================================================================================
The financial statements of the Company from inception to July 31, 1992
incorporated by reference into this Registration Statement, were audited by the
independent accounting firm of Armus Harrison & Co. ("Armus Harrison"). The
accounting firm of Armus Harrison dissolved and ceased all operations in June,
1996. As a result of such dissolution, investors seeking to sue and recover
damages from Armus Harrison for material misstatements or omissions, if any, in
the registration statement or prospectus, including the financial statements,
may be unable to do so. Armus Harrison has not consented to the use of its audit
report and as a result, investors seeking to recover damages pursuant to Section
11 of the Securities Act against Armus Harrison for false and misleading
statements, if any, may be limited, and the lack of such consent may preclude
directors or officers of the Company from asserting a due diligence defense in
connection with a Section 11 action. See "Experts".
================================================================================
PROSPECTUS
3,734,541 Shares
Alfacell Corporation
Common Stock, par value $.001 per share
The Registration Statement, of which this Prospectus forms a part,
registers the offer and sale of up to 3,734,541 shares of Common Stock, par
value $.001 per share (the "Common Stock"), of Alfacell Corporation (the
"Company" or "Alfacell") by certain holders of Common Stock, warrants to
purchase Common Stock and options to purchase Common Stock (collectively, the
"Selling Stockholders"). Of these 3,734,541 shares, 2,737,480 shares are
outstanding and held by certain of the Selling Stockholders, 409,745 shares are
issuable upon the exercise of outstanding warrants to purchase Common Stock (the
"Warrants") held by certain of the Selling Stockholders, and 587,316 shares are
issuable upon the exercise of outstanding options to purchase Common Stock (the
"Options") held by certain of the Selling Stockholders (the "Option Holders").
The Company's Common Stock is traded in the over-the-counter market on
Nasdaq SmallCap Market. On January 12, 1998 the high bid and low asked price of
the Common Stock was $3 1/16 and $2 3/4, respectively, as reported by Nasdaq.
The Company will bear all of the expenses in connection with the
registration of the Common Stock offered hereby, which expenses are estimated to
be $44,200. The Selling Stockholders will pay any brokerage compensation in
connection with their sale of the Common Stock.
THESE ARE SPECULATIVE SECURITIES AND AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is January 23, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and proxy
and information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its regional offices located at Seven World Trade Center, Suite 1300, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511; and copies of such material can be obtained
from the Public Reference Section of the Commission in Washington, D.C., at
prescribed rates. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
shares of Common Stock offered hereby, reference is hereby made to the
Registration Statement, exhibits and schedules.
The following trademarks appear in this Prospectus: ONCONASE(R) is a
registered trademark of Alfacell Corporation; and Gemzar(R) is a registered
trademark of Eli Lilly & Co.
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus in connection with this offering. Any information
or representation not contained or incorporated by reference herein must not be
relied on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy the
securities offered hereby in any state to any person to whom it is unlawful to
make such offer or solicitation. Except where otherwise indicated, this
Prospectus speaks as of its date and neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the affairs of the Company since the date
hereof.
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<PAGE>
TABLE OF CONTENTS
Page
----
Available Information ..................................................... i
Incorporation of Certain Documents by Reference ........................... 1
Prospectus Summary ........................................................ 2
Risk Factors .............................................................. 4
Use of Proceeds ........................................................... 10
Selling Stockholders ...................................................... 10
Plan of Distribution ...................................................... 20
Legal Matters ............................................................. 21
Experts ................................................................... 21
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<PAGE>
================================================================================
The financial statements of the Company from inception to July 31, 1992
incorporated by reference into this Registration Statement, were audited by the
independent accounting firm of Armus Harrison. The accounting firm of Armus
Harrison dissolved and ceased all operations in June, 1996. As a result of such
dissolution, investors seeking to sue and recover damages from Armus Harrison
for material misstatements or omissions, if any, in the registration statement
or prospectus, including the financial statements, may be unable to do so. Armus
Harrison has not consented to the use of its audit report and as a result,
investors seeking to recover damages pursuant to Section 11 of the Securities
Act against Armus Harrison for false and misleading statements, if any, may be
limited, and the lack of such consent may preclude directors or officers of the
Company from asserting a due diligence defense in connection with a Section 11
action. See "Experts".
================================================================================
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus (i) its
Annual Report on Form 10-K for the Fiscal Year Ended July 31, 1997, as amended
by the Form 10-K/A filed on January 22, 1998, which contains audited financial
statements for the Company's latest fiscal year for which a Form 10-K was
required to have been filed, and incorporates by reference certain portions of
the Company's definitive Proxy Statement for the Annual Meeting of Stockholders
held December 9, 1997, (ii) all other reports filed by the Company pursuant to
Section 13(a) or 15(d) of the Exchange Act since July 31, 1997, including but
not limited to, the Form 8-K filed on August 13, 1997 and the Form 10-Q for the
quarter ended October 31, 1997, and (iii) the description of the Company's
Common Stock, $.001 par value, as contained in its registration statement on
Form 8-A, filed with the Commission on April 26, 1983.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the date hereof and prior to the
filing of a post-effective amendment to the Registration Statement which
indicates that all shares of Common Stock offered hereby have been sold or which
deregisters all shares of Common Stock then remaining unsold, shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that such statement is modified or
superseded by a statement contained herein or in a subsequently filed document
which also is or is deemed to be incorporated by reference herein. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person (including any
beneficial owner) to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference in this Prospectus (not including exhibits to such
information unless such exhibits are specifically incorporated by reference into
such information). Such requests should be directed to Gail Fraser, Vice
President, Finance and Chief Financial Officer, at the Company's principal
executive offices at 225 Belleville Avenue, Bloomfield, New Jersey 07003,
telephone (973) 748-8082.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial statements appearing elsewhere
and incorporated by reference in this Prospectus.
THE COMPANY
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(R)
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.
The Selling Stockholders acquired substantially all of the outstanding
shares of Common Stock offered hereby and the Warrants directly from the Company
in private placement transactions which were completed on March 21, 1994 (the
"March 1994 Private Placement"), September 13, 1994 (the "September 1994 Private
Placement"), October 21, 1994 (the "October 1994 Private Placement"), September
29, 1995 (the "September 1995 Private Placement"), several private placement
transactions during the period of October 1995 to April 1996 (the "1995/1996
Private Placements"), in a private placement transaction completed on June 11,
1996 (the "June 1996 Private Placement"), in connection with a raw material
purchasing agreement dated October 5, 1995 (the "Supply Agreement") and in a
private placement completed on March 3, 1997 (the "March 1997 Private
Placement") (the investors in the March 1994 Private Placement, September 1994
Private Placement, October 1994 Private Placement, September 1995 Private
Placement, the 1995/1996 Private Placements, the June 1996 Private Placement,
the Supply Agreement and the March 1997 Private Placement are referred to herein
collectively as the "Private Placement Investors"). See "Selling Stockholders."
133,834 of the outstanding shares of Common Stock offered hereby were acquired
pursuant to the exercise of previously outstanding options (the "Exercised
Options"). The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. To the extent any Warrants or Options
are exercised, the Company will apply the proceeds thereof to its general
corporate purposes. See "Use of Proceeds." The March 1994 Private Placement, the
September 1994 Private Placement, the October 1994 Private Placement, the
September 1995 Private Placement, the 1995/1996 Private Placements, the June
1996 Private Placement, the Supply Agreement and March 1997 Private Placement
are sometimes collectively referred to herein as the "Private Placements". The
Option Holders acquired the Options directly from the Company in private
transactions during the period from October 1992 through January 1993.
Alfacell, a Delaware corporation, was incorporated in 1981. The Company's
executive offices are located at 225 Belleville Avenue, Bloomfield, New Jersey
07003, telephone (973) 748-8082.
The Offering
Securities Offered ................ This Prospectus relates to an offering
by the Selling Stockholders of up to
3,734,541 shares of Common Stock of the
Company. Of these shares (i) an
aggregate of 2,737,480 shares of Common
Stock (including 3,030 shares issued
pursuant to the Supply Agreement) are
currently outstanding and were issued to
the Private Placement Investors either
directly in the Private Placements,
pursuant to the exercise of Warrants
issued in the Private Placements, or
pursuant to the Exercised Options, (ii)
an aggregate of 409,745 shares may be
issued upon exercise of the Warrants
which were issued to the Private
Placement Investors in the Private
Placements and (iii) an aggregate of
587,316 shares may be issued
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<PAGE>
upon exercise of the Options which were
issued to the Option Holders in certain
other private transactions. See "Selling
Stockholders."
Securities Outstanding ............ As of January 12, 1998, the Company had
14,847,793 shares of Common Stock
outstanding. Assuming that all of the
Warrants and Options are exercised and
no other shares of Common Stock are
issued subsequent to January 12, 1998,
the Company would have 15,711,020 shares
of Common Stock outstanding.
Use of Proceeds ................... The Company will not receive any
proceeds from the sale of the shares of
Common Stock offered by the Selling
Stockholders. If all of the Warrants and
Options are exercised, the Company will
receive estimated net proceeds of
$4,248,422. The Company intends to
utilize any proceeds received from the
exercise of the Warrants and Options for
general corporate purposes, including
the funding of research and development
activities. There can be no assurance
that any of the Warrants and Options
will be exercised. See "Use of
Proceeds."
Risk Factors ...................... See "Risk Factors" on page 4 for a
discussion of certain risk factors that
should be considered by prospective
investors in connection with an
investment in the shares of Common Stock
offered hereby.
-3-
<PAGE>
RISK FACTORS
The shares of Common Stock offered hereby are speculative and involve a
high degree of risk. They should not be purchased by anyone who cannot afford
the loss of his or her entire investment. In analyzing this offering,
prospective investors should consider the matters set forth below, among others,
and carefully read this Prospectus. Information contained or incorporated by
reference in this Prospectus contains "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should" or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussion of strategy
or future plans. No assurance can be given that the future results covered by
the forward-looking statements will be achieved. The following matters include
cautionary statements, including certain risks and uncertainties, that could
cause actual results to vary materially from the future results covered in such
forward-looking statements. Other factors could also cause actual results to
vary materially from the future results covered in such forward-looking
statements.
Development Stage Company, Significant Accumulated Deficit, and Uncertainty
of Future Profitability. The Company is a development stage company which is
subject to all of the risks and uncertainties of such a company, including
uncertainties of product development, constraints on financial and personnel
resources and dependence upon and need for third party financing. The Company's
profitability will depend primarily upon its success in developing, obtaining
regulatory approvals for, and effectively marketing ONCONASE. ONCONASE has not
been approved by the United States Food and Drug Administration ("FDA").
Potential investors should be aware of the difficulties a development stage
enterprise encounters, especially in view of the intense competition in the
pharmaceutical industry in which the Company competes. There can be no assurance
that the Company's plans will either materialize or prove successful, that its
products under development will be successfully developed or that such products
will generate revenues sufficient to enable the Company to earn a profit. Since
the Company's incorporation in 1981, a significant source of cash for the
Company has been public and private placements of its securities. At October 31,
1997 the Company had an accumulated deficit of approximately $46,900,000. The
Company anticipates that it will continue to incur substantial losses in the
future. The Company is pursuing licensing, marketing and development
arrangements that may result in contract revenue to the Company prior to its
receiving revenues from commercial sales of ONCONASE. To date, the Company has
not received any such revenues. There can be no assurance that the Company will
be able to successfully consummate any such arrangements.
No Assurance Of Successful Product Development Or Commercialization;
Uncertainties Related To Clinical Trials. The Company's research and development
programs are at various stages of development, ranging from the preclinical
stage to Phase III clinical trials. Substantial additional research and
development will be necessary in order for the Company to develop and obtain
regulatory approval for its product candidates, and there can be no assurance
that the Company's research and development will lead to development of products
that are shown to be safe and effective in clinical trials and that are
commercially viable. In addition to further research and development, the
Company's product candidates will require clinical testing, regulatory approval
and development of marketing and distribution channels, all of which are
expected to require substantial additional investment prior to
commercialization. There can be no assurance that the Company's products will be
successfully developed, prove to be safe and efficacious in clinical trials,
meet applicable regulatory standards, receive marketing approval from the FDA,
be capable of being produced in commercial quantities at acceptable costs, be
eligible for third party reimbursement from governmental or private insurers, be
successfully marketed or achieve market acceptance. Further, the Company's
products may prove to have undesirable or unintended side effects that may
prevent or limit their commercial use.
The Company may find, at any stage of its research and development, that
products which appeared promising in preclinical studies or Phase I and Phase II
clinical trials do not demonstrate efficacy in larger-scale Phase III clinical
trials and do not receive regulatory approvals. The results from preclinical
testing and early clinical trials may not be predictive of results obtained in
later clinical trials and large-scale testing. Companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in various
stages of clinical trials, even
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<PAGE>
in advanced clinical trials after promising results had been obtained in earlier
trials. Accordingly, any product development program undertaken by the Company
may be curtailed, redirected or eliminated at any time. The rate of completion
of the Company's clinical trials may be delayed by many factors, including
slower than anticipated patient enrollment or adverse events occurring during
the clinical trials. Completion of testing, studies and trials may take several
years, and the length of time varies substantially with the type, complexity,
novelty and intended use of the product. In addition, data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. Delays or rejections
may be encountered based upon many factors, including changes in regulatory
policy during the period of product development. No assurance can be given that
any of the Company's development programs will be successfully completed, or
that the Company's products will receive FDA approval.
Need for, and Uncertainty of, Future Financing. The Company will be
required to expend significant funds on the further development of ONCONASE and
its continued operations will depend on its ability to raise additional funds
through equity or debt financings, collaborative agreements, strategic alliances
and revenues from the commercial sale of ONCONASE. To date, the Company has had
several preliminary discussions regarding potential collaborative agreements and
strategic alliances, however there can be no assurance that such arrangements
will be consummated. Indeed, there can be no assurance that such funds will be
available to the Company on acceptable terms, if at all. The Company believes
that its cash and cash equivalents as of July 31, 1997, after giving effect to
the repayment of an approximately $1.3 million bank loan in October 1997, will
be sufficient to meet its anticipated cash needs through the fiscal year ending
July 31, 1998. The Company will be required to raise additional funds to meet
its cash needs upon exhaustion of its current cash resources. The Company
continues to be primarily financed by proceeds from private placements of its
Common Stock and investments in its equity securities. If the Company is unable
to secure sufficient future financing it may be necessary for the Company to
curtail or discontinue its research and development activities.
Government Regulation; No Assurance of FDA Approval. The pharmaceutical
industry in the United States is subject to stringent governmental regulation
and the sale of ONCONASE for use in humans in the United States will require the
prior approval of the FDA. 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. Pharmaceutical manufacturing facilities are also
regulated by state, local and other authorities. Obtaining FDA approval for a
new therapeutic drug may take several years and involve substantial
expenditures. ONCONASE has not been approved for sale in the United States or
elsewhere. There can be no assurance that the Company will be able to obtain FDA
approval for ONCONASE or any of its future products. Failure to obtain requisite
governmental approvals or failure to obtain approvals of the scope requested
will delay or preclude the Company from marketing its products while under
patent protection or limit the commercial use of the products, and thereby may
have a material adverse effect on the Company's liquidity and financial
condition. Further, even if governmental approval is obtained, new drugs are
subject to continual review and a later discovery of previously unknown problems
may result in restrictions on the particular product, including withdrawal of
such product from the market.
Uncertain Ability to Protect Patents and Proprietary Technology. The
Company believes it is important to develop new technology and improve its
existing technology. When appropriate, the Company files patent applications to
protect inventions made by its personnel. The Company owns five U.S. Patents:
(i) U.S. Patent No. 4,888,172 issued in 1989, which covers a pharmaceutical
produced from fertilized frog eggs and the methodology for producing it; (ii)
U.S. Patent No. 5,559,212 issued in 1996 which covers the amino acid sequence of
ONCONASE; and (iii) U.S. Patents Nos. 5,529,775 and 5,540,925 issued in 1996 and
U.S. Patent No.5,595,734 issued in 1997, which cover combinations of ONCONASE
with certain other chemotherapeutics. The Company owns three European patents
which have been validated in certain European countries. These European patents
cover ONCONASE, process technology for making ONCONASE, and combinations of
ONCONASE with certain other chemotherapeutics. The Company also owns other
patent applications, which are pending in the United States, Europe, and Japan.
Additionally, the Company owns an undivided interest in two applications that
are pending in the United States. Each
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<PAGE>
of these applications relate to a Subject Invention (as that term is defined in
cooperative research and development agreements to which the Company and the
National Institutes of Health (the "NIH") are parties). Patents covering
biotechnological inventions have an uncertain scope, and the Company is subject
to this uncertainty. The Company's patent applications may not issue as patents.
Moreover, the Company's patents may not provide the Company with competitive
advantages and may not withstand challenges by others. Likewise, patents owned
by others may adversely affect the ability of the Company to do business.
Furthermore, others may independently develop similar products, may duplicate
the Company's products, and may design around patents owned by the Company. The
Company's patent protection is limited to that afforded under the claims of its
issued patents, unless and until other patent protection is available to the
Company. Although the Company believes that its patents and patent applications
are of substantial value to the Company, there can be no assurance that such
patents will be of substantial commercial benefit to the Company, will afford
the Company adequate protection from competing products or will not be
challenged or declared invalid. The Company expects that there will continue to
be significant litigation in the industry regarding patents and other
proprietary rights and, if the Company were to become involved in such
litigation, there could be no assurance that the Company would have the
resources necessary to litigate the contested issues effectively.
Intense Competition and Technological Obsolescence. There are several
companies, universities, research teams and scientists, both private and
government-sponsored, which engage in developing products for the same
indications as the Company. Many of these entities and associations have far
greater financial resources, larger research staffs and more extensive physical
facilities than the Company. Several competitors are more experienced and have
substantially greater clinical, marketing and regulatory capabilities and
managerial resources than the Company. Such competitors may succeed in their
research and development of products for the same indications as the Company
prior to the Company achieving any measure of success in its efforts.
The number of persons skilled in the research and development of
pharmaceutical products is limited and significant competition exists for such
individuals. As a result of this competition and the Company's limited
resources, the Company may find it difficult to attract skilled individuals to
research, develop and investigate anti-cancer drugs in the future.
The business in which the Company is engaged is highly competitive and
involves rapid changes in the technologies of discovering, investigating and
developing new drugs. Rapid technological development by others may result in
the Company's products becoming obsolete before the Company recovers a
significant portion of the research, development and commercialization expenses
incurred with respect to those products. Competitors of the Company are numerous
and are expected to increase as new technologies become available. The Company's
success depends upon developing and maintaining a competitive position in the
development of new drugs and technologies in its area of focus. There can be no
assurance that, if attained, the Company will be able to maintain a competitive
position in the pharmaceutical industry.
Uncertain Availability Of Health Care Reimbursement. The Company's ability
to commercialize its product candidates will depend in part on the extent to
which reimbursement for the costs of such product will be available from
government health administration authorities, private health insurers and
others. Significant uncertainty exists as to the reimbursement status of newly
approved health care products. There can be no assurance of the availability of
adequate third-party insurance reimbursement coverage that enables the Company
to establish and maintain price levels sufficient for realization of an
appropriate return on its investment in developing its products. Government and
other third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new
therapeutic products approved for marketing by the FDA and by refusing, in some
cases, to provide any coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for uses of the Company's product candidates, the market acceptance of
these products would be adversely affected.
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<PAGE>
Potential Product Liability. The use of the Company's products during
testing or after regulatory approval entails an inherent risk of adverse effects
which could expose the Company to product liability claims. The Company
maintains product liability insurance coverage in the total amount of $6,000,000
for claims arising from the use of its products in clinical trials prior to FDA
approval. There can be no assurance that the Company will be able to maintain
its existing insurance coverage or obtain coverage for the use of its products
in the future. Management believes that the Company maintains adequate insurance
coverage for the operation of its business at this time, however, there can be
no assurance that such insurance coverage and the resources of the Company would
be sufficient to satisfy any liability resulting from product liability claims.
Dependence Upon Key Personnel. The Company is currently managed by a small
number of key management and operating personnel, whose efforts will largely
determine the Company's success. The loss of key management personnel,
particularly Kuslima Shogen, the Company's Chairman and Chief Executive Officer,
would likely have a material adverse effect on the Company. The Company carries
key person life insurance on the life of Ms. Shogen with a face value of
$1,000,000.
Dependence on Third Parties for Manufacturing. The Company does not
currently have facilities capable of manufacturing its product in commercial
quantities and, for the foreseeable future, the Company intends to rely on third
parties to manufacture its product. If the Company were to establish a
manufacturing facility, which it currently does not intend to do, the Company
would require substantial additional funds and would be required to hire and
retain significant additional personnel to comply with the extensive current
Good Manufacturing Practices ("cGMP") regulations of the FDA applicable to such
a facility. No assurance can be given that the Company would be able to make the
transition successfully to commercial production, if it chose to do so.
Dependence on Third Parties for Marketing; No Marketing Experience. Neither
the Company nor any of its officers or employees has pharmaceutical marketing
experience. The Company intends to enter into development and marketing
agreements with third parties. The Company expects that under such arrangements
it would act as a co-marketing partner or would grant exclusive marketing rights
to its corporate partners in return for up-front fees, milestone payments and
royalties on sales. Under these agreements, the Company's marketing partner may
have the responsibility for a significant portion of development of the product
and regulatory approval. In the event that the marketing partner fails to
develop a marketable product or fails to market a product successfully, the
Company's business may be adversely affected. If the Company were to market its
products itself, significant additional expenditures and management resources
would be required to develop an internal sales force and there can be no
assurance that the Company would be successful in penetrating the markets for
any products developed or that internal marketing capabilities would be
developed at all.
Liquidity. The Company's Common Stock has been quoted on the National
Association of Securities Dealers Inc. Automated Quotation System ("NASDAQ")
SmallCap Market since December 5, 1996 and is currently thinly traded. A limited
trading market could result in an investor being unable to liquidate his or her
investment.
No Dividends. The Company has not paid any dividends on its Common Stock
since its inception and does not currently foresee the payment of cash dividends
in the future. The Company currently intends to retain all earnings, if any, to
finance its operations.
Preferred Stock; Anti-takeover Device. The Company is currently authorized
to issue 1,000,000 shares of preferred stock, par value $.001 per share. The
Company's Board of Directors is authorized, without any approval of the
stockholders, to issue the preferred stock and determine the terms of such
preferred stock. There are no shares of preferred stock outstanding. The
authorized and unissued shares of preferred stock may be classified as an
"anti-takeover" measure and may discourage attempted takeovers of the Company
which are not approved by the Board of Directors. The authorized shares of
preferred stock will remain available for general corporate purposes, may be
privately placed and can be used to make a change in control of the Company more
difficult. Under certain circumstances, the Board of Directors could create
impediments to, or frustrate, persons seeking to effect a takeover
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<PAGE>
or transfer in control of the Company by causing such shares to be issued to a
holder or holders who might side with the Board of Directors in opposing a
takeover bid that the Board of Directors determines is not in the best interests
of the Company and its stockholders, but in which unaffiliated stockholders may
wish to participate. Under Delaware law, the Board of Directors is permitted to
use a depositary receipt mechanism which enables the Board to issue an unlimited
number of fractional interests in each of the authorized and unissued shares of
preferred stock without stockholder approval. Consequently, the Board of
Directors, without further stockholder approval, could issue authorized shares
of preferred stock or fractional interests therein with rights that could
adversely affect the rights of the holders of the Company's Common Stock to a
holder or holders which, when voted together with other securities held by
members of the Board of Directors and the executive officers and their families,
could prevent the majority stockholder vote required by the Company's
certificate of incorporation or Delaware law to effect certain matters.
Furthermore, the existence of such authorized shares of preferred stock might
have the effect of discouraging any attempt by a person, through the acquisition
of a substantial number of shares of Common Stock, to acquire control of the
Company. Accordingly, the accomplishment of a tender offer may be more
difficult. This may be beneficial to management in a hostile tender offer, but
have an adverse impact on stockholders who may want to participate in such
tender offer.
Control By Present Management. The Company's officers and directors, as a
group, beneficially owned 21.4% of the outstanding Common Stock of the Company
as of January 12, 1998 and thus could in some instances exercise effective
control over the Company. The Company's Chief Executive Officer has pledged
substantially all the shares of the Company's Common Stock beneficially owned by
her to secure repayment of a term loan owed by her.
Volatility and Possible Reduction in Price of Common Stock. The market
price of the Common Stock, like that of the securities of many other development
stage biotechnology companies, has been and may continue to be, highly volatile.
Factors such as announcements of technological innovations or new commercial
products by the Company or its competitors, disclosure of results of clinical
testing or regulatory proceedings, governmental regulation and approvals,
developments in patent or other proprietary rights, public concern as to the
safety of products developed by the Company and general market conditions may
have a significant effect on the market price of the Common Stock. In addition,
the stock market has experienced and continues to experience extreme price and
volume fluctuations which have effected the market price of many biotechnology
companies. These broad market fluctuations, as well as general economic and
political conditions, may adversely effect the market price of the Company's
Common Stock.
Shares Eligible for Future Sale. As of January 12, 1998, the Company had
outstanding 14,847,793 shares of Common Stock and options and warrants to
acquire an additional 4,398,208 shares of Common Stock. Of these outstanding
shares, 10,183,973 shares are freely transferable without restriction or further
registration under the Securities Act. The remaining 4,663,820 shares are
"restricted securities" as that term is defined in Rule 144 adopted under the
Securities Act. Of these restricted shares, approximately 4,487,820 were
eligible to be sold under Rule 144 as of January 12, 1998 and 2,737,480
(including 2,561,480 eligible to be sold under Rule 144) are covered by the
Registration Statement of which this Prospectus forms a part. Such 2,737,480
shares of restricted Common Stock included in the Registration Statement filed
with the Commission, will, if sold pursuant thereto, be freely tradeable without
restriction under the Securities Act, except that any shares sold to an
"affiliate," as that term is defined under the Securities Act, will be subject
to the resale limitations of Rule 144. As of January 12, 1998, in addition to
the Warrants to purchase 409,745 shares of Common Stock issued in the Private
Placements and the Options to purchase 587,316 shares of Common Stock, all of
which are covered by the Registration Statement of which this Prospectus forms a
part, there were outstanding options issued to officers, directors and
consultants of the Company (the "Employee Options") to purchase an aggregate of
3,534,981 shares of Common Stock, which are covered by an effective Registration
Statement on Form S-8. The 4,398,208 shares of Common Stock underlying such
Warrants, Options and Employee Options will, if issued upon exercise of such
Warrants, Options and Employee Options and sold pursuant to their respective
registration statements, be freely tradeable without restriction under the
Securities Act, except that any shares of Common Stock held by an "affiliate,"
as that term is defined under the Securities Act,
-8-
<PAGE>
will be subject to the resale limitations of Rule 144. The existence of such
Warrants, Options and Employee Options may adversely affect the Company's
ability to consummate future equity financings. The future sale of a substantial
number of shares of Common Stock by existing holders of Common Stock and holders
of warrants and options exercisable for Common Stock pursuant to Rule 144 under
the Securities Act or through effective registration statements may have an
adverse impact on the market price of the Common Stock.
Utilization of Carryforwards. At July 31, 1997, the Company had federal net
operating loss carryforwards of approximately $27,700,000 that expire in the
years 1998 to 2012. The Company also had investment tax credit carryforwards of
approximately $52,000 and research and experimentation tax credit carryforwards
of approximately $391,000 that expire in the years 1998 to 2011. Ultimate
utilization/availability of such net operating losses and credits may be
significantly curtailed if a significant change in ownership occurs.
Termination of Company's Auditors. The financial statements of the Company
from inception to July 31, 1992 incorporated by reference into this Registration
Statement, were audited by the independent accounting firm of Armus Harrison. On
December 1, 1993, certain shareholders of Armus Harrison terminated their
association with Armus Harrison (the "Armus Harrison Termination"), and Armus
Harrison ceased performing accounting and auditing services, except for limited
accounting services to be performed on behalf of the Company. In June 1996,
Armus Harrison dissolved and ceased all operations. The report of KPMG Peat
Marwick LLP with respect to the financial statements of the Company from
inception to July 31, 1997 is based on the report of Armus Harrison for the
period from inception to July 31, 1992 (the "Armus Harrison Report"), although
Armus Harrison has not consented to the use of such report herein and will not
be available to perform any subsequent review procedures with respect to such
report. Accordingly, based upon the provisions of Section 11(a)(4) of the
Securities Act, it is the Company's belief that investors may be limited to
asserting claims against Armus Harrison under Section 11 of the Securities Act
on the basis of the use of the Armus Harrison Report in any registration
statement of the Company into which such report is incorporated by reference,
including but not limited to this Registration Statement. In addition, in the
event any persons seek to assert a claim against Armus Harrison for false or
misleading financial statements and disclosures in documents previously filed by
the Company, such claim may also be adversely affected and possibly barred.
Furthermore, as a result of the lack of a consent from Armus Harrison to the use
of its audit report herein, or to its incorporation by reference into a
registration statement, the officers and directors of the Company will be unable
to rely on the authority of Armus Harrison as experts in auditing and accounting
in the event any claim is brought against any such persons under Section 11 of
the Securities Act based on alleged false and misleading financial statements
and disclosures attributable to Armus Harrison. To the Company's knowledge,
Armus Harrison is not, and has not been, the subject of any proceeding under any
federal or state bankruptcy or insolvency laws. The Company has not
investigated, and has no knowledge concerning, the assets of Armus Harrison or
its shareholders, if any, which may be available to satisfy any claims brought
by any investors. In addition, the Company has not investigated the status and
nature of the liability of any of the shareholders of Armus Harrison and it may
be that any such obligation may be limited or precluded under applicable law.
The discussion regarding certain effects of the Armus Harrison Termination is
not meant and should not be construed in any way as legal advice to any party
and any potential purchaser should consult with his, her or its own counsel with
respect to the effect of the Armus Harrison Termination on a potential
investment in the Common Stock of the Company or otherwise. The Company believes
that the Armus Harrison Report is correct and accurate in all material respects.
-9-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares of
Common Stock offered herein by the Selling Stockholders. If all of the Warrants
and Options are exercised, the Company will receive estimated net proceeds of
approximately $4,248,422. The Company intends to utilize any proceeds received
from the exercise of the Warrants and Options primarily to fund research and
development activities and for general corporate purposes. There can be no
assurance that any of the Warrants and Options will be exercised.
SELLING STOCKHOLDERS
This Prospectus relates to the offer and sale of an aggregate of 133,834
shares issued pursuant to exercised options which were exercised during the
period from July 1991 through September 1996. In March 1994 Options to purchase
an aggregate of 453,482 shares of Common Stock were issued to the Company's
Chief Executive Officer and an unaffiliated lender in the conversion of an
aggregate of $875,221 of Company debt. The Options expire on various dates from
the date hereof through March 30, 2004. The exercise price of the Options is
$3.20 per share. As of the date hereof, all of the Options remain outstanding.
This Prospectus relates to the offer and sale by the Option Holders of 453,482
shares of Common Stock.
On March 21, 1994 the Company completed the March 1994 Private Placement
resulting in the issuance of 40 units consisting of an aggregate of 800,000
shares of restricted Common Stock and three-year Warrants to purchase an
aggregate of 800,000 shares of Common Stock at an exercise price of $5.00 per
share. The units were sold for $50,000 per unit. The per share price of the
Common Stock was $2.50. The Company received net proceeds of approximately
$1,865,791 (including the purchase of 4.1 units from the conversion of $182,000
of outstanding Company debt, plus $23,000 of outstanding payables by an
unaffiliated creditor and after the payment of certain offering expenses) which
has been used primarily for general corporate purposes, including the funding of
research and development activities, which include collaborations with the NIH
and the National Cancer Institute ("NCI") and Phase II/III clinical trials. This
Prospectus relates to the offer and sale of 498,000 shares of Common Stock which
were purchased in the March 1994 Private Placement and are held by investors in
the March 1994 Private Placement as of the date hereof.
On September 13, 1994, the Company completed the September 1994 Private
Placement resulting in the issuance of an aggregate of 288,506 shares of
restricted Common Stock and 288,506 three-year Warrants to purchase an aggregate
of 288,506 shares of Common Stock at an exercise price of $5.50 per share. The
shares of Common Stock and Warrants to purchase Common Stock were sold in units
consisting of 20,000 shares of Common Stock and 20,000 Warrants. An aggregate of
14.4 units were sold at $50,000 per unit. The per share price of the Common
Stock was $2.50. The Company received net proceeds of approximately $545,000
(after giving effect to the purchase of 2.4 units by the conversion of $44,000
of outstanding Company debt plus $77,265 of outstanding payables by certain
unaffiliated creditors and the payment of certain offering expenses). The
Company utilized these net proceeds primarily for general corporate purposes,
including the funding of research and development activities, which include
collaborations with the NIH and the NCI and Phase II/III clinical trials. This
Prospectus relates to the offer and sale of 150,000 shares of Common Stock which
were purchased in the September 1994 Private Placement and are held by investors
in the September 1994 Private Placement as of the date hereof.
On October 21, 1994, the Company completed the October 1994 Private
Placement resulting in the issuance of 40,000 shares of restricted Common Stock
at a per share price of $2.50 and three-year Warrants to purchase 40,000 shares
of Common Stock at an exercise price of $5.50 per share to a single private
investor. On September 29, 1995, the Company completed the September 1995
Private Placement resulting in the issuance of an aggregate of 1,925,616 shares
of restricted Common Stock and three-year warrants to purchase 55,945 shares of
Common Stock at an exercise price of $4.00 per share. The Common Stock was sold
alone at per share prices ranging from $2.00 to $3.70, and in combination with
Warrants at per share prices ranging from $4.96 to $10.92, which related to the
-10-
<PAGE>
number of Warrants contained in the unit. After taking into account expenses of
the offerings, the Company received net proceeds of approximately $4.2 million
from the October 1994 and September 1995 Private Placements. The Company
utilized these net proceeds primarily for general corporate purposes, including
the funding of research and development activities, which include collaborations
with the NIH and the NCI and Phase II/III clinical trials. This Prospectus
relates to the offer and sale of 819,434 shares of Common Stock and 95,945
shares of Common Stock underlying Warrants which were purchased in the aggregate
in the October 1994 Private Placement and the September 1995 Private Placement
and are held by investors in the October 1994 Private Placement and investors in
the September 1995 Private Placement as of the date hereof.
On October 5, 1995, the Company entered into a supply agreement (the
"Supply Agreement") with one of its raw material suppliers for the purchase of
leopard frog eggs and embryos. Pursuant to the Supply Agreement the Company
issued 6,060 shares of Common Stock to each of Gerald and Doris L. Graska. This
Prospectus relates to the offer and sale by Doris L. Graska of 3,030 shares of
Common Stock.
On April 4, 1996, the Company completed the 1995/1996 Private Placements
for an aggregate of 207,316 shares of restricted Common Stock at per share
prices ranging from $3.60 to $4.24. On June 11, 1996, the Company completed the
June 1996 Private Placement for an aggregate of 1,515,330 shares of restricted
Common Stock and three-year Warrants to purchase 313,800 shares of Common Stock
at an exercise price of $7.50 per share. The Common Stock was sold alone at a
per share price of $3.70 and in combination with Warrants at a per unit price of
$12.52. Each unit consisted of three shares of Common Stock and one Warrant. The
Warrants were also sold alone at a per Warrant price of $1.42. These Warrants
are exercisable for terms ending between August 30, 1999 and September 10, 1999,
respectively. After taking into account expenses of the offerings, the Company
received aggregate net proceeds of approximately $6.5 million from the 1995/1996
Private Placements and the June 1996 Private Placement. The Company intends to
utilize these net proceeds primarily for general corporate purposes, including
the funding of research and development of its product, ONCONASE. This
Prospectus relates to the offer and sale of 1,155,016 shares of Common Stock and
313,800 shares of Common Stock underlying Warrants which were purchased in the
aggregate in the 1995/1996 Private Placements and the June 1996 Private
Placement and are held by investors in the 1995/1996 Private Placements and the
June 1996 Private Placement.
On March 3, 1997, the Company completed the March 1997 Private Placement
with a private investor of an aggregate of 112,000 shares of restricted Common
Stock at a per share price of $4.50 resulting in net proceeds of $504,000. The
Company intends to utilize these net proceeds primarily for general corporate
purposes, including the funding of research and development of its product,
ONCONASE. This Prospectus relates to the offer and sale by the investor in the
March 1997 Private Placement of 112,000 shares of Common Stock.
The Company's sale of Common Stock and Warrants to accredited investors (as
that term is defined in Rule 501 under the Securities Act) and several
non-accredited investors in each of the March 1994 Private Placement, the
September 1994 Private Placement, the October 1994 Private Placement, the
September 1995 Private Placement, the 1995/1996 Private Placements, the June
1996 Private Placement, the Supply Agreement and the March 1997 Private
Placement was effected in reliance upon Section 4(2) of the Securities Act and
Rule 506 thereunder, except that 115,000 shares were sold pursuant to Regulation
S under the Securities Act. Pursuant to stock purchase agreements entered into
by the Company with each of the Private Placement Investors (the "Purchase
Agreements"), the Company agreed to indemnify each of the Private Placement
Investors (all of whom are Selling Stockholders) against any liabilities, under
the Securities Act or otherwise, arising out of or based upon any untrue or
alleged untrue statement of a material fact in the Registration Statement or
this Prospectus or by any omission of a material fact required to be stated
therein except to the extent that such liabilities arise out of or are based
upon any untrue or alleged untrue statement or omission in any information
furnished in writing to the Company by the Private Placement Investors expressly
for use in the Registration Statement. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to its certificate of
incorporation and by-laws, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
-11-
<PAGE>
The Private Placement Investors (except the Supply Agreement investor) have
the right, at the Company's expense, to have the shares of Common Stock offered
hereby registered for the offer and sale to the public under the Securities Act.
The Private Placement Investors in the March 1994 Private Placement have the
right to have the offer and sale of their shares of Common Stock registered
through August 3, 1997, the Private Placement Investors in the September 1994
Private Placement have the right to have the offer and sale of their shares of
Common Stock registered through September 14, 1997 and the Private Placement
Investors in the October 1994 and September 1995 Private Placements have the
right to have the offer and sale of their shares of Common Stock registered
through December 11, 1998. The Private Placement Investors in the June 1996
Private Placement have the right, at the Company's expense, to have the shares
of Common Stock offered hereby registered for the offer and sale to the public
under the Securities Act until September 13, 1999. The Company has determined to
include the shares of Common Stock issued and issuable to the Private Placement
Investors in the March 1994, September 1994, and 1995/1996 Private Placements,
the shares acquired pursuant to the Exercised Options and the shares of Common
Stock acquired pursuant to the Supply Agreement in this Registration Statement,
although it has no obligation to do so. In addition, the Option Holders have the
right to have the shares of Common Stock issuable upon the exercise of the
Options registered on a registration statement at their request. The Company has
determined to register such shares herein. The investor in the March 1997
Private Placement has the right to have his shares registered no later than July
31, 1997 and to have the Company maintain the effectiveness of such registration
statement for three years after initial effectiveness.
Stock Ownership
The table below sets forth the number of shares of Common Stock (i) owned
beneficially by each of the Selling Stockholders; (ii) offered by each Selling
Stockholder pursuant to this Prospectus; (iii) to be owned beneficially by each
Selling Stockholder after completion of the offering, assuming that all of the
Warrants and Options held by the Selling Stockholders are exercised and all of
the shares offered hereby are sold and that none of the other shares held by the
Selling Stockholders, if any, are sold; and (iv) the percentage to be owned by
each Selling Stockholder after completion of the offering, assuming that all of
the Warrants and Options held by the Selling Stockholders are exercised and all
of the shares offered hereby are sold and that none of the other shares held by
the Selling Stockholders, if any, are sold. For purposes of this table each
Selling Stockholder is deemed to own beneficially (i) the shares of Common Stock
underlying the Warrants and Options, (ii) the issued and outstanding shares of
Common Stock owned by the Selling Stockholder as of January 12, 1998 and (iii)
the shares of Common Stock underlying any other options or warrants owned by the
Selling Stockholder which are exercisable as of January 12, 1998 or which will
become exercisable within 60 days after January 12, 1998. Except as otherwise
noted, none of such persons or entities has had any material relationship with
the Company during the past three years.
In connection with the registration of the shares of Common Stock offered
hereby, the Company will supply prospectuses to the Selling Stockholders.
-12-
<PAGE>
SELLING SHAREHOLDERS TABLE
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ansam Investment 125,000 0 0 125,000 0 0 0
Establishment Vaduz
Arinia Establishment Vaduz 125,000 0 0 125,000 0 0 0
Banque Diamantaire 43,478 0 0 43,478 0 0 0
Anversoise (Suisse) SA
Barlow, Albert T. (3) 144,718 24,000 0 63,636 0 0 0
Barlow, Marie (4) 144,718 0 0 0 0 26,316 0
Barlow, Steven C. & Dianne 10,500 0 0 3,500 0 0 0
F. Barlow JT TEN
Bloom, Walter Dr. (5) 24,000 0 0 0 0 0 6,000
Borghese, Francesco 1,500 0 0 0 0 0 1,500
Budhrani, Devidas Naraindas 38,910 0 0 38,910 0 0 0
Camp, Herbert L. 80,000 0 0 0 0 0 80,000
Chaikin, Marc 8,000 0 0 0 0 0 8,000
Champagne, Corinne M. 18,540 0 0 0 6,500 0 0
Cooper, Arthur G. 20,000 20,000 0 0 0 0 0
Costanzi, John B. (6) 40,200 0 0 0 20,000 0 0
C.S.W. Investment 18,000 0 0 0 0 0 18,000
Corporation (5)
DeSantis, Carmen 17,000 0 0 0 4,000 0 0
DeSantis, Mary F. 6,000 0 0 0 6,000 0 0
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
Ansam Investment 0 0 *
Establishment Vaduz
Arinia Establishment Vaduz 0 0 *
Banque Diamantaire 0 0 *
Anversoise (Suisse) SA
Barlow, Albert T. (3) 0 57,082 *
Barlow, Marie (4) 0 118,402 *
Barlow, Steven C. & Dianne 0 7,000 *
F. Barlow JT TEN
Bloom, Walter Dr. (5) 0 18,000 *
Borghese, Francesco 0 0 *
Budhrani, Devidas Naraindas 0 0 *
Camp, Herbert L. 0 0 *
Chaikin, Marc 0 0 *
Champagne, Corinne M. 0 12,040 *
Cooper, Arthur G. 0 0 *
Costanzi, John B. (6) 0 20,200 *
C.S.W. Investment 0 0 *
Corporation (5)
DeSantis, Carmen 0 13,000 *
DeSantis, Mary F. 0 0 *
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Digital Creations, 112,000 0 0 0 0 0 0
Incorporated
Dung, Lili B.L. 30,000 0 20,000 0 0 5,000 0
EC Investment Limited 115,000 40,000 0 0 0 0 0
Einhorn D.D.S. Ltd., Gerald 15,000 0 0 15,000 0 0 0
Factor, Mallory 20,000 0 0 0 0 0 20,000
Falk, Martin 13,800 0 0 0 0 0 13,800
Farnum, Scott 400 0 0 0 0 0 400
Foundation Danonia 256,000 0 0 0 0 0 256,000
Foundation Zemara 64,000 0 0 0 0 0 64,000
Fraser, Margaret 10,000 0 10,000 0 0 0 0
Fry Jr., Kenneth L. 13,040 0 0 5,040 0 0 0
Goldsmith, Joel 2,000 0 0 0 0 0 2,000
Gordon, Michael A. 10,000 10,000 0 0 0 0 0
Graska, Doris L. (8) 24,030 0 0 0 0 0 3,030
Grymes III, Arthur J. 20,000 20,000 0 0 0 0 0
Hare & Co. 200,000 0 0 0 0 0 200,000
Harrington, Lynn P. 1,500 0 0 0 0 0 1,500
Henry, Heather J. (8) 5,400 0 0 0 0 0 5,400
Henry, Kimberly A. (8) 5,400 0 0 0 0 0 5,400
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
Digital Creations, 112,000 0 *
Incorporated
Dung, Lili B.L. 0 5,000 *
EC Investment Limited 0 75,000 *
Einhorn D.D.S. Ltd., Gerald 0 0 *
Factor, Mallory 0 0 *
Falk, Martin 0 0 *
Farnum, Scott 0 0 *
Foundation Danonia 0 0 *
Foundation Zemara 0 0 *
Fraser, Margaret 0 0 *
Fry Jr., Kenneth L. 0 8,000 *
Goldsmith, Joel 0 0 *
Gordon, Michael A. 0 0 *
Graska, Doris L. (8) 0 21,000 *
Grymes III, Arthur J. 0 0 *
Hare & Co. 0 0 *
Harrington, Lynn P. 0 0 *
Henry, Heather J. (8) 0 0 *
Henry, Kimberly A. (8) 0 0 *
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry, Robert R. (9) 232,550 40,000 20,000 100,000 0 0 16,300
Heritage Finance & Trust 190,000 120,000 40,000 0 0 30,000 0
Co.
Heritage U.S.A. Value Fund 40,000 40,000 0 0 0 0 0
Kemper Clearing Corp. 200,000 0 0 200,000 0 0 0
Cust. FBO Henry C.
Herrington Jr. IRA
Hofferbert, J. Harv 15,000 0 0 15,000 0 0 0
Holsapple, Jane R. 10,000 10,000 0 0 0 0 0
Jacob, David 29,000 0 20,000 0 0 5,000 0
Jacobson, Richard M. 11,120 0 0 11,120 0 0 0
JAM Trust 47,100 20,000 0 0 0 0 27,100
Katz, Robert 19,000 0 0 0 0 0 16,000
Kaufman Jr., C.L. 15,120 0 0 15,120 0 0 0
Kaufman, David L. 6,000 0 0 6,000 0 0 0
Kimberly Computer 10,000 0 0 0 0 0 10,000
Group Inc.
Knakal, Jeffrey R. 8,000 0 0 0 0 0 8,000
Konrad, Adolf & Adair 20,000 20,000 0 0 0 0 0
Konrad JT TEN
Lampl, Stephen C. & Anne 35,000 0 0 5,000 0 0 0
B. Shumadine TTEE
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
Henry, Robert R. (9) 0 56,250 *
Heritage Finance & Trust 0 0 *
Co.
Heritage U.S.A. Value Fund 0 0 *
Kemper Clearing Corp. 0 0 *
Cust. FBO Henry C.
Herrington Jr. IRA
Hofferbert, J. Harv 0 0 *
Holsapple, Jane R. 0 0 *
Jacob, David 0 4,000 *
Jacobson, Richard M. 0 0 *
JAM Trust 0 0 *
Katz, Robert 0 3,000 *
Kaufman Jr., C.L. 0 0 *
Kaufman, David L. 0 0 *
Kimberly Computer 0 0 *
Group Inc.
Knakal, Jeffrey R. 0 0 *
Konrad, Adolf & Adair 0 0 *
Konrad JT TEN
Lampl, Stephen C. & Anne 0 30,000 *
B. Shumadine TTEE
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
First Trust Corp. C/F 17,000 0 0 15,000 0 0 0
Robert Le Buhn Keogh
Long, Patricia H. 1,000 0 0 0 0 0 1,000
Lowe, Colleen A. (10) 20,040 0 0 0 6,500 0 0
Lowe, Michael (11) 215,000 0 0 0 20,000 0 0
Lowe, Terry D. 10,000 0 0 0 10,000 0 0
Lynch Jr., James H. 20,000 20,000 0 0 0 0 0
Madsen, MADS Peter 8,000 0 0 0 0 0 8,000
Manna, Timothy J. 53,000 20,000 0 0 0 13,000 0
Maraist, Michael P. 73,393 0 0 0 0 0 32,000
Marden, Bernard A. 320,000 0 0 0 0 0 320,000
McCash, David J. 21,040 0 0 0 6,500 0 0
McCash, Donna M. 7,500 0 0 0 5,500 0 0
McCash, James O. 361,185 0 0 0 22,834 0 0
McCash, Michael J. 21,540 0 0 0 6,500 0 0
McMahan, Gary D. 17,000 0 0 10,000 0 0 0
Mesches, Kenneth S. (12) 62,365 0 20,000 0 0 0 0
Milgram, Annmarie 1,000 0 0 1,000 0 0 0
Miller, Donald W. 15,000 0 0 0 0 0 15,000
Miller, Janet 10,000 0 0 0 0 0 10,000
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
First Trust Corp. C/F 0 2,000 *
Robert Le Buhn Keogh
Long, Patricia H. 0 0 *
Lowe, Colleen A. (10) 0 13,540 *
Lowe, Michael (11) 0 195,000 1.3%
Lowe, Terry D. 0 0 *
Lynch Jr., James H. 0 0 *
Madsen, MADS Peter 0 0 *
Manna, Timothy J. 0 20,000 *
Maraist, Michael P. 0 41,393 *
Marden, Bernard A. 0 0 *
McCash, David J. 0 14,540 *
McCash, Donna M. 0 2,000 *
McCash, James O. 0 338,351 2.3%
McCash, Michael J. 0 15,040 *
McMahan, Gary D. 0 7,000 *
Mesches, Kenneth S. (12) 0 42,365 *
Milgram, Annmarie 0 0 *
Miller, Donald W. 0 0 *
Miller, Janet 0 0 *
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Miller, Kara A. 15,000 0 0 0 0 0 15,000
Miller, Kristin L. 15,000 0 0 0 0 0 15,000
Mittelman, Abraham (13) 95,000 0 0 0 10,000 0 0
Osso, Rizziero 10,000 0 0 0 0 8,000
Parallax Partners 20,000 0 0 0 0 0 20,000
Pisani, B. Michael (14) 201,000 0 0 80,000 0 0 22,000
Pisani, Michael B. 500 0 0 0 0 0 500
Pisani, John P. 10,000 0 0 0 0 0 10,000
Rankin, Carlton 35,500 0 0 0 0 25,000 0
Roberts, W. Daniel & 52,500 0 0 0 0 0 41,500
Maureen M.Roberts JT WROS
Rosenwald, Barbara 5,000 0 0 5,000 0 0 0
Saltus, Susan E. 20,000 20,000 0 0 0 0 0
Samet, Roger H. 115,000 10,000 20,000 0 0 0 0
Sands, Marvin 24,000 0 0 0 0 0 24,000
Schierloh, John (15) 133,804 20,000 0 0 73,804 0 0
Shogen, Kuslima (16) 2,621,402 0 0 0 379,678 0 0
Siegel, Allen (17) 212,562 0 0 0 3,000 0 0
Siegel, Josana 10,000 10,000 0 0 0 0 0
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
Miller, Kara A. 0 0 *
Miller, Kristin L. 0 0 *
Mittelman, Abraham (13) 0 85,000 *
Osso, Rizziero 0 2,000 *
Parallax Partners 0 0 *
Pisani, B. Michael (14) 0 99,000 *
Pisani, Michael B. 0 0 *
Pisani, John P. 0 0 *
Rankin, Carlton 0 10,500 *
Roberts, W. Daniel & 0 11,000 *
Maureen M.Roberts JT WROS
Rosenwald, Barbara 0 0 *
Saltus, Susan E. 0 0 *
Samet, Roger H. 0 85,000 *
Sands, Marvin 0 0 *
Schierloh, John (15) 0 40,000 *
Shogen, Kuslima (16) 0 2,241,724 13.9%
Siegel, Allen (17) 0 209,562 1.4%
Siegel, Josana 0 0 *
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Offered Offered Number of
Number of and and Acquired Shares Number of
Shares Acquired in October Offered Shares Number of
Offered and in 1994 and Underlying Offered and Shares Offered
Number of Acquired in September September Options and acquired in and acquired in
Shares March 1994 1994 1995 Issued upon the 1995/1996 the June 1996
Selling Beneficially Private Private Private Exercise of Private Private
Stockholders(1) Owned Placement Placement Placement Options Placements Placement
- --------------- ----- --------- --------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Skidmore, C. Eric C/F 1,250 0 0 1,250 0 0 0
Amelia C. Skidmore UGMA TX
Skidmore, C. Eric C/F 500 0 0 500 0 0 0
Julia Skidmore UGMA TX
Skidmore, Dr. Eric 4,550 0 0 2,050 0 0 0
Skidmore, John E. 1,200 0 0 1,200 0 0 0
Spengler, Thomas M. and 10,075 0 0 9,075 0 0 0
Michele P. Spengler JT WROS
Starita, Fred A. 4,000 4,000 0 0 0 0 0
Sylvester, Carmine 11,000 0 0 1,000 0 0 0
Thall, Richard S. & Alice 21,000 0 0 0 0 0 16,000
Thall TEN COM
Thompson, Mary M. (18) 24,640 0 0 0 6,500 0 0
Tierney, James G. & 31,400 0 0 0 0 0 27,100
Shirley A. Tierney TTEES
Walker, David R. 6,000 0 0 6,000 0 0 0
Walter, Peter 10,000 10,000 0 0 0 0 0
Windsor Partners L.P. 20,000 0 0 0 0 0 20,000
Wingfield, Charles L. 11,500 0 0 11,500 0 0 0
Woodmere Court Investment 20,000 20,000 0 0 0 0 0
<CAPTION>
Percentage of
Number of Oustanding
Number of Shares to be Shares to be
Shares Offered Owned owned
and Acquired in Beneficially Beneficially
March 1997 After After
Selling Private Completion of Completion
Stockholders(1) Placement Offering of Offering(2)
- --------------- --------- -------- --------------
<S> <C> <C> <C>
Skidmore, C. Eric C/F 0 0 *
Amelia C. Skidmore UGMA TX
Skidmore, C. Eric C/F 0 0 *
Julia Skidmore UGMA TX
Skidmore, Dr. Eric 0 2,500 *
Skidmore, John E. 0 0 *
Spengler, Thomas M. and 0 1,000 *
Michele P. Spengler JT WROS
Starita, Fred A. 0 0 *
Sylvester, Carmine 0 10,000 *
Thall, Richard S. & Alice 0 5,000 *
Thall TEN COM
Thompson, Mary M. (18) 0 18,140 *
Tierney, James G. & 0 4,300 *
Shirley A. Tierney TTEES
Walker, David R. 0 0 *
Walter, Peter 0 0 *
Windsor Partners L.P. 0 0 *
Wingfield, Charles L. 0 0 *
Woodmere Court Investment 0 0 *
</TABLE>
================================================================================
Footnotes appear on the following page.
-18-
<PAGE>
(*) Less than one percent.
(1) The last name of each individual Seller Stockholder is listed first.
(2) Based upon shares of Common Stock outstanding as of January 12, 1998 after
giving effect to shares of Common Stock underlying options or warrants
which are deemed to be owned beneficially by the Selling Stockholders.
(3) Includes 29,641 shares of Common Stock owned by Mr. Barlow's wife.
(4) Includes 115,077 shares owned by Ms. Barlow's husband.
(5) Dr. Bloom's beneficial ownership includes 18,000 shares owned by C.S.W.
Investment Corporation, which is a corporation controlled by Dr. Bloom.
(6) Dr. Costanzi is a member of the Company's Scientific Advisory Board and
received his Options for services rendered.
(7) Doris L. Graska is a party to the Company's Supply Agreement. Doris L.
Graska's beneficial ownership includes 21,000 shares owned by R.P.
Biologicals, which is a corporation controlled by her and her husband.
(8) Mr. Robert Henry was a director of the Company until December 9, 1997.
Heather Henry and Kimberly Henry are Mr. Henry's daughters.
(9) Robert Henry was a director of the Company until December 9, 1997.
(10) Includes 2,500 shares registered in the name of Colleen A. Dille and
offered hereby.
(11) Michael Lowe was the Company's President and a member of the Board of
Directors from August 1, 1996 through July 31, 1997 and prior to that was a
consultant to the Company and a member of the Company's Scientific Advisory
Board. He received his Options for services rendered.
(12) Includes 49,215 held by Kenneth S. Mesches TTEE Kenneth S. Mesches Money
Purchase Plan.
(13) Abraham Mittelman is a member of the Company's Scientific Advisory Board.
He received his Options for services rendered.
(14) Michael Pisani was a consultant to the Company and his beneficial ownership
includes shares underlying options he received for services rendered.
(15) John Schierloh was a consultant to the Company and received 72,800 shares
of Common Stock and matching Warrants in the March 1994 Private Placement
in consideration for conversion of $182,000 of debt owed by the Company to
him and 73,804 Options in consideration for conversion of $142,441 of
Company debt.
(16) Kuslima Shogen is the Chief Executive Officer and Chairman of the Board of
the Company. Ms. Shogen is also a principal stockholder of the Company. As
of the date hereof, Ms. Shogen's Option to purchase 379,678 shares is
exercisable as to 303,743 shares.
(17) Allen Siegel was a director of the Company until December 9, 1997 and
received his Options for services rendered. Mr. Siegel disclaims beneficial
ownership as to the shares owned by Ina Siegel, his wife.
(18) Includes 2,500 shares registered in the name of Mary M. Richards offered
hereby.
-19-
<PAGE>
PLAN OF DISTRIBUTION
Shares of Common Stock currently outstanding and shares of Common Stock
issuable upon exercise of the Warrants and Options may be sold pursuant to this
Prospectus by the Selling Stockholders. These sales may occur in privately
negotiated transactions or in the over-the-counter market through brokers and
dealers as agents or to brokers and dealers as principals, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or from the purchasers of the Common Stock for whom the
broker-dealers may act as agent or to whom they may sell as principal, or both.
Certain of the Selling Stockholders may also sell certain of their shares of
Common Stock pursuant to Rule 144 under the Securities Act. The Company has been
advised by the Selling Stockholders that they have not made any arrangements
relating to the distribution of the shares of Common Stock covered by this
Prospectus. In effecting sales, broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate. Broker-dealers
will receive commissions or discounts from the Selling Stockholders in amounts
to be negotiated immediately prior to the sale.
Upon being notified by a Selling Stockholder that any material arrangement
(other than a customary brokerage account agreement) has been entered into with
a broker or dealer for the sale of shares through a block trade, purchase by a
broker or dealer, or similar transaction, the Company will file a supplemented
Prospectus pursuant to Rule 424(c) under the Securities Act disclosing (a) the
name of each such broker-dealer, (b) the number of shares involved, (c) the
price at which such shares were sold, (d) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), (e) if applicable, that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in the Prospectus, as supplemented, and (f) any
other facts material to the transaction.
Certain of the Selling Stockholders and any broker-dealers who execute
sales for the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act by virtue of the number of shares of Common Stock
to be sold or resold by such persons or entities or the manner of sale thereof,
or both. If any of the Selling Stockholders, broker-dealers or other holders
were determined to be underwriters, any discounts, concessions or commissions
received by them or by brokers or dealers acting on their behalf and any profits
received by them on the resale of their shares of Common Stock might be deemed
underwriting discounts and commissions under the Securities Act.
The Selling Stockholders have represented to the Company that any purchase
or sale of the Common Stock by them will be in compliance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In general, Rule 102
under Regulation M ("Regulation M") under the Exchange Act prohibits any person
connected with a distribution of the Company's Common Stock (the "Distribution")
from directly or indirectly bidding for, or purchasing for any account in which
he has a beneficial interest, any Common Stock or any right to purchase Common
Stock, or attempting to induce any person to purchase Common Stock or rights to
purchase Common Stock, for a period of one business day prior to and subsequent
to completion of his participation in the Distribution (the "Distribution
Period").
During the Distribution Period, Rule 104 ("Rule 104") under Regulation M
prohibits the Selling Stockholders and any other person engaged in the
Distribution from engaging in any stabilizing bid or purchasing the Common Stock
except for the purpose of preventing or retarding a decline in the open market
price of the Common Stock. No such person may effect any stabilizing transaction
to facilitate any offering at the market. Inasmuch as the Selling Stockholders
will be reoffering and reselling the Common Stock at the market, Rule 104
prohibits them from effecting any stabilizing transaction in contravention of
Rule 104 with respect to the Common Stock.
-20-
<PAGE>
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been passed
on for the Company by Dorsey & Whitney LLP, New York, New York.
EXPERTS
The financial statements of Alfacell Corporation (a development stage
company) as of July 31, 1997 and 1996 and for each of the years in the
three-year period ended July 31, 1997, and for the period from August 24, 1981
(date of inception) to July 31, 1997, have been incorporated by reference herein
and in the Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP as it relates to the financial
statements for the period from August 24, 1981 (date of inception) to July 31,
1997 is based on the report of Armus Harrison as to the amounts included therein
for the period from August 24, 1981 (date of inception) to July 31, 1992,
although Armus Harrison has not consented to the use of such report herein and
will not be available to perform any subsequent review procedures with respect
to such report.
================================================================================
The financial statements of the Company from inception to July 31, 1992
incorporated by reference into this Registration Statement, were audited by the
independent accounting firm of Armus Harrison. The accounting firm of Armus
Harrison dissolved and ceased all operations in June, 1996. As a result of such
dissolution, investors seeking to sue and recover damages from Armus Harrison
for material misstatements or omissions, if any, in the registration statement
or prospectus, including the financial statements, may be unable to do so. Armus
Harrison has not consented to the use of its audit report and as a result,
investors seeking to recover damages pursuant to Section 11 of the Securities
Act against Armus Harrison for false and misleading statements, if any, may be
limited, and the lack of such consent may preclude directors or officers of the
Company from asserting a due diligence defense in connection with a Section 11
action.
================================================================================
-21-
