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


     January 31, 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 March 6, 1998:
17,184,943




<PAGE>

                              ALFACELL CORPORATION
                          (A Development Stage Company)



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                                 BALANCE SHEETS
                       January 31, 1998 and July 31, 1997


<TABLE>
<CAPTION>
                                                                                                     January 31,
                                                                                                         1998            July 31,
                                                    ASSETS                                            (Unaudited)          1997
                                                                                                     ------------      ------------
<S>                                                                                                  <C>               <C>         
Current assets:
      Cash and cash equivalents                                                                      $  3,922,386      $  7,542,289
      Prepaid expenses                                                                                    167,137           165,106
                                                                                                     ------------      ------------
           Total current assets                                                                         4,089,523         7,707,395
                                                                                                     ------------      ------------

Property and equipment, net of accumulated depreciation and amortization
   of $788,909 at January 31, 1998 and $742,319 at July 31, 1997                                          350,870           326,003
                                                                                                     ------------      ------------

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

           Total assets                                                                              $  4,440,393      $  8,034,954
                                                                                                     ============      ============


                                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt                                                              $      8,740      $  1,381,416
      Accounts payable                                                                                    934,255           377,704
      Accrued expenses                                                                                    540,900           693,841
                                                                                                     ------------      ------------
           Total current liabilities                                                                    1,483,895         2,452,961
                                                                                                     ------------      ------------

Long-term debt, less current portion                                                                       11,426            15,902
                                                                                                     ------------      ------------
           Total liabilities                                                                            1,495,321         2,468,863
                                                                                                     ------------      ------------


Commitments and contingencies
Stockholders' equity:
      Preferred stock, $.001 par value 
           Authorized and unissued, 1,000,000 shares at January 31, 1998
              and July 31, 1997                                                                              --                --
      Common stock $.001 par value 
           Authorized 40,000,000 shares at January 31, 1998 and
               25,000,000 shares at July 31, 1997;
           Issued and outstanding 14,847,793 shares at January 31, 1998
              and July 31, 1997                                                                            14,848            14,848
      Capital in excess of par value                                                                   51,060,202        50,961,382
      Common stock to be issued, 213,333 shares at January 31, 1998                                       479,969              --
      Deficit accumulated during development stage                                                    (48,609,947)      (45,410,139)
                                                                                                     ------------      ------------
           Total stockholders' equity                                                                   2,945,072         5,566,091
                                                                                                     ------------      ------------

           Total liabilities and stockholders' equity                                                $  4,440,393      $  8,034,954
                                                                                                     ============      ============
</TABLE>

See accompanying notes to financial statements.

                                      - 2 -

<PAGE>

                              ALFACELL CORPORATION
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

          Three months and six months ended January 31, 1998 and 1997,
                       and the Period from August 24, 1981
                     (Date of Inception) to January 31, 1998

                                                      (Unaudited)

<TABLE>
<CAPTION>
                                                    Three Months Ended                Six Months Ended             August 24, 1981
                                                        January 31,                      January 31,             (Date of Inception)
                                                                                                                         to         
                                                  1998             1997             1998             1997         January 31, 1998  
                                              ------------     ------------     ------------     ------------      ----------------
<S>                                           <C>              <C>              <C>              <C>                 <C>         
REVENUE:                                                                                                            
      Sales                                   $       --       $       --       $       --       $       --          $    553,489
      Investment income                             59,500          117,065          144,526          229,048             972,352
      Other income                                    --               --               --               --                60,103
                                              ------------     ------------     ------------     ------------        ------------
      TOTAL REVENUE                                 59,500          117,065          144,526          229,048           1,585,944
                                              ------------     ------------     ------------     ------------        ------------
                                                                                                                    
COSTS AND EXPENSES:                                                                                                 
      Cost of sales                                   --               --               --               --               336,495
      Research and development                   1,411,096          842,868        2,607,300        1,693,761          29,029,406
      General and administrative                   389,266          288,677          716,158          554,427          17,897,564
      Interest:                                                                                                     
           Related parties                            --               --               --               --             1,033,960
           Others                                      528           31,249           20,876           63,043           1,898,466
                                              ------------     ------------     ------------     ------------        ------------
       TOTAL COSTS AND EXPENSES                  1,800,890        1,162,794        3,344,334        2,311,231          50,195,891
                                              ------------     ------------     ------------     ------------        ------------
                                                                                                                    
       NET LOSS                               $ (1,741,390)    $ (1,045,729)    $ (3,199,808)    $ (2,082,183)       $(48,609,947)
                                              ============     ============     ============     ============        ============
                                                                                                                    
                                                                                                                    
      Loss per basic and diluted common                                                                             
           share                              $       (.12)    $       (.07)    $       (.21)    $       (.14)       $      (7.33)
                                              ============     ============     ============     ============        ============
                                                                                                                    
Weighted average number of shares                                                                                   
      outstanding                               15,043,921       14,567,821       14,882,968       14,444,346           6,629,826
                                              ============     ============     ============     ============        ============
</TABLE>

See accompanying notes to financial statements.

                                      - 3 -

<PAGE>


                              ALFACELL CORPORATION
                          (A Development Stage Company)


                            STATEMENTS OF CASH FLOWS

                   Six months ended January 31, 1998 and 1997,
                       and the Period from August 24, 1981
                     (Date of Inception) to January 31, 1998

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Six Months Ended              August 24, 1981  
                                                                                        January 31,              (Date of Inception)
                                                                                                                           to       
                                                                                  1998               1997          January 31, 1998
                                                                              ------------       ------------     ------------------
<S>                                                                           <C>                <C>                <C>          
Cash flows from operating activities:
  Net Loss                                                                    $ (3,199,808)      $ (2,082,183)      $(48,609,947)
  Adjustments to reconcile net loss to
      net cash used in operating activities:
    Gain on sale of marketable securities                                             --                 --              (25,963)
    Depreciation and amortization                                                   48,146             29,517          1,168,174
    Loss on disposal of property and equipment                                        --                 --               18,926
    Noncash operating expenses                                                      98,820             27,900          5,063,285
    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                                                    (2,031)           (57,934)          (167,137)
    Decrease in other assets                                                          --                9,415             36,184
    Increase in interest payable, related party                                       --                 --              744,539
    Increase in accounts payable                                                   556,551             49,532          1,011,520
    Increase in accrued payroll and expenses, related parties                         --                 --            2,348,145
    Increase (decrease) in accrued expenses                                       (152,941)          (110,581)         1,082,413
                                                                              ------------       ------------       ------------
  Net cash used in operating activities                                         (2,651,263)        (2,022,084)       (25,883,271)
                                                                              ------------       ------------       ------------
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                                             (71,457)          (136,623)        (1,365,403)
    Patent costs                                                                      --                 --              (97,841)
                                                                              ------------       ------------       ------------

      Net cash used in investing activities                                        (71,457)          (136,623)        (1,437,281)
                                                                              ------------       ------------       ------------
</TABLE>


See accompanying notes to financial statements.                      (continued)



                                      - 4 -

<PAGE>

                              ALFACELL CORPORATION
                          (A Development Stage Company)


                       STATEMENTS OF CASH FLOWS, Continued

                   Six months ended January 31, 1998 and 1997,
                      and the Period from August 24, 1981
                     (Date of Inception) to January 31, 1998

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                      Six Months Ended             August 24, 1981
                                                                                         January 31,             (Date of Inception)
                                                                                                                         to       
                                                                                   1998               1997         January 31, 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                                      (1,377,152)          (50,274)         (2,905,289)
  Proceeds from common stock to be issued                                           479,969              --               479,969
  Proceeds from issuance of common stock, net                                          --                --            22,605,919
  Proceeds from exercise of stock options and warrants, net                            --           2,620,025           5,449,588
  Proceeds from issuance of convertible debentures                                     --                --               347,000
                                                                               ------------       -----------        ------------
      Net cash provided (used) by financing activities                             (897,183)        2,573,951          31,242,938
                                                                               ------------       -----------        ------------
      Net increase (decrease) in cash                                            (3,619,903)          415,244           3,922,386
Cash and cash equivalents at beginning of period                                  7,542,289         8,131,442                --
                                                                               ------------       -----------        ------------
Cash and cash equivalents at end of period                                     $  3,922,386       $ 8,546,686        $  3,922,386
                                                                               ============       ===========        ============

Supplemental disclosure of cash flow information -
   interest paid                                                               $     20,876       $    74,790        $  1,645,449
                                                                               ============       ===========        ============
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                              $       --         $      --          $     77,265
                                                                               ============       ===========        ============
   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 January 31,
1998 and the results of  operations  for the six month periods ended January 31,
1998 and 1997 and the period from August 24, 1981 (date of inception) to January
31, 1998.  The results of  operations  for the six months ended January 31, 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 4,358,208 at January 31,
1998 and  5,745,476 at January 31, 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 January
31, 1998, the Company  recorded general and  administrative  expense of $20,100,
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 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 January  31,  1998,  the  Company  recorded  research  and
development expense of $11,200, 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 is 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 January
31, 1998, the Company  recorded general and  administrative  expense of $30,000,
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  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.

     Subsequent to January 31, 1998, the Company  completed a 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 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 $365,000,
including  $480,000 in proceeds  received  during the  three-month  period ended
January 31, 1998.  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. As a condition of the private placement, the Company agreed
to file a registration  statement covering the shares underlying the Units at no
cost to the stockholders other than such stockholders'  selling  commissions and
expenses of counsel,  if any, no later than March 31, 1998. As noted above,  the
Company received $480,000 related to this financing as of January 31, 1998 which
is recorded as common stock to be issued.

                                      - 8 -

<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 six month periods ended January 31, 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 six months ended  January 31, 1998 and 1997.  Investment  income for the six
months  ended  January 31, 1998 was  $144,000  compared to $229,000 for the same
period last year, a decrease of $85,000. This decrease was due to lower balances
of cash and cash equivalents.

     Research and  Development.  Research and development  expense for the three
months ended January 31, 1998 was  $1,411,000  compared to $843,000 for the same
period last year,  an increase of $568,000 or 67%.  This  increase was primarily
due to a 122% increase in costs related to the purchase of raw materials and the
manufacture of clinical supplies of ONCONASE, a 59% 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,  and a 243% increase in expenses in
preparation of a New Drug Application ("NDA") for ONCONASE.

     Research and development  expense for the six months ended January 31, 1998
was $2,607,000 compared to $1,694,000 for the same period last year, an increase
of $913,000 or 54%.  This increase was primarily due to a 123% increase in costs
related to 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 32% increase in costs related to
the  purchase of raw  materials  and the  manufacture  of  clinical  supplies of
ONCONASE and a 225% increase in expenses in preparation of an NDA for ONCONASE.

     General  and  Administrative.  General and  administrative  expense for the
three  months ended  January 31, 1998 was $389,000  compared to $289,000 for the
same period  last year,  an increase  of  $100,000  or 35%.  This  increase  was
primarily  due to an $80,000  increase in legal costs  primarily  related to SEC
matters and an $18,000 increase in insurance expenses.

                                      - 9 -

<PAGE>

     General and  administrative  expense for the six months  ended  January 31,
1998 was  $716,000  compared  to  $554,000  for the same  period  last year,  an
increase of $162,000  or 29%.  This  increase  was  primarily  due to a $106,000
increase in legal costs primarily  related to SEC matters and a $41,000 increase
in insurance expenses.

     Interest.  Interest expense for the three months ended January 31, 1998 was
$500 compared to $31,200 for the same period last year, a decrease of $30,700 or
98%.  Interest  expense  for the six months  ended  January 31, 1998 was $20,900
compared to $63,000 for the same period last year, a decrease of $42,100 or 67%.
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  January  31,  1998 was
$1,741,000 as compared to $1,046,000  for the same period last year, an increase
of $695,000 or 66%. The net loss for the six months  ended  January 31, 1998 was
$3,200,000 as compared to $2,082,000  for the same period last year, an increase
of $1,118,000 or 54%. The cumulative loss from the date of inception, August 24,
1981 to January 31, 1998, amounted to $48,610,000.  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 six months ended  January 31,  1998,  the Company had a net decrease in cash
and cash equivalents of $3,620,000,  which resulted primarily from net cash used
in operating  activities  of  $2,651,000,  payment of bank debt and reduction of
long-term  debt of $1,377,000 and purchase of property and equipment of $72,000,
offset by proceeds from common stock to be issued of $480,000.

     The  Company's  accounts  payable  balance at January 31, 1998 was $934,000
compared to $378,000 on July 31, 1997.  The increase is primarily  due to higher
levels of raw material purchases, increased legal costs, higher costs associated
with  increased  patient  enrollment in on-going  clinical  trials and increased
regulatory and manufacturing costs in preparation of an NDA for ONCONASE.

     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 January
31, 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 received proceeds of approximately $4,300,000,  net of the placement
agent's commission and expenses of approximately $365,000, including $480,000 in
proceeds  received  during the  three-month  period ended January 31, 1998.  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.


                                     - 10 -

<PAGE>

     The  Company's  continued  operations  will  depend on its ability to raise
additional  funds  through  several  potential  sources  such as  equity or debt
financing,  collaborative agreements,  strategic alliances and revenues from the
commercial  sale of  ONCONASE.  The Company  expects  that its cash needs in the
future will increase due to the on-going  clinical trials.  The Company believes
that its cash and cash  equivalents  as of January 31,  1998,  after taking into
account the  approximately  $4,300,000 in net proceeds received from the private
placement completed in February 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 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 4.   Submission of Matters to a Vote of Security Holders

     (a) An annual meeting of stockholders was held on December 9, 1997.

     (b) The directors  elected at the annual meeting were Kuslima Shogen,  Gail
E. Fraser,  Stanislaw  M.  Mikulski,  Stephen K.  Carter,  Donald R. Conklin and
Martin F. Stadler.

     (c) The  matters  voted upon at the annual  meeting  and the results of the
voting are set forth  below.  Except  with  respect to the matter  described  in
paragraph (ii) below, broker non-votes were not applicable.  All of such matters
were approved by the stockholders.

          (i) The  stockholders  voted  10,330,827  shares in favor and withheld
     169,550  shares  with  respect  to the  election  of  Kuslima  Shogen  as a
     director;  10,354,327  shares in favor and  withheld  146,050  shares  with
     respect to the election of Gail E. Fraser, as a director; 10,358,427 shares
     in favor and  withheld  141,950  shares  with  respect to the  election  of
     Stanislaw  M.  Mikulski  as a  director;  10,360,427  shares  in favor  and
     withheld  139,950  shares with respect to the election of Stephen K. Carter
     as a director;  10,363,527 shares in favor and withheld 136,850 shares with
     respect to the election of Donald R. Conklin as a director;  and 10,360,387
     shares in favor and withheld 139,990 shares with respect to the election of
     Martin F. Stadler as a director;


                                     - 11 -

<PAGE>

          (ii) The  stockholders  voted 4,885,824  shares in favor and 1,194,840
     shares  against a proposal to ratify the Company's  1997 Stock Option Plan.
     95,785  shares  abstained  from  voting  and there  were  4,323,928  broker
     non-votes with respect to this proposal;

          (iii) The  stockholders  voted 9,240,487 shares in favor and 1,166,740
     shares   against  a  proposal  to  amend  the  Company's   certificate   of
     incorporation  to increase the number of shares of common stock the Company
     is  authorized  to issue  from  25,000,000  to  40,000,000.  93,150  shares
     abstained from voting on this proposal;

          (iv) The  stockholders  voted  10,381,769  shares in favor and  47,558
     shares  against a proposal  to select  KPMG Peat  Marwick  LLP to audit the
     Company's  financial  statements  for the fiscal year ending July 31, 1998.
     71,050 shares abstained from voting on this proposal.

Item 5.   Other Information

     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, including $480,000 in
proceeds  received  during the  three-month  period ended January 31, 1998.  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.  The
securities offered and sold were not registered under the Securities Act of 1933
and may not be offered or sold in the United  States absent  registration  or an
applicable exemption from such registration requirements.

Item 6.   Exhibits and Reports on Form 8-K.

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


<TABLE>
<CAPTION>
                                                                          Exhibit No. or
Exhibit                                                                   Incorporation
  No.            Item Title                                                by Reference
-------          ----------                                               --------------
<C>     <S>                                                                   <C>
  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        ***
</TABLE>
                                                                        
                                     - 12 -

<PAGE>

<TABLE>
<CAPTION>
                                                                          Exhibit No. or
Exhibit                                                                   Incorporation
  No.            Item Title                                                by Reference
-------          ----------                                               --------------
<C>     <S>                                                                   <C>
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               *****
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     #####
</TABLE>

<TABLE>
<C>   <S>
*     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.
</TABLE>

                                     - 13 -

<PAGE>

<TABLE>
<C>   <S>
***   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.

+     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  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.
</TABLE>

(b)  Reports on Form 8-K.

     None.

                                     - 14 -

<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)


March 16, 1998                                /s/ GAIL E. FRASER
                                              ----------------------------------
                                              Gail E. Fraser
                                              Vice President, Finance and
                                              Chief Financial Officer (Principal
                                              Accounting Officer and Principal
                                              Financial Officer)







                                     - 15 -