UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
quarterly period ended: April 30, 2009
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ___________________________ to
______________________________
Commission
File Number: 0-11088
ALFACELL
CORPORATION
(Exact
name of registrant as specified in its charter)
|
Delaware
|
|
22-2369085
|
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer Identification No.)
|
|
organization)
|
|
|
300 Atrium Drive, Somerset,
NJ 08873
(Address
of principal executive
offices) (Zip
Code)
(732)
652-4525
(Registrant’s
telephone number, including area code)
NOT
APPLICABLE
(Former
name, former address, and former fiscal year, if changed since last
report.)
Indicate
by check mark whether the registrant has (1) 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 whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).
Yes ¨ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definitions of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act. Large Accelerated Filer ¨ Accelerated
Filer x Non-accelerated
Filer ¨
Smaller Reporting Company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x
The
number of shares of Common Stock, $.001 par value, outstanding as of June 8,
2009 was 47,313,880
shares.
PART
I. FINANCIAL INFORMATION
Item
1. Financial
Statements
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
BALANCE SHEETS
April 30,
2009 and July 31, 2008
|
|
|
April
30, 2009
(Unaudited)
|
|
|
July
31, 2008
(See Note 1)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
646,488 |
|
|
$ |
4,661,656 |
|
|
Prepaid
expenses
|
|
|
85,043 |
|
|
|
165,259 |
|
|
Total
current assets
|
|
|
731,531 |
|
|
|
4,826,915 |
|
|
Property
and equipment, net of accumulated depreciation and amortization of
$369,008 at April 30, 2009 and $342,031 at July 31, 2008
|
|
|
116,144 |
|
|
|
143,121 |
|
|
Other
assets
|
|
|
350,000 |
|
|
|
350,000 |
|
|
Total
assets
|
|
$ |
1,197,675 |
|
|
$ |
5,320,036 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
989,381 |
|
|
$ |
1,252,478 |
|
|
Accrued
clinical trial expenses
|
|
|
569,191 |
|
|
|
882,386 |
|
|
Accrued
professional service fees
|
|
|
334,258 |
|
|
|
511,779 |
|
|
Accrued
compensation expense
|
|
|
367,518 |
|
|
|
227,803 |
|
|
Current
portion of obligations under capital lease
|
|
|
4,070 |
|
|
|
3,453 |
|
|
Other
accrued expenses
|
|
|
5,637 |
|
|
|
4,135 |
|
|
Total
current liabilities
|
|
|
2,270,055 |
|
|
|
2,882,034 |
|
|
Other
liabilities:
|
|
|
|
|
|
|
|
|
|
Obligations
under capital lease, net of current portion
|
|
|
13,806 |
|
|
|
16,940 |
|
|
Accrued
retirement benefits
|
|
|
280,500 |
|
|
|
510,000 |
|
|
Deferred
rent
|
|
|
286,620 |
|
|
|
267,668 |
|
|
Deferred
revenue
|
|
|
5,200,000 |
|
|
|
5,200,000 |
|
|
Total
other liabilities
|
|
|
5,780,926 |
|
|
|
5,994,608 |
|
|
Total
liabilities
|
|
|
8,050,981 |
|
|
|
8,876,642 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficiency:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value. Authorized and unissued, 1,000,000
shares at April 30, 2009 and July 31, 2008
|
|
|
– |
|
|
|
– |
|
|
Common
stock $.001 par value. Authorized 100,000,000 shares at April
30, 2009 and July 31, 2008; issued and outstanding 47,313,880 shares and
47,276,880 shares at April 30, 2009 and July 31, 2008,
respectively
|
|
|
47,314 |
|
|
|
47,277 |
|
|
Capital
in excess of par value
|
|
|
101,645,146 |
|
|
|
100,788,973 |
|
|
Deficit
accumulated during development stage
|
|
|
(108,545,766 |
) |
|
|
(104,392,856 |
) |
|
Total
stockholders’ deficiency
|
|
|
(6,853,306 |
) |
|
|
(3,556,606 |
) |
|
Total
liabilities and stockholders’ deficiency
|
|
$ |
1,197,675 |
|
|
$ |
5,320,036 |
|
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
STATEMENTS OF OPERATIONS
Three and
nine months ended April 30, 2009 and 2008,
and the
Period from August 24, 1981
(Date of
Inception) to April 30, 2009
(Unaudited)
|
|
|
Three
Months Ended
April
30,
|
|
|
Nine
Months Ended
April
30,
|
|
|
August
24, 1981
(Date
of
Inception) to
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
April 30, 2009
|
|
|
Sales
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
553,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
336,495 |
|
|
Research
and development
|
|
|
361,766 |
|
|
|
2,704,980 |
|
|
|
3,187,000 |
|
|
|
6,354,271 |
|
|
|
72,500,532 |
|
|
General
and administrative
|
|
|
333,949 |
|
|
|
2,386,992 |
|
|
|
2,127,658 |
|
|
|
5,032,243 |
|
|
|
40,660,426 |
|
|
Total
operating expenses
|
|
|
695,715 |
|
|
|
5,091,972 |
|
|
|
5,314,658 |
|
|
|
11,386,514 |
|
|
|
113,497,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(695,715 |
) |
|
|
(5,091,972 |
) |
|
|
(5,314,658 |
) |
|
|
(11,386,514 |
) |
|
|
(112,943,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
1,000 |
|
|
|
67,028 |
|
|
|
25,083 |
|
|
|
193,598 |
|
|
|
2,301,531 |
|
|
Other
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
99,939 |
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
parties, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,147,547 |
) |
|
Others
|
|
|
(1,021 |
) |
|
|
(1,195 |
) |
|
|
(3,202 |
) |
|
|
(2,452 |
) |
|
|
(2,880,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before state tax benefit
|
|
|
(695,736 |
) |
|
|
(5,026,139 |
) |
|
|
(5,292,777 |
) |
|
|
(11,195,368 |
) |
|
|
(114,571,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
tax benefit
|
|
|
- |
|
|
|
- |
|
|
|
1,139,867 |
|
|
|
1,755,380 |
|
|
|
6,025,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(695,736 |
) |
|
$ |
(5,026,139 |
) |
|
$ |
(4,152,910 |
) |
|
$ |
(9,439,988 |
) |
|
$ |
(108,545,766 |
) |
|
Loss
per basic and diluted common share
|
|
$ |
(0.01 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
47,313,880 |
|
|
|
47,122,191 |
|
|
|
47,312,744 |
|
|
|
46,802,187 |
|
|
|
|
|
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
STATEMENT OF STOCKHOLDERS' DEFICIENCY
Period
from July 31, 2008 to April 30, 2009
(Unaudited)
|
|
|
Common
Stock
|
|
|
Capital
In
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Value
|
|
|
|
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 31, 2008
|
|
|
47,276,880 |
|
|
$ |
47,277 |
|
|
$ |
100,788,973 |
|
|
$ |
(104,392,856 |
) |
|
$ |
(3,556,606 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of stock options and warrants
|
|
|
37,000 |
|
|
|
37 |
|
|
|
13,183 |
|
|
|
— |
|
|
|
13,220 |
|
|
Share-based
compensation
|
|
|
— |
|
|
|
— |
|
|
|
842,990 |
|
|
|
— |
|
|
|
842,990 |
|
|
Net
loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,152,910 |
) |
|
|
(4,152,910 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at April 30, 2009
|
|
|
47,313,880 |
|
|
$ |
47,314 |
|
|
$ |
101,645,146 |
|
|
$ |
(108,545,766 |
) |
|
$ |
(6,853,306 |
) |
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS
Nine
months ended April 30, 2009 and 2008,
and the
Period from August 24, 1981
(Date of
Inception) to April 30, 2009
(Unaudited)
|
|
|
Nine
Months Ended
April 30,
|
|
|
August
24, 1981
(Date
of Inception)
to
|
|
|
|
|
2009
|
|
|
2008
|
|
|
April 30, 2009
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(4,152,910 |
) |
|
$ |
(9,439,988 |
) |
|
$ |
(108,545,766 |
) |
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on sale of marketable equity securities
|
|
|
- |
|
|
|
- |
|
|
|
(25,963 |
) |
|
Depreciation
and amortization
|
|
|
26,977 |
|
|
|
37,836 |
|
|
|
1,737,468 |
|
|
Loss
on disposal of property and equipment
|
|
|
- |
|
|
|
- |
|
|
|
18,926 |
|
|
Loss
on lease termination
|
|
|
- |
|
|
|
- |
|
|
|
30,964 |
|
|
Share-based
compensation
|
|
|
842,990 |
|
|
|
2,868,570 |
|
|
|
13,774,506 |
|
|
Amortization
of deferred rent
|
|
|
18,952 |
|
|
|
116,846 |
|
|
|
188,656 |
|
|
Amortization
of debt discount
|
|
|
- |
|
|
|
- |
|
|
|
594,219 |
|
|
Amortization
of deferred compensation
|
|
|
- |
|
|
|
- |
|
|
|
11,442,000 |
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in prepaid expenses
|
|
|
80,216 |
|
|
|
(75,059 |
) |
|
|
(144,910 |
) |
|
Decrease
in loan receivable, related party
|
|
|
- |
|
|
|
180,397 |
|
|
|
96,051 |
|
|
Decrease
(increase) in other assets
|
|
|
- |
|
|
|
35,000 |
|
|
|
(350,000 |
) |
|
Increase
in interest payable-related party
|
|
|
- |
|
|
|
- |
|
|
|
744,539 |
|
|
(Decrease)
increase in accounts payable
|
|
|
(263,097 |
) |
|
|
904,043 |
|
|
|
1,496,016 |
|
|
Increase
in accrued payroll and expenses, related parties
|
|
|
- |
|
|
|
- |
|
|
|
2,348,145 |
|
|
(Decrease)
increase in accrued retirement benefits
|
|
|
(500 |
) |
|
|
612,000 |
|
|
|
611,500 |
|
|
(Decrease)
increase in accrued expenses
|
|
|
(578,499 |
) |
|
|
21,497 |
|
|
|
1,664,487 |
|
|
Increase
in deferred revenue
|
|
|
- |
|
|
|
5,100,000 |
|
|
|
5,200,000 |
|
|
Net
cash (used in) provided by operating activities
|
|
|
(4,025,871 |
) |
|
|
361,142 |
|
|
|
(69,119,162 |
) |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of marketable equity securities
|
|
|
- |
|
|
|
- |
|
|
|
(290,420 |
) |
|
Purchase
of short-term investments
|
|
|
- |
|
|
|
- |
|
|
|
(1,993,644 |
) |
|
Proceeds
from sale of marketable equity securities
|
|
|
- |
|
|
|
- |
|
|
|
316,383 |
|
|
Proceeds
from sale of short-term investments
|
|
|
- |
|
|
|
- |
|
|
|
1,993,644 |
|
|
Capital
expenditures
|
|
|
- |
|
|
|
(32,315 |
) |
|
|
(1,605,066 |
) |
|
Patent
costs
|
|
|
- |
|
|
|
- |
|
|
|
(97,841 |
) |
|
Net
cash used in investing activities
|
|
|
- |
|
|
|
(32,315 |
) |
|
|
(1,676,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued)
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS, Continued
Nine
months ended April 30, 2009 and 2008,
and the
Period from August 24, 1981
(Date of
Inception) to April 30, 2009
(Unaudited)
|
|
|
Nine
Months Ended
April 30,
|
|
|
August
24, 1981
(Date
of Inception)
to
|
|
|
|
|
2009
|
|
|
2008
|
|
|
April 30, 2009
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from short-term borrowings
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
874,500 |
|
|
Payment
of short-term borrowings
|
|
|
- |
|
|
|
- |
|
|
|
(653,500 |
) |
|
Increase
in loans payable - related party, net
|
|
|
- |
|
|
|
- |
|
|
|
2,628,868 |
|
|
Proceeds
from bank debt and other long-term debt, net of costs
|
|
|
- |
|
|
|
- |
|
|
|
3,667,460 |
|
|
Reduction
of bank debt and long-term debt
|
|
|
- |
|
|
|
- |
|
|
|
(2,966,568 |
) |
|
Payment
of capital lease obligation
|
|
|
(2,517 |
) |
|
|
(2,633 |
) |
|
|
(5,902 |
) |
|
Proceeds
from issuance of common stock, net
|
|
|
- |
|
|
|
- |
|
|
|
53,102,893 |
|
|
Proceeds
from exercise of stock options and warrants, net
|
|
|
13,220 |
|
|
|
549,540 |
|
|
|
14,080,850 |
|
|
Proceeds
from issuance of convertible debentures, related party
|
|
|
- |
|
|
|
- |
|
|
|
297,000 |
|
|
Proceeds
from issuance of convertible debentures,
unrelated party
|
|
|
- |
|
|
|
- |
|
|
|
416,993 |
|
|
Net
cash provided by financing activities
|
|
|
10,703 |
|
|
|
546,907 |
|
|
|
71,442,594 |
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(4,015,168 |
) |
|
|
875,734 |
|
|
|
646,488 |
|
|
Cash
and cash equivalents at beginning of period
|
|
|
4,661,656 |
|
|
|
6,968,172 |
|
|
|
- |
|
|
Cash
and cash equivalents at end of period
|
|
$ |
646,488 |
|
|
$ |
7,843,906 |
|
|
$ |
646,488 |
|
|
Supplemental
disclosure of cash flow information – interest paid
|
|
$ |
3,202 |
|
|
$ |
2,452 |
|
|
$ |
1,721,035 |
|
|
Noncash
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of convertible subordinated debenture for loan payable to
officer
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,725,000 |
|
|
Issuance
of common stock upon the conversion of convertible subordinated
debentures, related party
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,242,000 |
|
|
Conversion
of short-term borrowings to common stock
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
226,000 |
|
|
Conversion
of accrued interest, payroll and expenses by related parties to stock
options
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,194,969 |
|
|
Repurchase
of stock options from related party
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(198,417 |
) |
|
Conversion
of accrued interest to stock options
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
142,441 |
|
|
Conversion
of accounts payable to common stock
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
506,725 |
|
(continued)
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS, Concluded
Nine
months ended April 30, 2009 and 2008,
and the
Period from August 24, 1981
(Date of
Inception) to April 30, 2009
(Unaudited)
|
|
|
Nine
Months Ended
April 30,
|
|
|
August
24, 1981
(Date
of
Inception)
to
|
|
|
|
|
2009
|
|
|
2008
|
|
|
April 30, 2009
|
|
|
Conversion
of notes payable, bank and accrued interest to long-term
debt
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,699,072 |
|
|
Conversion
of loans and interest payable, related party and accrued payroll and
expenses, related parties to long-term accrued
payroll and other, related party
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,863,514 |
|
|
Issuance
of common stock upon the conversion of convertible subordinated
debentures, other
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,584,364 |
|
|
Issuance
of common stock for services rendered
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,460 |
|
|
Lease
incentive allowance
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
67,000 |
|
|
Issuance
of warrants with notes payable
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
594,219 |
|
|
Acquisition
of equipment through capital lease obligation
|
|
$ |
- |
|
|
$ |
23,778 |
|
|
$ |
23,778 |
|
See
accompanying notes to condensed financial statements.
ALFACELL
CORPORATION
(A
Development Stage Company)
NOTES TO
CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1.
ORGANIZATION AND BASIS OF
PRESENTATION
In the opinion of management, the
accompanying unaudited condensed financial statements of Alfacell Corporation
(“Alfacell” or the “Company”) have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not contain all of the information and
notes required by U.S. GAAP for complete financial statements. In the
opinion of the management, the accompanying unaudited condensed interim
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company’s financial position as of
April 30, 2009, the results of its operations for the three and nine months
ended April 30, 2009 and 2008, and the period from August 24, 1981 (date of
inception) to April 30, 2009, the changes in stockholders’ deficiency for the
nine months ended April 30, 2009, and its cash flows for the nine month periods
ended April 30, 2009 and 2008, and the period from August 24, 1981 (date of
inception) to April 30, 2009. The results of operations for the three and
nine months ended April 30, 2009 are not necessarily indicative of operating
results for fiscal year 2009 or future interim periods. The July 31,
2008 balance sheet presented herein has been derived from the audited financial
statements included in the Company’s Annual Report on Form 10-K for the fiscal
year ended July 31, 2008, filed with the Securities and Exchange
Commission.
Certain footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
in accordance with the rules and regulations of the Securities and Exchange
Commission. The condensed financial statements in this report should
be read in conjunction with the financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31,
2008.
The Company is a development stage
company as defined in Statement of Financial Accounting Standards (“SFAS”) No.
7, “Accounting and Reporting by Development Stage Enterprises.” The
Company is devoting substantially all of its present efforts to establishing its
business. Its planned principal operations have not commenced and,
accordingly, no significant revenue has been derived therefrom.
The Company is continuing to develop
its drug product candidates, which require substantial capital for research,
product development, and market development activities. The Company
has not yet initiated marketing of a commercial drug product. Future product
development will require clinical testing, regulatory approval, and substantial
additional investment prior to commercialization. The future success
of the Company is dependent on its ability to make progress in the development
of its drug product candidates and, ultimately, upon its ability to attain
future profitable operations through the successful manufacturing and marketing
of those drug product candidates. There can be no assurance that the
Company will be able to obtain the necessary financing or regulatory approvals
to be able to successfully develop, manufacture, and market its products, or
attain successful future operations. Accordingly, the Company’s
future success is uncertain.
2.
LIQUIDITY
The Company has reported net losses of
approximately $696,000 and $4,153,000 for the three and nine months ended April
30, 2009, respectively, and $12,321,000, $8,755,000 and $7,810,000 for the
fiscal years ended July 31, 2008, 2007 and 2006, respectively. As of
April 30, 2009, the Company had a working capital deficit of approximately
$1,539,000 and cash and cash equivalents of approximately
$646,000. The loss from date of inception, August 24, 1981, to April
30, 2009 amounts to approximately $108,546,000.
The Company expects that its cash
balances as of April 30, 2009, will be sufficient to support its activities
through July 2009, based upon its reduced level of operations. The
Company’s continued operations will depend on its ability to raise additional
capital or conclude a strategic transaction which may include a strategic
partnership or a possible sale of the Company or its assets. Such
additional funds and various alternatives may not become available as the
Company may need them or be available on terms acceptable to the Company, if at
all. The Company may also obtain additional capital through the sale
of its tax benefit, if any, although there is no assurance that such sale will
take place due to the current restructuring of the Company’s overall
operations.
The audit report of the Company’s
independent registered public accounting firm on the Company’s fiscal year ended
July 31, 2008 financial statements expressed substantial doubt about the
Company’s ability to continue as a going concern. Continued
operations are dependent on the Company’s ability to raise additional capital
from various sources such as those described above. Such capital
raising opportunities may not be available or may not be available on reasonable
terms. The Company’s financial statements do not include any
adjustments that may result from the outcome of this uncertainty.
The
following table sets forth the computation of basic and diluted net loss per
common share:
|
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(695,736 |
) |
|
$ |
(5,026,139 |
) |
|
$ |
(4,152,910 |
) |
|
$ |
(9,439,988 |
) |
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
outstanding
|
|
|
47,313,880 |
|
|
|
47,122,191 |
|
|
|
47,312,744 |
|
|
|
46,802,187 |
|
|
Loss
per common share - basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
Potentially
dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
11,582,283 |
|
|
|
15,122,534 |
|
|
|
11,582,283 |
|
|
|
15,122,534 |
|
|
Stock
options
|
|
|
4,771,650 |
|
|
|
6,423,067 |
|
|
|
4,771,650 |
|
|
|
6,423,067 |
|
|
Total
potentially dilutive securities
|
|
|
16,353,933 |
|
|
|
21,545,601 |
|
|
|
16,353,933 |
|
|
|
21,545,601 |
|
As the
Company has incurred a net loss for all periods presented, basic and diluted per
common share amounts are the same, since the inclusion of all potentially
dilutive securities would be anti-dilutive.
4.
SHARE-BASED
COMPENSATION
Effective
August 1, 2005, the Company adopted SFAS 123(R), “Share-Based Payment” (“SFAS
123(R)”), which requires all share-based payments, including stock option grants
to employees, to be recognized as an operating expense in the statement of
operations. The expense is recognized over the requisite service
period based on fair values measured on the date of grant. The
Company adopted SFAS 123(R) using the modified prospective method and,
accordingly, prior period amounts have not been restated. Under the
modified prospective method, the fair value of all new stock options issued
after July 31, 2005 and the unamortized fair market value of unvested
outstanding stock options at August 1, 2005 are recognized as expense as
services are rendered.
Shares,
warrants and options issued to non-employees for services are accounted for in
accordance with SFAS 123(R) and Emerging Issues Task Force Issue (“EITF”) No.
96-18, “Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring or In Conjunction with Selling Goods or Services” (“EITF
96-18”). The fair value of such securities is recorded as an expense
and capital in excess of par value in stockholders’ equity over the applicable
service periods using variable accounting through the vesting date based on the
fair market value of the securities at the end of each period or the vesting
date.
The
Company recorded the following share-based compensation expense under SFAS
123(R) and EITF 96-18 based on the fair value of stock options.
|
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Research
and development
|
|
$ |
35,767 |
|
|
$ |
482,917 |
|
|
$ |
303,911 |
|
|
$ |
1,425,315 |
|
|
General
and administrative
|
|
|
42,884 |
|
|
|
520,864 |
|
|
|
539,079 |
|
|
|
1,443,255 |
|
|
Total
share-based compensation expense
|
|
$ |
78,651 |
|
|
$ |
1,003,781 |
|
|
$ |
842,990 |
|
|
$ |
2,868,570 |
|
|
Basic
and diluted loss per common share
|
|
$ |
0.00 |
|
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.06 |
|
The fair
value of the stock options at the grant dates was estimated using the
Black-Scholes option pricing model based on the weighted-average assumptions as
noted in the following table. In accordance with SFAS 123(R), the
calculated Black-Scholes value was reduced by applying a forfeiture rate, based
upon historical pre-vesting cancellations of stock options. Estimated
forfeitures are reassessed at each reporting period and may change based on new
facts and circumstances. The risk-free interest rate for periods
approximating the expected life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant. The expected stock price
volatility is based on the historical volatility of the Company’s stock
price. For post July 31, 2005 grants, the expected term until
exercise is derived using the “simplified” method as allowed under the
provisions of the Securities and Exchange Commission’s Staff Accounting Bulletin
No. 110, and represents the period of time that options granted are expected to
be outstanding. The “simplified” method was used since the Company
does not have sufficient historical data to provide a basis to estimate a
justifiable expected term. There were no stock options granted during
the three months ended April 30, 2009.
4.
SHARE-BASED COMPENSATION,
Concluded
|
|
|
Three
Months Ended
April 30,
|
|
|
Nine
Months Ended
April 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
dividend yield
|
|
|
- |
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
Risk-free
interest rate
|
|
|
- |
|
|
|
3.65 |
% |
|
|
1.00 |
% |
|
|
3.45 |
% |
|
Expected
stock price volatility
|
|
|
- |
|
|
|
114.41 |
% |
|
|
102.13 |
% |
|
|
108.17 |
% |
|
Expected
term (years)
|
|
|
- |
|
|
|
9.0 |
|
|
|
3.5 |
|
|
|
7.53 |
|
|
Weighted
average grant date fair value
|
|
|
- |
|
|
$ |
1.84 |
|
|
$ |
0.16 |
|
|
$ |
1.64 |
|
The
following table summarizes the stock option activity for the period August 1,
2008 to April 30, 2009:
|
|
|
Stock
Options
Outstanding
|
|
|
Weighted
Average
Exercise
Price
Per
Share
|
|
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
August 1, 2008
|
|
|
6,353,067 |
|
|
$ |
2.69 |
|
|
|
6.72 |
|
|
|
|
|
Granted
|
|
|
265,000 |
|
|
|
0.24 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(37,000 |
) |
|
|
0.36 |
|
|
|
|
|
|
$ |
8,126 |
|
|
Expired
|
|
|
(1,512,905 |
) |
|
|
2.74 |
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(296,512 |
) |
|
|
1.42 |
|
|
|
|
|
|
|
|
|
|
Balance
April 30, 2009
|
|
|
4,771,650 |
|
|
|
2.64 |
|
|
|
4.95 |
|
|
|
|
|
|
Exercisable
as of April 30, 2009
|
|
|
3,410,650 |
|
|
|
3.02 |
|
|
|
3.58 |
|
|
|
|
|
|
Unvested
as of April 30, 2009
|
|
|
1,361,000 |
|
|
|
1.67 |
|
|
|
8.38 |
|
|
|
|
|
As of
April 30, 2009, there was approximately $963,000 of total unrecognized
compensation expense related to unvested options granted that is expected to be
recognized over a weighted average period of 2.57 years.
5. OTHER
ASSETS
|
Lease
security deposit held by a bank as collateral for a standby letter of
credit in favor of the Company. The cash held by the bank is
restricted as to use for the term of the standby letter of
credit.
|
|
$ |
350,000 |
|
6. SALE OF NET OPERATING LOSS
CARRYFORWARDS
New
Jersey permits certain corporations located in New Jersey to sell a portion of
their state tax loss carryforwards and state research and development
credits. For the state fiscal year 2009 (July 1, 2008 to June 30,
2009), the Company had approximately $1,274,000 of total available state tax
benefit that was saleable. On December 1, 2008, the Company received
approximately $1,140,000 from the sale of its total available state tax benefit,
which was recognized as state tax benefit for the nine months ended April 30,
2009.
6. SALE OF NET OPERATING LOSS
CARRYFORWARDS, Concluded
For the
state fiscal year 2008 (July 1, 2007 to June 30, 2008), the Company had
approximately $2,496,000 of total available state tax benefit that was saleable,
of which New Jersey permitted the Company to sell approximately
$1,969,000. In December 2007, the Company received approximately
$1,755,000 from the sale of the $1,969,000 saleable state tax benefit, which was
recognized as state tax benefit for the nine months ended April 30,
2008.
7. COMMITMENTS AND
CONTINGENCIES
Employment
and Retirement Agreements
Since
July 31, 2008, there have been no material changes with respect to the Company’s
employment and retirement agreements as disclosed in the “Notes to the Financial
Statements – Commitments” in the Company’s Annual Report on Form 10-K for the
fiscal year ended July 31, 2008.
Lease
Commitments
Since July 31, 2008, there have been no
material changes with respect to the Company’s operating leases as disclosed in
the “Notes to the Financial Statements – Commitments” in the Company’s Annual
Report on Form 10-K for the fiscal year ended July 31, 2008.
Contingencies
The
Company has product liability insurance coverage for clinical trials in the U.S.
and in other countries where it conducts its clinical trials. No product
liability claims have been filed against the Company. If a claim arises and the
Company is found liable in an amount that significantly exceeds the policy
limits, it may have a material adverse effect upon the financial condition and
results of operations of the Company.
Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Information herein contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. All statements, other than statements of
historical fact, regarding our financial position, potential, business strategy,
plans and objectives for future operations are “forward-looking
statements.” These statements are commonly identified by the use of
forward-looking terms and phrases as “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “may,” “seeks,” “should,” or “will” or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. We cannot assure you that the future results
covered by these forward-looking statements will be achieved. The
matters set forth in Part I, Item 1A. “Risk Factors” in our most recent Annual
Report on Form 10-K, filed on October 14, 2008, and as such risk factors have
been revised in Part II, Item 1A “Risk Factors” in the quarterly report on Form
10-Q for the quarter ended January 31, 2009, constitute cautionary statements
identifying important factors with respect to these forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
vary significantly from the future results indicated in these forward-looking
statements. Other factors could also cause actual results to differ
significantly from the future results indicated in these forward-looking
statements.
Overview
We are a biopharmaceutical company
engaged in the research, development, and commercialization of drugs for life
threatening-diseases, such as malignant mesothelioma and other
cancers. Our corporate strategy is to become a leader in the
discovery, development, and commercialization of novel ribonuclease (RNase)
therapeutics for cancer and other life-threatening diseases. As of
April 30, 2009, we had four full time employees who conducted all administrative
and research and development operations at our facility in Somerset,
NJ.
We are a
development stage company as defined in the Financial Accounting Standards
Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”)
No. 7, “Accounting and Reporting by Development Stage Enterprises” (“SFAS
7”). We are devoting substantially all of our present efforts to
establishing a new business and developing new drug products. Our planned
principal operations of marketing and/or licensing new drugs have not commenced
and, accordingly, we have not derived any significant revenue from these
operations.
Since
our inception in 1981, we have devoted the vast majority of our resources to the
research and development of ONCONASE®, our
lead drug candidate, as well as other related drug candidates. In
recent years we have focused our resources towards the completion of the
clinical program for ONCONASE® in
patients suffering from unresectable, or inoperable, malignant mesothelioma
(“UMM”). We have incurred losses since inception and we have not
received Food and Drug Administration (“FDA”) approval of any of our drug
candidates. We expect to continue to incur losses for the foreseeable
future as we continue our research and development activities. Until
we are able to consistently generate revenue through the sale of products, we
anticipate that we will be required to fund the development of our pre-clinical
compounds and drug product candidates primarily by other means, including, but
not limited to, licensing the development or marketing rights to some of our
drug candidates to third parties, collaborating with third parties to develop
our drug candidates, or selling Company issued securities.
ONCONASE® has been
granted orphan drug designation by the FDA. Orphan drug designation permits us
to be awarded seven years of marketing exclusivity for ONCONASE® for the
malignant mesothelioma indication upon FDA approval for this
indication. Other benefits for which we are eligible with the orphan
drug designation include protocol assistance by the FDA in the preparation of a
dossier
that will
meet regulatory requirements, tax credits, research and development grant
funding, and reduced filing fees for the marketing
application. Previously, our ONCONASE®
development program received Fast Track Designation from the FDA for the
treatment of malignant mesothelioma patients.
We
also have received an Orphan Medicinal Product Designation for ONCONASE® from the
European Agency for the Evaluation of Medicinal Products, or EMEA, as well as
Orphan Drug Designation for ONCONASE® for
malignant mesothelioma in Australia from the Therapeutics Goods Administration,
or TGA. Orphan drug designation from these agencies provides benefits
such as marketing exclusivity, reduced filing fees and regulatory
guidance.
On May 28, 2008, we announced that the
results of the preliminary statistical analysis of data from our ONCONASE®
confirmatory Phase IIIb clinical trial did not meet statistical significance for
the primary endpoint of survival in UMM. However, a statistically significant
improvement in survival was seen in the treatment of UMM patients who failed one
prior chemotherapy regimen, a currently unmet medical need and one of the
predefined primary sub-group data sets for patients in the trial. In
January 2009, we met with the FDA to discuss our proposed NDA submission of the
final components of the ONCONASE® rolling
NDA. At the pre-NDA meeting, the FDA recommended that an additional
clinical trial be conducted in UMM patients that have failed one prior
chemotherapy regimen, prior to filing an NDA.
During the quarter, Charles Muniz, a
long time supporter and significant stockholder of Alfacell, was brought in at
the direction of our board of directors (“Board”), to conduct a thorough review
of our operations. His assignment included, but was not limited to a
complete review of our management as well as our clinical, scientific,
regulatory, finance, and business development operations. He was also
asked to conduct a thorough review of our Phase III clinical trial in malignant
mesothelioma. After conducting his review, Mr. Muniz was asked to
implement a restructuring of our overall operations. Mr. Muniz was
later elected to our Board and as our President, Chief Operating Officer and
Chief Financial Officer (“CFO”). Also,
during the quarter, Lawrence A. Kenyon resigned as our acting President, CFO,
Corporate Secretary and member of the board of directors and
Kuslima Shogen, our Chief Executive Officer, acting CFO and scientific founder
retired pursuant to a previously reported retirement agreement. Dr. Shogen
remains a member of our board of directors.
Almost all of the $72.5 million of
research and development expenses we have incurred since our inception has gone
toward the development of ONCONASE® and
related drug candidates. For the three and nine months ended April
30, 2009 and for fiscal years ended July 31, 2008, 2007 and 2006, our research
and development expenses were approximately $0.4 million, $3.2 million, $8.5
million, $5.5 million, and $5.2 million, respectively, almost all of which were
used for the development of ONCONASE® and
related drug candidates. We cannot predict with certainty what our
total cost associated with obtaining marketing approvals will be, and we are
unable to predict when and if such approvals will be granted, or if and when
actual sales will occur.
We fund the research and development of
our products primarily from cash receipts resulting from the sale of our equity
securities and convertible debentures in registered offerings and private
placements. Additionally, we have raised capital through other debt
financings, the sale of our tax benefits and research products, interest income
and financing received from our retired Chief Executive
Officer. During the nine months ended April 30, 2009, we received
gross proceeds of $13,220 from exercises of stock options and approximately $1.1
million from the sale of our total available tax benefits. Our
current cash reserves will be used to continue our operations and to explore
strategic alternatives. We have incurred losses since inception and
in order to continue our operations we will need to obtain additional capital or
conclude a strategic transaction, which could involve the possible sale of our
Company or our assets.
Liquidity
and Capital Resources
We have
reported cumulative net losses of approximately $28.9 million for the three most
recent fiscal years ended July 31, 2008. The net losses from date of
inception, August 24, 1981, to April 30, 2009 amount to approximately $108.5
million. As of April 30, 2009, we have a working capital deficit of
approximately $1.5 million.
We have
financed our operations since inception primarily through the sale of our equity
securities and convertible debentures in registered offerings and private
placements. Additionally, we have raised capital through other debt
financings, the sale of our state tax benefit and research products, and
investment income and financing received from our retired Chief Executive
Officer. As of April 30, 2009, we had approximately $0.6 million
in cash and cash equivalents. We effected a reduction in force in
January 2009 and have otherwise reduced our operations to the minimum
sustainable level required to pursue strategic alternatives and additional
capital. Based upon these actions, we currently believe that our cash
reserves can support our activities through July 2009.
The
primary use of cash will be to continue our operations while we seek additional
capital or strategic alternatives. We will need to obtain additional
financing or conclude a strategic transaction in order to continue our
operations and continue to seek marketing approval for ONCONASE®. Given
current market conditions, it may be extremely difficult, if not impossible, to
obtain such financing. Strategic transactions may not be available
when needed or on terms acceptable to us. We may also obtain
additional capital through the sale of our tax benefit, if any, although there
is no assurance that such sale will take place due to the current restructuring
of our overall operations.
The audit
report of our independent registered public accounting firm on our fiscal year
ended July 31, 2008 financial statements expressed substantial doubt about our
ability to continue as a going concern. Continued operations are
dependent on our ability to raise additional capital from various sources such
as those described above. Such capital raising opportunities may not
be available or may not be available on reasonable terms. Our
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.
Results
of Operations
Three month periods ended
April 30, 2009 and 2008
We focus most of our productive and
financial resources on the development of ONCONASE® and as
such we did not have any sales in the three month periods ended April 30, 2009
and 2008.
Research
and development expense for the three month period ended April 30, 2009 was
approximately $0.4 million compared to approximately $2.7 million for the same
period in 2008, a decrease of approximately $2.3 million, or 86%. The
decrease was primarily related to decreased expenses of approximately $1.7
million related to costs incurred for the ONCONASE® rolling
NDA submission of our confirmatory Phase IIIb ONCONASE® clinical
trial; and decreased compensation expense of approximately $0.6 million from
decreased share-based compensation expense.
General
and administrative expense for the three month period ended April 30, 2009 was
approximately $0.3 million compared to approximately $2.4 million for the same
period in 2008, a decrease of approximately $2.1 million, or
86%. This decrease was primarily due to decreased compensation
expense of approximately $1.8 million, mostly related to the retirement
agreement executed
by our
chief executive officer in 2008 and share-based compensation; decreased legal
and professional fees of approximately $0.2 million; and decreased general
office expenses of approximately $0.1 million.
The net
loss for the three month period ended April 30, 2009 was approximately $0.7
million as compared to $5.0 million for the same period last year, a decrease of
approximately $4.3 million.
Nine month periods ended
April 30, 2009 and 2008
We focus most of our productive and
financial resources on the development of ONCONASE® and as
such we did not have any sales in the nine month periods ended April 30, 2009
and 2008.
Research
and development expense for the nine month period ended April 30, 2009 was
approximately $3.2 million compared to approximately $6.4 million for the same
period in 2008, a decrease of approximately $3.2 million, or 50%. The
decrease was primarily due to decreased expenses of approximately $1.9 million
related to costs incurred for the ONCONASE® rolling
NDA submission of our confirmatory Phase IIIb ONCONASE® clinical
trial; decreased compensation expense of approximately $1.0 million, mostly
related to share-based compensation expense; and a decrease of approximately
$0.3 million in expenses due to the completion of the Phase I component of our
Phase I/II ONCONASE® clinical
trials.
General
and administrative expense for the nine month period ended April 30, 2009 was
approximately $2.1 million compared to $5.0 million for the same period in 2008,
a decrease of $2.9, or 58%. This decrease was primarily due to
decreased compensation expense of approximately $2.3 million, mostly related to
the retirement agreement executed by our chief executive officer in 2008 and
share-based compensation; and decreased legal and professional fees of
approximately $0.6 million primarily related to negotiations that resulted in
commercial partnerships for ONCONASE® in
2008.
New
Jersey permits certain corporations located in New Jersey to sell a portion of
their state tax loss carryforwards and state research and development
credits. For the state fiscal year 2009 (July 1, 2008 to June 30,
2009), we had approximately $1,274,000 of total available state tax benefit that
was saleable. On December 1, 2008, we received approximately
$1,140,000 from the sale of our total available state tax benefit, which was
recognized as state tax benefit for the nine months ended April 30,
2009.
For the
state fiscal year 2008 (July 1, 2007 to June 30, 2008), we had approximately
$2,496,000 of total available state tax benefit that was saleable, of which New
Jersey permitted us to sell approximately $1,969,000. In December
2007, we received approximately $1,755,000 from the sale of the $1,969,000
saleable state tax benefit, which was recognized as state tax benefit for the
nine months ended April 30, 2008.
The net
loss for the nine month period ended April 30, 2009 was approximately $4.2
million as compared to $9.4 million for the same period last year, a decrease of
$5.2 million. The cumulative loss from the date of inception, August
24, 1981 to April 30, 2009, amounted to $108.5 million. We have
incurred net losses during each year since our inception. Such losses
are attributable to the fact that we are still in the development stage and,
accordingly, have not derived sufficient revenues from operations to offset our
development stage expenses.
Off-balance
Sheet Arrangements
We have
no debt, no exposure to off-balance sheet arrangements, no special purpose
entities, nor activities that include non-exchange-traded contracts accounted
for at fair value as of April 30, 2009.
Contractual
Obligations and Commercial Commitments
Since
July 31, 2008, there has been no material change with respect to our commitments
and contingencies as disclosed in the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations - Contractual Obligations and
Commercial Commitments” in our Annual Report on Form 10-K for the fiscal year
ended July 31, 2008.
Critical
Accounting Policies and Estimates
Critical
accounting policies are those that involve subjective or complex judgments,
often as a result of the need to make estimates. The following areas
all require the use of judgments and estimates: research and development
expenses, accounting for share-based compensation, accounting for warrants
issued with convertible debt and deferred income taxes. Estimates in
each of these areas are based on historical experience and various assumptions
that we believe are appropriate. Actual results may differ from these
estimates. Our accounting practices are discussed in more detail in
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and Note 1 of “Notes to Financial Statements” in our Annual Report
on Form 10-K for the year ended July 31, 2008.
Recently
Issued Accounting Standards
In June 2008, the FASB issued EITF No.
07-05 “Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity’s Own Stock”, (“EITF 07-05”). EITF 07-05 provides guidance for
determining whether an equity-linked financial instrument (or embedded feature)
is indexed to an entity’s own stock, which would qualify as a scope exception
under SFAS No 133, “Accounting for Derivative Instruments and Hedging
Activities.” EITF 07-05 is effective for fiscal years beginning after
December 15, 2008 and early adoption for an existing instrument is not
permitted. We are currently evaluating the impact that the adoption
of EITF 07-05 will have, if any, on our reported financial results.
In May
2008, the FASB issued SFAS No. 162 “Hierarchy of GAAP”, (“SFAS
162”). SFAS 162 identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with GAAP in the United States. SFAS 162 is effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
with GAAP”. We adopted SFAS 162 in November 2008 and determined that
it did not have a material impact on our reported financial
results.
In
September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. SFAS 157 does not require new fair value
measurements. We adopted SFAS 157 as of August 1, 2008, and
determined that it did not have a material impact on our reported financial
results.
In
February 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-1,
“Application of FASB Statement No. 157 to SFAS Statement No. 13 and Other
Accounting Pronouncements that Address Fair Value Measurements for Purposes of
Lease Classification or Measurement under Statement
13”,
(“FSP 157-1”). FSP 157-1 amends SFAS 157 to exclude SFAS 13 and other
accounting pronouncements that address fair value measurements for purposes of
lease classifications under SFAS 13. However, this scope exception
does not apply to assets acquired and liabilities assumed in a business
combination that are required to be measured at fair value under FASB Statement
No. 141, “Business Combinations”, or SFAS 141(R), regardless of whether those
assets and liabilities are related to leases. FSP 157-1 is effective
upon initial adoption of SFAS 157. We adopted SFAS 157 as of August
1, 2008, and determined that it did not have a material impact on our reported
financial results.
In
February 2008, the FASB issued FSP SFAS No. 157-2, “Effective Date of FASB SFAS
No. 157”, (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS
157 for non financial assets and non financial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis at least annually. This delay is intended to allow
the FASB and constituents additional time to consider the effect of various
implementation issues that have arisen from the application of SFAS
157. We have reviewed FSP 157-2 and will wait to hear for additional
positions taken by the FASB before proceeding further.
In
October 2008 the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of
a Financial Asset when the Market for that Asset is not Active” (“FSP
157-3”). FSP 157-3 clarifies the application of FASB No. 157 in a
market that is not active and provides key considerations in determining the
fair value of a financial asset when the market for that financial asset is not
active. This FSP shall become effective upon issuance. We believe
that this new pronouncement will not have a material impact on our financial
statements in future periods.
In
December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (“SFAS
141(R)”). SFAS 141(R) establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141(R) also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. The guidance will become effective as of the beginning of a
company's fiscal year beginning after December 15, 2008. We believe
that this new pronouncement will not have a material impact on our financial
statements in future periods.
In June
2007, the FASB issued EITF Issue No. 07-03, “Accounting for Nonrefundable
Advance Payments for Goods or Services to Be Used in Future Research and
Development Activities,” (“EITF 07-03”). EITF 07-03 addresses the
diversity that exists with respect to the accounting for the nonrefundable
portion of a payment made by a research and development entity for future
research and development activities. The EITF concluded that an
entity must defer and capitalize nonrefundable advance payments made for
research and development activities and expense these amounts as the related
goods are delivered or the related services are performed. EITF 07-03
will be effective for interim or annual reporting periods in fiscal years
beginning after December 15, 2007. We adopted EITF 07-03 as of
August 1, 2008, and determined that it did not have a material impact on our
reported financial results.
In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair
value. We adopted SFAS 159 as of August 1, 2008, and determined that
it did not have a material impact on our reported financial
results.
In June
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes - an Interpretation of FASB Statement No. 109” (“FIN 48”).
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a
company’s financial statements in accordance with Statement No. 109, “Accounting
for Income Taxes.” FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a company’s tax
return. We adopted FIN 48 and determined that it did not have a
material impact on our reported financial results.
Item
3. Quantitative and Qualitative
Disclosures About Market Risk
As of April 30, 2009, we were exposed
to market risks, primarily changes in U.S. interest rates. As of April 30, 2009,
we held total cash and cash equivalents of approximately $0.6 million. All cash
equivalents have a maturity less than 90 days. Declines in interest rates
over time would reduce our interest income from our investments.
Item
4. Controls
And Procedures
(a)
Evaluation
of disclosure controls and procedures.
Under the supervision and with the
participation of our management, including our President and Chief Financial
Officer, we evaluated the effectiveness of the design and operation of our
"disclosure controls and procedures" (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 ("the Exchange Act") as of April 30, 2009, the
end of the period covered by this report. Based on this evaluation,
our President and Chief Financial Officer has concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission including
without limitation, controls and procedures that are designed to ensure that the
information required to be disclosed in reports by us that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, as
appropriate to allow timely discussion regarding required
disclosures.
(b) Changes in internal
controls.
There has
been no changes in our internal control over financial reporting during the
quarter ended April 30, 2009 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting subsequent to the date of the evaluation referred to
above.
PART
II. OTHER
INFORMATION
Item
1. Legal
Proceedings
None.
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds
(a) Recent Sales of
Unregistered Securities
None.
(b) Purchases of Equity
Securities by Issuer and Affiliated Purchasers
None.
Item
3. Defaults Upon Senior
Securities
None.
Item
4. Submission of Matters to a
Vote of Security Holders
None.
Item 5. Other
Information
None.
Item
6. Exhibits
Exhibits
(numbered in accordance with Item 601 of Regulation S-K).
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Exhibit
No.
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Item Title
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31.1
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Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
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32.1
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Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
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SIGNATURE
PAGE
Pursuant to the requirements 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.
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ALFACELL
CORPORATION
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(Registrant)
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June
9, 2009
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/s/ Charles Muniz
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President
and Chief Financial Officer
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(Principal
Accounting Officer and
Principal
Financial Officer)
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