U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
July 31, 1997 0-11088
For the fiscal year ended Commission file number
ALFACELL CORPORATION
(Exact name of registrant as specified 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)
Registrant's telephone number, including area code: (973) 748-8082
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 Nasdaq SmallCap Market on October 10, 1997 was $48,764,742. As
of October 10, 1997 there were 14,847,793 shares of Common Stock, par value
$.001 per share, outstanding.
The Index to Exhibits appears on page 12.
Documents Incorporated by Reference
The registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on December 9, 1997, to be filed with the
Commission not later than 120 days after the close of the registrant's fiscal
year ended July 31, 1997, has been incorporated by reference, in whole or in
part, into Part III Items 10, 11, 12 and 13 of this Annual Report on Form 10-K.
The following trademarks appear in this Annual Report: ONCONASE(R) is a
registered trademark of Alfacell Corporation; Gemzar(R) is a registered
trademark of Eli Lilly & Co.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
Fiscal Years Ended July 31, 1997, 1996 and 1995
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 focuses most of its productive and financial resources on the
development of ONCONASE and as such has not had any sales in fiscal 1997, 1996
and 1995. Investment income for fiscal 1997 was $443,000 compared to $184,000
for fiscal 1996, an increase of $259,000. This increase was due to higher
balances of cash and cash equivalents. Investment income for fiscal 1996 was
$184,000 compared to $21,000 for fiscal 1995, an increase of $163,000.
Research and Development
Research and Development expense for fiscal 1997 was $3,863,000 for fiscal 1996,
an increase of $1,674,000 or 76%. This increase was primarily due to a 135%
increase in costs in support of ongoing clinical trials, including the Phase III
clinical trials for pancreatic cancer and the Phase II and III clinical trials
for malignant mesothelioma, a 269% increase in costs associated with the
purchase of raw materials for anticipated future production of ONCONASE, a 394%
increase in regulatory costs in preparation for an NDA for ONCONASE, and a 49%
increase in personnel costs.
Research and development expense for fiscal 1996 was $2,189,000 compared to
$1,206,000 for fiscal 1995, an increase of $983,000 or 82%. This increase was
primarily due to a 100% increase in costs associated with manufacturing clinical
supplies of ONCONASE and a 94% increase in costs in support of on-going clinical
trials, including the initial Phase III clinical trial for pancreatic cancer and
the Phase II clinical trial for malignant mesothelioma.
General and Administrative
General and administrative expense for fiscal 1997 was $1,476,000 compared to
$807,000 for fiscal 1996, an increase of $669,000 or 83%. This increase was
primarily due to an 84% increase in personnel costs, a 34% increase in legal
fees, a 139% increase in public relations expenses and a 330% increase in
insurance expenses.
General and administrative expense for fiscal 1996 was $807,000 compared to
$664,000 for fiscal 1995, an increase of $143,000 or 22%. This increase was
primarily due to a 90% increase in public relations expenses, a 22% increase in
legal fees and a 29% increase in accounting fees.
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Interest
Interest expense for fiscal 1997 was $123,000 compared to $131,000 in fiscal
1996, a decrease of $8,000 or 6%. The decrease was primarily due to a reduction
in the principal balance of the Company's Term Loan (as defined herein) and
reductions in related party and other short term payables.
Interest expense for fiscal 1996 was $131,000 compared to $144,000 in fiscal
1995, a decrease of $13,000 or 9%. The decrease in fiscal 1996 was primarily due
to the conversion of convertible subordinated debentures to common stock and a
reduction in short-term loans payable over the prior period.
Net Loss
The Company has incurred net losses during each year since its inception. The
net loss for fiscal 1997 was $5,019,000 as compared to $2,942,000 in fiscal 1996
and $1,993,000 in fiscal 1995. The cumulative loss from the date of inception,
August 24, 1981, to July 31, 1997 amounted to $45,410,000. 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
During fiscal 1997, the Company had a net decrease in cash of $589,000. This
decrease resulted from net cash used in operating activities of $4,107,000 and
net cash used in investing activities of $252,000, principally due to the
purchase of property and equipment, offset by the net cash provided by financing
activities of $3,770,000, primarily from proceeds from the exercise of stock
options and warrants and the private placement of common stock. Total cash
resources as of July 31, 1997 were $7,542,000 compared to $8,131,000 at July 31,
1996.
The Company's term loan agreement with its bank, (the "Term Loan") matured on
August 31, 1997. The entire principal amount outstanding on the Term Loan as of
July 31, 1997 was reflected as a current liability. This is the primary reason
for a significant increase in current liabilities as of July 31, 1997 compared
to July 31, 1996 and a significant decrease in long-term debt as of July 31,
1997 compared to July 31, 1996. The Company had a verbal agreement with the bank
to extend the maturity date of the loan until December 1, 1997, provided the
Company deposited a compensating balance in the amount of the principal balance
as of the date the extension was negotiated with the bank. On October 3, 1997,
the Company elected to pay the entire loan balance, including accrued interest,
in the amount of $1,376,646 out of its cash resources.
The Company's continued operations will depend on its ability to raise
additional funds through several potential sources such as equity or debt
financing, collaborative agreements, strategic alliances and revenues from the
commercial sale of ONCONASE. The Company is in discussions with several
potential collaborative partners for further development and marketing of
ONCONASE, however there can be no assurance that any such arrangements will be
consummated. In addition, the Company expects that its cash needs in the future
will increase due to the on-going clinical trials. The Company believes that its
cash and cash equivalents as of July 31, 1997, after giving effect to the
repayment of the Term Loan, will be sufficient to meet its anticipated cash
needs through the fiscal year ending July 31, 1998. To date, a significant
portion of the Company's financing has been through private placements of common
stock and warrants, the issuance of common stock for stock options exercised and
services rendered, debt financing and financing provided by the Company's Chief
Executive Officer. The Company's long-term liquidity
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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.
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.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". The new statement
replaces the calculations currently used with "basic earnings per share" that
includes only actual weighted shares outstanding and "diluted earnings per
share" that includes the effect of any common stock equivalents or other items
that dilute earnings per share. The new rules are effective for the Company in
the upcoming year and are retroactively applied to the previous quarterly
periods. The adoption of this statement is not expected to be material.
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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: January 15, 1998 /s/ GAIL E. FRASER
Gail E. Fraser, Chief Financial Officer,
Vice President of Finance, (Principal
Financial Officer and Principal
Accounting Officer) and Director
