UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                          -----------------------------

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


        April 30, 1998                                           0-11088
For the quarterly period 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


                                 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 the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:

Shares  of  Common  Stock,  $.001 par  value  outstanding  as of June 11,  1998:
17,239,893


<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

                                 BALANCE SHEETS
                        April 30, 1998 and July 31, 1997

<TABLE>
<CAPTION>
                                                                             April 30,
                                                                               1998           July 31,
                             ASSETS                                         (Unaudited)        1997
                                                                           ------------    ------------
<S>                                                                        <C>             <C>         
Current assets:
      Cash and cash equivalents                                            $  6,120,425    $  7,542,289
      Prepaid expenses                                                          183,730         165,106
                                                                           ------------    ------------
            Total current assets                                              6,304,155       7,707,395
                                                                           ------------    ------------

Property and equipment, net of accumulated depreciation and amortization
   of $816,254 at April 30, 1998 and $742,319 at July 31, 1997                  327,382         326,003
                                                                           ------------    ------------

Other assets:
      Deferred debt costs, net                                                       --           1,556
                                                                           ------------    ------------

            Total assets                                                   $  6,631,537    $  8,034,954
                                                                           ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt                                    $      8,955    $  1,381,416
      Accounts payable                                                          701,512         377,704
      Accrued expenses                                                          706,516         693,841
                                                                           ------------    ------------
            Total current liabilities                                         1,416,983       2,452,961
                                                                           ------------    ------------

Long-term debt, less current portion                                              9,105          15,902
                                                                           ------------    ------------
            Total liabilities                                                 1,426,088       2,468,863
                                                                           ------------    ------------


Commitments and contingencies
Stockholders' equity:
      Preferred stock, $.001 par value
            Authorized and unissued, 1,000,000 shares at April 30, 1998
               and July 31, 1997                                                     --              --
      Common stock $.001 par value
            Authorized 40,000,000 shares at April 30, 1998 and
               25,000,000 shares at July 31, 1997;
            Issued and outstanding 17,234,943 shares at April 30, 1998
               and 14,847,793 shares at July 31, 1997                            17,235          14,848
      Capital in excess of par value                                         55,430,487      50,961,382
      Deficit accumulated during development stage                          (50,242,273)    (45,410,139)
                                                                           ------------    ------------
            Total stockholders' equity                                        5,205,449       5,566,091
                                                                           ------------    ------------

            Total liabilities and stockholders' equity                     $  6,631,537    $  8,034,954
                                                                           ============    ============
</TABLE>

See accompanying notes to financial statements.



                                      - 2 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

           Three months and nine months ended April 30, 1998 and 1997,
                       and the Period from August 24, 1981
                      (Date of Inception) to April 30, 1998

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                Three Months Ended              Nine Months Ended        August 24, 1981
                                                     April 30,                      April 30,          (Date of Inception)
                                          ----------------------------    ----------------------------          to
                                              1998            1997            1998            1997       April 30, 1998
                                          ------------    ------------    ------------    ------------   --------------
<S>                                       <C>             <C>             <C>             <C>             <C>         
REVENUE:
      Sales                               $       --      $       --      $       --      $       --      $    553,489

      Investment income                         81,806         109,232         226,332         338,280       1,054,158
      Other income                                --              --              --              --            60,103
                                          ------------    ------------    ------------    ------------    ------------
      TOTAL REVENUE                             81,806         109,232         226,332         338,280       1,667,750
                                          ------------    ------------    ------------    ------------    ------------

COSTS AND EXPENSES:
      Cost of sales                               --              --              --              --           336,495
      Research and development               1,300,507         677,007       3,907,807       2,370,768      30,329,913
      General and administrative               413,146         285,863       1,129,304         840,290      18,310,710
      Interest:
            Related parties                       --              --              --              --         1,033,960
            Others                                 479          29,757          21,355          92,800       1,898,945
                                          ------------    ------------    ------------    ------------    ------------
       TOTAL COSTS AND EXPENSES              1,714,132         992,627       5,058,466       3,303,858      51,910,023
                                          ------------    ------------    ------------    ------------    ------------

       NET LOSS                           $ (1,632,326)   $   (883,395)   $ (4,832,134)   $ (2,965,578)   $(50,242,273)
                                          ============    ============    ============    ============    ============


      Loss per basic and diluted common
           share                          $       (.10)   $       (.06)   $       (.31)   $       (.20)   $      (7.65)
                                          ============    ============    ============    ============    ============

Weighted average number of shares
      outstanding                           16,727,344      14,668,354      15,484,248      14,517,375       6,566,770
                                          ============    ============    ============    ============    ============
</TABLE>



See accompanying notes to financial statements.




                                      - 3 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)


                            STATEMENTS OF CASH FLOWS

                   Nine months ended April 30, 1998 and 1997,
                       and the Period from August 24, 1981
                      (Date of Inception) to April 30, 1998

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended         August 24, 1981
                                                                          April 30,          (Date of Inception)
                                                                ----------------------------         to       
                                                                    1998            1997       April 30, 1998
                                                                ------------    ------------   --------------
<S>                                                             <C>             <C>             <C>          
Cash flows from operating activities:
  Net Loss                                                      $ (4,832,134)   $ (2,965,578)   $(50,242,273)
  Adjustments to reconcile net loss to
      net cash used in operating activities:
    Gain on sale of marketable securities                               --              --           (25,963)
    Depreciation and amortization                                     75,491          50,130       1,195,519
    Loss on disposal of property and equipment                          --              --            18,926
    Noncash operating expenses                                       159,914          27,900       5,124,379
    Amortization of deferred compensation                               --              --        11,442,000
    Amortization of organization costs                                  --              --             4,590
Changes in assets and liabilities:
    Decrease in loan receivable, related party                          --           112,250            --
    Increase in prepaid expenses                                     (18,624)       (137,693)       (183,730)
    Decrease in other assets                                            --             7,196          36,184
    Increase in interest payable, related party                         --              --           744,539
    Increase (decrease) in accounts payable                          323,808         (54,177)        778,777
    Increase in accrued payroll and expenses, related parties           --              --         2,348,145
    Increase (decrease) in accrued expenses                           12,675        (118,137)      1,248,029
                                                                ------------    ------------    ------------
  Net cash used in operating activities                           (4,278,870)     (3,078,109)    (27,510,878)
                                                                ------------    ------------    ------------
Cash flows from investing activities:
    Purchase of marketable equity securities                            --              --          (290,420)
    Proceeds from sale of marketable equity securities                  --              --           316,383
    Purchase of property and equipment                               (75,314)       (170,197)     (1,369,260)
    Patent costs                                                        --              --           (97,841)
                                                                ------------    ------------    ------------

      Net cash used in investing activities                          (75,314)       (170,197)     (1,441,138)
                                                                ------------    ------------    ------------
</TABLE>


See accompanying notes to financial statements.                      (continued)





                                      - 4 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)


                       STATEMENTS OF CASH FLOWS, Continued

                   Nine months ended April 30, 1998 and 1997,
                       and the Period from August 24, 1981
                      (Date of Inception) to April 30, 1998

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                     Nine Months Ended      August 24, 1981
                                                                          April 30,       (Date of Inception)
                                                               --------------------------         to       
                                                                   1998          1997       April 30, 1998
                                                               ------------  ------------   --------------
<S>                                                            <C>           <C>             <C>          
Cash flows from financing activities:
  Proceeds from short-term borrowings                          $      --     $       --     $    849,500
  Payment of short-term borrowings                                    --             --         (623,500)
  Increase in loans payable - related party, net                      --             --        2,628,868
  Proceeds from bank debt and other long-term debt, net of
    deferred debt costs                                               --            4,200      2,410,883
  Reduction of bank debt and long-term debt                     (1,379,258)       (71,638)    (2,907,395)
  Proceeds from issuance of common stock, net                    4,311,578        504,000     26,917,497
  Proceeds from exercise of stock options and warrants, net           --        3,002,874      5,449,588
  Proceeds from issuance of convertible debentures                    --             --          347,000
                                                               -----------   ------------   ------------
      Net cash provided by financing activities                  2,932,320      3,439,436     35,072,441
                                                               -----------   ------------   ------------
      Net increase (decrease) in cash                           (1,421,864)       191,130      6,120,425
Cash and cash equivalents at beginning of period                 7,542,289      8,131,442           --
                                                               -----------   ------------   ------------
Cash and cash equivalents at end of period                     $ 6,120,425   $  8,322,572   $  6,120,425
                                                               ===========   ============   ============

Supplemental disclosure of cash flow information -
   interest paid                                               $    21,355   $    104,546   $  1,645,928
                                                               ===========   ============   ============
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        $      --     $       --     $  2,945,000
                                                               ===========   ============   ============
   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              $   100,000   $       --     $    177,265
                                                               ===========   ============   ============
   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               $      --     $       --     $    127,000
                                                               ===========   ============   ============
</TABLE>

See accompanying notes to financial statements.


                                      - 5 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


1.   ORGANIZATION AND BASIS OF PRESENTATION

     In  the  opinion  of  management,   the  accompanying  unaudited  financial
statements  contain all adjustments  (consisting of normal  recurring  accruals)
necessary to present  fairly the  Company's  financial  position as of April 30,
1998 and the results of  operations  for the nine month  periods ended April 30,
1998 and 1997 and the period from August 24, 1981 (date of  inception)  to April
30, 1998. The results of operations for the nine months ended April 30, 1998 are
not necessarily indicative of the results to be expected for the full year.

     The  Company is a  development  stage  company as defined in the  Financial
Accounting  Standards Board's Statement of Financial Accounting Standards No. 7.
The Company is devoting substantially all of its present efforts to establishing
a new  business.  Its  planned  principal  operations  have not  commenced  and,
accordingly, no significant revenue has been derived therefrom.

2.   EARNINGS PER COMMON SHARE

     Statement of Financial  Accounting Standards No. 128, "Earnings Per Share",
became effective for financial  statements for periods ending after December 31,
1997,  and  requires  presentation  of two  calculations  of earnings per common
share.  "Basic"  earnings per common share equals net income divided by weighted
average  common shares  outstanding  during the period.  "Diluted"  earnings per
common share  equals net income  divided by the sum of weighted  average  common
shares  outstanding  during  the  period  plus  common  stock  equivalents.  The
Company's  Basic and  Diluted  per share  amounts are the same since the assumed
exercise of stock  options and  warrants  are all  anti-dilutive.  The amount of
options and warrants  excluded from the  calculation  was 5,921,357 at April 30,
1998 and  5,532,976  at April 30,  1997.  The Company  restated all prior period
amounts to reflect these calculations.

3.   CAPITAL STOCK

     The Company  issued 833  three-year  stock  options as payment for services
rendered in August 1997.  The options  vested thirty days from the issuance date
and  have  an  exercise  price  of  $4.47  per  share.  The  total  general  and
administrative  expense  recorded for these  options was $1,700,  based upon the
fair value of such options on the date of issuance.

     In September 1997, the Company issued 15,000  three-year stock options with
an exercise price of $4.15 per share as payment for services to be rendered.  An
equal   portion  of  these   options  vest  monthly  and  a  total  general  and
administrative  expense  of $30,000 is being  amortized  over a one-year  period
which commenced  September 1997. The Company also issued 5,000  three-year stock
options with an exercise  price of $4.15 per share as payment for services to be
rendered. Of these options, 833 vest monthly for



                                      - 6 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   (Unaudited)


3.   CAPITAL STOCK (continued)

five months  commencing  September  30, 1997 and 835 vest on the last day of the
sixth  month.  Total  general  and  administrative  expense  of  $9,700 is being
amortized over a six-month  period which  commenced  September 1997. As of April
30, 1998, the Company  recorded general and  administrative  expense of $29,300,
based  upon  the fair  value  of the  20,000  stock  options  on the date of the
issuance,  amortized on a  straight-line  basis over the vesting  periods of the
grants.

     In October 1997,  the Company  issued 12,000  five-year  stock options (the
"Options")  with an exercise price of $3.91 per share as payment for services to
be rendered. An equal portion of these options vest monthly and a total research
and  development  expense of $27,500 is being  amortized over a one-year  period
which  commenced in October  1997.  As of April 30, 1998,  the Company  recorded
research and development  expense of $18,100,  based upon the fair value of such
options on the date of  issuance,  amortized on a  straight-line  basis over the
vesting period of the grant.

     In October 1997, the Company issued 75,000 stock options to a director with
an exercise price of $3.66 per share as payment for non-board  related  services
to be rendered.  These options will vest as follows provided he has been serving
continuously on the Company's board of directors at the time of vesting:  10,000
vested  immediately;  10,000 after one full calendar year;  10,000  annually for
each of the following  three years;  and 25,000 on October 31, 2002. The vesting
and  exercisability  of the 25,000  options  which  vest in October  2002 may be
accelerated  upon  the  good  faith  determination  of the  Company's  Board  of
Directors   that  a   substantive   collaborative   agreement   with   a   major
pharmaceutical/biotechnology  company  was a  direct  result  of the  director's
efforts.  A total  general  and  administrative  expense  of  $185,600  is being
amortized over a five-year  period which  commenced in October 1997. As of April
30, 1998, the Company  recorded general and  administrative  expense of $39,500,
based  upon  the fair  value of such  75,000  options  on the date of  issuance,
amortized on a straight-line basis over the vesting period of the grant.

     On December 9, 1997,  the  stockholders  authorized  the  amendment  of the
Company's  Certificate  of  Incorporation  to increase the number of  authorized
shares of common  stock,  par value $.001 from  25,000,000  shares to 40,000,000
shares.

     On December 9, 1997, the  stockholders  approved the 1997 Stock Option Plan
(the "1997  Plan").  The total number of shares of common stock  authorized  for
issuance  upon  exercise of options  granted  under the 1997 Plan is  2,000,000.
Options are granted at fair market value on the date of the grant and  generally
are  exercisable  in 20%  increments  annually over five years starting one year
after the date of grant and  terminate  five years from their  initial  exercise
date.



                                      - 7 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   (Unaudited)


3.   CAPITAL STOCK (continued)

     On January 23, 1998 the  Securities  and  Exchange  Commission  (the "SEC")
declared  effective a  registration  statement for the offer and sale by certain
stockholders  of up to 3,734,541  shares of common stock. Of these shares (i) an
aggregate  of  2,737,480  shares were issued to private  placement  investors in
private placement transactions which were completed during the period from March
1994 through June 1996 (the "Earlier Private Placements"),  (ii) an aggregate of
409,745  shares are  issuable  upon  exercise of  warrants  which were issued to
private  placement  investors  in the Earlier  Private  Placements  and (iii) an
aggregate of 587,316 shares may be issued, or have been issued, upon exercise of
options   which  were  issued  to  option   holders  in  certain  other  private
transactions.

     On February  20,  1998,  the Company  completed  a private  placement  (the
"February 1998 Private  Placement")  primarily to institutional  investors which
resulted in the  issuance of  1,168,575  units (the  "Units") at a unit price of
$4.00.  Each Unit consisted of two (2) shares of the Company's common stock, par
value $.001 per share (the  "Common  Stock") and one (1)  three-year  warrant to
purchase one (1) share of common stock (the  "Warrants") at an exercise price of
$2.50 per share. The Company received proceeds of approximately $4,300,000,  net
of the  placement  agent's  commission  and expenses of $365,000.  The placement
agent also received  warrants  (the  "Placement  Agent  Warrant") to purchase an
additional  116,858 units  comprised of the same securities sold to investors at
an exercise price of $4.40 per unit as part of its compensation.

     In March 1998, the Company entered into a conversion  agreement with one of
its raw material suppliers (the "Supplier") for the conversion of an outstanding
payable (the "Conversion  Agreement") into 50,000 shares of the Company's Common
Stock. Pursuant to the Conversion Agreement, the Company issued 50,000 shares of
Common Stock to the  Supplier.  The fair value of the Common Stock  approximated
the outstanding payable amount of $100,000.

     In March 1998,  the Company  issued 75,000 stock options to a director with
an exercise price of $2.80 per share as payment for non-board  related  services
to be rendered.  These options will vest as follows provided he has been serving
continuously on the Company's board of directors at the time of vesting:  10,000
vested  immediately;  10,000 after one full calendar year;  10,000  annually for
each of the following three years; and 25,000 on March 24, 2003. The vesting and
exercisability of the 25,000 options which vest in March 2003 may be accelerated
upon the good faith  determination  of the Company's  Board of Directors  that a
substantive  collaborative agreement and licensing or financing arrangement with
a  major  pharmaceutical/biotechnology  company  was  a  direct  result  of  the
director's  efforts. A total general and  administrative  expense of $139,900 is
being  amortized  over a five-year  period which  commenced in March 1998. As of
April 30,  1998,  the Company  recorded  general and  administrative  expense of
$17,600,  based  upon  the  fair  value of such  75,000  options  on the date of
issuance,  amortized  on a  straight-line  basis over the vesting  period of the
grant.


                                      - 8 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   (Unaudited)


3.   CAPITAL STOCK (continued)

     On April 20, 1998 the SEC declared  effective a registration  statement for
the offer and sale by certain  stockholders of up to 3,918,299  shares of common
stock. Of these shares (i) an aggregate of 2,337,150  shares of Common Stock are
currently  outstanding and were issued to the private placement investors in the
February 1998 Private  Placement,  (ii) an aggregate of 1,168,575  shares may be
issued upon exercise of the Warrants which were issued to the private  placement
investors in the February 1998 Private  Placement,  (iii) 350,574  shares may be
issued upon the exercise of the Placement  Agent Warrant which was issued to the
placement agent in the February 1998 Private Placement and the Warrants issuable
upon exercise of the Placement Agent Warrant, (iv) 50,000 shares of Common Stock
are currently outstanding and were issued to the Supplier in connection with the
Conversion  Agreement,  and (v) 12,000 shares may be issued upon the exercise of
Options which were issued as payment for services to be rendered.

                                      - 9 -

<PAGE>



Item 2.     Management's Discussion and Analysis of Financial Condition and 
            Results of Operations.

     Information  contained herein 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  discussions  of
strategy.  No  assurance  can be given  that the future  results  covered by the
forward-looking  statements  will be achieved.  The matters set forth in Exhibit
99.1 hereto constitute cautionary statements  identifying important factors with
respect  to  such  forward-looking  statements,   including  certain  risks  and
uncertainties,  that could  cause  actual  results to vary  materially  from the
future results indicated in such forward-looking statements. Other factors could
also cause actual results to vary materially  from the future results  indicated
in such forward-looking statements.

Results of Operations

Three and nine month periods ended April 30, 1998 and 1997

     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
the nine months  ended April 30, 1998 and 1997.  Investment  income for the nine
months  ended April 30,  1998 was  $226,000  compared  to $338,000  for the same
period  last year,  a  decrease  of  $112,000.  This  decrease  was due to lower
balances of cash and cash equivalents.

     Research and  Development.  Research and development  expense for the three
months  ended April 30, 1998 was  $1,301,000  compared to $677,000  for the same
period last year,  an increase of $624,000 or 92%.  This  increase was primarily
due to a 243% increase in costs associated with increased patient  enrollment in
on-going  clinical  trials,  including  the two Phase III  clinical  trials  for
pancreatic  cancer  and the  Phase  II and III  clinical  trials  for  malignant
mesothelioma,  a 274% increase in costs related to the  manufacture  of clinical
supplies of  ONCONASE,  and a 96% increase in expenses in  preparation  of a New
Drug Application ("NDA") for ONCONASE.

     Research and  development  expense for the nine months ended April 30, 1998
was $3,908,000 compared to $2,371,000 for the same period last year, an increase
of  $1,537,000  or 65%.  This  increase was  primarily due to a 159% increase in
costs associated with increased patient  enrollment in on-going clinical trials,
including the two Phase III clinical trials for pancreatic  cancer and the Phase
II and III clinical trials for malignant  mesothelioma,  a 55% increase in costs
related to the manufacture of clinical  supplies of ONCONASE and a 161% increase
in expenses in preparation of an NDA for ONCONASE.

     General  and  Administrative.  General and  administrative  expense for the
three months ended April 30, 1998 was $413,000 compared to $286,000 for the same
period last year,  an increase of $127,000 or 44%.  This  increase was primarily
due to a $139,000 increase in legal costs primarily for SEC and related matters,
offset by an $18,000 decrease in costs related to administrative personnel.


                                     - 10 -

<PAGE>



     General and administrative expense for the nine months ended April 30, 1998
was  $1,129,000  compared to $840,000 for the same period last year, an increase
of $289,000 or 34%. This  increase was  primarily due to a $245,000  increase in
legal  costs  primarily  for SEC and related  matters and a $42,000  increase in
insurance   expenses,   offset  by  a  $38,000  decrease  in  costs  related  to
administrative personnel.

     Interest.  Interest  expense for the three  months ended April 30, 1998 was
$500 compared to $30,000 for the same period last year, a decrease of $29,500 or
98%.  Interest  expense  for the nine  months  ended  April 30, 1998 was $21,000
compared to $93,000 for the same period last year, a decrease of $72,000 or 77%.
This decrease was primarily due to the payment of the entire principal amount of
the Company's $1.4 million term loan on October 3, 1997.

     Net Loss.  The Company has incurred  net losses  during each year since its
inception. The net loss for the three months ended April 30, 1998 was $1,632,000
as compared to $883,000  for the same period last year,  an increase of $749,000
or 85%. The net loss for the nine months ended April 30, 1998 was  $4,832,000 as
compared to $2,966,000  for the same period last year, an increase of $1,866,000
or 63%. The cumulative loss from the date of inception, August 24, 1981 to April
30, 1998, amounted to $50,242,000. Such losses are attributable to the fact that
the Company is still in the  development  stage and  accordingly has not derived
sufficient revenues from operations to offset the development stage expenses.


Liquidity and Capital Resources

     Alfacell has financed its  operations  since  inception  primarily  through
equity and debt financing,  research product sales and interest  income.  During
the nine months ended April 30, 1998, the Company had a net decrease in cash and
cash equivalents of $1,422,000,  which resulted  primarily from net cash used in
operating  activities  of  $4,279,000  and purchase of property and equipment of
$75,000,  offset by net cash  provided by financing  activities  of  $2,932,000,
primarily  from a private  placement of common  stock and warrants  completed in
February  1998 which  resulted  in net  proceeds  received of  $4,311,000,  less
payment  of bank  debt in  October  1997  and  reduction  of  long-term  debt of
$1,379,000.

     The  Company's  accounts  payable  balance at April 30,  1998 was  $701,000
compared  to  $378,000  on July 31,  1997.  The  increase  is  primarily  due to
increased  legal  costs,   increased   regulatory  and  manufacturing  costs  in
preparation  of an NDA for ONCONASE and higher costs  associated  with increased
patient enrollment in on-going clinical trials.

     The Company's  accrued expenses at April 30, 1998 were $706,000 compared to
$694,000 on July 31, 1997.  The increase was primarily due to increased  patient
enrollment in on-going clinical trials.

     The  Company's  term loan with its bank,  matured  on August 31,  1997.  On
October 3, 1997,  the Company paid the entire loan  balance,  including  accrued
interest,  in the amount of $1,376,646  out of its cash  resources.  This is the
primary reason for a significant decrease in current liabilities as of April 30,
1998 compared to July 31, 1997.

     On February 20, 1998 the Company completed a private placement primarily to
institutional  investors  which resulted in the issuance of 1,168,575 Units at a
unit price of $4.00.  Each Unit  consisted  of two (2)  shares of the  Company's
Common  Stock,  par value  $.001 per share  and one (1)  three-year  warrant  to
purchase one (1) share of Common Stock at an exercise  price of $2.50 per share.
The Company

                                     - 11 -

<PAGE>



received  proceeds of  approximately  $4,300,000,  net of the placement  agent's
commission  and expenses of  approximately  $365,000.  The placement  agent also
received warrants to purchase an additional  116,858 units comprised of the same
securities  sold to investors at an exercise  price of $4.40 per unit as part of
its compensation.

     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.  Alfacell  continues to incur costs in conjunction
with the preparation of an anticipated  NDA for ONCONASE.  The Company is in the
process  of  collecting  and  analyzing  the data from its Phase III  pancreatic
cancer clinical trials to determine the  appropriateness of filing such NDA. The
Company  expects  that its cash needs in the future  may  increase  due to costs
associated with on-going clinical trials and preparation of an NDA for ONCONASE.
The Company  believes that its cash and cash  equivalents  as of April 30, 1998,
will be  sufficient to meet its  anticipated  cash needs through the fiscal year
ending July 31, 1999. 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 upon the exercise of stock options and warrants and for services
rendered, debt financing and financing provided by the Company's Chief Executive
Officer.  The Company's  long-term liquidity will depend on its ability to raise
substantial  additional funds. There can be no assurance that such funds will be
available to the Company on acceptable terms, if at all.

     The  Company's  working  capital and capital  requirements  may depend upon
numerous  factors  including,   the  progress  of  the  Company's  research  and
development programs, the timing and cost of obtaining regulatory approvals, and
the  levels  of  resources  that  the  Company  devotes  to the  development  of
manufacturing and marketing capabilities.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Not applicable.

PART II. OTHER INFORMATION

Item 2. (c) Recent Sales of Unregistered Securities

     On February 20, 1998, the Company sold in a private placement  primarily to
institutional  investors an aggregate of 1,168,575 units at a price of $4.00 per
unit.  Each  unit  consisted  of two (2)  shares  of  Common  Stock  and one (1)
three-year  warrant to  purchase  one (1) share of Common  Stock at an  exercise
price of $2.50 per  share.  Aggregate  gross  proceeds  from the  offering  were
approximately  $4,674,000 and the aggregate commissions payable to the placement
agent were approximately $327,000. The placement agent also received warrants to
purchase 116,858 units comprised of the same securities as the units sold to the
investors at an exercise  price of $4.40 per unit.  This private  placement  was
effected in accordance with the exemptions from the registration requirements of
the  Securities  Act of 1933,  as amended (the  "Securities  Act")  contained in
Section 4(2) of the Securities Act and Rule 506 under the Securities Act.

     In March 1998, the Company converted a $100,000 account payable owed to one
of its  suppliers  into 50,000  shares of Common Stock in a private  transaction
effected in accordance with the exemption from the registration  requirements of
the Securities Act contained in Section 4(2) of the Securities Act.


                                     - 12 -

<PAGE>



Item 5. Other Information

     In March 1998 the SEC approved the settlement  previously  disclosed in the
Company's  November 1997 Proxy Statement of allegations by the SEC of violations
of  Sections 13 and 16 of the  Securities  Exchange  Act of 1934 (the  "Exchange
Act") by  Kuslima  Shogen,  Chairman  and  Chief  Executive  Officer,  Stanislaw
Mikulski,  Executive  Vice  President  and  director  and Allen  Siegel,  former
director.  Ms.  Shogen and Doctors  Mikulski and Siegel agreed to the entry of a
cease and desist order and the payment of monetary  penalties  totaling  $40,000
(payable by the Company under its indemnity  agreements with these  individuals)
without  admitting or denying any of the SEC's  allegations  concerning  certain
allegedly  late filings  required to be made by them pursuant to Sections 13 and
16 of the Exchange Act with  respect to changes in  beneficial  ownership of the
Company's  securities.  With the  exception of one late filing by Ms.  Shogen in
1996, each of the allegedly  unreported  transactions  occurred during the years
1983 to 1994. The alleged  reporting  violations relate solely to the filings of
required forms.  There was no allegation by the SEC of any fraudulent or willful
misconduct. No action was brought against the Company. Since mid- 1994, when the
Company and its officers and  directors,  with the  assistance of its securities
counsel, fully implemented a comprehensive Section 16(a) compliance program, all
changes of beneficial  ownership which have occurred for these  individuals have
been  reported  under  Section  16(a) on a timely  basis,  except for one Form 4
reporting  changes in  beneficial  ownership  occurring in 1996 which Ms. Shogen
filed  one month  late,  as  disclosed  in the  Company's  November  1997  Proxy
Statement.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K).


                                                                  Exhibit No. or
Exhibit                                                            Incorporation
  No.                              Item Title                      by Reference
 -----                             ----------                      ------------
 3.1   Certificate of Incorporation                                          *
 3.2   By-Laws                                                               *
 3.3   Amendment to Certificate of Incorporation                             #
 3.4   Amendment to Certificate of Incorporation                            +++
 4.1   Form of Convertible Debenture                                        **
10.1   Form of Stock and Warrant Purchase Agreements used in private
       placements completed April 1996 and June 1996                         ##
10.2   Lease Agreement - 225 Belleville Avenue,  Bloomfield, New Jersey     ###
10.3   Form of Stock Purchase Agreement and Certificate used in
       connection with various private placements                           ***
10.4   Form of Stock and Warrant Purchase Agreement and Warrant
       Agreement used in Private Placement completed on March 21, 1994      ***
10.5   The Company's 1993 Stock Option Plan and Form of
       Option Agreement                                                    *****
10.6   Debt Conversion Agreement dated March 30, 1994 with Kuslima
       Shogen                                                              ****
10.7   Accrued Salary Conversion Agreement dated March 30, 1994 with
       Kuslima Shogen                                                      ****


                                     - 13 -

<PAGE>

                                                                  Exhibit No. or
Exhibit                                                            Incorporation
  No.                              Item Title                      by Reference
 -----                             ----------                      ------------
 10.8  Accrued Salary Conversion Agreement dated 
       March 30, 1994 with Stanislaw Mikulski                              ****
 10.9  Debt Conversion Agreement dated March 30, 1994 with John
       Schierloh                                                           ****
10.10  Option Agreement dated March 30, 1994 with Kuslima Shogen           ****
10.11  Option Agreement dated March 30, 1994 with Kuslima Shogen           ****
10.12  Amendment No. 1 dated June 20, 1994 to Option Agreement dated
       March 30, 1994 with Kuslima Shogen                                  ****
10.13  Form of Amendment No. 1 dated June 20, 1994 to Option
       Agreement dated March 30, 1994 with Kuslima Shogen                  *****
10.14  Form of Amendment No. 1 dated June 20, 1994 to Option
       Agreement  dated  March 30, 1994 with  Stanislaw  Mikulski          *****
10.15  Form of Stock and Warrant Purchase Agreement and Warrant
       Agreement used in Private Placement completed on September 13,
       1994                                                                  +
10.16  Form of Subscription Agreements and Warrant Agreement used in
       Private Placements closed in October 1994 and September 1995          #
10.17  1997 Stock Option Plan.                                              ###
10.18  Separation Agreement with Michael C. Lowe dated as of October 9,
       1997                                                                 ++
10.19  Form of Subscription Agreement and Warrant Agreement used in
       Private Placement completed on February 20, 1998.                    +++
10.20  Form of Warrant Agreement issued to the Placement Agent in
       connection with the Private Placement completed on
       February 20, 1998.                                                   +++
10.21  Placement Agent Agreement dated December 15, 1997.                   +++
 27.1  Financial Data Schedule                                             #####
 99.1  Factors to Consider in Connection with Forward-Looking Statements   #####


*       Previously filed as exhibit to the Company's  Registration  Statement on
        Form S-18 (File No.  2-79975-NY)  and  incorporated  herein by reference
        thereto.

**      Previously filed as exhibits to the Company's Annual Report on Form 10-K
        for the year ended July 31, 1993 and  incorporated  herein by  reference
        thereto.

***     Previously  filed as exhibits to the Company's  Quarterly Report on Form
        10-QSB for the quarter ended January 31, 1994 and incorporated herein by
        reference thereto.

****    Previously  filed as exhibits to the Company's  Quarterly Report on Form
        10-QSB for the quarter ended April 30, 1994 and  incorporated  herein by
        reference thereto.


                                     - 14 -

<PAGE>



*****   Previously  filed as exhibits to the  Company's  Registration  Statement
        Form SB-2  (File No.  33-76950)  and  incorporated  herein by  reference
        thereto.

+       Previously filed as exhibits to the Company's  Registration Statement on
        Form SB-2  (File No.  33-83072)  and  incorporated  herein by  reference
        thereto.

++      Previously  filed as exhibits to the Company's  Quarterly Report on Form
        10-Q for the quarter ended October 31, 1997 and  incorporated  herein by
        reference thereto.

+++     Previously  filed as exhibits to the Company's  Quarterly Report on Form
        10-Q for the quarter ended January 31, 1998 and  incorporated  herein by
        reference thereto.

#       Previously  filed as exhibits  to the  Company's  Annual  Report on Form
        10-KSB  for the year  ended  July 31,  1995 and  incorporated  herein by
        reference thereto.

##      Previously filed as exhibits to the Company's  Registration Statement on
        Form SB-2 (File No.  333-11575)  and  incorporated  herein by  reference
        thereto.

###     Previously  filed as exhibits to the Company's  Quarterly Report on Form
        10-QSB for the quarter ended April 30, 1997 and  incorporated  herein by
        reference thereto.

####    Previously filed as exhibits to the Company's Annual Report on Form 10-K
        for the year ended July 31, 1997 and  incorporated  herein by  reference
        thereto.

#####   Filed herewith.

(b)  Reports on Form 8-K.

     On February 24, 1998 the Company filed a report on Form 8-K which  reported
under Item 5 thereof that on February  20, 1998 the Company  completed a private
placement primarily to institutional investors which resulted in the issuance of
1,168,575 units at a unit price of $4.00.  Each Unit consisted of two (2) shares
of the Company's  Common Stock, par value $.001 per share and one (1) three-year
warrant to purchase one (1) share of Common Stock at an exercise  price of $2.50
per share. The Company received proceeds of approximately $4,300,000, net of the
placement  agent's  commission  and  expenses  of  approximately  $365,000.  The
placement agent also received warrants to purchase an additional 116,858 similar
Units at an exercise price of $4.40 per unit as part of its compensation.




                                     - 15 -

<PAGE>



                                   SIGNATURES


     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.



                                        ALFACELL CORPORATION
                                        (Registrant)


June 12, 1998                           /s/ GAIL E. FRASER
                                        ------------------
                                        Gail E. Fraser
                                        Vice President, Finance and Chief
                                        Financial Officer (Duly Authorized
                                        Officer, Principal Accounting Officer
                                        and Principal Financial Officer)










                                     - 16 -