompanying notes to financial statements.
</TABLE>
August 24,
1981
(date of
inception)
to
July 31,
1995199519941993Revenue:Sales$553,489---Investment income201,00414,9926,064489
Other income 60,1036,000 - - 814,59620,992 6,064
489Costs and expenses:Cost of sales336,495---Research and development
20,370,5001,205,5231,114,4551,091,762General and administrative
14,898,820664,435903,350903,955Interest:Related parties
1,032,15914,98274,221198,330Others 1,625,742 129,175 148,466
163,79238,263,7162,014,1152,240,4922,357,839 Net loss
$(37,449,120)(1,993,123)(2,234,428)(2,357,350)Loss per common share$
(7.72) (.21) (.26) (.31)Weighted average number of shares
outstanding
4,853,000
9,598,000
8,466,000
7,602,000See accompanying notes to financial statements.
<PAGE>
Statement of Stockholders' Deficiency, Continued
Statement of Stockholders' Deficiency
Period from August 24, 1981
(Date of Inception) to July 31, 1995
<TABLE>
<CAPTION>
Common Stock Capital Common Deficit Deferred Total
in stock accumulated compen- stock-
excess to be during sation, holders'
of PAR ISSUED developmentrestrictedDEFICIENCY
VALUE STAGE STOCK
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C><C> <C><C> <C><C>
Number AMOUNT
of
SHARES
Issuance of shares to officers and 712,500 $ 713 212,987 - - -213,700
stockholders for equipment, research and
development, and expense reimbursement
Issuance of shares for organizational legal 50,000 50 4,950 - - -5,000
services
Sale of shares for cash, net 82,143 82 108,418 - - - 108,500
Adjustment for 3 for 2 stock split declared 422,321 422 (422) - - - -
September 8, 1982
Net loss - - - - (121,486) - (121,486)
Balance at July 31, 1982 1,266,964 1,267 325,933 - (121,486) - 205,714
Issuance of shares for equipment 15,000 15 13,985 - - - 14,000
Sale of shares to private investors 44,196 44 41,206 - - - 41,250
Sale of shares in public offering, net 660,000 660 1,307,786 - - - 1,308,446
Issuance of shares under stock grant program 20,000 20 109,980 - - - 110,000
Exercise of warrants, net 1,165 1 3,494 - - - 3,495
Net loss - - - - (558,694) - (558,694)
Balance at July 31, 1983 2,007,325 2,007 1,802,384 - (680,180) - 1,124,211
Exercise of warrants, net 287,566 287 933,696 - - - 933,983
Issuance of shares under stock grant program 19,750 20 101,199 - - - 101,219
Issuance of shares under stock bonus plan for 130,250 131 385,786 - - -385,917
directors and consultants
Net loss - - - - (1,421,083) -(1,421,083)
Balance at July 31, 1984 2,444,891 2,445 3,223,065 - (2,101,263) - 1,124,247
Issuance of shares under stock grant program 48,332 48 478,057 - - - 478,105
Issuance of shares under stock bonus plan for 99,163 99 879,379 - - -879,478
directors and consultants
Shares canceled (42,500) (42) (105,783) - - - (105,825)
Exercise of warrants, net 334,957 335 1,971,012 - - - 1,971,347
Net loss - - - - (2,958,846) -(2,958,846)
Balance at July 31, 1985 2,884,843 2,885 6,445,730 - (5,060,109) - 1,388,506
Issuance of shares under stock grant program 11,250 12 107,020 - - - 107,032
Issuance of shares under stock bonus plan for 15,394 15 215,385 - - -215,400
directors and consultants
Exercise of warrants, net 21,565 21 80,977 - - - 80,998
Net loss - - - - (2,138,605) -(2,138,605)
Balance at July 31, 1986 (carried forward) 2,933,052 2,933 6,849,112 - (7,198,714) - (346,669)
(Continued)
Balance at July 31, 1986 (brought forward) 2,933,052 2,933 6,849,112 - (7,198,714) - (346,669)
Exercise of warrants at $10.00 per share 14,745 15 147,435 - - - 147,450
Issuance of shares under stock bonus plan for 5,000 5 74,995 - - -75,000
directors and consultants
Issuance of shares for services 250,000 250 499,750 - - - 500,000
Sale of shares to private investors, net 5,000 5 24,995 - - - 25,000
Net loss - - - - (2,604,619) -(2,604,619)
Balance at July 31, 1987 3,207,797 3,208 7,596,287 - (9,803,333) -(2,203,838)
Issuance of shares for legal and consulting 206,429 207 724,280 - - -724,487
services
Issuance of shares under employment incentive 700,000 700 2,449,300 - -(2,450,000) -
program
Issuance of shares under stock grant program 19,000 19 66,481 - - - 66,500
Exercise of options at $3.00 per share 170,000 170 509,830 - - - 510,000
Issuance of shares for litigation settlement 12,500 12 31,125 - - - 31,137
Exercise of warrants at $7.06 per share 63,925 64 451,341 - - - 451,405
Sale of shares to private investors 61,073 61 178,072 - - - 178,133
Amortization of deferred compensation, - - - - - 449,167449,167
restricted stock
Net loss - - - - (3,272,773) -(3,272,773)
Balance at July 31, 1988 4,440,724 4,441 12,006,716 -(13,076,106)(2,000,833)(3,065,782)
Sale of shares for litigation settlement 135,000 135 1,074,703 - - - 1,074,838
Conversion of debentures at $3.00 per share 133,333 133 399,867 - - - 400,000
Sale of shares to private investors 105,840 106 419,894 - - - 420,000
Exercise of options at $3.50 per share 1,000 1 3,499 - - - 3,500
Issuance of shares under employment agreement 750,000 750 3,749,250 - -(3,750,000) -
Issuance of shares under the 1989 Stock Plan 30,000 30 149,970 - - (150,000) -
Amortization of deferred compensation, - - - - - 1,050,7561,050,756
restricted stock
Net loss - - - - (2,952,869) -(2,952,869)
Balance at July 31, 1989 5,595,897 5,596 17,803,899 -(16,028,975)(4,850,077)(3,069,557)
Issuance of shares for legal and consulting 52,463 52 258,725 - - -258,777
services
Issuance of shares under the 1989 Stock Plan 56,000 56 335,944 - - (336,000) -
Sale of shares for litigation settlement 50,000 50 351,067 - - - 351,117
Exercise of options at $3.00 - $3.50 per 105,989 106 345,856 - - -345,962
share
Sale of shares to private investors 89,480 90 354,990 - - - 355,080
Issuance of shares under employment agreement 750,000 750 3,749,250 - -(3,750,000) -
Conversion of debentures at $5.00 per share 100,000 100 499,900 - - - 500,000
Amortization of deferred compensation, - - - - - 3,015,5613,015,561
restricted stock
Net loss - - - - (4,860,116) -(4,860,116)
Balance at July 31, 1990 (carried forward) 6,799,829 6,800 23,699,631 -(20,889,091)(5,920,516)(3,103,176)
(Continued)
Balance at July 31, 1990 (brought forward) 6,799,829 6,800 23,699,631 -(20,889,091)(5,920,516)(3,103,176)
Exercise of options at $6.50 per share 16,720 16 108,664 - - - 108,680
Issuance of shares for legal consulting 87,000 87 358,627 - - -358,714
services
Issuance of shares under the 1989 Stock Plan 119,000 119 475,881 - - (476,000) -
Amortization of deferred compensation, - - - - - 2,891,5612,891,561
restricted stock
Net loss - - - - (5,202,302) -(5,202,302)
Balance at July 31, 1991 7,022,549 7,022 24,642,803 - (26,091,393)(3,091,393)
(4,946,523)
Exercise of options at $3.50 per share 1,000 1 3,499 - - - 3,500
Sale of shares to private investors 70,731 71 219,829 - - - 219,900
Conversion of debentures at $5.00 per share 94,000 94 469,906 - - - 470,000
Issuance of shares for services 45,734 46 156,944 - - - 156,990
Issuance of shares under the 1989 Stock Plan 104,000 104 285,896 - - (286,000) -
Amortization of deferred compensation, - - - - - 3,046,7263,046,726
restricted stock
Net loss - - - - (4,722,826) -(4,722,826)
Balance at July 31, 1992 7,338,014 7,338 25,778,877 - (30,864,219) (744,229)
(5,822,233)
Sale of share to private investors 352,667 353 735,147 - - - 735,500
Issuance of shares for legal services 49,000 50 132,180 - - - 132,230
Issuance of shares for services 5,000 5 9,995 - - (10,000) -
Issuance of shares under the 1989 Stock Plan 117,000 117 233,883 - - (234,000) -
Amortization of deferred compensation, - - - - - 664,729664,729
restricted stock
Net loss - - - - (2,357,350) -(2,357,350)
Balance at July 31, 1993 7,862,281 7,863 26,890,082 -(33,221,569) (323,500)(6,647,124)
Conversion of debentures at $2.75 per share 425,400 425 1,701,575 - - -1,702,000
to $6.00 per share
Sale of shares to private investors, net 743,000 743 1,710,048 - - - 1,710,791
Conversion of short-term borrowings 72,000 73 181,927 - - - 182,000
Issuance of shares for services 16,200 16 43,334 - - - 43,350
Issuance of shares under the 1989 Stock Plan, 5,000 5 14,995 - - -15,000
for services
Issuance of options to related parties upon - - 3,194,969 - - -3,194,969
conversion of
accrued interest, payroll and expenses
Repurchase of stock options from related - - (198,417) - - -3,194,969
party
Issuance of options upon conversion of - - 142,441 - - -142,441
accrued interest
Common stock to be issued - - - 50,000 - - 50,000
Amortization of deferred compensation, - - - - - 265,000265,000
restricted stock
Net loss - - - - (2,234,428) -(2,234,428)
Balance at July 31, 1994 (carried forward) 9,124,681 9,125 33,680,954 50,000(35,455,997) (58,500)(1,774,418)
(Continued)
Balance at July 31, 1994 (brought forward) 9,124,681 9,125 33,680,954 50,000(35,455,997) (58,500)(1,774,418)
Sale of shares to private investors, net 961,000 961 2,023,241 (50,000) - - 1,974,202
Conversion of short-term borrowings 17,600 17 43,983 - - - 44,000
Issuance of shares for services 30,906 31 77,234 - - - 77,265
Exercise of options at $2.27 - $2.50 per 185,000 185 437,015 - - -437,200
share
Common stock to be issued - - - 339,008 - - 339,008
Common stock to be issued, for services - - - 4,800 - - 4,800
Amortization of deferred compensation, - - - - - 58,50058,500
restricted stock
Net loss - - - - (1,993,123) -(1,993,123)
Balance at July 31, 1995 10,319,187 $ 10,319 36,262,427 343,808 (37,449,120) - (832,566)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ALFACELL CORPORATION
(A Development Stage
Company)
Statements of
Cash Flows
Years ended July 31,
1995, 1994 and 1993,
and the Period from
August 24, 1981
(Date of Inception) to
July 31, 1995
<TABLE>
<CAPTION>
August 24, 1995 1994 1993
1981 (date
of incep-
tion) to
July 31,
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(37,449,120) (1,993,123) (2,234,428) (2,357,350)
Adjustments to reconcile net loss to net cash used in operating
activities:
Gain on sale of marketable securities (25,963) - - -
Depreciation and amortization 977,993 69,699 75,157 42,923
Loss on disposal of property and equipment 18,926 - - -
Noncash operating expenses 4,771,011 4,800 58,350 132,230
Amortization of deferred compensation 11,442,000 58,500 265,000 664,729
Amortization of organization costs 4,590 - - -
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses (38,607) 30,060 (13,091) 45,490
(Increase) decrease in other assets 28,483 39,877 (1,723) 5,586
Increase (decrease) in loans and interest payable, related 883,177 (65,085) 5,306 198,330
party
Increase (decrease) in accounts payable 260,487 (152,538) (61,388) 161,691
Increase in accrued payroll and expenses, related parties 2,763,141 256,731 386,246 301,979
Increase (decrease) in accrued expenses 643,290 48,944 (10,318) 228,152
Net cash used in operating (15,720,592) (1,702,135) (1,530,889) (576,240)
activities
Cash flows from investing activities:
Purchase of marketable equity securities (1,040,420) (750,000) (251,209) -
Proceeds from sale of marketable equity securities 316,383 251,209 - -
Purchase of property and equipment (996,187) (31,879) (13,660) (97,049)
Patent costs (97,841) - (37,251) -
Net cash used in investing (1,818,065) (530,670) (302,120) (97,049)
activities
(Continued)
</TABLE>
<PAGE>
Statement of Cash Flows, Continued
<TABLE>
<CAPTION>
August
24,
1981
(date
of
incep- 1995 1994
tion)
to
July
31,
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash
flows
from
financing
1993 activities:
$ 849,500 - 169,500
Proceeds
from
short-
term
borrowings
56,500 (623,500) - -
Payment
of
short-
term
borrowings
- 2,628,868 - 175,798
Increase
(decrease)
in loans
payable,
related
party,
net
(107,080) 2,377,14317,595 4,028
Proceeds
from
bank
debt and
other
long-
term
debt,
net of
deferred
debt
costs
(68,980) (1,281,612)(89,827) (67,285)
Reduction
of bank
debt and
long-
term
debt
- 389,008339,008 50,000
Proceeds
from
common
stock to
be
issued
- 13,063,0771,974,202 1,710,791
Proceeds
from
issuance
of
common
stock,
net
735,500 437,200 437,200 -
Proceeds
from
exercise
of stock
options
- 347,000 - -
Proceeds
from
issuance
of
convertible
debentures
- - - (7,169)
(Decrease)
increase
in bank
overdraft
7,169 Net 18,186,684
cash 2,678,178 2,035,663
provided
by
financing
activities
648,027445,373
623,109 Net 202,654
increase
(decrease)
in cash
Cash at - 202,654 -
(50,180) beginning
of
period
50,180
Cash at $ 648,027648,027 202,654
end of
period
-
Supplemental $1,359,504129,477 144,322
disclosure
of cash
flow
information
-
interest
paid
- Noncash
financing
activities:
$ 2,725,000 - -
Issuance
of
convertible
subordinated
debenture
for loan
payable
to
officer
275,000 $ 2,945,000 - 1,575,000
Issuance
of
common
stock
upon the
conversion
of
convertible
subordinated
debentures,
related
party
- $ 226,00044,000 182,000
Conversion
of
short-
term
borrowings
to
common
stock
-
</TABLE>
<PAGE>
Statement of Cash Flows, Continued
<TABLE>
<CAPTION>
August 1995 1994
24,
1981
(date
of
incep-
tion)
to
July
31,
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
Conversion $ 3,194,969 - 3,194,969
of
accrued
interest,
payroll
and
expenses
by
related
parties
to
stock
options
$ (198,417) - (198,417)
- Repurchase
of stock
options
from
related
party
- $ 142,441 - 142,441
Conversion
of
accrued
interest
to stock
options
- $ 77,26577,265 -
Conversion
of
accounts
payable
to common
stock
-
Conversion $ 1,699,072 - -
of
notes
payable,
bank
and
accrued
interest
to
long-
term debt
1,699,072 Conversion
of $ 1,863,514 - -
loans
and
interest
payable,
related
party
and
accrued
payroll
and
expenses,
related
parties
to long-
term
accrued
payroll
and
other,
related
party
Issuance $ - 127,000
1,863,514 of 127,000
common
stock
upon
the
conversion
of
convertible
subordinated
debentures,
other
-
</TABLE>
<PAGE>
Notes to Financial Statements, Continued
Notes to Financial Statements
Years ended July 31, 1995, 1994 and 1993
and the Period From August 24, 1981
(Date of Inception) to July 31, 1995
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION
Alfacell Corporation (the "Company") was incorporated in Delaware on August
24, 1981 for the purpose of engaging in the discovery, investigation and
development of a new class of anticancer drugs and antiviral agents. To
date, the Company is in the initial stage of its operations and has not yet
engaged in any significant commercial activities.
The Company is a development stage company as defined in the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
7. The Company is devoting substantially all of its present efforts to
establishing its business. Its planned principal operations have not
commenced and, accordingly, no significant revenue has been derived
therefrom.
BASIS OF FINANCIAL STATEMENTS
The Company's financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
As shown in the financial statements, the Company has reported net losses of
$1,993,123, $2,234,428 and $2,357,350 for the fiscal years ended July 31,
1995, 1994 and 1993, respectively. The loss from date of inception, August
24, 1981, to July 31, 1995 amounts to $37,449,120. As of July 31, 1995, the
Company had a working capital deficit of $1,004,973, liabilities exceeded
its assets and there is a deficit in stockholders' equity of $832,566.
These factors raise substantial doubt about the Company's ability to
continue as a going concern.
The Company's continued operations will depend on its ability to raise
additional funds through a combination of equity or debt financings,
collaborative agreements, strategic alliances and revenues from the
commercial sale of ONCONASE. The Company believes that its current
resources (including proceeds of the recently completed private placement,
see note 16), will be sufficient to meet its anticipated cash needs through
August 1996. To date, a significant portion of the Company's financing has
been provided by its President and Chief Executive Officer and through
private placements of common stock, the issuance of common stock for
services rendered and debt financing.
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
BASIS OF FINANCIAL STATEMENTS, (CONTINUED)
The Company's long-term liquidity will depend on its ability to raise
substantial additional funds. There can be no assurance that such funds
will be available to the Company on acceptable terms, if at all.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
assets ranging from five to ten years. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations for
the period.
The cost of repairs and maintenance is charged to operations as incurred;
significant renewals and betterments are capitalized.
MARKETABLE SECURITIES
The Company's investments in marketable securities are available for sale to
fund its operations. The Company, subject to changes in market conditions,
does not intend to hold the marketable securities for an extended period of
time and, accordingly, they have been classified as current assets and are
carried at fair value.
PATENTS
Costs related to patents are expensed when incurred. Previously, costs
related to approved patents were capitalized and were amortized using the
straight-line method over the life of the patent, usually 17 years. As a
result of this change in policy, the Company wrote-off $76,807 of
capitalized patent costs during the fiscal year ended July 31, 1995.
DEFERRED DEBT COSTS
Deferred debt costs associated with the Company's long-term debt are being
amortized using the straight-line method over the life of the debt
agreement. Accumulated amortization as of July 31, 1995 and 1994 was
$90,416 and $48,416, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common shares
outstanding during the period and shares to be issued at the end of the
period. Common stock equivalents are not included in the computations since
the effect would be antidilutive.
(2)MARKETABLE SECURITIES
Effective July 31, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), "Accounting for Certain
Investments in Debt and Equity Securities." There was no effect upon
adopting this Statement. Under this new accounting standard, securities for
which there is not the positive intent and ability to hold to maturity are
classified as available-for-sale and are carried at fair value. Unrealized
holding gains and losses on securities classified as available-for-sale are
carried as a separate component of stockholders' equity. The Company
considers its marketable securities to be available-for-sale. The Company's
marketable securities were purchased during July 1995 for the current fiscal
year and June 1994 for the prior fiscal year. The market value approximates
cost due to the short holding period. As of July 31, 1995 and 1994, there
were no unrealized holding gains or losses.
(3)PROPERTY AND EQUIPMENT
Property and equipment consists of the following at July 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Laboratory equipment $ 587,443 568,672
Office equipment 130,143 117,035
Leasehold improvements 52,976 52,976
$ 770,562 738,683
</TABLE>
(4)LONG-TERM DEBT
Long-term debt consists of the following at July 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
$ 1,577,049 $ 1,645,513
First Fidelity Bank, N.A., New Jersey, payable in
monthly
installments of $15,945, including principal and
interest at 7.5% commencing on October 1, 1993.
Subject to other provisions, the entire unpaid
amount shall be due and payable on May 31, 1996.
The note is secured by substantially all of the
assets of the Company and contains restrictive
covenants including restrictions on the payment of
dividends to stockholders. The President and Chief
Executive Officer of the Company has personally
guaranteed the note and has pledged certain
additional collateral including a majority of the
shares of common stock and options to purchase
common stock of the Company owned by her. Certain
obligations owed by the Company to the President and
Chief Executive Officer are subordinated to the bank
debt.
Note payable in monthly installments of $600, 9,833 16,193
including
principal and interest at 6.3%, commencing September
1993 and each month thereafter until September 1996,
secured by equipment.
Note payable in monthly installments of $164, 2,411 3,559
including
principal and interest, commencing May 1994 and each
month thereafter until September 1996, secured by
equipment.
Note payable in monthly installments of $822, 8,586 17,070
including
principal and interest at 10.4%, commencing May 1993
and each month thereafter until April 1996, secured by
equipment.
Note payable in monthly installments of $728, 12,224 -
including
principal and interest at 8.5%, commencing February
1995 and each month thereafter until January 1997,
secured by equipment.
1,610,103 1,682,335
Less current portion 1,602,974 88,359
$ 7,129 $ 1,593,976
</TABLE>
(4)LONG-TERM DEBT, (CONTINUED)
Principal maturities for the next two years ending July 31, are as follows:
<TABLE>
<CAPTION>
1996 $ 1,602,974
<S> <C> <C>
1997 7,129
$ 1,610,103
</TABLE>
(5)LOANS AND INTEREST PAYABLE, RELATED PARTY
From time to time, the Company's President and Chief Executive Officer has
advanced sums of money to the Company in the form of unsecured obligations,
payable on demand. The following table provides a summary of the related-
party loan activity involving the President and Chief Executive Officer at
July 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Loans and interest payable, related party at
beginning of year $ 203,723 $ -
Reduction in loan balance (80,067) -
Accrued interest 14,982 5,306
Repurchase of stock options - 198,417
Loans and interest payable, related party at $ 138,638 $ 203,723
end of year
</TABLE>
In March 1994, the following liabilities were converted into options to
purchase common stock: the long-term liability at July 31, 1993 of
$2,061,844, accrued payroll and expenses, related parties of $729,346 at
July 31, 1993, additional advances by the President and Chief Executive
Officer and accrued interest during the period from August 1, 1993 to
January 31, 1994 of $260,353 and accrued salaries and expense for that
period owed to the President and Chief Executive Officer and to the
Executive Vice President and Medical Director aggregating $143,426. These
liabilities as of January 31, 1994 were converted into 5-year options to
purchase 1,655,433 shares of common stock at an exercise price of $3.20.
Certain options were issued pursuant to the 1993 Stock Option Plan (see note
10).
On May 1, 1994, the Company, with its bank's consent, reinstituted certain
advances of $198,417 from the Company's President and Chief Executive
Officer as short-term debt that was previously converted into 102,807
options on March 30, 1994. Such options were returned to the Company. The
Company's bank has consented to allow repayment of such advances under
certain circumstances and $80,067 was repaid during fiscal 1995.
(6)LOANS PAYABLE, OTHER
At July 31, 1994, a Company stockholder had a loan outstanding to the
Company of $44,000. The loan, which was payable on demand, did not have any
stated interest rate. During fiscal 1995, this loan was converted into
17,600 shares of common stock.
(7)LEASES
The Company leases its facility under a five-year operating lease which was
due to expire on October 31, 1993, but has been extended to November 11,
1996 at a reduced annual rental obligation commencing April 1, 1993, of
$66,000. The Company has an option to further extend its lease, subject to
certain conditions, through October 31, 1998, at the current rent. In
addition to the basic rent, the Company pays its pro rata share of increases
in real estate taxes and utilities over the base year. Rent expense charged
to operations was $66,000, $66,500 and $61,334 in 1995, 1994 and 1993,
respectively.
Future minimum lease payments under noncancellable leases are approximately
as follows:
<TABLE>
<CAPTION>
Operating
LEASES
<S> <C> <C>
Year ending July 31:
1996 $ 66,000
1997 16,500
Total minimum lease payments $ 82,500
</TABLE>
(8)STOCKHOLDERS' DEFICIENCY
On September 1, 1981, the Company issued 712,500 shares of common stock
(1,068,750 shares adjusted for the stock split on September 8, 1982) to
officers and stockholders in exchange for equipment, research and
development services, stock registration costs, reimbursement of expenses
and other miscellaneous services. The common stock issued for services was
recorded at the estimated fair value of services rendered based upon the
Board of Directors' determination and ratification of the value of services.
Equipment received in exchange for common stock was recorded at the
transferor's cost. Common stock issued for reimbursement of expenses was
recorded based upon expenses incurred. All values assigned for expenses and
services rendered have been charged to operations except for stock
registration costs which were charged against proceeds.
On July 30, 1982, the Company sold 82,143 shares of common stock (123,214
shares adjusted to reflect the stock split on September 8, 1982) to a
private investor at a price of $1.40 per share, resulting in net proceeds to
the Company of approximately $108,500.
On September 8, 1982, the Company declared a 3-for-2 stock split. Shares
previously issued by the Company have been restated in accordance with the
stock split.
(8)STOCKHOLDERS' DEFICIENCY, (CONTINUED)
On September 8, 1982, the Company issued 15,000 shares of common stock to an
officer and stockholder in exchange for equipment. The equipment received
in exchange for the common stock was recorded at the transferor's cost.
On November 1, 1982 and January 3, 1983, the Company sold 28,125 and 16,071
shares of common stock, respectively, to private investors at $.93 per
share, resulting in net proceeds to the Company of approximately $41,250.
On January 17, 1983, the Company sold 660,000 shares of its common stock and
330,000 common stock purchase warrants in a public offering at a price of
$2.50 per share, resulting in net proceeds to the Company of approximately
$1,308,446. The warrants were to expire 12 months after issuance; however,
the Company extended the expiration date to July 16, 1984. During the
fiscal years ended July 31, 1983 and 1984, the net proceeds to the Company
from the exercising of the warrants amounted to $934,000. Each common stock
purchase warrant was not detachable from its common stock or exercisable
until six months after the issuance date of January 17, 1983. Each warrant
entitled the holder to purchase one share of common stock at an exercise
price of $3.00 after six months and prior to nine months after issuance.
The exercise price increased to $3.50 after nine months and prior to 12
months after issuance.
In connection with the public offering, the Company sold 60,000 five-year
purchase warrants to the underwriters at a price of $.001 per warrant. Each
warrant entitled the holder to purchase one share of common stock at an
exercise price of $3.00. Pursuant to the antidilution provisions of the
warrants, the underwriters received warrants to purchase 67,415 shares at an
exercise price of $2.67 per share. As of July 31, 1986, all such warrants
were exercised and the Company received proceeds of approximately $180,000.
On February 22, 1984, the Company filed a registration statement with the
Securities and Exchange Commission for the issuance of two series of new
warrants each to purchase an aggregate of 330,000 shares (hereinafter
referred to as one-year warrants and two-year warrants). The one-year
warrants had an exercise price of $6.50 per share and expired July 17, 1985.
The two-year warrants had an exercise price of $10.00 per share and were to
expire July 17, 1986. However, the Company extended the expiration date to
August 31, 1987. The one-year warrants and two-year warrants were issued as
of July 17, 1984 on a one-for-one basis to those public offering warrant
holders who exercised their original warrants, with the right to
oversubscribe to any of the warrants not exercised. During the fiscal years
ended July 31, 1985, 1986, 1987 and 1988, the Company received net proceeds
of approximately $2,471,000 as a result of the exercising of the warrants.
On January 2, 1987, the Company issued 250,000 shares of common stock to
officers and stockholders, including the President and Chief Executive
Officer, in recognition of services performed for the Company. The fair
value of such shares was recorded as compensation expense.
On February 3, 1987, the Company sold 5,000 shares of common stock to a
private investor for $5.00 per share, resulting in net proceeds to the
Company of approximately $25,000.
(8)STOCKHOLDERS' DEFICIENCY, (CONTINUED)
During the year ended July 31, 1988, the Company issued 206,429 shares of
common stock for payment of legal and consulting services. The fair value
of such shares was charged to operations.
On September 1, 1987, the Board of Directors approved new wage contracts for
three officers. The contracts provided for the issuance of 700,000 shares
of common stock as an inducement for signing; the shares of common stock
were issued on November 16, 1987. The fair value of these shares has been
recorded as deferred compensation and is being amortized over the term of
the employment agreements. The contracts also provided for the issuance of
1,500,000 shares of common stock in 750,000 increments on the occurrence of
certain events. These shares were issued during the fiscal years ended July
31, 1989 and 1990 and the fair value of such shares has been recorded as
deferred compensation and is being amortized over the remaining term of the
employment agreements. The contracts also provided for five-year options to
purchase 750,000 shares of common stock at $3.00 per share; options for the
purchase of 170,000 shares were exercised on June 16, 1988 and the remaining
options for the purchase of 580,000 shares expired on September 2, 1992.
During fiscal 1988, the Company issued 12,500 shares of common stock in
connection with the settlement of certain litigation. The fair value of
these shares was charged to operations.
During the fiscal year ended July 31, 1988, the Company sold 61,073 shares
of common stock to private investors at $2.92 per share resulting in net
proceeds to the Company of approximately $178,133.
On September 21, 1988, the Company entered into a stipulation of settlement
arising from a lawsuit wherein it agreed to pay a total of $250,000 in 12
monthly installments. Under the agreement, the Company authorized the
issuance on September 7, 1988 and October 18, 1988 of 85,000 and 50,000
shares, respectively, to an escrow account to secure payment of the $250,000
due under the stipulation of settlement. During the fiscal year ended July
31, 1989, the Company issued and sold the 135,000 shares of common stock for
$1,074,838. On February 14, 1989, the Board of Directors authorized the
issuance of an additional 50,000 shares. During the year ended July 31,
1990, the shares were sold for $351,117. The proceeds from the above
transactions were used to pay the settlement and related legal costs, reduce
loans from and interest due to the Company's President and Chief Executive
Officer, and for working capital.
During the fiscal year ended July 31, 1989, the Company sold 105,840 shares
of common stock to private investors at $3.97 per share resulting in net
proceeds to the Company of approximately $420,000.
During the fiscal year ended July 31, 1990, the Company issued 52,463 shares
of common stock for payment of legal and consulting services. The fair
value of the common stock was charged to operations.
During the fiscal year ended July 31, 1990, the Company issued 50,000 shares
of common stock in connection with the settlement of certain litigation.
The fair value of these shares was charged to operations.
(8)STOCKHOLDERS' DEFICIENCY, (CONTINUED)
During the fiscal year ended July 31, 1990, the Company sold 89,480 shares
of common stock to private investors at $3.97 per share resulting in net
proceeds to the Company of approximately $355,080.
During the fiscal year ended July 31, 1991, the Company issued 87,000 shares
of common stock for payment of legal and consulting services. The fair
value of the common stock was charged to operations.
During the fiscal year ended July 31, 1992, the Company sold 70,731 shares
of common stock to private investors at $2.75 to $3.50 per share resulting
in net proceeds to the Company of approximately $219,900.
During the fiscal year ended July 31, 1992, the Company issued 45,734 shares
of common stock as payment for services rendered to the Company. The fair
value of this common stock was charged to operations.
During the fiscal years ended July 31, 1992 and 1990, 94,000 and 50,000
shares of common stock, respectively, were issued to the Company's President
and Chief Executive Officer upon the conversion of outstanding debentures.
During the fiscal year ended July 31, 1993, the Company sold 352,667 shares
of common stock to private investors at prices ranging from $2.00 to $3.00
resulting in net proceeds to the Company of approximately $735,500. In
addition, the private investors were granted options to purchase common
stock totaling 587,167 shares at prices ranging from $3.00 to $7.00. During
the fiscal year ended July 31, 1995, 322,500 options expired. A total of
30,167 options due to expire on July 31, 1995 were extended to July 31,
1996, their exercise price was reduced to $2.50 and they are currently
outstanding. The remaining 234,500 options are currently outstanding and
will expire during fiscal 1996.
During the fiscal year ended July 31, 1993, the Company issued 54,600 shares
of common stock as payment for legal and other services performed for the
Company. The fair value of 49,600 shares was charged to operations. The
remaining 5,000 shares were recorded as deferred compensation and were
amortized over a one-year period, beginning in February 1993, in accordance
with the agreement entered into with the recipient.
During the fiscal year ended July 31, 1994, the Company issued 7,000 shares
of common stock as payment for services performed for the Company. The fair
value of the shares issued was charged to operations.
During the fiscal year ended July 31, 1994, the Company sold 25,000 shares
of common stock to a private investor at $2.00 per share resulting in net
proceeds to the Company of $50,000. In addition, the private investor was
granted options to purchase common stock totaling 25,000 shares at $4.00 per
common share. The options expire during fiscal 1997.
(8)STOCKHOLDERS' DEFICIENCY, (CONTINUED)
During the fiscal year ended July 31, 1994, the Company sold 800,000 shares
of common stock to private investors at $2.50 per share resulting in net
proceeds to the Company of $1,865,791. In addition, the private investors
were granted warrants to purchase common stock totaling 800,000 shares at
$5.00 per common share. The warrants expire during fiscal 1997.
During the fiscal year ended July 31, 1994, 400,000 shares of common stock
were issued to the Company's President and Chief Executive Officer upon the
conversion of outstanding debentures.
During the fiscal year ended July 31, 1994, 25,400 shares of common stock
were issued upon the conversion of other outstanding debentures.
In September 1994, the Company completed a private placement resulting in
the issuance of 288,506 shares of common stock and three-year warrants to
purchase 288,506 shares of common stock at an exercise price of $5.50 per
share. The common stock and warrants were sold in units consisting of
20,000 shares of common stock and warrants to purchase 20,000 shares of
common stock. The price per unit was $50,000. The Company received
proceeds of approximately $545,000, net of costs associated with the
placement of approximately $55,000 and the conversion of certain debt by
creditors of $121,265 into equivalent private placement units, of 17,600
shares for conversion of short-term borrowings and 30,906 shares issued for
services rendered. In October 1994, an additional two units at $50,000 per
unit were sold to a private investor under the same terms as the September
1994 private placement resulting in the issuance of 40,000 shares of common
stock.
During the fiscal year ended July 31, 1995, 185,000 shares of common stock
were issued upon the exercise of stock options by unrelated parties
resulting in net proceeds to the Company of $437,200. The exercise prices
of the options ranged from $2.27 to $2.50, which had been reduced from $3.50
and $5.00, respectively, during fiscal 1995.
During the fiscal year ended July 31, 1995, the Company sold 681,000 shares
of common stock to private investors resulting in net proceeds to the
Company of approximately $1,379,000. The shares were sold at prices ranging
from $2.00 to $2.25.
During the fiscal year ended July 31, 1995, the Company sold 139,080 shares
of common stock and 47,405 three-year warrants to purchase shares of common
stock at an exercise price of $4.00 per share to private investors. The
stock and warrants were sold at prices ranging from $2.25 to $2.73 per share
and resulted in net proceeds to the Company of $343,808, of which $4,800 was
for services rendered. The common shares were issued to the investors
subsequent to July 31, 1995.
(9)COMMON STOCK WARRANTS
The following table summarizes the activity of the common stock warrants
issued in connection with the public stock offering during 1983:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Sold in public offering 330,000 $3.00-3.50
Sold to underwriters 60,000 3.00
Exercised (1,165) 3.00
Outstanding at July 31, 1983 388,835 3.00-3.50
Exercised (287,566) 2.00-3.50
Expired (41,269) 3.50
Issued (one-year warrants) 288,731 6.50
Issued (two-year warrants) 288,731 10.00
Outstanding at July 31, 1984 637,462 3.00-10.00
Additional underwriters' warrants 7,415 2.67
pursuant to antidilution provisions
Exercised (334,957) 2.67-10.00
Expired (4,359) 6.50
Outstanding and exercisable at July 31, 1985 305,561 2.67-10.00
Reinstated 2,000 6.50
Exercised (21,565) 2.67-10.00
Outstanding and exercisable at July 31, 1986 285,996 10.00
Exercised (14,745) 10.00
Outstanding and exercisable at July 31, 1987 271,251 10.00
Exercised (63,925) $ 7.06
Expired (207,236)
Outstanding at July 31, 1988 -
</TABLE>
STOCK PURCHASE WARRANTS
On July 28, 1988, the Board of Directors granted stock purchase warrants to
acquire a maximum of 200,000 shares of common stock at $5.00 per share which
were not exercised and expired.
On July 23, 1991, the Board of Directors granted stock purchase warrants to
purchase 200,000 shares of common stock at $5.00 per share which were not
exercised and expired.
(9)COMMON STOCK WARRANTS, (CONTINUED)
WARRANTS SOLD IN 1994 AND 1995 PRIVATE PLACEMENTS
<TABLE>
<CAPTION>
WARRANTS EXERCISE PRICE EXPIRATION
<S> <C> <C> <C> <C> <C>
Sold in March 1994 Private Placement 800,000 $ 5.00 3/21/97 to 6/21/97
Outstanding at July 31, 1994 800,000 5.00 3/21/97 to 6/21/97
Sold in September 1994 Private Placement 288,506 5.50 12/9/97 to 12/14/97
Sold in October 1994 Private Placement 40,000 5.50 1/21/98
Sold in September 1995 Private Placement 47,405 4.00 10/1/98
Outstanding and exercisable at July 31, 1995 1,175,911 $ 4.00 - 5.50 3/21/97 to 10/1/98
</TABLE>
(10)STOCK OPTIONS
1981 NON-QUALIFIED STOCK OPTION PLAN
In 1981, the Board of Directors adopted a non-qualified stock option plan
and had reserved 300,000 shares for issuance to key employees or
consultants. Options were nontransferable and expired if not exercised
within five years. The maximum amount exercisable in any one year was one-
fifth of the options granted which accumulated if not exercised. The
options were issuable in such amounts as determined by the Board of
Directors and such prices as determined by the Board of Directors, except
that no single recipient would be granted options to purchase more than
15,000 shares.
The following table summarizes stock options outstanding:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Granted, August 24, 1984 15,000 $ 5.00
Granted, August 1, 1985 45,000 15.00
Subtotal 60,000 5.00-15.00
Cancelled (45,000) 5.00-15.00
Outstanding, July 31, 1990 15,000 15.00
Expired (15,000) $ 15.00
Outstanding, July 31, 1991 -
</TABLE>
(10)STOCK OPTIONS, (CONTINUED)
NON-QUALIFIED STOCK OPTIONS
The Board of Directors issued non-qualified stock options which were not
part of the 1981 non-qualified stock option plan or the 1989 Stock Plan as
follows:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Granted 1,032,000 $ 3.00-3.50
Exercised (170,000) 3.00
Cancelled (6,000) 3.50
Balance at July 31, 1988 856,000 3.00-3.50
Exercised (1,000) 3.50
Balance at July 31, 1989 855,000 3.00-3.50
Cancelled (100,000) 3.00
Expired (59,011) 3.50
Exercised (105,989) 3.00-3.50
Balance at July 31, 1990, 1991 and 1992 590,000 3.00-3.50
Expired (590,000) 3.00-3.50
Granted 750,000 3.50
Balance at July 31, 1993 750,000 3.50
Granted pursuant to conversion of certain
liabilities, 1,397,818 3.20
primarily related party
Repurchased stock options (102,807) 3.20
Balance at July 31, 1994 and 1995 2,045,011 $ 3.20-3.50
Exercisable at July 31, 1995 1,143,982 $ 3.20-3.50
</TABLE>
The options outstanding at July 31, 1995 will expire between September 16,
1996 and March 30, 2004. Subsequent to July 31, 1995, certain of these
options were extended, see Note 16.
(10)STOCK OPTIONS, (CONTINUED)
In connection with certain private placements, the Board of Directors have
included in the agreements, options to purchase additional shares of the
Company's common stock as follows:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Granted 126,000 $ 3.97
Exercised (included in 1989 proceeds from
sale to (25,200) 3.97
private investors)
Balance at July 31, 1989 100,800
Granted 61,720 6.50
Exercised (included in 1990 proceeds from
sale to (39,080) 3.97
private investors)
Expired (61,720) 3.97
Balance at July 31, 1990 61,720
Granted 45,000 6.50
Exercised (included in 1991 proceeds from
sale to (16,720) 6.50
private investors)
Expired (45,000) 6.50
Balance at July 31, 1991 45,000 6.50
Granted 50,000 5.00
Expired (45,000) 6.50
Balance at July 31, 1992 50,000
Granted (30,167 options were repriced and 587,167 2.50-7.00
extended
as described in note 8)
Expired (50,000) 5.00
Balance at July 31, 1993 587,167
Granted 25,000 4.00
Balance at July 31, 1994 612,167 2.50-7.00
Expired (322,500) 3.00
Balance outstanding and exercisable at July
31, 1995 289,667 $ 2.50-7.00
</TABLE>
The options outstanding at July 31, 1995, will expire during the fiscal
years ending July 31, 1996 and 1997.
(10)STOCK OPTIONS, (CONTINUED)
1989 STOCK PLAN
On February 14, 1989, the Company adopted the Alfacell Corporation 1989
Stock Plan (the "1989 Stock Plan"), pursuant to which the Board of Directors
shall issue awards, options and grants. The maximum amount of shares of
common stock that may be issued pursuant to the option plan is 2,000,000.
The per share option exercise price shall be determined by the Board of
Directors. All options are nontransferable and forfeitable in the event
employment is terminated within two years of the date an option is exercised
or prior to an option being exercised. In the event the option is exercised
and said shares are forfeited, the Company will return to the optionee the
lesser of the current market value of the securities or the exercise price
paid.
The stock option activity is as follows:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
<S> <C> <C> <C> <C>
Granted, February 14, 1989 230,000 $ 5.00
Granted, April 27, 1990 450,000 5.00
Granted, November 2, 1990 260,000 5.00
Granted, April 23, 1991 945,000 5.00
1,885,000
Options issued in connection
with share purchase 36,365 2.75
Expired (680,000) 5.00
Cancelled 5.00
(10,000)
Balance at July 31, 1992 1,231,365 2.75-5.00
Expired (1,195,000) 5.00
Granted 1,575,000 3.50-5.00
Balance at July 31, 1993 1,611,365 2.75-5.00
Expired (36,365) 2.75
Balance at July 31, 1994 1,575,000 3.50-5.00
Expired (945,000) 3.50-5.00
Exercised (185,000) 2.27-2.50
Balance outstanding and
exercisable at July 31, 1995 445,000 $ 2.50-2.68
</TABLE>
(10)STOCK OPTIONS, (CONTINUED)
In order to induce the exercise of options due to expire, the Board of
Directors approved the extension and repricing of certain options as
follows:
<TABLE>
<CAPTION>
Exercise Price
<S> <C> <C> <C> <C>
No. of Options
NO. OF OPTIONS ORIGINAL REVISED EXERCISED EXPIRATION DATE
110,000 $ 3.50 $ 2.27 110,000 January 9, 1995
320,000 5.00 2.50 75,000 July 31, 1996
200,000* 5.00 2.68 - July 31, 1996
630,000 185,000
</TABLE>
* Options to related parties were repriced at the fair market value of the
common stock at the time of extension.
1993 STOCK OPTION PLAN
The Company's Board of Directors adopted the 1993 Stock Option Plan (the
"Plan") in November 1993 and the stockholders ratified the plan in January
1994. The total number of shares of common stock authorized for issuance
upon exercise of options granted under the Plan is 3,000,000.
The stock options activity is as follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
<S> <C> <C> <C>
Granted 1,703,159 $ 2.71 - 5.00
Balance at July 31, 1994 1,703,159
Granted 188,850 2.27 - 5.00
Balance at July 31, 1995 1,892,009 $ 2.27 - 5.00
Exercisable at July 31, 1995 771,864 $ 2.71 - 5.00
</TABLE>
These options become exercisable over five years starting at various dates
from date of grant, up to one year after the grant date.
The options outstanding at July 31, 1995 will expire from November 10, 1997
to March 13, 2005.
(11)STOCK GRANT AND COMPENSATION PLANS
The Company had adopted a stock grant program effective September 1, 1981,
and pursuant to said Plan, had reserved 375,000 shares of its common stock
for issuance to key employees. The stock grant program was superseded by
the 1989 Stock Plan and no further grants will be given pursuant to the
grant plan. The following stock transactions occurred under the Company's
stock grant program:
<TABLE>
<CAPTION>
Year SHARES Fair Amount
ended VALUE of
JULY 31, COMPENSATION
<S> <C> <C> <C> <C> <C>
1983 20,000 $ 5.50 $ 110,000
1984 19,750 5.125 101,219
1985 48,332 5.125-15.00 478,105
1986 11,250 5.125-15.00 107,032
1988 19,000 $ 3.50 $ 6,500
</TABLE>
On January 26, 1984, the Company adopted a stock bonus plan for directors
and consultants. The plan was amended on October 6, 1986, to reserve
500,000 shares for issuance under the plan and to clarify a requirement that
a stock cannot be transferred until three years after the date of the grant.
The stock bonus plan for directors and consultants was superseded by the
1989 Stock Plan and no further grants will be given pursuant to the stock
bonus plan for directors and consultants. The following stock transactions
occurred under the Company's stock bonus plan:
<TABLE>
<CAPTION>
Year Amount
ended Fair of
JULY 31, SHARES VALUE COMPENSATION
<S> <C> <C> <C> <C> <C>
1984 130,250 $ 2.50-3.88 $ 385,917
1985 99,163 3.50-15.00 879,478
1985 (42,500) 2.50 (105,825)*
1986 15,394 9.65-15.00 215,400
1987 5,000 $ 15.00 $ 75,000
</TABLE>
* Shares granted in 1984 were renegotiated in 1985 and cancelled as a
result of recipient's termination.
(11)STOCK GRANT AND COMPENSATION PLANS, (CONTINUED)
ALFACELL CORPORATION 1989 STOCK PLAN
Under the 1989 Stock Plan, one million shares of the Company's common stock
have been reserved for issuance as awards to employees. The 1989 Stock Plan
also provides for the granting of options to purchase common stock of the
Company (see note 10). In addition, the 1989 Stock Plan provides for the
issuance of one million shares of the Company's common stock as grants. To
be eligible for a grant, grantees must have made substantial contributions
and shown loyal dedication to the Company and be ineligible to receive an
award or option.
During the fiscal years ended, the following awards and grants were
authorized under the 1989 Stock Plan:
<TABLE>
<CAPTION>
Year SHARES Fair Amount
ended VALUE of
JULY 31, COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
1989 30,000 $ 5.00 $ 150,000
1990 56,000 6.00 336,000
1991 119,000 4.00 476,000
1992 104,000 2.75 286,000
1993 117,000 2.00 234,000
1994 5,000 $ 3.00 $ 15,000
</TABLE>
Compensation expense is recorded for the fair value of all stock awards and
grants over the vesting period. The 1994 stock award was immediately
vested. There were no stock awards in fiscal 1995.
(12)INCOME TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109) for the year
ended July 31, 1993. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial statement
carrying amounts and tax bases of assets and liabilities using enacted tax
rates in effect for all years in which the temporary differences are
expected to reverse.
(12)INCOME TAXES, (CONTINUED)
At July 31, 1995 and 1994, the tax effects of temporary differences that
give rise to the deferred tax assets are as follows:
<TABLE>
<CAPTION>
1995 1994
Deferred tax assets:
<S> <C> <C> <C> <C>
Excess of book over tax depreciation $ 26,223 $ 56,116
Deferred compensation 165,999 55,916
Other 7,993 1,996
Federal and state net operating loss 8,926,338 8,662,634
carryforwards
Research and experimentation and investment
tax 473,287 471,234
credit carryforwards
Total gross deferred tax assets 9,599,840 9,247,896
Valuation allowance (9,599,840) (9,247,896)
Net deferred tax assets $ - $ -
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
At July 31, 1995, the Company has federal net operating loss carryforwards
of approximately $23,460,000 that expire in the years 1997 to 2010. The
Company also has investment tax credit carryforwards of $63,076 and research
and experimentation tax credit carryforwards of $410,211 that expire in the
years 1998 to 2010. Ultimate utilization/availability of such net operating
losses and credits may be significantly curtailed if a significant change in
ownership occurs.
(13)OTHER FINANCIAL INFORMATION
Accrued expenses as of July 31, consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Payroll and payroll $ 27,539 $ 12,535
taxes
Interest 10,196 10,623
Professional fees 23,800 29,675
Other 40,242 -
$ 101,777 $ 52,833
</TABLE>
(13)OTHER FINANCIAL INFORMATION, (CONTINUED)
Prepaid expenses as of July 31, consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Insurance $ 31,607 $ 26,223
NIH research - 32,000
Other 7,000 10,444
$ 38,607 $ 68,667
</TABLE>
(14)COMMITMENTS AND CONTINGENCIES
On July 23, 1991, the Board of Directors authorized the Company to pay to
the President and Chief Executive Officer of the Company an amount equal to
15% of any gross royalties which may be paid to the Company from any
license(s) with respect to the Company's principal product, ONCONASE, or any
other products derived from amphibian source extract, produced either as a
natural, synthesized, and/or genetically engineered drug for which the
Company is the owner or co-owner of the patents, or acquires such rights in
the future, for a period not to exceed the life of the patent. If the
Company manufactures and markets its own drugs, then the Company will pay an
amount equal to 5% of gross sales from any products sold during the life of
the patents. In addition, the agreement provides for a reduction of
indebtedness to the President and Chief Executive Officer in the amount of
$200,000 upon the Company entering into a licensing agreement for its
principal product.
The Company has product liability insurance coverage in the amount of
$6,000,000 for clinical trials. No product liability claims have been filed
against the Company. If a claim arises and the Company is found liable in
an amount that significantly exceeds the policy limits, it may have a
material adverse effect upon the financial condition of the Company.
(15)RESEARCH AND DEVELOPMENT AGREEMENT
In November 1992, the Company entered into a Cooperative Research and
Development Agreement (CRADA) with the National Institutes of Health (NIH).
In accordance with this CRADA, the NIH will perform research for the Company
on potential uses for its drug technology. During the term of this research
and development agreement, which expires in January 1996, the Company is
obligated to pay approximately $5,000 per month to the NIH. Total research
and development expenses under this arrangement amounted to $64,000, $43,000
and $17,000 during the years ended July 31, 1995, 1994 and 1993,
respectively.
(16)SUBSEQUENT EVENTS
In order to preserve stock options as a source of financing which were
granted during fiscal year 1993 and due to expire, the Board of Directors
approved effective September 15, 1995, a one-year extension for 750,000
options which were held by officers and due to expire on that day. The
exercise price was increased from $3.50 to $3.87, the fair market value of
the common stock at the time of the extension.
(16)SUBSEQUENT EVENTS, (CONTINUED)
On September 29, 1995, the Company completed a private placement resulting
in the issuance of 1,105,536 shares of common stock and 8,540 three-year
warrants to purchase shares of common stock at an exercise price of $4.00
per share to private and institutional investors. The stock and warrants
were sold at prices ranging from $2.00 to $3.70 per share and resulted in
net proceeds to the Company of approximately $2.3 million.
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALFACELL CORPORATION
* * * * * * * * *
Alfacell Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, at a meeting of
its members, adopted resolutions proposing and declaring advisable the
following amendments to the Certificate of Incorporation of said Corporation:
RESOLVED, that Article 4 of the Certificate of Incorporation be amended
as set forth below:
"4: The total number of shares of capital stock which the Corporation
shall have authority to issue is twenty-six million (26,000,000) shares,
of which twenty-five million (25,000,000) shares shall be Common Stock,
par value $.001 per share, and one million (1,000,000) shares shall be
Preferred Stock, par value $.001 per share".
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby expressly
authorized to provide, by resolution or resolutions duly adopted by it
prior to issuance, for the creation of each such series and to fix the
definition and the powers, preferences, rights, qualifications,
limitations and restrictions relating to the shares of each such series.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determining the
following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof if different from
the par value thereof;
(b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other series of
Preferred Stock;
(d) whether the shares of such series shall be subject to redemption
by the Corporation, and, if so, the times, prices and other conditions
of such redemption;
(e) the amount or amounts payable on shares of such series upon, and
the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement
or other corporation purposes and the terms and provisions relating to
the operation thereof;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series
of Preferred Stock or any other securities and, if so, the price or
prices or the rate or rates of conversion or exchange and the method, if
any, of adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other series
of Preferred Stock or of any other class; and
(i) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions, thereof.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All
shares of any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereof shall be cumulative.
SECOND: That at the Annual Meeting of Stockholders of the Corporation,
the holders of a majority of the outstanding stock entitled to vote thereon
voted in favor of said amendments in accordance with the provisions of Section
216 of the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendments were duly adopted in accordance
with the applicable provisions of Sections 242 and 216 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Alfacell Corporation has caused this certificate to
be signed by Kuslima Shogen, its President and attested to by Alan Bell,
Secretary of the Corporation, this 18 day of February, 1994.
By:/S/ KUSLIMA SHOGEN
KUSLIMA SHOGEN, President
ATTEST:
By:/S/ ALAN BELL
Alan Bell, Secretary
EXHIBIT 10.3
August 29, 1995
Alfacell Corporation
225 Belleville Ave.
Bloomfield, NJ 07003
Attn: Kuslima Shogen
Dear Ms. Shogen:
This letter will confirm our agreement to extend the terms of the lease for
an additional one year period ending November 11, 1996. The monthly rent
during the lease term shall be $5,500.00.
Please indicate your agreement with the foregoing by executing and
returning the enclosed copy of this letter.
Very truly yours,
/S/SANFORD SPECTOR
Sanford Spector
Plant Manager
National Starch & Chemical Co.
AGREED AND ACCEPTED
ALFACELL CORPORATION
/S/ KUSLIMA SHOGEN
Kuslima Shogen
AUGUST 30, 1995
Date
EXHIBIT 10.9
June 30, 1995
Alfacell Corporation Kuslima Shogen
Attn: Kuslima Shogen 428 Cedar Grove Lane
225 Belleville Avenue Somerset, New Jersey 08873
Bloomfield, New Jersey 07003
Re: SUBORDINATION AGREEMENT DATED AS OF MAY 31, 1993 BY AND AMONG
ALFACELL CORPORATION ("ALFACELL"), KUSLIMA SHOGEN ("JUNIOR
CREDITOR") AND FIRST FIDELITY BANK, N.A., SUCCESSOR IN INTEREST
TO FIRST FIDELITY BANK, N.A., NEW JERSEY ("SENIOR CREDITOR")
Dear Ms. Shogen:
Reference is hereby made to the above-referenced Subordination Agreement.
All capitalized terms used herein but not otherwise defined shall have the
meaning set forth in the Subordination Agreement.
As you are aware, pursuant to the terms of the Subordination Agreement,
Alfacell is not permitted to make any payment of principal on the Junior
Indebtedness unless and until all principal, interest, fees, expenses and
all other Senior Indebtedness has been paid in full. You have requested
that the Senior Creditor amend the Subordination Agreement so as to permit
Alfacell to make certain principal payments to the Junior Creditor on
account of the Junior Indebtedness in an amount not to exceed One Hundred
and Fifty Thousand Dollars ($150,000.00).
Please be advised that the Senior Creditor is willing to allow Alfacell to
make certain payments to the Junior Creditor provided that the following
terms and conditions are met and complied with:
1. The aggregate amount to be paid by Alfacell to the Junior Creditor on
account of the Junior Indebtedness pursuant to the terms hereof shall not
exceed $150,000.00.
2. Alfacell shall immediately pay to the Junior Creditor the amount of
$80,067.27, which shall be applied to reduce the Junior Indebtedness.
Immediately upon receipt of said funds but in any event no later than June
30, 1995, the Junior Creditor shall deliver the sum of $80,067.27 in good
funds to the Senior Creditor. The Senior Creditor is hereby authorized and
directed to apply said funds to the arrearages due and owing under the
Shogen Agreement.
3. In addition to the sum set forth in paragraph 2 hereof, Alfacell shall
immediately pay to the Junior Creditor an amount not to exceed $45,000.00,
which funds shall be utilized by the Junior Creditor to satisfy personal
obligations due and owing to other creditors.
4. In addition to the sums set forth in paragraphs 2 and 3 and subject to
the limitations set forth in paragraph 1 hereof, Alfacell shall pay to the
Junior Creditor, upon the request of the Junior Creditor from time to time,
all such amounts as may be necessary to allow the Junior Creditor to timely
pay the Senior Creditor any and all amounts due the Senior Creditor under
the terms of the Shogen Agreement. Immediately upon receipt of said funds,
the Junior Creditor shall deliver such funds to the Senior Creditor, and
the Senior Creditor is hereby authorized and directed to apply said funds
to the payments due and owing under the Shogen Agreement.
5. This letter agreement shall not be deemed to be a novation and shall
not be a modification of any term, condition, obligation, right, covenant
or responsibility set forth in the Subordination Agreement or any loan
document or other agreement between the parties, unless specifically stated
herein.
If the foregoing is acceptable to you, please sign on the lines indicated
below, and return an executed copy of this letter agreement together with
the sum of $80,067.27 to the undersigned no later than June 30, 1995. In
the event you fail to comply with the preceding sentence, this letter shall
be deemed null and void and shall be of no force and effect.
Very truly yours,
/S/RICHARD A. WOLBACH
Richard A. Wolbach
Vice President
The undersigned hereby agree to the
foregoing:
ALFACELL CORPORATION
By:/S/KUSLIMA SHOGEN
Kuslima Shogen, President
/S/ KUSLIMA SHOGEN
KUSLIMA SHOGEN
EXHIBIT 10.26
ALFACELL CORPORATION
PURCHASE AGREEMENT FOR
COMMON STOCK
Alfacell Corporation
225 Belleville Avenue
Bloomfield, New Jersey 07003
Attention: Kuslima Shogen, President
and Chief Executive Officer
Dear Ms. Shogen:
The undersigned acknowledges that there is no minimum proceeds
requirement for the closing of this offering, the Company may close only on
the undersigned's investment and such investment may be inadequate to meet
the Company's cash requirement.
The undersigned hereby subscribes to purchase shares of Common
Stock, $.001 par value per share (the "Shares") of Alfacell Corporation, a
Delaware corporation (the "Company") at a cost of $ in full
payment of the purchase price for the Shares to which the
undersigned subscribes (in the manner indicated on the signature page
hereof.)
The undersigned understands that the right to transfer all or any part
of the Shares (hereinafter sometimes collectively referred to as the
"Securities") will be restricted. The undersigned may not transfer the
Securities unless they are registered under the Act and applicable state
securities or "blue sky" laws, or an exemption from such registration is
available. The undersigned recognizes that the Company shall have no
obligation to register the Securities, except as set forth herein.
The undersigned hereby represents, warrants and covenants that:
1. The undersigned is acquiring the Shares for the undersigned's own
account for investment and not with a view towards distribution. The
undersigned will not sell, hypothecate, transfer or otherwise dispose of
the Securities unless such transaction has been registered under the Act
or, in the opinion of counsel for the Company, an exemption from
registration is available.
2. Please check here if the representation contained in this
paragraph 2 is applicable to the undersigned . (i) The
undersigned's individual net worth or joint net worth with the
undersigned's spouse exceeds $1,000,000 as of the date hereof, (ii) the
undersigned's individual income has been in excess of $200,000 in 1994, or
(iii) the undersigned's joint income with the undersigned's spouse has been
in excess of $300,000 in each of 1992 and 1993 and is expected to be in
excess of $300,000 in 1994.
3. Whether or not the representation contained in paragraph 2 is
applicable to the undersigned, the undersigned has adequate means of
providing for the undersigned's current needs and possible contingencies
and has no need for liquidity of the Shares. The undersigned's overall
commitment to investments is not disproportionate to the undersigned's net
worth, and acquisition of the Shares will not cause such overall commitment
to become excessive. Prior to the execution hereof, the undersigned has
received and had the opportunity to review, examine and read all documents,
records and books pertaining to this investment, including the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1994, the
Company's Quarterly Reports on Form 10-QSB for each of the two quarterly
periods subsequent to the fiscal year ended July 31, 1994 and copy of the
Company's Proxy Statement as distributed to its stockholders in connection
with the annual meeting of stockholders held on December 6, 1994
(collectively, the "Disclosure Documents").
4. The undersigned is knowledgeable and experienced in financial and
business matters. The undersigned recognizes and is fully cognizant of the
fact that the investment contemplated hereby involves a high degree of
risk. The undersigned is able to evaluate the merits and risks of an
investment in the Shares. The undersigned has been given an opportunity to
ask questions of, and receive answers and obtain information from,
representatives of the Company concerning the Company.
5. The undersigned has been given no oral or written representations
or assurances by the Company or any other person acting or purporting to
act on behalf of the Company in connection with the acquisition of the
Shares, in each case except as provided herein or in the Disclosure
Documents.
6. The undersigned understands and specifically acknowledges and
agrees that since the Shares have not been registered under the Act, the
certificates representing the Securities will bear a legend to such effect
and a stop transfer order will be placed on the Securities in the Company's
transfer books.
7. In the event Seller intends to file a registration statement for
its common stock (or any warrant, option or right to purchase stock) for
purposes of registering such stock for public sale under applicable federal
and state securities laws, Seller shall take action to include in such
registration statement to the extent it is able to do so such number of the
Shares as Buyer shall request and will use its best efforts to cause such
registration statement to be declared effective under the Securities Act of
1933 and applicable state securities laws. Buyer shall provide such
information as Sell shall reasonably request to prepare and file such
registration statement.
In connection with any such registration of Share, the Company shall
supply prospectuses, use its best efforts to qualify the Shares for sale in
the states of New York and New Jersey and furnish indemnification in the
manner set forth below.
The Company shall bear the entire cost and expense of any such
Registration hereunder. Notwithstanding the foregoing, each holder of
Shares shall bear the fees of all persons retained by it, such as counsel
and accountants, and any transfer taxes or underwriting discounts or
commissions applicable to the Shares sold by it pursuant to the
Registration Statement.
The Company shall indemnify and hold harmless each holder of Shares
that are registered pursuant to the Registration Statement and each
underwriter, within the meaning of the Act, who may purchase from or sell
for any such holder any such Shares and each person, if any, who controls
any such holder or underwriter within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration Statement
or any post-effective amendment thereto or any prospectus included therein
required to be filed or furnished in connection therewith or caused by any
omission to state therein a material fact required to be stated therein in
order to make the statements made therein, in light of the circumstances
under which they were make, not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission based upon information furnished or required to be furnished in
writing to the Company by such holder or underwriter expressly for use
therein; PROVIDED, HOWEVER, that such holder or underwriter shall indemnify
the Company, its directors, each officer signing the Registration Statement
and each person, if any, who controls the Company within the meaning of the
Act, from and against any and all losses, claims, damages and liabilities
caused by any untrue statement of a material fact contained inn any
Registration Statement or any post-effective amendment thereto or any
prospectus included therein required to filed or furnished pursuant thereto
or caused by any omission to state therein a material fact required to be
state therein in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement
or omission based upon information furnished in writing to the Company by
any such holder or underwriter expressly for use therein.
By its acceptance hereof, the Company hereby acknowledges that the
foregoing accurately reflects its understanding concerning the transaction
contemplated hereby.
Very truly yours,
(Signature)
Please type or print name
(and title if applicable)
Social Security Number of
Taxpayer Identification Number
Address:
As of Date
Number of Shares
Amount of Subscription
(U.S. Dollars)
ACCEPTED AND AGREED
ALFACELL CORPORATION
By:
Name: Kuslima Shogen
Title: President and Chief
Executive Officer
<PAGE>
PURCHASE AGREEMENT FOR
COMMON STOCK
Alfacell Corporation
225 Belleville Avenue
Bloomfield, New Jersey 07003
Attention: Kuslima Shogen, President
and Chief Executive Officer
Dear Ms. Shogen:
The undersigned acknowledges that there is no minimum proceeds
requirement for the closing of this Offering, the Company may close only
on the undersigned's investment and such investment may be inadequate to
meet the Company's cash requirements.
The undersigned hereby subscribes to purchase ________ shares of
Common Stock, $.001 par value per share (the "Shares") of Alfacell
Corporation, a Delaware corporation (the "Company")at a cost of $______
per share. The Shares are being sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Act").
The undersigned tenders herewith $_________ in full payment of the
purchase price for the _________ Shares to which the undersigned
subscribes (in the manner indicated on the signature page hereof.)
The undersigned understands that the right to transfer all or any
part of the Shares (hereinafter sometimes collectively referred to as the
"Securities") will be restricted. The undersigned may not transfer the
Securities unless they are registered under the Act and applicable state
securities or "blue sky" laws, or an exemption from such registration is
available. The undersigned recognizes that the Company shall have no
obligation to register the Securities, except as set forth herein.
The undersigned hereby represents, warrants and covenants that:
1. The undersigned is acquiring the Shares for the undersigned's
own account for investment and not with a view towards distribution. The
undersigned will not sell, hypothecate, transfer or otherwise dispose of
the Securities unless such transaction has been registered under the Act
or, in the opinion of counsel for the Company, an exemption from
registration is available.
2. (i) Please check here if the representation contained in this
paragraph 2(i) is applicable to the undersigned _________. (A)If an
individual, (a) the undersigned's individual net worth or joint net worth
with the undersigned's spouse exceeds $1,000,000 as of the date hereof, or
(b) the undersigned's individual income has been in excess of $200,000 in
each of 1994 and 1993 and is expected to be in excess of $200,000 in 1995,
or (c) the undersigned's joint income with the undersigned's spouse has
been in excess of $300,000 in each of 1994 and 1993 and is expected to be
in excess of $300,000 in 1995; or (B) if a corporation, partnership, or
other entity, the foregoing representation applies to all of the equity
owners of the corporation, partnership, or entity.
(ii) If a corporation, partnership, or other entity, was such a
corporation, partnership, or other entity formed for the specific purpose
of acquiring the Shares? _____Yes _____ No
(iii) If the answer to 2(ii) is yes, how many equity owners does
the corporation partnership or entity have? _____
3. Whether or not the representation contained in paragraph 2(i) is
applicable to the undersigned, the undersigned has adequate means of
providing for the undersigned's current needs and possible contingencies
and has no need for liquidity of the Shares. The undersigned's overall
commitment to investments is not disproportionate to the undersigned's net
worth, and acquisition of the Shares will not cause such overall
commitment to become excessive. Prior to the execution hereof, the
undersigned has received and had the opportunity to review, examine and
read all documents, records and books pertaining to this investment,
including the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1994, the Company's Quarterly Reports on Form 10-QSB for
each of the three quarterly periods subsequent to the fiscal year ended
July 31, 1994 and a copy of the Company's Proxy Statement as distributed
to its stockholders in connection with the annual meeting of stockholders
held on December 6, 1994 (collectively, the "Disclosure Documents").
4. The undersigned is knowledgeable and experienced in financial
and business matters. The undersigned recognizes and is fully cognizant
of the fact that the investment contemplated hereby involves a high degree
of risk. The undersigned is able to evaluate the merits and risks of an
investment in the Shares. The undersigned has been given an opportunity
to asks questions of, and receive answers and obtain information from,
representatives of the Company concerning the Company.
5. The undersigned has been given no oral or written
representations or assurances by the Company or any other person acting or
purporting to act on behalf of the Company in connection with the
acquisition of the Shares, in each case except as provided herein or in
the Disclosure Documents.
6. The undersigned understands and specifically acknowledges and
agrees that since the Shares have not been registered under the Act, the
certificates representing the Securities will bear a legend to such effect
and a stop transfer order will be placed on the Securities in the
Company's transfer books.
7. By its acceptance hereof, the Company hereby agrees that on or
around August 31, 1995, the Company shall use its best efforts to file a
registration statement (the "Registration Statement") under the Act to
register the resale of the Shares by the undersigned. The Company further
agrees to use its best efforts to cause such Registration Statement to
become effective.
In the case of the registration effected by Alfacell pursuant to
these registration provisions, Alfacell shall use its best efforts to: (i)
keep such registration effective until the earlier of (A) three years from
issue or (B) such date as all of the Shares have been resold; (ii) prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Shares covered by
the Registration Statement; (iii) furnish such number of prospectuses and
other documents incident thereto, including any amendment of or supplement
to the prospectus, as a Purchaser from time to time may reasonably
request: (iv) cause all Shares registered as described herein to be listed
on each securities exchange and quoted on each quotation service on which
similar securities issued by Alfacell are then listed or quoted; (v)
provide a transfer agent and registrar for all Shares registered pursuant
to the Registration Statement and a CUSIP number for all such Shares; (vi)
otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC; and (vii) file the documents required of Alfacell
and otherwise use its reasonable best efforts to maintain requisite blue
sky clearance in all United States jurisdictions specified in writing by a
Purchaser; provided, however that Alfacell shall not be required to
qualify to do business or consent to service of process in any state in
which it is not now so qualified or has not so consented.
With a view to making available to the Purchaser the benefits of Rule
144 and any other rule or regulation of the SEC that may at any time
permit a Purchaser to sell Shares to the public pursuant to registration
statement, Alfacell covenants and agrees to use its best efforts to: (i)
make and keep public information available, as those terms are understood
and defined in Rule 144, until the earlier of (A) the third anniversary of
the date hereof or (B) such date as all of the Shares shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of Alfacell under the Securities Act and Exchange Act;
and (iii) furnish to the Purchaser upon request, as long as the Purchaser
owns any Shares (A) a written statement by Alfacell that it has complied
with the reporting requirements of the Securities Act and the Exchange Act
(assuming this is accurate at the time the Purchaser makes such a
request), (B) a copy of the most recent annual or quarterly report of
Alfacell and (C) such other information as may be reasonably requested in
order to avail the Purchaser of any rule or regulation of the SEC that
permits the selling of any such Shares pursuant to Rule 144.
The Company shall bear the entire cost and expense of any such
Registration hereunder. Notwithstanding the foregoing, the undersigned
shall bear the fees of all persons retained by it, such as counsel and
accountants, and any transfer taxes or underwriting discounts or
commissions applicable to the Shares sold by it pursuant to the
Registration Statement.
The Company shall indemnify and hold harmless each holder of Shares
that are registered pursuant to the Registration Statement and each
underwriter, within the meaning of the Act, who may purchase from or sell
for any such holder any such Shares, and each person, if any, who controls
any such holder or underwriter within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any prospectus
included therein required to be filed or furnished in connection therewith
or caused by any omission to state therein a material fact required to be
stated therein in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission based upon information furnished or
required to be furnished in writing to the Company by such holder or
underwriter expressly for use therein; PROVIDED, HOWEVER, that such holder
or underwriter shall indemnify the Company, its directors, each officer
signing the Registration Statement and each person, if any, who controls
the Company within the meaning of the Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of
a material fact contained in any Registration Statement or any post-
effective amendment thereto or any prospectus included therein required to
be filed or furnished pursuant thereto or caused by any omission to state
therein a material fact required to be stated therein in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by any such holder or
underwriter expressly for use therein.
In connection with the Registration Statement, the undersigned shall
provide the Company, from time to time, as reasonably requested by the
Company, written information concerning its ownership of the Company's
Shares, its intentions concerning the sale of its Shares and such other
matters as are required in order to enable the Company to prepare, file
and obtain the effectiveness of such Registration Statement.
After such Registration Statement becomes effective and in connection
with the sale of the Shares under such Registration Statement, the
undersigned shall take such steps as may be necessary to ensure that the
offer and sale thereof are in compliance with the requirements of the
federal securities laws, including, but not limited to, compliance with
the antimanipulation requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The undersigned further acknowledges that except as otherwise set
forth in Section 7 hereof, the Company has not represented that any
attempt will be made to register the Shares at any future date or that
compliance with any exemption from the registration requirements under the
Act will be effected.
By its acceptance hereof, the Company hereby acknowledges that the
foregoing accurately reflects its understanding concerning the transaction
contemplated hereby.
Very truly yours,
___________________________________
(Signature)
___________________________________
Please type or print name
(and title if applicable)
___________________________________
Social Security Number or
Taxpayer Identification Number
Address: _____________________________
______________________________________
______________________________________
(H)___________________(W)_____________
Telephone Number
___________________________________
As of Date
___________________________________
Number of Shares
___________________________________
Amount of Subscription
(U.S. Dollars)
ACCEPTED AND AGREED:
ALFACELL CORPORATION
By: _________________________
Name: Kuslima Shogen
Title: President and Chief
Executive Officer
<PAGE>
WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK VOID AFTER 5:00
p.m. NEW JERSEY TIME, ON OCT.1, 1998. THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN AND WILL BE
ISSUED IN TRANSACTIONS WHICH HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES OR BLUE
SKY LAWS. THIS WARRANT AND SUCH SHARES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE LAW, OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
NO. _______ _______ SHARES
ALFACELL CORPORATION
This certifies that, for value received,_______, the registered
holder hereof or assigns (the "Warrantholder") is entitled to purchase
from Alfacell Corporation, a Delaware corporation (the "Company"), at any
time on and after October 1, 1995, and before 5:00 p.m., New Jersey time,
on October 1, 1998 (the "Termination Date"), at the purchase price of
_______ per share (the "Exercise Price"), the number of shares of Common
Stock, par value $.001 per share, of the Company set forth above (the
"Warrant Stock"). The number of shares of Warrant Stock, the Termination
Date and the Exercise Price per share of this Warrant shall be subject to
adjustment from time to time as set forth below.
SECTION I. TRANSFER OR EXCHANGE OF WARRANT.
The Company shall be entitled to treat the Warrantholder as the owner
in fact hereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in this Warrant on the part of any
other person. This Warrant shall be transferable only on the books of the
Company, maintained at its principal office upon delivery of this Warrant
Certificate duly endorsed by the Warrantholder or by his duly authorized
attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall deliver a new Warrant Certificate or
Certificates to the persons entitled thereto.
SECTION II. TERM OF WARRANT; EXERCISE OF WARRANTS
A. TERMINATION. The Company may, in its sole discretion, extend
the Termination Date with respect to the exercise of this Warrant upon
notice to the Warrantholder. As used herein, "Termination Date" shall be
deemed to include any such extensions.
B. EXERCISE. This Warrant shall be exercised by surrender to the
Company, at its principal office, of this Warrant Certificate, together
with the Purchase Form attached hereto duly completed and signed, and upon
payment to the Company of the Exercise Price for the number of shares of
Warrant Stock in respect of which this Warrant is then exercised. Payment
of the aggregate Exercise Price shall be made in cash or by certified or
official bank check.
C. WARRANT CERTIFICATE. Subject to Section III hereof, upon such
surrender of this Warrant Certificate and payment of the Exercise Price as
aforesaid, the Company shall issue and cause to be delivered to or upon
the written order of the Warrantholder a certificate or certificates for
the number of full shares of Warrant Stock so purchased upon the exercise
of such Warrant, together with cash, as provided in Section VI hereof, in
respect of any fractional shares of Warrant Stock otherwise issuable upon
such surrender. Such certificate or certificates representing the Warrant
Stock shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
shares of Warrant Stock as of the date of receipt by the Company of this
Warrant Certificate and payment of the Exercise Price as aforesaid;
provided, however, that if, at the date of surrender of this Warrant
Certificate and payment of the Exercise Price, the transfer books for the
Warrant Stock or other class of stock purchasable upon the exercise of
this Warrant shall be closed, the certificate or certificates for the
shares of Warrant Stock in respect of which this Warrant is then exercised
shall be deemed issuable as of the date on which such books shall next be
opened (whether before or after the Termination Date) and until such date
the Company shall be under no duty to deliver any certificate for such
shares of Warrant Stock; provided further, however, that the transfer
books of record, unless otherwise required by law, shall not be closed at
any one time for a period longer than twenty (20) days. The rights of
purchase represented by this Warrant shall be exercisable, at the election
of the Warrantholder, either in full or from time to time in part, and, in
the event that this Warrant is exercised in respect of fewer than all of
the shares of Warrant Stock purchasable on such exercise at any time prior
to the Termination Date, a new Warrant Certificate evidencing the
remaining Warrant or Warrants will be issued, and the Company shall
deliver the new Warrant Certificate or Certificates pursuant to the
provisions of this Section.
SECTION III. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of the shares of Warrant Stock upon
the exercise of this Warrant; provided, however, that the Warrantholder
shall pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of
Warrant Certificates or the certificates for the shares of Warrant Stock
in a name other than that of the Warrantholder in respect of which this
Warrant or shares of Warrant Stock are issued.
SECTION IV. MUTILATED OR MISSING WARRANT CERTIFICATES.
In case this Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue
and deliver, in exchange and substitution for and upon cancellation of
this certificate if mutilated, or in lieu of and in substitution for this
certificate if lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of this Warrant Certificate and indemnity, if requested, also
satisfactory to the Company.
SECTION V. RESERVATION OF SHARES OF WARRANT STOCK.
There has been reserved, and the Company shall at all times keep
reserved so long as this Warrant remains outstanding, out of its
authorized Common Stock a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by this
Warrant. The transfer agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon
the exercise of this Warrant will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be
requisite for such purpose.
SECTION VI. FRACTIONAL SHARES.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of
a share called for upon the exercise of this Warrant, the Company shall
pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the current market price of such fractional share. "Market
Price", as of any date means, (i) the last reported sale price for the
shares of Common Stock as reported by National Association of Securities
Dealers Automated Quotation National Market System, ("NASDAQ-NMS"), (ii)
the closing bid price for the shares of Common Stock as reported by the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") if the shares are not traded as NASDAQ-NMS, (iii) the average
of the closing bid and closing asked prices of the Common Stock as
reported by the National Quotations Bureau if the shares are not traded on
NASDAQ; (iv) the last reported sale price, if the shares of Common Stock
are listed on a national securities exchange or (v) if market value cannot
be calculated as of such date on any of the foregoing basis, the fair
market price determined by the Board of Directors of the Company, acting
with reasonable business judgment.
SECTION VII. EXERCISE PRICE; ANTI-DILUTION PROVISIONS.
A. EXERCISE PRICE. The shares of Warrant Stock shall be
purchasable upon the exercise of this Warrant, at a price of $_______ per
share. The Company may, in its sole discretion, reduce the Exercise Price
applicable to the exercise of this Warrant upon notice to the
Warrantholder. As used herein, "Exercise Price" shall be deemed to
include any such reduction.
If the Company shall at any time issue Common Stock by way of
dividend or other distribution on any stock of the Company or effect a
stock split or reverse stock split of the outstanding shares of Common
Stock, the Exercise Price shall be proportionately decreased in the case
of such issuance (on the day following the date fixed for determining
stockholders entitled to receive such dividend or other distribution) or
such stock split or increased in the case of such reverse stock split (on
the date that such reverse stock split shall become effective), by
multiplying the Exercise Price in effect immediately prior to the stock
dividend, stock split or reverse stock split by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
prior to such stock dividend, stock split or reverse stock split, and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such stock dividend, stock split or reverse stock split.
B. NO IMPAIRMENT. The Company (a) will not increase the par value
of any shares of stock receivable upon the exercise of this Warrant above
the amount payable therefor upon such exercise, and (b) will take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant.
C. NUMBER OF SHARES ADJUSTED. Upon any adjustment of the Exercise
Price pursuant to this Warrant, the Warrantholder shall thereafter (until
another such adjustment) be entitled to purchase upon the exercise of this
Warrant, at the new Exercise Price, the number of shares, calculated to
the nearest full share, obtained by multiplying the number of shares of
Warrant Stock initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.
SECTION VIII. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company (other than a
change in par value or as a result of an issuance of Common Stock by way
of dividend or other distribution or of a stock split or reverse stock
split) or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which
merger the Company is the continuing corporation and which does not result
in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company issuable upon exercise
of this Warrant) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially
as an entirety, the Company shall cause effective provision to be made so
that the Warrantholder shall have the right thereafter, by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property the Warrantholder would have been entitled to
receive if the Warrantholder had exercised this Warrant immediately prior
to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Section shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock and to successive consolidations, mergers, sales and conveyances.
SECTION IX. REGISTRATION RIGHTS
A. REGISTRATION RIGHTS. As soon as practicable after the
successful completion of the offering (the "Offering") of the Company's
Common Stock and this Warrant pursuant to its Private Placement the
Company will use its best efforts to file, obtain and maintain the
effectiveness of a registration statement (the "Registration Statement")
under the Act with respect to the Common Stock and the Warrant Stock.
In connection with the Registration Statement, the Warrantholder
shall provide the Company, from time to time, as reasonably requested by
the Company, written information concerning the Warrantholder's ownership
of the Company's securities, any intentions concerning the sale of
Warrants, Common Stock and Warrant Stock and such other matters as are
required in order to enable the Company to prepare, file and obtain the
effectiveness of such Registration Statement. Notwithstanding any of the
foregoing, the Company shall not be required to maintain the effectiveness
of the Registration Statement for more than three (3) years after the
initial effective date thereof.
B. BLUE SKY. In connection with any such registration of the
Warrants, Common Stock and Warrant Stock, the Company shall supply
prospectuses, use its best efforts to qualify the Warrants, Common Stock
and Warrant Stock for sale in the states of New York and New Jersey and
furnish indemnification in the manner set forth below.
C. EXPENSES. The Company shall bear the entire cost and expense of
any such registration hereunder. Notwithstanding the foregoing, the
Warrantholder shall pay the fees of all persons retained by Warrantholder,
such as counsel and accountants, and any transfer taxes or underwriting
discounts or commissions applicable to the Warrants, Common Stock and
Warrant Stock sold by the Warrantholder pursuant to the Registration
Statement.
D. INDEMNIFICATION. The Company shall indemnify and hold harmless
the Warrantholder for Warrants, Common Stock and Warrant Stock that are
registered pursuant to the Registration Statement and each underwriter,
within the meaning of the Act, who may purchase from or sell for the
Warrantholder any such Warrants, Common Stock and Warrant Stock, and each
person, if any, who controls the Warrantholder or underwriter within the
meaning of the Act, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment
thereto or any prospectus included therein required to be filed or
furnished in connection therewith or caused by any omission to state
therein a material fact required to be stated therein in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the
Company by the Warrantholder or underwriter expressly for use therein.
The Warrantholder agrees to indemnify and hold harmless the Company
and its directors, officers, employees and agents against any and all
losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of material fact
contained in the Registration Statement as originally filed or in any
amendment thereof, or any prospectus contained therein, or in any
amendment thereof or supplement thereto, or arose out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided that any such loss, claim, damage, liability
or expense arises out of or is based upon an untrue statement or an
omission or an alleged untrue statement or an alleged omission made in
reliance upon or in conformity with
written information furnished to the Company by the Warrantholder or on
behalf of the Warrantholder expressly for use in the Registration Statement
or any amendment thereof or any prospectus contained therein or in any
amendment thereof or supplement thereto.
E. CONTRIBUTION. If the indemnification provided for herein from
either the Warrantholder or the Company is unavailable to an indemnified
party (the "Indemnitee") hereunder in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to herein, then the
party responsible for such indemnification (the "Indemnitor"), in lieu of
indemnifying the Indemnitee, shall contribute to the amount paid or payable
by the Indemnitee as a result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative fault of the
Indemnitor and Indemnitee in connection with the actions which resulted in
such losses, claims, damages or liabilities (including legal or other fees
and expenses reasonably incurred in connection with any investigation or
proceeding) as well as any other equitable considerations.
If indemnification is available, the Indemnitor shall indemnify each
Indemnitee to the full extent provided for herein without regard to the
relative fault of the Indemnitor, the Indemnitee or any other equitable
consideration provided for hereunder.
F. SECURITIES EXCHANGE ACT. After the Registration Statement becomes
effective and in connection with the sale of the Warrants, Common Stock and
Warrant Stock under such Registration Statement, the Warrantholder shall
take such steps as may be necessary to ensure that the offer and sale
thereof are in compliance with the requirements of the federal securities
laws, including, but not limited to, compliance with the anti-manipulation
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
SECTION X. NOTICES TO WARRANTHOLDERS.
So long as this Warrant shall be outstanding and unexercised (a) if the
Company shall pay any dividend or make any distribution upon the Common
Stock or (b) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any shares of stock of any class or any
other rights or (c) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale, lease or
transfer of all or substantially all of the assets of the Company to another
corporation, or the voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be effected, then, in any such case, the
Company shall cause to be delivered to the
Warrantholder, at least ten days prior to the date specified in (i) or (ii)
below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (i) a record is to be taken
for the purpose of such dividend or distribution, or (ii) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if
any, as of which the holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up.
SECTION XI. NOTICES.
Any notice pursuant to this Warrant by the Company or by the
Warrantholder shall be in writing and shall be deemed to have been duly
given if delivered or mailed certified mail, return receipt requested, (a)
if to the Company, to it at 225 Belleville Avenue, Bloomfield, New Jersey
07003, Attention: President and (b) if to the Warrantholder to the
Warrantholder at the address set forth on the signature page hereto. Each
party hereto may from time to time change the address to which such party's
notices are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.
SECTION XII. SUCCESSORS.
All the covenants and provisions of this Warrant by or for the benefit
of the Company or the Warrantholder shall bind and inure to the benefit of
their respective successors and assigns hereunder.
SECTION XIII. APPLICABLE LAW.
This Warrant shall be deemed to be a contract made under the laws of
the State of Delaware applicable to agreements made and to be performed
entirely in Delaware and for all purposes shall be construed in accordance
with the internal laws of Delaware without giving effect to the conflicts of
laws principles thereof.
SECTION XIV. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to give to any person or
corporation other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Warrant and this Warrant shall
be for the sole and exclusive benefit of the Company and the Warrantholder.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Certificate or caused this Warrant Certificate to be duly executed as of the
day and year first above written.
ALFACELL CORPORATION
By: ______________________
Name: Kuslima Shogen
Title: President and Chief
Executive Officer
WARRANTHOLDER
_________________________
Name:
Address:
__________________________
__________________________
__________________________
Social Security Number
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the Warrant
represented by this Warrant Certificate to the extent of _____ shares of
Common Stock, par value $.001 per share, of Alfacell Corporation, and hereby
makes payment of $_______ in payment of the actual exercise price thereof.
Name: _____________________________________________________________
(Please type or print in block letters)
Address:_____________________________________________________
(Address for delivery of Stock Certificate)
Social Security Number:______________________________________
Signature:___________________________________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUED RECEIVED, _____________________________ hereby sells, assigns and
transfers unto ______________________________________
(Please type or print in block letters)
Address__________________________________________________________
the right to purchase Common Stock, par value $.001 per share, of Alfacell
Corporation, represented by this Warrant Certificate to the extent of
__________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ______________________, to transfer the
same on the books of the Company with full power of substitution in the
premises.
__________________________
Signature
Dated: , 199_
Notice: The signature of this assignment must
correspond with the name as it appears upon
the face of this Warrant Certificate in every
particular, without alteration or enlargement
or any change whatever.
SIGNATURE GUARANTEED:
_________________________
ALFACELL CORPORATION
PURCHASE AGREEMENT FOR
COMMON STOCK
Alfacell Corporation
225 Belleville Avenue
Bloomfield, New Jersey 07003
Attention: Kuslima Shogen, President
and Chief Executive Officer
Dear Ms. Shogen:
The undersigned acknowledges that there is no minimum proceeds
requirement for the closing of this Offering, the Company may close only on
the undersigned's investment and such investment may be inadequate to meet
the Company's cash requirements.
The undersigned hereby subscribes to purchase ________ units at
________ per unit (the "units"). Each unit consists of four (4) shares of
Common Stock, $.001 par value per share (the "Shares") of Alfacell
Corporation, a Delaware corporation (the "Company") and one (1) warrant (the
"Warrants"). Each Warrant is exercisable into one (1) Share (the "Warrant
Shares"). The Shares are being sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Act"). The
Warrants will be issued pursuant to a Warrant Agreement in the form attached
hereto as Exhibit A executed by the Company for the benefit of the
undersigned. Each Warrant will be exercisable at $4.00 per share for a
three year period commencing three months after its issuance. The
undersigned tenders herewith $_________ in full payment of the purchase
price for the _________ Units to which the undersigned subscribes (in the
manner indicated on the signature page hereof.)
The undersigned understands that the right to transfer all or any part
of the Shares (hereinafter sometimes collectively referred to as the
"Securities") will be restricted. The undersigned may not transfer the
Securities unless they are registered under the Act and applicable state
securities or "blue sky" laws, or an exemption from such registration is
available. The undersigned recognizes that the Company shall have no
obligation to register the Securities, except as set forth herein.
The undersigned hereby represents, warrants and covenants that:
1. The undersigned is acquiring the Shares for the undersigned's own
account for investment and not with a view towards distribution. The
undersigned will not sell, hypothecate, transfer or otherwise dispose of the
Securities unless such transaction has been registered under the Act or, in
the opinion of counsel for the Company, an exemption from registration is
available.
2. Please check here if the representation contained in this
paragraph 2 is applicable to the undersigned _________. (i) The
undersigned's individual net worth or joint net worth with the undersigned's
spouse exceeds $1,000,000 as of the date hereof, (ii) the undersigned's
individual income has been in excess of $200,000 in each of 1994 and 1993
and is expected to be in excess of $200,000 in 1995, or (iii) the
undersigned's joint income with the undersigned's spouse has been in excess
of $300,000 in each of 1994 and 1993 and is expected to be in excess of
$300,000 in 1995.
3. Whether or not the representation contained in paragraph 2 is
applicable to the undersigned, the undersigned has adequate means of
providing for the undersigned's current needs and possible contingencies and
has no need for liquidity of the Units. The undersigned's overall
commitment to investments is not disproportionate to the undersigned's net
worth, and acquisition of the Units will not cause such overall commitment
to become excessive. Prior to the execution hereof, the undersigned has
received and had the opportunity to review, examine and read all documents,
records and books pertaining to this investment, including the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1994, the
Company's Quarterly Reports on Form 10-QSB for each of the three quarterly
periods subsequent to the fiscal year ended July 31, 1994 and a copy of the
Company's Proxy Statement as distributed to its stockholders in connection
with the annual meeting of stockholders held on December 6, 1994
(collectively, the "Disclosure Documents").
4. The undersigned is knowledgeable and experienced in financial and
business matters. The undersigned recognizes and is fully cognizant of the
fact that the investment contemplated hereby involves a high degree of risk.
The undersigned is able to evaluate the merits and risks of an investment in
the Units. The undersigned has been given an opportunity to asks questions
of, and receive answers and obtain information from, representatives of the
Company concerning the Company.
5. The undersigned has been given no oral or written representations
or assurances by the Company or any other person acting or purporting to act
on behalf of the Company in connection with the acquisition of the Units, in
each case except as provided herein or in the Disclosure Documents.
6. The undersigned understands and specifically acknowledges and
agrees that since the Shares and Warrants have not been registered under the
Act, the certificates representing the Securities will bear a legend to such
effect and a stop transfer order will be placed on the Securities in the
Company's transfer books.
7. By its acceptance hereof, the Company hereby agrees that no later
than July 31, 1995, the Company shall use its best efforts to file a
registration statement (the "Registration Statement") under the Act to
register the resale of the Shares and the Shares underlying the Warrants.
The Company further agrees to use its best efforts to cause such
Registration Statement to become effective.
In connection with the Registration Statement, the undersigned
shall provide the Company, from time to time, as reasonably requested by the
Company, written information concerning its ownership of the Company's
Shares and Warrants, their intentions concerning the sale of its Shares and
Warrants and such other matters as are required in order to enable the
Company to prepare, file and obtain the effectiveness of such Registration
Statement. Notwithstanding any of the foregoing, the Company shall not be
required to maintain the effectiveness of the Registration Statement for
more than three (3) years after the initial effective date thereof.
In connection with any such registration of Shares and Warrants,
the Company shall supply a reasonable number of prospectuses to the
undersigned, use its best efforts to qualify the Shares and Warrants for
sale in the states of New York and New Jersey and furnish indemnification in
the manner set forth below.
The Company shall bear the entire cost and expense of any such
Registration hereunder. Notwithstanding the foregoing, the undersigned
shall bear the fees of all persons retained by it, such as counsel and
accountants, and any transfer taxes or underwriting discounts or commissions
applicable to the Shares and Warrants sold by it pursuant to the
Registration Statement.
The Company shall indemnify and hold harmless each holder of
Shares and Warrants that are registered pursuant to the Registration
Statement and each underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any such Shares or Warrants, and
each person, if any, who controls any such holder or underwriter within the
meaning of the Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereto or any
prospectus included therein required to be filed or furnished in connection
therewith or caused by any omission to state therein a material fact
required to be stated therein in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or omission based upon information furnished or
required to be furnished in writing to the Company by such holder or
underwriter expressly for use therein; PROVIDED, HOWEVER, that such holder
or underwriter shall indemnify the Company, its directors, each officer
signing the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement of a material
fact contained in any Registration Statement or any post-effective amendment
thereto or any prospectus included therein required to be filed or furnished
pursuant thereto or caused by any omission to state therein a material fact
required to be stated therein in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading,
insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission based upon information furnished in writing to
the Company by any such holder or underwriter expressly for use therein.
After such Registration Statement becomes effective and in
connection with the sale of the Shares and Warrants under such Registration
Statement, the undersigned shall take such steps as may be necessary to
ensure that the offer and sale thereof are in compliance with the
requirements of the federal securities laws, including, but not limited to,
compliance with the antimanipulation requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The undersigned further acknowledges that except as otherwise set
forth in Section 7 hereof, the Company has not represented that any attempt
will be made to register the Shares or Warrants at any future date or that
compliance with any exemption from the registration requirements under the
Act will be effected.
By its acceptance hereof, the Company hereby acknowledges that the
foregoing accurately reflects its understanding concerning the transaction
contemplated hereby.
Very truly yours,
___________________________________
(Signature)
___________________________________
Please type or print name
(and title if applicable)
___________________________________
Social Security Number or
Taxpayer Identification Number
Address (as it should appear on
certificates):
______________________________________
______________________________________
______________________________________
(H)___________________(W)_____________
Telephone Number
___________________________________
As of Date
___________________________________
Number of Units
___________________________________
Amount of Subscription
(U.S. Dollars)
ACCEPTED AND AGREED: Deliver to Address: (if
different from above)
ALFACELL CORPORATION ___________________________
By: _________________________
Name: Kuslima Shogen ___________________________
Title: President and
Chief Executive Officer
<PAGE>
ALFACELL CORPORATION
PURCHASE AGREEMENT FOR
COMMON STOCK
Alfacell Corporation
225 Belleville Avenue
Bloomfield, New Jersey 07003
Attention: Kuslima Shogen, President
and Chief Executive Officer
Dear Ms. Shogen:
The undersigned acknowledges that there is no minimum proceeds
requirement for the closing of this Offering, the Company may close only
on the undersigned's investment and such investment may be inadequate to
meet the Company's cash requirements.
The undersigned hereby subscribes to purchase ________ shares of
Common Stock, $.001 par value per share (the "Shares") of Alfacell
Corporation, a Delaware corporation (the "Company")at a cost of $______
per share. The Shares are being sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Act").
The undersigned tenders herewith $_________ in full payment of the
purchase price for the _________ Shares to which the undersigned
subscribes (in the manner indicated on the signature page hereof.)
The undersigned understands that the right to transfer all or any
part of the Shares (hereinafter sometimes collectively referred to as the
"Securities") will be restricted. The undersigned may not transfer the
Securities unless they are registered under the Act and applicable state
securities or "blue sky" laws, or an exemption from such registration is
available. The undersigned recognizes that the Company shall have no
obligation to register the Securities, except as set forth herein.
The undersigned hereby represents, warrants and covenants that:
1. The undersigned is acquiring the Shares for the undersigned's
own account for investment and not with a view towards distribution. The
undersigned will not sell, hypothecate, transfer or otherwise dispose of
the Securities unless such transaction has been registered under the Act
or, in the opinion of counsel for the Company, an exemption from
registration is available.
2. Please check here if the representation contained in this
paragraph 2 is applicable to the undersigned _________. (i) The
undersigned's individual net worth or joint net worth with the
undersigned's spouse exceeds $1,000,000 as of the date hereof, (ii) the
undersigned's individual income has been in excess of $200,000 in each of
1994 and 1993 and is expected to be in excess of $200,000 in 1995, or
(iii) the undersigned's joint income with the undersigned's spouse has
been in excess of $300,000 in each of 1994 and 1993 and is expected to be
in excess of $300,000 in 1995.
3. Whether or not the representation contained in paragraph 2 is
applicable to the undersigned, the undersigned has adequate means of
providing for the undersigned's current needs and possible contingencies
and has no need for liquidity of the Shares. The undersigned's overall
commitment to investments is not disproportionate to the undersigned's net
worth, and acquisition of the Shares will not cause such overall
commitment to become excessive. Prior to the execution hereof, the
undersigned has received and had the opportunity to review, examine and
read all documents, records and books pertaining to this investment,
including the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1994, the Company's Quarterly Reports on Form 10-QSB for
each of the three quarterly periods subsequent to the fiscal year ended
July 31, 1994 and a copy of the Company's Proxy Statement as distributed
to its stockholders in connection with the annual meeting of stockholders
held on December 6, 1994 (collectively, the "Disclosure Documents").
4. The undersigned is knowledgeable and experienced in financial
and business matters. The undersigned recognizes and is fully cognizant
of the fact that the investment contemplated hereby involves a high degree
of risk. The undersigned is able to evaluate the merits and risks of an
investment in the Shares. The undersigned has been given an opportunity
to asks questions of, and receive answers and obtain information from,
representatives of the Company concerning the Company.
5. The undersigned has been given no oral or written
representations or assurances by the Company or any other person acting or
purporting to act on behalf of the Company in connection with the
acquisition of the Shares, in each case except as provided herein or in
the Disclosure Documents.
6. The undersigned understands and specifically acknowledges and
agrees that since the Shares have not been registered under the Act, the
certificates representing the Securities will bear a legend to such effect
and a stop transfer order will be placed on the Securities in the
Company's transfer books.
7. By its acceptance hereof, the Company hereby agrees that no
later than July 15, 1995, the Company shall use its best efforts to file a
registration statement (the "Registration Statement") under the Act to
register the resale of the Shares by the undersigned. The Company further
agrees to use its best efforts to cause such Registration Statement to
become effective.
Notwithstanding the foregoing, should the Company propose to
conduct a Qualifying Offering (as hereinafter defined) at any time from
and after the date hereof and before the expiration of the time period
during which the Company is required to maintain the effectiveness of the
Registration Statement pursuant to this Section 7, and the underwriter of
such Qualifying Offering advises the Company that, in its opinion, the
effectiveness of the Registration Statement would adversely affect the
Company's ability to complete the Qualifying Offering, then the
undersigned agrees that the filing by the Company of the Registration
Statement covering the shares may be delayed (the "Delayed Shares"), or if
the Registration Statement has been filed the Shares may be deregistered
("the Deregistered Shares"), for a period of time not to exceed six
months. The Delayed Shares shall be included on a registration statement
or the Deregistered Shares shall be included on a second registration
statement, as the case may be, filed by the Company no later than six
months after the date the Registration Statement would have been required
to be filed but for the delay or the date of deregistration, and the terms
in this Section 7 applying to the Registration Statement shall apply to
such delayed registration statement, or second registration statement,
except that the Company shall have no further right to delay the filing of
any such registration statement or deregister the Shares. For purposes
hereof a "Qualifying Offering" shall mean an underwritten public offering
of Shares of the Company's Common Stock registered under the Securities
Act.
In connection with the Registration Statement, the undersigned
shall provide the Company, from time to time, as reasonably requested by
the Company, written information concerning its ownership of the Company's
Shares, its intentions concerning the sale of its Shares and such other
matters as are required in order to enable the Company to prepare, file
and obtain the effectiveness of such Registration Statement.
Notwithstanding any of the foregoing, the Company shall not be required to
maintain the effectiveness of the Registration Statement for more than
three (3) years after the initial effective date thereof.
In connection with any such registration of Shares, the Company
shall supply a reasonable number of prospectuses to the undersigned, use
its best efforts to qualify the Shares for sale in the states of New York
and New Jersey and furnish indemnification in the manner set forth below.
The Company shall bear the entire cost and expense of any such
Registration hereunder. Notwithstanding the foregoing, the undersigned
shall bear the fees of all persons retained by it, such as counsel and
accountants, and any transfer taxes or underwriting discounts or
commissions applicable to the Shares sold by it pursuant to the
Registration Statement.
The Company shall indemnify and hold harmless each holder of
Shares that are registered pursuant to the Registration Statement and each
underwriter, within the meaning of the Act, who may purchase from or sell
for any such holder any such Shares, and each person, if any, who controls
any such holder or underwriter within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any prospectus
included therein required to be filed or furnished in connection therewith
or caused by any omission
to state therein a material fact required to be stated therein in order to
make the statements made therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission based upon information furnished or required to be furnished in
writing to the Company by such holder or underwriter expressly for use
therein; PROVIDED, HOWEVER, that such holder or underwriter shall
indemnify the Company, its directors, each officer signing the
Registration Statement and each person, if any, who controls the Company
within the meaning of the Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue statement of a
material fact contained in any Registration Statement or any post-
effective amendment thereto or any prospectus included therein required to
be filed or furnished pursuant thereto or caused by any omission to state
therein a material fact required to be stated therein in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by any such holder or
underwriter expressly for use therein.
After such Registration Statement becomes effective and in
connection with the sale of the Shares under such Registration Statement,
the undersigned shall take such steps as may be necessary to ensure that
the offer and sale thereof are in compliance with the requirements of the
federal securities laws, including, but not limited to, compliance with
the antimanipulation requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The undersigned further acknowledges that except as otherwise
set forth in Section 7 hereof, the Company has not represented that any
attempt will be made to register the Shares at any future date or that
compliance with any exemption from the registration requirements under the
Act will be effected.
By its acceptance hereof, the Company hereby acknowledges that
the foregoing accurately reflects its understanding concerning the
transaction contemplated hereby.
Very truly yours,
___________________________________
(Signature)
___________________________________
Please type or print name
(and title if applicable)
___________________________________
Social Security Number or
Taxpayer Identification Number
Address: _____________________________
______________________________________
______________________________________
(H)___________________(W)_____________
Telephone Number
___________________________________
As of Date
___________________________________
Number of Shares
___________________________________
Amount of Subscription
(U.S. Dollars)
ACCEPTED AND AGREED:
ALFACELL CORPORATION
By: _________________________
Name: Kuslima Shogen
Title: President and Chief
Executive Officer
<PAGE>
Dated as of ____________, 1995
Alfacell Corporation
225 Belleville Avenue
Bloomfield, New Jersey 07003
Dear Sirs:
The undersigned, ______________________________, hereby agrees
to purchase from Alfacell Corporation, a Delaware corporation (the
"Company"), and, by its acceptance hereof, the Company hereby agrees to
issue and sell to the undersigned, shares of the Common
Stock, par value $.001 per share (the "Shares"), of the Company for $
______ per share, or an aggregate of $ _____________, in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Act"), pursuant to Regulation S promulgated thereunder ("Regulation S").
The undersigned represents and warrants to the Company as
follows:
A. The undersigned is not a United States Person nor is it
acquiring the Shares for the account or benefit of any United States
Person. In particular the undersigned is not:
i) a natural person resident in the United States;
ii) a partnership or corporation organized or
incorporated under the laws of the United States;
iii) an estate of which any executor is a United States
Person;
iv) a trust of which any trustee is a United States
Person;
v) an agency or branch of a foreign entity located in
the United States;
vi) a non-discretionary account or similar account
(other than an estate or trust) held by a dealer or
other fiduciary for the benefit or account of a
United States Person;
vii) a discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporated or (if an
individual) resident in the United States; or
viii) a partnership or corporation organized under the
laws of a non-United States jurisdiction by or for
the benefit of a United States Person principally
for the purpose of investing in securities not
registered under the Act unless such United States
Person is an accredited investor who is not a
natural person, an estate or a trust.
B. The undersigned is outside the United States of America as
of the date of the execution and delivery of this Agreement and is
purchasing the Shares for its own account and not for the benefit of a
United States Person.
C. The undersigned has received a copy of, and reviewed, the
Company's prospectus dated September 14, 1994, as supplemented through the
date hereof (the "Prospectus"), the Company's Annual Report on Form 10-KSB
for the year ended July 31, 1994, the Company's quarterly reports on Form
10-QSB for each of the quarters ended October 31, 1994 and January 31,
1995 (together with the Prospectus, the "Disclosure Documents").
D. The undersigned has been given an opportunity to ask
questions of, and receive answers and obtain information from,
representatives of the Company concerning the Company and has such
experience in financial and business matters that the undersigned is
capable of evaluating the information contained in the Disclosure
Document, including all of the merits and risks of an investment in the
Company.
E. The undersigned is acquiring the Shares without being
furnished any offering literature, prospectus or other form of general
solicitation or advertising and has been given no oral or written
representations or assurances by the Company or any other person acting or
purporting to act on behalf of the Company in connection with the
acquisition of the Shares, in each case except as provided herein.
F. The undersigned shall not, directly or indirectly, offer,
sell, pledge, transfer, hypothecate or otherwise dispose of any interest
in the Shares (or solicit any offers to buy, purchase, or otherwise
acquire any interest in the Shares) except in compliance with Regulation
S, pursuant to registration under the Act, or pursuant to an available
exemption from registration under the Act or the Rules and Regulations
promulgated thereunder.
G. The undersigned understands and specifically acknowledges
and agrees that (i) the sale of the Shares has not been registered under
the Act and, therefore, they may not be offered, pledged, transferred,
hypothecated or otherwise disposed of in the United States or to a United
States Person unless such transaction is pursuant to an effective
registration statement under the Act or unless an exemption from the
registration requirements of the Act is available, and (ii) the
certificates representing the Shares will bear a legend, substantially in
the form annexed hereto as Annex A.
H. Unless the Shares are registered under the Act or another
exemption from such registration is available, the undersigned shall not
resell the Shares to or for the account or benefit of a United States
Person within forty (40) days following the date hereof.
I. The undersigned represents and warrants that (i) it has no
open short positions with respect to the Company's Common Stock and it
will not utilize the Shares to cover any short position in the Company's
Common Stock it may establish in the future and (ii) it does not own, of
record or beneficially, any derivative securities convertible into the
Company's Common Stock.
J. By its acceptance hereof, the Company hereby agrees that no
later than July 15, 1995, the Company shall use its best efforts to file a
registration statement (the "Registration Statement") under the Act to
register the resale of the Shares by the undersigned. The Company further
agrees to use its best efforts to cause such Registration Statement to
become effective.
In connection with the Registration Statement, the undersigned
shall provide the Company, from time to time, as reasonably requested by
the Company, written information concerning its ownership of the Company's
Shares, its intentions concerning the sale of its Shares and such other
matters as are required in order to enable the Company to prepare, file
and obtain the effectiveness of such Registration Statement.
Notwithstanding any of the foregoing, the Company shall not be required to
maintain the effectiveness of the Registration Statement for more than
three (3) years after the initial effective date thereof.
In connection with any such registration of Shares, the Company
shall supply a reasonable number of prospectuses to the undersigned, use
its best efforts to qualify the Shares for sale in the states of New York
and New Jersey and furnish indemnification in the manner set forth below.
The Company shall bear the entire cost and expense of any such
Registration hereunder. Notwithstanding the foregoing, the undersigned
shall bear the fees of all persons retained by it, such as counsel and
accountants, and any transfer taxes or underwriting discounts or
commissions applicable to the Shares sold by it pursuant to the
Registration Statement.
The Company shall indemnify and hold harmless each holder of
Shares that are registered pursuant to the Registration Statement and each
underwriter, within the meaning of the Act, who may purchase from or sell
for any such holder any such Shares, and each person, if any, who controls
any such holder or underwriter within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any prospectus
included therein required to be filed or furnished in connection therewith
or caused by any omission to state therein a material fact required to be
stated therein in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission based upon information furnished or
required to be furnished in writing to the Company by such holder or
underwriter expressly for use therein; PROVIDED, HOWEVER, that such holder
or underwriter shall indemnify the Company, its directors, each officer
signing the Registration Statement and each person, if any, who controls
the Company within the meaning of the Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of
a material fact contained in any Registration Statement or any post-
effective amendment thereto or any prospectus included therein required to
be filed or furnished pursuant thereto or caused by any omission to state
therein a material fact required to be stated therein in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by any such holder or
underwriter expressly for use therein.
After such Registration Statement becomes effective and in
connection with the sale of the Shares under such Registration Statement,
the undersigned shall take such steps as may be necessary to ensure that
the offer and sale thereof are in compliance with the requirements of the
federal securities laws, including, but not limited to, compliance with
the antimanipulation requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The undersigned further acknowledges that except as otherwise
set forth in Section J hereof, the Company has not represented that any
attempt will be made to register the Shares at any future date or that
compliance with any exemption from the registration requirements under the
Act will be effected.
By its acceptance hereof, the Company hereby acknowledges that
the foregoing accurately reflects its understanding concerning the
transaction contemplated hereby.
Very truly yours,
_____________________________
By:______________________________
ACCEPTED AND AGREED:
ALFACELL CORPORATION
By:__________________________________________
<PAGE>
ANNEX A
"The Shares represented by this Certificate have been offered and
sold in an "Offshore Transaction" in reliance upon Regulation S as
promulgated by the Securities and Exchange Commission. Accordingly, the
Shares represented by this Certificate have not been registered under the
Securities Act of 1933 (the "Act") and may not be offered for sale, sold
or otherwise transferred in the United States or to a "U.S. person" (as
defined under Regulation S) except pursuant to an effective registration
statement under the Act or pursuant to an exemption from registration
under the Act."
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alfacell Corporation:
We consent to incorporation by reference in the registration statement (No. 33-
81308) on Form S-8 of Alfacell Corporation of our report dated September 29,
1995, relating to the balance sheets of Alfacell Corporation as of July 31,
1995 and 1994, and the related statements of operations, stockholders'
deficiency, and cash flows for each of the years in the three-year period ended
July 31, 1995 and the period from August 24, 1981 (date of inception) to July
31, 1995 which report appears in the July 31, 1995 annual report on Form 10-KSB
of Alfacell Corporation.
Our report dated September 29, 1995, contains an explanatory paragraph that
states that the Company's recurring losses from operations, its working capital
deficiency and net capital deficiency raise substantial doubt about the
entity's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of that
uncertainty. Further, our report as it relates to the financial statements for
the period from August 24, 1981 (date of inception) to July 31, 1995, is based
on the report of other auditors as to the amounts included therein for the
period from August 24, 1981 (date of inception) to July 31, 1992.
/S/KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
October 6, 1995
EXHIBIT 23.2
INDEPENDENTS AUDITOR'S CONSENT
The Board of Directors
Alfacell Corporation
We consent to incorporation by reference in the registration statement (No. 33-
81308) on Form S-8 of Alfacell Corporation of our report dated December 9,
1992, except as to Note 18 which is July 19, 1993 and Note 3 which is October
28, 1993 relating to the balance sheets of Alfacell Corporation as of July 31,
1992 and 1991 as restated and the related statements of operations,
stockholders' deficiency and cash flows for the three years ended July 31,
1992, as restated and for the period from inception August 24, 1981 to July 31,
1992, as restated.
Our report dated December 9, 1992, except as to Note 18 which is July 19, 1993
and Note 3 which is October 28, 1993, contains an explanatory paragraph that
states that the Company's recurring losses from operations, working capital
deficiency and net capital deficiency raise substantial doubt about the
entity's ability to continue as a going concern. The financial statements and
financial statement schedules do not include any adjustments that might result
from the outcome of that uncertainty.
/S/ARMUS, HARRISON & CO.
Armus, Harrison & Co.
Mountainside, New Jersey
October 6, 1995
