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, 2001                                             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

     The number of shares of common stock,  $.001 par value,  outstanding  as of
June 11, 2001 was 18,942,246 shares.



<PAGE>

                              ALFACELL CORPORATION
                          (A Development Stage Company)

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

                                 BALANCE SHEETS
                        April 30, 2001 and July 31, 2000


<TABLE>
<CAPTION>
                                                                             April 30,
                                                                               2001           July 31,
                                                                            (Unaudited)        2000
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
                                  ASSETS
Current assets:
  Cash and cash equivalents                                                $    359,767    $    257,445
  Other assets                                                                   38,704          28,617
                                                                           ------------    ------------
      Total current assets                                                      398,471         286,062

Property and equipment, net of accumulated depreciation and amortization
   of $1,063,346 at April 30, 2001 and $1,006,808 at July 31, 2000               85,631         142,170

Other assets                                                                     59,867          59,867
                                                                           ------------    ------------
      Total assets                                                         $    543,969    $    488,099
                                                                           ============    ============

          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
  Current portion of long-term debt                                        $      7,100    $      7,074
  Note payable - convertible debt - related party, less debt discount           218,670            --
  Note payable - convertible debt - unrelated party, less debt discount          54,668            --
  Accounts payable                                                              349,265         170,788
  Accrued expenses                                                              474,261         411,846
                                                                           ------------    ------------
      Total current liabilities                                               1,103,964         589,708

Long-term debt, less current portion                                             25,896          30,251
                                                                           ------------    ------------
      Total liabilities                                                       1,129,860         619,959
                                                                           ------------    ------------

Commitments and contingencies Stockholders' equity (deficiency):
  Preferred stock, $.001 par value
    Authorized and unissued, 1,000,000 shares at April 30, 2001
       and July 31, 2000                                                           --              --
  Common stock $.001 par value
    Authorized 40,000,000 shares at April 30, 2001 and July 31,
    2000;  Issued and outstanding 18,942,246 shares at April 30,
    2001 and 18,431,559 shares at July 31, 2000                                  18,942          18,431
  Capital in excess of par value                                             57,382,825      56,526,288
  Common stock to be issued, 222,222 shares at April 30, 2001                   200,000            --
  Deficit accumulated during development stage                              (58,187,658)    (56,676,579)
                                                                           ------------    ------------
        Total stockholders' equity (deficiency)                                (585,891)       (131,860)
                                                                           ------------    ------------
        Total liabilities and stockholders' equity (deficiency)            $    543,969    $    488,099
                                                                           ============    ============
</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, 2001 and 2000,
                      and the Period from August 24, 1981
                     (Date of Inception) to April 30, 2001

<TABLE>
<CAPTION>
                                            (Unaudited)
                                                                                                   August 24, 1981
                                        Three Months Ended               Nine Months Ended       (Date of Inception)
                                             April 30,                       April 30,                    to
                                        2001            2000            2001            2000       April 30, 2001
                                    ------------    ------------    ------------    ------------   --------------
<S>                                 <C>             <C>             <C>             <C>             <C>
REVENUE:
  Sales                             $       --      $       --      $       --      $       --      $    553,489
  Investment income                        1,450          12,986           8,219          39,206       1,367,383
  Other income                              --              --              --              --            60,103
                                    ------------    ------------    ------------    ------------    ------------
  TOTAL REVENUE                            1,450          12,986           8,219          39,206       1,980,975
                                    ------------    ------------    ------------    ------------    ------------
COSTS AND EXPENSES:
  Cost of sales                             --              --              --              --           336,495
  Research and development               526,716         602,807       1,404,552       1,767,128      37,372,909
  General and administrative             193,788         137,497         519,240         443,479      20,678,888
  Interest:
    Related parties                       32,110            --            32,110            --         1,066,070
    Others                                11,023             872          14,791           2,600       1,921,520
                                    ------------    ------------    ------------    ------------    ------------
TOTAL COSTS AND EXPENSES                 763,637         741,176       1,970,693       2,213,207      61,375,882
                                    ------------    ------------    ------------    ------------    ------------
NET LOSS BEFORE
         STATE TAX BENEFIT          $   (762,187)   $   (728,190)   $ (1,962,474)   $ (2,174,001)   $(59,394,907)

STATE TAX BENEFIT                           --              --           451,395         755,854       1,207,249
                                    ------------    ------------    ------------    ------------    ------------

NET LOSS                            $   (762,187)   $   (728,190)   $ (1,511,079)   $ (1,418,147)   $(58,187,658)
                                    ============    ============    ============    ============    ============

  Loss per basic and diluted
    common share                    $       (.04)   $       (.04)   $       (.08)   $       (.08)   $      (6.99)
                                    ============    ============    ============    ============    ============

Weighted average number of shares
     outstanding                      18,911,660      18,116,726      18,802,114      17,603,454       8,320,015
                                    ============    ============    ============    ============    ============
</TABLE>


See accompanying notes to financial statements.


                                      - 3 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS

                   Nine months ended April 30, 2001 and 2000,
                       and the Period from August 24, 1981
                     (Date of Inception) to April 30, 2001


<TABLE>
<CAPTION>

                                            (Unaudited)

                                                                                         August 24, 1981
                                                                  Nine Months Ended    (Date of Inception)
                                                                      April 30,                 to
                                                                  2001          2000      April 30, 2001
                                                              -----------    ----------    -----------
<S>                                                           <C>            <C>           <C>
Cash flows from operating activities:
  Net loss                                                    $(1,511,079)   (1,418,147)   (58,187,658)
  Adjustments to reconcile net loss to
      net cash used in operating activities:
    Gain on sale of marketable securities                            --            --          (25,963)
    Depreciation and amortization                                  56,538        71,227      1,474,381
    Loss on disposal of property and equipment                       --            --           18,926
    Noncash operating expenses                                    168,360       112,459      5,687,744
    Amortization of deferred compensation                            --            --       11,442,000
    Amortization of organization costs                               --            --            4,590
Changes in assets and liabilities:
    Increase in other current assets                              (10,087)      (19,145)       (98,571)
    Decrease in other assets                                         --            --           36,184
    Increase in interest payable, related party                      --            --          744,539
    Increase in accounts payable                                  188,507       152,690        645,375
    Increase in accrued payroll and expenses, related party          --            --        2,348,145
    Increase (decrease) in accrued expenses                        62,415       (35,810)     1,015,774
                                                              -----------    ----------    -----------
Net cash used in operating activities                          (1,045,346)   (1,136,726)   (34,894,534)
                                                              -----------    ----------    -----------
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                               --            --       (1,406,836)
    Patent costs                                                     --            --          (97,841)
                                                              -----------    ----------    -----------
Net cash used in investing activities                                --            --       (1,478,714)
                                                              -----------    ----------    -----------
</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, 2001 and 2000,
                       and the Period from August 24, 1981
                     (Date of Inception) to April 30, 2001

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                               August 24, 1981
                                                                      Nine Months Ended      (Date of Inception)
                                                                           April 30,                  to
                                                                       2001            2000     April 30, 2001
                                                                   -----------    ----------     ----------
<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                                  --            --        2,452,460
  Reduction of bank debt and long-term debt                             (4,329)       (6,263)    (2,933,572)
  Proceeds from issuance of common stock, net                          501,274       613,653     27,855,013
  Proceeds from exercise of stock options and warrants, net             83,730        41,337      5,590,253
  Proceeds from issuance of convertible debentures                        --            --          347,000
  Proceeds from issuance of convertible debt - related party           297,000          --          297,000
  Proceeds from issuance of convertible debt - unrelated party          69,993          --           69,993
  Proceeds from common stock to be issued                              200,000          --          200,000
                                                                   -----------    ----------     ----------
            Net cash provided by financing activities                1,147,668       648,727     36,733,015
                                                                   -----------    ----------     ----------
            Net increase (decrease) in cash and cash equivalents       102,322      (487,999)       359,767
Cash and cash equivalents at beginning of period                       257,445     1,383,133           --
                                                                   -----------    ----------     ----------
Cash and cash equivalents at end of period                         $   359,767       895,134        359,767
                                                                   ===========    ==========     ==========
Supplemental disclosure of cash flow information - interest paid   $     6,763         2,600      1,660,476
                                                                   ===========    ==========     ==========
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                  $    10,030        92,184        296,200
                                                                   ===========    ==========     ==========
   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
                                                                   ===========    ==========     ==========
   Issuance of common stock for services rendered                  $      --            --            2,460
                                                                   ===========    ==========     ==========
</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,
2001 and the results of  operations  for the three and nine month  periods ended
April 30, 2001 and 2000 and the period from August 24, 1981 (date of  inception)
to April 30, 2001. The results of operations for the nine months ended April 30,
2001 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.

     Effective  August 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 130, or SFAS 130, Reporting  Comprehensive Income. SFAS
130 establishes new rules for the reporting and display of comprehensive  income
and its components. The net loss of $1,511,000 and $1,418,000,  recorded for the
nine  months  ended  April  30,  2001 and  2000,  respectively,  is equal to the
comprehensive loss for those periods.

     The Company has reported net losses since its inception.  Also, the Company
has limited liquid resources.  The report of the Company's  independent auditors
on the Company's  July 31, 2000  financial  statements  included an  explanatory
paragraph  which states that the Company's  recurring  losses,  working  capital
deficit and limited liquid resources raise substantial doubt about the Company's
ability to continue as a going  concern.  The  financial  statements at July 31,
2000 or April 30, 2001 do not include any adjustments that might result from the
outcome of this uncertainty.

     The  Company's  continued  operations  will  depend on its ability to raise
additional  funds  through  various  potential  sources  such as equity and debt
financing,  collaborative agreements, strategic alliances, sale of tax benefits,
revenues from the commercial sale of ONCONASE(R) and


                                      - 6 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)


                    NOTES TO FINANCIAL STATEMENTS, continued

                                   (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION, continued

its  ability  to  realize  the full  potential  of its  technology  and its drug
candidates.  Such  additional  funds may not  become  available  as needed or be
available on acceptable  terms. To date, a significant  portion of the Company's
financing has been through private placements of common stock and warrants,  the
issuance  of common  stock for stock  options  and  warrants  exercised  and for
services rendered,  debt financing and financing provided by the Company's Chief
Executive Officer. Additionally, the Company has raised capital through the sale
of its tax benefits.  The Company believes that its cash and cash equivalents as
of April 30, 2001 will be sufficient to meet its anticipated  cash needs through
fiscal  year ending  July 31,  2001.  However,  until the  Company's  operations
generate significant revenues,  the Company will continue to fund its operations
from cash on hand and through the sources of capital previously described.

2. EARNINGS (LOSS) PER COMMON SHARE

     "Basic"  earnings  (loss) per common share equals net income (loss) divided
by weighted  average  common  shares  outstanding  during the period.  "Diluted"
earnings  (loss)  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 5,604,599
and 6,180,945 at April 30, 2001 and 2000, respectively.

3. NOTE PAYABLE - CONVERTIBLE DEBT

     In April 2001,  the Company  entered into a  convertible  note payable with
certain related and unrelated  parties in the aggregate amount of $366,993.  The
note is due within  ninety  (90) days  unless the  lenders  elect to exercise an
option to convert  the note into  Alfacell  common  stock,  par value  $.001 per
share, at a conversion price of $0.90 per share (the estimated fair market value
of the stock on the loan date). In addition,  upon conversion,  the lender would
receive a three-year  warrant for each share of converted  Alfacell common stock
at an exercise  price of $2.50 per share that will  expire on July 7, 2004.  The
estimated  value of the warrant has been treated as a debt  discount  which will
accrete as interest expense over the ninety day note term.


                                      - 7 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   (Unaudited)

4. CAPITAL STOCK

     In August  2000,  the  Company  issued  11,800  shares of common  stock for
payment of services  rendered.  The fair value of the common stock in the amount
of $10,030 was charged to operations.

     In August and  September  2000,  the Company  sold an  aggregate of 333,332
shares  of  common  stock to  private  investors  at a price of $1.50  per share
resulting in net proceeds of $501,000 to the Company.  In addition,  the private
investors  were granted  five-year  warrants to purchase an aggregate of 166,666
shares of common stock at a per share exercise price of $3.00.

     In September  2000,  the Company  issued 40,000 shares of common stock upon
the exercise of stock options by a related party  resulting in gross proceeds of
$16,100 to the Company.

     In January 2001,  the Company issued 70,000 shares of common stock upon the
exercise of stock  options by related  parties  resulting  in gross  proceeds of
$30,500 to the Company.

     In March 2001,  the Company  issued  55,555 shares of common stock upon the
exercise of stock  options by a related  party  resulting  in gross  proceeds of
$37,100 to the Company.

     In April 2001,  the Company  issued  50,000  five-year  stock  options to a
director  as payment for  non-board  related  services  over the past 18 months.
These options vested  immediately and have an exercise price of $0.90 per share.
The Company recorded general and administrative expense of $31,600 which was the
fair  market  value of the options on the date of  issuance.  In  addition,  the
director  will  receive a  contingent  award of 50,000  shares of the  Company's
common stock should the Company  complete a strategic  partnership or receive an
investment from the prospective partner or one of its affiliates.

     In April 2001, the Company sold 222,222 shares of common stock to a private
investor at a price of $0.90 per share  resulting in gross  proceeds of $200,000
to the  Company.  In  addition,  the private  investor  was  granted  three-year
warrants to purchase an  aggregate  of 222,222  shares of common  stock at a per
share  exercise  price of $2.50  that  will  expire on July 7,  2004.  The stock
certificate for the shares will be issued in June 2001.

5. SALE OF NET OPERATING LOSSES

     New Jersey has enacted legislation  permitting certain corporations located
in New  Jersey to sell  state tax loss  carryforwards  and  state  research  and
development  credits or tax  benefits.  For the state  fiscal year 2001 (July 1,
2000 to June 30, 2001),  the Company has $1,774,000 total available tax benefits
of which  $602,000  was  allocated  to be sold between July 1, 2000 and June 30,
2001.  In December  2000,  the Company  received  $451,000  from the sale of its
allocated  tax benefits  which was  recognized  as a tax benefit for the quarter
ended October 31, 2000.  The Company will attempt to sell the remaining  balance
of its tax benefits in the amount of  approximately  $1,172,000  between July 1,
2001 and June 30, 2002, subject to all existing laws of the State of New Jersey.
However, there is no assurance that the Company will be able to find a buyer for
its tax benefits or that such funds will be available in a timely manner.

                                      - 8 -

<PAGE>


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

     Information   contained   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 that the
future results covered by these forward-looking statements will be achieved. The
matters  set forth in  Exhibit  99.1  hereto  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.

Results of Operations

Three and nine month periods ended April  30, 2001 and 2000

     Revenues.  We are a  development  stage company as defined in the Financial
Accounting  Standards Board's Statement of Financial Accounting Standards No. 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 of new drugs have not commenced and, accordingly,  we
have not derived any significant revenue from these operations. We focus most of
our productive and financial  resources on the development of ONCONASE(R) and as
such we have not had any sales in the nine months ended April 30, 2001 and 2000.
Investment  income for the nine months ended April 30, 2001 was $8,000  compared
to $39,000 for the same period last year, a decrease of $31,000.  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,  2001 was  $527,000  compared  to $603,000  for the same
period last year, a decrease of $76,000 or 13%.  This decrease was primarily due
to a 65% decrease in expenses in preparation  for a Pre-NDA meeting with the FDA
and a 13%  decrease in costs in support of on- going Phase III  clinical  trials
for  ONCONASE(R) for malignant  mesothelioma.  These decreases were offset by an
11% increase in personnel costs and a 147% increase in expenses  associated with
new patent and trademark applications for ONCONASE(R).

     Research and  development  expense for the nine months ended April 30, 2001
was $1,404,000  compared to $1,767,000 for the same period last year, a decrease
of $363,000 or


                                      - 9 -

<PAGE>



21%.  This  decrease  was  primarily  due  to a  57%  decrease  in  expenses  in
preparation  for a Pre- NDA  meeting  with the FDA, a 38%  decrease  in costs in
support of on-going  Phase III clinical  trials for  ONCONASE(R)  for  malignant
mesothelioma  and a 19%  decrease  in  expenses  associated  with new patent and
trademark  applications  for  ONCONASE(R).  These  decreases were offset by a 4%
increase in personnel costs.

     General  and  Administrative.  General and  administrative  expense for the
three months ended April 30, 2001 was $194,000 compared to $137,000 for the same
period last year, an increase of $57,000 or 42%. This increase was primarily due
to a $32,000  increase in non-cash  expense relating to stock options issued for
consulting  services,  a $12,000  increase in costs related to public  relations
activities and a 20% increase in personnel costs.

     General and administrative expense for the nine months ended April 30, 2001
was $519,000  compared to $443,000 for the same period last year, an increase of
$76,000 or 17%. This  increase was primarily due to a $27,000  increase in costs
related to public relations activities,  a 16% increase in personnel costs and a
38% increase in non-cash expense relating to stock options issued for consulting
services.

     Interest  expense  for the three  months  ended  April 30, 2001 was $43,000
compared to $1,000 for the same period  last year,  an increase of $42,000.  The
increase was primarily due to the interest  expense on the convertible  note and
its attached  warrants,  by both  related and  unrelated  parties.  The interest
expense was based on the value of the warrants using the  Black-Scholes  pricing
model, amortized on a straight-line basis over the ninety day life of the note.

     Interest  expense  for the nine  months  ended  April 30,  2001 was $47,000
compared to $3,000 for the same period  last year,  an increase of $44,000.  The
increase  was  due to the  interest  expense  on the  convertible  note  and its
attached warrants,  by both related and unrelated parties.  The interest expense
was based on the value of the warrants  using the  Black-Scholes  pricing model,
amortized on a straight-line basis over the ninety day life of the note.

     Income  Taxes.  New  Jersey  has  enacted  legislation  permitting  certain
corporations  located  in New Jersey to sell  state tax loss  carryforwards  and
state  research and  development  credits or tax benefits.  For the state fiscal
year 2001 (July 1, 2000 to June 30,  2001),  our  company has  $1,774,000  total
available  tax benefits of which  $602,000 was allocated to be sold between July
1, 2000 and June 30, 2001. In December 2000, we received  $451,000 from the sale
of the  allocated  tax benefits  which was  recognized  as a tax benefit for the
quarter ended October 31, 2000. We will attempt to sell the remaining balance of
our tax benefits in the amount of approximately  $1,172,000 between July 1, 2001
and June 30,  2002,  subject to all  existing  laws of the State of New  Jersey.
However,  we cannot  assure you that we will be able to find a buyer for our tax
benefits or that such funds will be available in a timely manner.

     Net Loss. We have incurred net losses during each year since our inception.
The net loss for the three  months ended April 30, 2001 was $762,000 as compared
to a net loss of $728,000 for the same period last year,  an increase of $34,000
or 5%. The net loss for the nine months ended April



                                      - 10 -

<PAGE>



30, 2001 was $1,511,000 as compared to $1,418,000 for the same period last year,
an increase of $93,000 or 7%. The  cumulative  loss from the date of  inception,
August 24,  1981 to April 30,  2001,  amounted to  $58,188,000.  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 the
development stage expenses.

Liquidity and Capital Resources

     We have financed our operations  since inception  primarily  through equity
and debt financing,  research product sales and interest income. During the nine
months ended April 30, 2001, we had a net increase in cash and cash  equivalents
of  $103,000,  which  resulted  primarily  from net cash  provided by  financing
activities of $1,148,000,  primarily from the private  placement of common stock
and warrants,  proceeds from the issuance of convertible  note and proceeds from
the exercise of stock options,  offset by net cash used in operating  activities
of $1,045,000.  Total cash resources as of April 30, 2001 were $360,000 compared
to $257,000 at July 31, 2000.

     Our current  liabilities as of April 30, 2001 were  $1,104,000  compared to
$590,000 at July 31, 2000,  an increase of $514,000.  The increase was primarily
due to the  short-term  convertible  note payable by both related and  unrelated
parties and due to an increase in accounts payable.

     Our  continued  operations  will depend on our ability to raise  additional
funds  through  various  potential  sources  such as equity and debt  financing,
collaborative agreements,  strategic alliances,  sale of tax benefits,  revenues
from the  commercial  sale of  ONCONASE(R)  and our  ability to realize the full
potential of our technology and our drug  candidates.  Such additional funds may
not become  available as we need them or be available on  acceptable  terms.  To
date, a significant portion of our financing has been through private placements
of common stock and warrants, the issuance of common stock for stock options and
warrants  exercised  and for services  rendered,  debt  financing  and financing
provided by our Chief Executive  Officer.  Additionally,  we have raised capital
through  the  sale of our tax  benefits.  We  believe  that  our  cash  and cash
equivalents as of April 30, 2001 will be sufficient to meet our anticipated cash
needs through  fiscal year ending July 31, 2001.  However,  until our operations
generate significant  revenues, we will continue to fund operations from cash on
hand and through the sources of capital previously described.  The report of our
independent  auditors  on our July 31,  2000  financial  statements  included an
explanatory  paragraph which states that our recurring  losses,  working capital
deficit and limited liquid resources raise  substantial  doubt about our ability
to continue as a going  concern.  Our financial  statements at July 31, 2000 and
April 30, 2001 do not include any adjustments that might result from the outcome
of this uncertainty.

     We will  continue to incur costs in  conjunction  with our U.S. and foreign
registrations  for  marketing  approval  of  ONCONASE(R).  We are  currently  in
discussions with several potential strategic alliance partners,  including major
international companies, to further the development and marketing of ONCONASE(R)
and other related products in our pipeline.  However,  we cannot assure you that
any such alliances will materialize. We intend to seek marketing approvals for



                                     - 11 -

<PAGE>



ONCONASE(R) for the treatment of malignant  mesothelioma in foreign territories.
In February  2001,  we  received an Orphan  Medicinal  Product  Designation  for
ONCONASE(R)  with the European Agency for the Evaluation of Medicinal  Products,
or EMEA.  Currently,  we are in discussion with a number of European  regulatory
agencies  on  the  proposed   registration   requirements   for  the   malignant
mesothelioma indication.  Simultaneously, we are in the process of expanding our
clinical program in Europe (initially,  Germany and Italy).  However,  we cannot
assure you that marketing  approval for ONCONASE(R) as a treatment for malignant
mesothelioma will be granted.

     New Jersey has enacted legislation  permitting certain corporations located
in New  Jersey to sell  state tax loss  carryforwards  and  state  research  and
development  credits or tax  benefits.  For the state  fiscal year 2001 (July 1,
2000 to June 30, 2001),  our company has $1,774,000 total available tax benefits
of which  $602,000  was  allocated  to be sold between July 1, 2000 and June 30,
2001. In December 2000, we received  $451,000 from the sale of the allocated tax
benefits which was recognized as a tax benefit for the quarter ended October 31,
2000. We will attempt to sell the  remaining  balance of our tax benefits in the
amount of  approximately  $1,172,000  between  July 1,  2001 and June 30,  2002,
subject to all  existing  laws of the State of New  Jersey.  However,  we cannot
assure  you that we will be able to find a buyer  for our tax  benefits  or that
such funds will be available in a timely manner.

     Our common stock was delisted from The Nasdaq SmallCap Market  effective at
the close of  business  April 27, 1999 for failing to meet the minimum bid price
requirements set forth in the NASD Marketplace  Rules. As of April 28, 1999, our
common stock trades on the OTC Bulletin Board under the symbol "ACEL". Delisting
of our common  stock from  Nasdaq  could have a material  adverse  effect on our
ability to raise additional capital,  our stockholders'  liquidity and the price
of our common stock.

     The market  price of our  common  stock is  volatile,  and the price of the
stock could be  dramatically  affected one way or another  depending on numerous
factors.  The market price of our common stock could also be materially affected
by the marketing approval or lack of approval of ONCONASE(R).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

PART II. OTHER INFORMATION

Item 2. (c) Recent Sales of Unregistered Securities

     In March 2001, we issued 55,555 shares of common stock upon the exercise of
stock options by a related party  resulting in gross  proceeds of $37,100,  in a
transaction  consummated  as a private  sale  pursuant  to  Section  4(2) of the
Securities Act of 1933, as amended.


                                     - 12 -

<PAGE>



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                                               ****
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           *****


                                     - 13 -

<PAGE>

                                                                  Exhibit No. or
Exhibit                                                           Incorporation
  No.                           Item Title                         by Reference
-------                         ----------                        --------------
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   Common Stock Purchase Agreement by and between the
        Company and Digital Creations, Inc. dated March 3, 1997           ###
10.18   1997 Stock Option Plan                                            ###
10.19   Separation Agreement with Michael C. Lowe dated as of
        October 9, 1997                                                    ++
10.20   Form of Subscription Agreement and Warrant Agreement used
        in Private Placement completed on February 20, 1998               +++
10.21   Form of Warrant Agreement issued to the Placement Agent in
        connection with the Private Placement completed on February
        20, 1998                                                          +++
10.22   Placement Agent Agreement dated December 15, 1997                 +++
10.23   Separation Agreement with Gail Fraser dated August 31, 1999       ++++
10.24   Form of Subscription Agreement and Warrant Agreement used
        in the August and September 2000 Private Placement               +++++
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.

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

                                     - 14 -

<PAGE>



+       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-K
        for the year ended July 31, 1999 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, 2000 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.

####    Filed herewith.

(b) Reports on Form 8-K.

     On May 21,  2001,  we filed a report on Form 8-K stating  that the Board of
Directors  extended the expiration  date of warrants to purchase an aggregate of
1,168,575 shares of common stock issued in the 1998 private placement,  from May
19, 2001 to August 17, 2001. In addition,  we also extended the expiration  date
of 114,708  warrants to purchase units consisting of (i) an aggregate of 229,416
shares of common  stock and (ii)  warrants to purchase an  aggregate  of 116,208
shares  of  common  stock  issued  to the  placement  agent in the 1998  private
placement from May 19, 2001 to August 17, 2001.


                                     - 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 14, 2001                              /s/ KUSLIMA SHOGEN
                                           -------------------------------------
                                           Kuslima Shogen, Chief Executive
                                           Officer, Acting Chief Financial
                                           Officer (Principal Executive Officer,
                                           Principal Accounting Officer) and
                                           Chairman of the Board





                                     - 16 -