FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
For the quarterly period ended November 30, 2003
For the quarterly period ended February 29, 2004
or			or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
for the transition period from to .

Commission File Number: 0-12395

ALCIDE CORPORATION

Delaware		22-2445061
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)
8561 154th Avenue North East, Redmond WA		98052
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code (425) 882-2555

Registrant’s telephone number, including area code (425) 882-2555

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES o NO ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of February ~~November 30~~29, ~~2003~~2004: 2,~~655~~697,~~038~~396, net of Treasury Stock.

ALCIDE CORPORATION

INDEX

PART I.	FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets – November 30, 2003 and May 31, 2003
	Condensed Consolidated Balance Sheets — February 29, 2004 and May 31, 2003
	Condensed Consolidated Statements of Operations - For the three and six months ended November 30, 2003 and November 30, 2002
	Condensed Consolidated Statements of Operations - For the three and nine months ended February 29, 2004 and February 28, 2003
	Condensed Consolidated Statements of Shareholders’ Equity
	Condensed Consolidated Statements of Cash Flows - For the six months ended November 30, 2003 and November 30, 2002
	Condensed Consolidated Statements of Cash Flows - For the nine months ended February 29, 2004 and February 28, 2003
	Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II.	OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE

ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	November 30, 2003			May 31, 2003
	February 29, 2004			May 31, 2003
Assets:
Current assets:
Cash and cash equivalents	$	24,~~969~~567,~~633~~517		$	2,286,641
Accounts receivable – trade, net	43,~~276~~612,~~906~~352			3,831,527
Inventory	1,~~923~~863,~~595~~547			2,097,097
Deferred and prepaid income taxes	~~372~~163,~~502~~126			243,413
Spare parts	1,~~042~~119,~~552~~037			884,226
Prepaid expenses and other current assets	~~332~~465,~~795~~408			468,863
Total current assets	1011,~~917~~790,~~983~~987			9,811,767
Equipment and leasehold improvements:
SANOVA plant assets	1718,~~753~~026,~~908~~583			17,037,502
Construction in progress	2,~~666~~906,~~772~~229			2,596,332
Office equipment	~~664~~681,~~985~~713			567,158
Laboratory, manufacturing equipment and vehicles	577,916			523,718
Leasehold improvements	7790,~~089~~463			73,483
Less: Accumulated depreciation and amortization	(1112,~~392~~304,~~199~~215		)	(9,790,948		)
Total equipment and leasehold improvements, net	109,~~348~~978,~~471~~689			11,007,245
Goodwill	478,807			478,807
Other assets	70,885			70,885
Total Assets	$	2122,~~816~~319,~~146~~368		$	21,368,704
Liabilities and Shareholders’ Equity:
Current liabilities:
Accounts payable	$	~~742~~914,~~961~~213		$	686,391
Accrued expenses	~~583~~412,~~058~~911			501,578
Income taxes payable	~~115~~2,~~300~~325			115,300
Total current liabilities	1,~~441~~329,~~319~~449			1,303,269
Deferred tax liability	~~731~~596,~~351~~817			565,287
Other long-term liabilities	—			8,140
Total Liabilities	21,~~172~~926,~~670~~266			1,876,696
Commitments and Contingencies
Redeemable Class “B” Preferred Stock - $.01 par value; authorized 10,000,000 shares; issued and outstanding:
Redeemable Class “B” Preferred Stock - $.01 par value; authorized 10,000,000 shares; issued and outstanding: February 29, 2004 – 60,663; May 31, 2003 – 63,675	159,239			167,145
November 30, 2003 – 60,663; May 31, 2003 – 63,675	159,239			167,145
Shareholders’ equity:
Class “A” Preferred Stock - no par value, authorized 1,000 shares; issued and outstanding November 30, 2003 – 138; May 31, 2003 - 138	18,636			18,636
Class “A” Preferred Stock - no par value, authorized 1,000 shares; issued and outstanding February 29, 2004 – 138; May 31, 2003 - 138	18,636			18,636
Common Stock - $.01 par value; authorized 10,000,000 shares; issued:
Common Stock - $.01 par value; authorized 10,000,000 shares; issued: February 29, 2004 – 3,083,355; May 31, 2003 – 3,040,597	30,833			30,406
November 30, 2003 – 3,040,997; May 31, 2003 – 3,040,597	30,410			30,406
Common treasury stock at cost February 29, 2004 – 385,959;May 31, 2003 - 385,959	(7,260,041		)	(7,260,041		)
Common treasury stock at cost
Additional paid-in capital	22,049,051			21,502,828
November 30, 2003 – 385,959; May 31, 2003 - 385,959	(7,260,041		)	(7,260,041		)
Retained earnings	5,395,384			5,033,034
Additional paid-in capital	21,507,938			21,502,828
Total Shareholders’ Equity	20,233,863			19,324,863
Retained earnings	5,187,294			5,033,034
Total Liabilities and Shareholders’ Equity	$	22,319,368		$	21,368,704
Total Shareholders’ Equity	19,484,237			19,324,863
Total Liabilities and Shareholders’ Equity	$	21,816,146		$	21,368,704

See notes to Unaudited Condensed Consolidated Financial Statements.

ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended November 30,

For the Six Months Ended November 30,

For the Three Months Ended February 29 and 28,

For the Nine Months Ended February 29 and 28,

2003

2002

2003

2002

2004

2003

2004

2003

Revenue:

Net sales

5,~~942~~521,~~174~~818

5,~~547~~172,~~795~~872

1016,~~830~~352,~~499~~317

1015,~~563~~736,~~590~~462

License revenue

~~287~~321,~~143~~974

~~230~~330,~~757~~722

~~595~~917,~~414~~387

~~260~~590,~~154~~876

Total revenue

65,~~229~~843,~~317~~792

5,~~778~~503,~~552~~594

1117,~~425~~269,~~913~~704

1016,~~823~~327,~~744~~338

Expenditures:

Cost of goods sold, exclusive of impairment charges

3,550,985

3,086,656

6,587,098

5,891,934

Cost of goods sold, exclusive ofimpairment charges

3,432,322

3,098,205

10,019,419

8,990,139

Impairment of SANOVA plant assets

~~328,870~~—

538,~~301~~460

337,816

5361,~~301~~761

Research and development expense

~~470~~550,~~177~~180

~~563~~520,~~334~~678

~~949~~1,~~591~~499,771

1,~~153~~674,~~959~~636

Consulting expense to related parties

15,000

3045,000

Selling, general and administrative expense

1,~~785~~542,~~128~~210

1,~~390~~430,~~203~~379

34,~~313~~855,~~040~~250

24,~~925~~355,~~577~~957

Total expenditures

65,~~150~~539,~~160~~712

5,~~108~~072,~~494~~722

1116,~~217~~757,~~545~~256

1015,~~054~~127,~~771~~493

Operating income

79304,~~157~~080

~~670~~430,~~058~~872

~~208~~512,~~368~~448

~~768~~1,~~973~~199,845

Interest income

45,~~176~~772

65,~~201~~945

814,~~263~~036

1420,~~068~~013

Interest expense

—

(1615,~~805~~219

)

—

(3753,~~853~~072

)

Other income

1110,~~273~~285

98,~~645~~862

2030,~~693~~977

1827,~~784~~646

Income before provision for income taxes

94320,~~606~~137

~~669~~430,~~099~~460

~~237~~557,~~324~~461

~~763~~1,~~972~~194,432

Provision for income taxes

33112,~~113~~047

~~234~~150,~~185~~661

83195,~~064~~111

~~267~~418,~~390~~051

Net income

61208,~~493~~090

~~434~~279,~~914~~799

~~154~~362,~~260~~350

~~496~~776,~~582~~381

Basic earnings per common share

.0208

.1611

.0614

.1929

Diluted earnings per common share

.0208

.1610

.0614

.1929

Weighted average common stock and dilutive potential common shares outstanding:

Basic

2,~~654~~689,~~805~~704

2,~~656~~659,~~167~~910

2,~~654~~666,~~721~~339

2,~~656~~657,~~094~~352

Diluted

2,~~675~~712,~~662~~728

2,~~677~~682,~~684~~765

2,~~666~~680,~~634~~147

2,~~683~~681,~~300~~962

See notes to Unaudited Condensed Consolidated Financial Statements.

ALCIDE ~~CORPORATION~~ ~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~CORPORATION

	Class “A” Preferred Stock			Common Stock			Additional Paid-in Capital		Common Treasury Stock					Retained Earnings			Total Shareholders‘ Equity
	Shares	Amount		Shares	Amount				Shares		Amount
Balance May 31, 2003	138	$	18,636	3,040,597	$	30,406	$	21,502,828	(385,959	)	$	(7,260,041	)	$	5,033,034		$	19,324,863
Net income														92,767			92,767
Balance August 31, 2003	138	$	18,636	3,040,597	$	30,406	$	21,502,828	(385,959	)	$	(7,260,041	)	$	5,125,801		$	19,417,630
Exercise of stock options				400	4		4,771										4,775
Tax benefit from exercise of stock options							339										339
Net income														61,493			61,493
Balance November 30, 2003	138	$	18,636	3,040,997	$	30,410	$	21,507,938	(385,959	)	$	(7,260,041	)	$	5,187,294	)	$	19,484,237

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

							Additional									Total
	Class “A” Preferred Stock			Common Stock			Paid-in		Common Treasury Stock					Retained		Shareholders’
	Shares	Amount		Shares	Amount		Capital		Shares		Amount			Earnings		Equity
Balance May 31, 2003	138	$	18,636	3,040,597	$	30,406	$	21,502,828	(385,959	)	$	(7,260,041	)	$	5,033,034	$	19,324,863

Net income														92,767		92,767

Balance August 31, 2003	138	$	18,636	3,040,597	$	30,406	$	21,502,828	(385,959	)	$	(7,260,041	)	$	5,125,801	$	19,417,630

Exercise of stock options				400	4		4,771									4,775

Tax benefit from exercise of stock options							339									339

Net income														61,493		61,493

Balance November 30, 2003	138	$	18,636	3,040,997	$	30,410	$	21,507,938	(385,959	)	$	(7,260,041	)	$	5,187,294	$	19,484,237

Exercise of stock options				21,693	217		234,531									234,748

Stock issued to employee stock ownership plan				20,665	206		303,569									303,775

Tax benefit from exercise of stock options							3,013									3,013

Net income														208,090		208,090

Balance February 29, 2004	138	$	18,636	3,083,355	$	30,833	$	22,049,051	(385,959	)	$	(7,260,041	)	$	5,395,384	$	20,233,863

See notes to Unaudited Condensed Consolidated Financial Statements.

ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended November 30,
	For the Nine Months Ended February 29 and 28,
	2003			2002
	2004			2003
Cash Flows from Operating Activities:
Net income	$	~~154~~362,~~260~~350		$	~~496~~776,~~582~~381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	12,~~965~~877,~~059~~855			12,~~783~~718,~~149~~253
Asset impairment charges	337,816			5361,~~301~~761
Loss on disposal of assets	16,~~134~~911			—
Tax benefit from exercise of stock options	~~339~~3,352			—9,392
Deferred income taxes	8249,~~725~~678			~~267~~418,~~390~~659
Common stock issued to employee stock ownership plan	303,775			53,906
Decrease (increase) in assets:
Accounts receivable – trade, net	~~(445~~219,~~379~~175		)	(1,~~291~~006,~~738~~450		)
Inventory	~~173~~233,~~502~~550			(~~131~~191,~~520~~847		)
Prepaid income taxes	~~(45~~62,~~750~~139		)	~~205~~195,000
Spare parts	(~~158~~234,~~326~~811		)	(~~173~~186,~~953~~188		)
Prepaid expenses and other current assets	~~136~~3,~~068~~455			~~194~~88,~~288~~852
Other assets	—			3,539
Increase (decrease) in liabilities:
Accounts payable	56227,~~570~~822			~~(282~~66,~~340~~560		)
Accrued expenses	81(88,~~480~~667		)	(~~236~~241,~~137~~398		)
Income taxes payable	(112,975		)	—
Other long-term liabilities	(8,140		)	(26,346		)
Net cash provided by operating activities	24,~~346~~253,~~358~~285			~~861~~2,~~215~~740,074
Cash Flows from Investing Activities:
Acquisition of equipment	(12,~~660~~204,~~235~~026		)	(1,~~461~~904,~~626~~794		)
Cash Flows from Financing Activities:
Redemption of Class “B” Preferred Stock	(7,906		)	(12,469		)
Exercise of stock options	4239,~~775~~523			553,~~755~~205
Net cash used in financing activities	(3,131		)	(6,714		)
Net cash provided by financing activities	231,617			40,736
Net increase (decrease) in cash and cash equivalents	682,992			(607,125		)
Net increase in cash and cash equivalents	2,280,876			876,016
Cash and cash equivalents at beginning of period	2,286,641			2,847,581
Cash and cash equivalents at end of period	$	24,~~969~~567,~~633~~517		$	23,~~240~~723,~~456~~597
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for income taxes	$	45183,~~750~~366		$	—10,000
Cash paid during the period for interest	$	—		$	3753,~~853~~072

See notes to Unaudited Condensed Consolidated Financial Statements.

ALCIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

In the opinion of management, the accompanying unaudited condensed ~~consolidated~~ consolidated financial statements of Alcide Corporation (the “Company”) for the three and ~~six~~ nine month periods ended ~~November 30~~February 29, ~~2003~~2004 and ~~2002~~February ~~have~~28, 2003 have been prepared in accordance with the instructions to Form 10-Q. Certain information and disclosures normally included in notes to financial statements have been condensed or omitted according to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2003. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation. Certain reclassifications have been made to prior year financial statements to conform to current year presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Stock Option Plans

The Company has two stock option plans that allow granting of options to employees, officers, directors and consultants. Options granted to directors vest immediately while all other ~~options~~ options vest evenly over a five-year period. As As allowed by Financial Accounting Standards Board Statement No. 123, “Accounting for Stock-Based Compensation” (SFAS 123) and Statement No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” (SFAS 148), the Company accounts for its stock option plans under the guidelines of ~~Accounting~~ Accounting Principles Board Opinion No. 25, “Accounting for Stock issued to Employees” (APB 25).

The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123.

	Three Months Ended November 30,					Six Months Ended November 30,
	Three Months Ended February 29 and 28,					Nine Months Ended February 29 and 28,
	2003			2002		2003			2002
	2004			2003		2004			2003
Net income, as reported	$	61208,~~493~~090		$	~~434~~279,~~914~~799	$	~~154~~362,~~260~~350		$	~~496~~776,~~582~~381
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	~~174~~112,~~500~~800			~~221~~121,~~800~~700		~~326~~348,~~800~~300			~~372~~363,~~500~~800
Pro forma net (loss) income	$	(113,007	)	$	213,114	$	(172,540	)	$	124,082
Pro forma net income	$	95,290		$	158,099	$	14,050		$	412,581
Earnings (loss) per share
Earnings per share
Basic — as reported	$	.0208		$	.1611	$	.0614		$	.1929
Basic — pro forma	(.04		)	.0806		(.0601		)	.0516
Diluted — as reported	.0208			.1610		.0614			.1929
Diluted — pro forma	(.04		)	.0806		(.0601		)	.0515

Recently issued accounting pronouncements

In May 2003, the EITF issued a final consensus on Issue 01-8, “Determining Whether an Arrangement Contains a Lease.” Issue 01-8 provides guidance on determining whether an arrangement is or includes a lease within the scope of SFAS No. 13 “Accounting for Leases.” If it is determined that a lease exists, the lease and non-lease components of a combined sales arrangement must be accounted for separately. Issue 01-8 is effective prospectively for arrangements entered into, modified, or acquired in fiscal periods beginning after May 28, 2003.

Management has determined that at this time the revenue derived from the lease component in connection with SANOVA contracts is not material and, therefore, the Company has not separately reported lease revenue. If in the future, the amount becomes material and Issue 01-8 does not change the definition of a “lease”, the Company will be required to separately report lease revenue.

2. Accounts Receivable — – Trade, Net consisted of the following:

	November 30, 2003		May 31, 2003
	February 29, 2004		May 31, 2003
Domestic Distributors	$	~~317~~308,~~872~~803	$	372,837
International Distributors	1,~~417~~100,~~525~~538		1,402,504
SANOVA Customers	2,~~321~~109,~~465~~031		1,888,840
Other Receivables	~~220~~93,~~044~~980		167,346
Total Accounts Receivable –Trade, Net	$	4,276,906	$	3,831,527
Total Accounts Receivable – Trade, Net	$	3,612,352	$	3,831,527

The Company evaluates impairment of its trade receivables on a regular basis. The allowance for doubtful accounts was $28,000 as of ~~November 30~~February 29, ~~2003~~2004 and May 31, 2003, respectively, ~~which~~ which was estimated based on collection history and known events.

3. Inventory consisted of the following:

	November 30, 2003		May 31, 2003
	February 29, 2004		May 31, 2003
Raw Materials	$	~~553~~510,~~236~~894	$	692,480
Finished Products	~~486~~540,~~159~~224		484,426
SANOVA Inventory at Customer Sites	~~884~~812,~~200~~429		920,191
Total Inventory	$	1,~~923~~863,~~595~~547	$	2,097,097

4. Commitments and Contingencies

As of ~~November 30~~February 29, ~~2003~~2004, the Company had contracts for future startups of ~~four~~of three poultry and ~~five~~eight red meat processing operations. These systems are expected to be installed in the ~~third~~fourth quarter of fiscal 2004 and first quarter of fiscal 2005 at an approximate total cost of $1,~~160~~220,000. As of ~~November 30~~February 29, ~~2003~~2004, approximately $~~735~~840,000 of the equipment required for these installations was on hand. Subsequent to the end of the quarter, contracts were signed for one poultry plant and thirteen red meat plants. The cost for these systems is expected to be about $1,800,000. Approximately $400,000 of the equipment required for these installations had been purchased as of February 29, 2004.

5. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares of the Company include the dilutive effect of outstanding stock options and warrants. For the ~~three~~ three and ~~six~~nine month periods ended ~~November 30~~February 29, ~~2003~~2004, potential common ~~shares~~ shares excluded because of ~~their antidilutive effect were 255,993 and 269,697 shares respectively. For the three and six month periods ended November 30, 2002, 267,392 and 247,892 shares were excluded, respectively.~~

~~Basic~~their antidilutive effect were 239,326 and ~~diluted~~246,727 ~~earnings~~shares respectively. For ~~per~~the ~~share~~three ~~were~~and ~~calculated~~nine month asperiods ~~follows:~~ended February 28, 2003, 260,392 and 242,892 shares were excluded, respectively.

	Three Months Ended November 30,				Six Months Ended November 30,
	2003		2002		2003		2002
Net income	$	61,493	$	434,914	$	154,260	$	496,582
Weighted average number of common shares outstanding	2,654,805		2,656,167		2,654,721		2,656,094
Basic earnings per share	$	.02	$	.16	$	.06	$	.19
Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants	20,857		21,517		11,913		27,206
Weighted average common shares outstanding and dilutive potential common shares	2,675,662		2,677,684		2,666,634		2,683,300
Diluted earnings per share	$	.02	$	.16	$	.06	$	.19

Basic and diluted earnings per share were calculated as follows:

6. Orders for Future Delivery

	Three Months Ended February 29 and 28,				Nine Months Ended February 29 and 28,
	2004		2003		2004		2003

Net income	$	208,090	$	279,799	$	362,350	$	776,381
Weighted average number of common shares outstanding	2,689,704		2,659,910		2,666,339		2,657,352

Basic earnings per share	$	.08	$	.11	$	.14	$	.29
Assuming exercise of options and warrants reduced by the number of shares which could have been purchased with the proceeds from exercise of such options and warrants	23,024		22,855		13,808		24,610
Weighted average common shares outstanding and dilutive potential common shares	2,712,728		2,682,765		2,680,147		2,681,962

Diluted earnings per share	$	.08	$	.10	$	.14	$	.29

~~At November 30, 2003 and 2002, the Company had orders for future delivery of $406,940 and $474,296, respectively~~6. ~~The~~ Orders ~~$406,940 orders~~ for ~~future~~Future delivery are scheduled for shipment during the period December 2003 through January 2004. Data for both years excludes expected sales of SANOVA because contracts with SANOVA customers do not require placement of purchase orders for future delivery.Delivery

7At February 29, 2004 and February 28, 2003, the Company had orders for future delivery of $263,087 and $430,918, respectively. ~~Segment~~ The $263,087 ~~Information~~orders for future delivery are scheduled for shipment in March 2004. Data for both years excludes expected sales of SANOVA because contracts with SANOVA customers do not require placement of purchase orders for future delivery.

~~The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No~~7. Segment ~~131, “Disclosures about Segments of an Enterprise and Related~~ Information” and reports segment information in the same format as reviewed by the Company’s management (the “Management Approach”), which is organized around differences in products and services. Management has determined the Company has two reportable segments, Animal Health and Surface Disinfectants and SANOVA Food Antimicrobial Products.

The Company’s follows ~~reportable~~the ~~segments~~provisions ~~are~~of ~~strategic~~Statement ~~business~~of ~~units~~Financial ~~that offer~~Accounting ~~similar~~Standards ~~products~~(“SFAS”) No. 131, ~~but~~“Disclosures toabout ~~entirely~~Segments ~~different~~of ~~customers~~an atEnterprise ~~substantially~~and Related Information” ~~different~~and ~~selling~~reports ~~prices~~segment ~~and~~information ~~cost~~in ofthe ~~goods~~same ~~sold~~format ~~structures~~as reviewed by the Company’s management (the “Management Approach”), which is organized around differences in products and services. ~~The~~Management has determined the Company ~~does~~has ~~not~~two ~~have~~reportable ~~any~~segments, ~~inter-segment~~Animal Health and ~~revenues~~Surface Disinfectants and SANOVA Food Antimicrobial Products.

The ~~accounting~~Company’s reportable ~~policies of the~~ segments are ~~the~~strategic ~~same~~business asunits ~~those~~that ~~described in~~offer ~~Note~~similar 2products, but —to ~~Summary~~entirely ofdifferent ~~Significant~~customers ~~Accounting~~at ~~Policies~~substantially indifferent ~~the~~selling ~~Company’s~~prices ~~May 31,~~and ~~2003~~cost ~~Form~~of ~~10-K~~goods sold structures. The Company ~~evaluates performance based on gross margin from the sale of each segment’s products and~~ does not ~~allocate~~have ~~expenses~~any ~~beyond~~inter-segment ~~gross margin to the two segments~~revenues.

9The accounting policies of the segments are the same as those described in Note 2 — Summary of Significant Accounting Policies in the Company’s May 31, 2003 Form 10-K. The Company evaluates performance based on gross margin from the sale of each segment’s products and does not allocate expenses beyond gross margin to the two segments.

~~Segment net sales, gross margin, assets, fixed asset additions and depreciation expense are as follows:~~9

	Three Months Ended November 30,				Six Months Ended November 30,
	2003		2002		2003		2002
Animal Health and Surface Disinfectants
License Revenue – U.S.	$	287,143	$	230,757	$	595,414	$	260,154
Net Sales - U.S.	973,799		667,137		1,498,794		1,505,420
Net Sales - International	1,186,186		1,337,586		2,021,885		2,160,712
Total Revenue	2,447,128		2,235,480		4,116,093		3,926,286
Gross Margin	1,471,414		1,345,178		2,516,256		2,258,616
Assets (at end of period)	3,483,528		3,571,146		3,483,528		3,571,146
Fixed Asset Additions	—		—		—		—
Depreciation Expense	1,344		1,344		2,688		2,688
SANOVA Food Antimicrobial Products
Net Sales - U.S.	3,782,189		3,543,072		7,309,820		6,897,458
Gross Margin, before impairment	1,206,918		1,346,718		2,322,559		2,673,194
Gross Margin, after impairment	878,048		1,293,417		1,984,743		2,619,893
Assets (at end of period)	14,302,385		15,478,942		14,302,385		15,478,942
Fixed Asset Additions	979,796		278,838		1,590,807		1,383,416
Depreciation Expense	964,674		890,849		1,899,609		1,723,938
Not Segment Related
Assets (at end of period)	4,030,233		3,045,294		4,030,233		3,045,294
Fixed Asset Additions	42,470		22,212		69,428		78,210
Depreciation Expense	32,523		29,096		62,762		56,523
Total
License Revenue	287,143		230,757		595,414		260,154
Net Sales	5,942,174		5,547,795		10,830,499		10,563,590
Total Revenue	6,229,317		5,778,552		11,425,913		10,823,744
Gross Margin	2,349,462		2,638,595		4,500,999		4,878,509
Assets (at end of period)	21,816,146		22,095,382		21,816,146		22,095,382
Fixed Asset Additions	1,022,266		301,050		1,660,235		1,461,626
Depreciation Expense	998,541		921,289		1,965,059		1,783,149

Segment net sales, gross margin, assets, fixed asset additions and depreciation expense are as follows:

Assets assigned to the business segments include accounts receivable, inventories, fixed assets, spare parts and goodwill. No single customer accounted for 10% or more of revenues.

	Three Months Ended February 29 and 28,				Nine Months Ended February 29 and 28,
	2004		2003		2004		2003
Animal Health and Surface Disinfectants
License Revenue – U.S.	$	321,974	$	330,722	$	917,387	$	590,876
Net Sales - U.S.	768,440		878,954		2,267,233		2,384,374
Net Sales - International	1,030,101		1,070,183		3,051,987		3,230,895
Total Revenue	2,120,515		2,279,859		6,236,607		6,206,145
Gross Margin	1,256,354		1,395,902		3,772,610		3,654,518

Assets (at end of period)	3,043,113		3,359,538		3,043,113		3,359,538
Fixed Asset Additions	—		—		—		—
Depreciation Expense	1,344		1,344		4,032		4,032

SANOVA Food Antimicrobial Products
Net Sales - U.S.	3,723,277		3,223,735		11,033,097		10,121,193
Gross Margin, before impairment	1,155,116		1,009,487		3,477,675		3,682,681
Gross Margin, after impairment	1,155,116		1,001,027		3,139,859		3,620,920

Assets (at end of period)	13,742,632		14,996,925		13,742,632		14,996,925
Fixed Asset Additions	536,514		438,700		2,127,321		1,822,116
Depreciation Expense	879,103		903,852		2,778,712		2,627,790

Not Segment Related
Assets (at end of period)	5,533,623		4,678,765		5,533,623		4,678,765
Fixed Asset Additions	7,277		4,468		76,705		82,678
Depreciation Expense	32,349		29,908		95,111		86,431

Total
License Revenue	321,974		330,722		917,387		590,876
Net Sales	5,521,818		5,172,872		16,352,317		15,736,462
Total Revenue	5,843,792		5,503,594		17,269,704		16,327,338
Gross Margin	2,411,470		2,396,929		6,912,469		7,275,438

Assets (at end of period)	22,319,368		23,035,228		22,319,368		23,035,228
Fixed Asset Additions	543,791		443,168		2,204,026		1,904,794
Depreciation Expense	912,796		935,104		2,877,855		2,718,253

Assets assigned to the business segments include accounts receivable, inventories, fixed assets, spare parts and goodwill. No single customer accounted for 10% or more of revenues.

~~PART I~~10

~~ITEM 2~~8. ~~Management’s~~ Subsequent ~~Discussion and Analysis of Financial Condition and Results of Operations~~Events

~~Introduction~~On March 11, 2004, Alcide entered into an Agreement and Plan of Merger with Ecolab Inc., which was approved by Alcide’s board of directors. Under the terms of the agreement, a wholly-owned subsidiary of Ecolab will merge with and into Alcide, and Alcide will survive as a wholly-owned subsidiary of Ecolab. Each stockholder of Alcide will receive $21.00 per share of Alcide common stock, to be in shares of Ecolab common stock based on the average of Ecolab’s closing stock price for a ten-day period ending on the fifth day prior to the effective date of the merger. Holders of outstanding options to purchase Alcide common stock that have an exercise price equal to or greater than $21.00 per share will receive a cash payment of such options equal to $21.00, subject in certain instances to the consent of such option holders. Ecolab agreed to assume options held by certain holders of outstanding options who do not consent to receive a cash payment of $21.00 per share. Certain stockholders of Alcide who hold in the aggregate approximately 22.4% of the outstanding stock of Alcide have entered into voting agreements with Ecolab which provide that they will vote their shares in favor of the acquisition. The transaction is anticipated to be a tax-free reorganization for income tax purposes. The consummation of the merger is subject to the approval of Alcide’s stockholders and other customary closing conditions.

On March 15, 2004, a complaint was filed against Alcide ~~Corporation~~and ~~(the~~its ~~“Company”~~Directors orin ~~“Alcide”)~~the isKing aCounty ~~Delaware~~Superior ~~Corporation~~Court ~~organized~~of inthe ~~1983~~State of Washington. The complaint which ~~has~~purports to be brought ~~its~~as ~~executive~~a ~~offices~~class ~~and~~action ~~research~~alleges ~~laboratories~~that atAlcide’s ~~8561~~Directors ~~154th~~breached ~~Avenue~~their fiduciary Nduties in connection with their approval of the Ecolab Merger Agreement and seeks to enjoin the transaction.~~E.,~~ The Company ~~Redmond,~~believes ~~Washington~~that ~~98052~~the actions of the Company and the Board were appropriate.

Alcide is engaged in the research, development and commercialization of unique chemical compounds having intense microbiocidal activity. The Company holds substantial worldwide rights to its discoveries through various patents, patent applications, trademarks and other intellectual property, technology and know-how.11

~~The Company reports and controls its business through two business segments:~~PART I

~~• Animal~~ITEM ~~Health and Surface Disinfectants~~2. ~~This segment~~ Management’s ~~includes~~Discussion ~~products~~and ~~sold~~Analysis ~~to the dairy industry for prevention~~ of ~~mastitis infections~~Financial inCondition ~~dairy cows under the trade names UDDERgold® UDDERgold Plus®, UDDERgold Platinum®, UDDERgold 5-Star, 4XLA®~~ and ~~Pre-Gold®. All~~Results of ~~the Company’s Animal Health revenue is generated through sales to distributors who re-sell directly to dairy farmers and farm cooperatives.~~Operations

This business segment also includes a line of sterilants and disinfectants under the trade names of Exspor® and LD® sold predominantly to the health care industry to reduce the potential for disease transmission via contaminated surfaces.Introduction

~~• SANOVA~~Alcide ~~Food~~Corporation ~~Antimicrobial~~(the ~~Products. SANOVA~~“Company” ~~is an antimicrobial solution sold to~~or ~~poultry~~“Alcide”) ~~and~~is ~~meat~~a ~~slaughter~~Delaware ~~operations~~Corporation ~~and~~organized ~~food~~in ~~processing~~1983 ~~companies~~which ~~for~~has ~~control of~~its ~~food borne pathogens such as Salmonella, E-coli 015787, Listeria,~~executive offices and ~~Campylobacter. All~~research ~~SANOVA~~laboratories ~~sales~~at to8561 ~~date~~154th ~~have~~Avenue ~~been direct to the end customer/user~~N. ~~Typically~~E., ~~the~~ ~~SANOVA components are delivered to the customer’s site in bulk concentrate form then~~Redmond, atWashington ~~the time of use, the components are automatically mixed, diluted and dispensed through a PLC controlled mixing apparatus supplied and owned by Alcide~~98052.

~~Risk~~Alcide is engaged in research, development and ~~Uncertainties~~commercialization of unique chemical compounds having intense microbiocidal activity. The Company holds substantial worldwide rights to its discoveries through various patents, patent applications, trademarks and other intellectual property, technology and know-how.

~~This~~The report includes forward looking statements which involve risk and uncertainty including, without limitation, risk of dependence on patents, trademarks, third party suppliers, market acceptance of and demand for the Company’s ~~products, distribution~~reports ~~capabilities~~ and ~~the~~controls ~~development~~its ~~of technology and governmental~~business ~~regulatory~~through ~~approval~~two ~~thereof.~~business segments:

~~Sentences~~• Animal orHealth ~~phrases that~~and ~~use~~Surface ~~words~~Disinfectants. This ~~such as “believes”, “anticipates”, “hopes”, “plans”, “may”, “can”,~~segment ~~“will”,~~includes ~~“expects”~~products ~~and~~sold ~~others~~to ~~are~~the ~~often~~dairy ~~used~~industry tofor ~~flag~~prevention ~~such~~of ~~forward looking~~mastitis ~~statements,~~infections ~~but~~in ~~their~~dairy ~~absence~~cows ~~does~~under ~~not~~the ~~necessarily~~trade ~~mean~~names ~~a statement is not~~UDDERgold® ~~forward~~UDDERgold ~~looking. Such~~Plus®, ~~statements~~UDDERgold ~~reflect~~Platinum®, UDDERgold ~~management’s~~5-Star, ~~current~~4XLA® ~~opinion~~ and ~~are~~Pre-Gold®. All ~~designed~~of tothe ~~help readers understand management~~Company’s ~~thinking. By~~Animal ~~their~~Health ~~very nature,~~revenue ~~however,~~is ~~such~~generated ~~statements~~through sales ~~are subject~~ to ~~certain~~distributors ~~risks~~ and ~~uncertainties that~~license ~~could~~revenue ~~cause actual results to differ materially~~ from ~~those~~one ~~expected or projected~~distributor. ~~Readers~~These ~~are~~distributors ~~cautioned~~re-sell ~~not~~directly to ~~place~~ ~~undo reliance on these forward looking statements which speak only as of~~dairy ~~the~~farmers ~~date~~and ~~hereof. The~~farm Company undertakes no obligation to release publicly any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated eventscooperatives.

~~Risks~~ ~~and~~This ~~uncertainties that may affect the Company’s operating results and~~ business ~~performance include: the~~segment ~~Company’s~~also ~~ability~~includes ~~to protect~~a ~~its~~line ~~patents and other proprietary rights; the volume and timing~~ of ~~product~~sterilants ~~sales;~~and ~~pricing;~~disinfectants ~~market~~under ~~acceptance of its products;~~ the ~~costs~~trade ~~and effects~~names of ~~complying~~Exspor® ~~with laws~~ and ~~regulations relating to the environment and~~LD® tosold ~~the~~predominantly ~~manufacture, storage, distribution and labeling of the Company’s products; the ability~~ to ~~develop and maintain distribution and supply arrangements;~~ the ~~effect~~health ofcare ~~the~~industry Company’s accounting policies; changes in tax, fiscal and governmental and regulatory policies; economic factors such as the worldwide economy, interest rates, currency rates and currency movements; changes in the capital markets affecting the Company’s ability to ~~raise capital;~~reduce the ~~occurrence~~potential ~~of litigation or claims; the loss or insolvency of a~~for ~~major~~disease ~~customer,~~transmission ~~distributor~~via orcontaminated ~~supplier; losses of or changes in executive management; the~~surfaces.

11• SANOVA Food Antimicrobial Products. SANOVA is an antimicrobial solution sold to poultry and meat slaughter operations and food processing companies for control of food borne pathogens such as Salmonella, E-coli 015787, Listeria, and Campylobacter. All SANOVA sales to date have been direct to the end customer/user. Typically, the SANOVA components are delivered to the customer’s site in bulk concentrate form then, at the time of use, the components are automatically mixed, diluted and dispensed through a PLC controlled mixing apparatus supplied and owned by Alcide.

~~Company’s~~Risk ~~ability to continue product introductions~~ and technological innovations; and other uncertainties and risks reported from time to time in our reports filed with the Securities and Exchange Commission. In addition, the Company notes that its stock price can be affected by fluctuations in quarterly earnings. There can be no assurance that the Company’s earnings level will meet investors’ expectations.Uncertainties

~~Substantially~~This ~~all~~report ofincludes ~~the~~forward looking ~~Company’s~~statements ~~products~~which ~~are~~involve ~~subject~~risk toand ~~regulatory~~uncertainty ~~approval~~including, ofwithout ~~or control by various~~limitation, ~~governmental~~risk ~~agencies~~of ~~such~~dependence ason ~~the~~patents, ~~FDA~~trademarks, ~~USDA~~third ~~and~~party ~~EPA~~suppliers, ~~in the United States and~~market ~~their~~acceptance ~~equivalents in international markets. The exercise~~ of ~~control~~ and ~~regulatory~~demand ~~authority~~for ~~by these agencies can have a material effect on~~ the Company’s ~~business~~products, ~~directly~~distribution ascapabilities and itthe ~~relates~~development toof ~~the Company’s~~technology ~~products~~ and ~~indirectly~~governmental asregulatory itapproval ~~relates to competitors’ products~~thereof.

~~Within~~Sentences ~~the~~or ~~Animal~~phrases ~~Health and~~that ~~Surface~~use ~~Disinfectant~~words ~~business~~such ~~segment~~as “believes”, ~~all~~“anticipates”, of“hopes”, ~~the~~“plans”, ~~Company’s~~“may”, ~~Animal~~“can”, ~~Health~~“will”, “expects” ~~products~~and others are ~~sold~~often ~~through~~used ~~distributors~~to ~~having~~flag ~~exclusive~~such orforward ~~semi-exclusive~~looking statements, but their ~~rights~~absence todoes ~~specified~~not ~~geographical~~necessarily ~~territories~~mean a statement is not forward looking. ~~The~~ Forward ~~loss~~looking ofstatements areflect management’s ~~distributor~~current ~~can~~opinion ~~have~~and aare ~~material~~designed ~~effect~~to onhelp ~~the~~readers ~~Company~~understand management’s thinking. By their very ~~sales~~nature, ~~particularly~~however, insuch ~~the~~statements ~~short-term~~are ~~until~~subject ato ~~replacement~~certain isrisks ~~found,~~and ~~contracted~~uncertainties ~~and~~that ~~trained~~could incause ~~the~~actual ~~sale~~results ofto ~~the~~differ ~~Company’s~~materially ~~products~~from those expected or projected. ~~Further,~~Readers ~~the~~are ~~Company~~cautioned ~~faces~~not ~~well~~to place ~~established~~undo ~~competition~~reliance inon ~~each of~~these ~~the~~forward ~~markets~~looking ~~where~~statements ~~its~~which ~~Animal~~speak ~~Health~~only ~~products~~as ~~are~~of the ~~sold~~date hereof. ~~Such~~The ~~competition,~~Company ~~particularly,~~undertakes no ~~competition~~obligation to release publicly any revisions to these forward looking ~~claiming~~statements ~~equivalence~~that may be made to reflect events or circumstances after the ~~Company’s~~date hereof ~~products,~~or ~~can~~to ~~limit~~reflect the ~~sales~~occurrence ~~potential for~~of ~~Alcide’s~~unanticipated ~~products~~events.

~~Alcide’s~~Risks ~~SANOVA~~and ~~Food Antimicrobial~~uncertainties ~~products~~that ~~participate~~may inaffect ~~a rapidly evolving marketplace which by~~the ~~its~~Company’s ~~nature~~operating ~~attracts~~results ~~innovation~~ and ~~competing~~business ~~technologies.~~performance include: ~~The~~the Company’s ~~SANOVA~~ability ~~sales~~to ~~are~~protect ~~based~~its onpatents ~~performance,~~and ~~price~~other ~~and~~proprietary ~~convenience. Introduction~~rights; ofthe ~~competitive~~volume ~~products~~and ~~better~~timing ~~meeting~~of ~~these~~product ~~customer~~sales; ~~needs~~pricing; ~~can~~market ~~have~~acceptance aof ~~material~~its ~~impact~~products; on the ~~Company’s~~costs ~~ability to sell~~ and ~~expand~~effects ~~the use~~ of ~~its~~complying ~~SANOVA~~with ~~products.~~laws and

The Company’s business model for its SANOVA business involves a capital investment ranging from $20,000 to $500,000 for each user plant site depending on the size of the operation. The capital investments are depreciated over a five-year life while customer contracts range from one to four years. If a substantial number of customers elect not to renew their contracts, non-productive assets would exist until new customers are found.12

~~Occasionally~~regulations relating to the environment and to the manufacture, storage, distribution and labeling of the Company’s ~~also~~products; ~~incurs~~the ~~installation~~ability ~~costs~~to develop and maintain distribution and supply arrangements; the effect of ~~between~~the ~~$80~~Company’s accounting policies; changes in tax,~~000~~ fiscal and ~~$120~~governmental and regulatory policies; economic factors such as the worldwide economy,~~000~~ tointerest ~~install~~rates, currency rates and currency movements; changes in the capital markets affecting the Company’s ability to raise ~~SANOVA~~capital; ~~equipment~~the ~~components~~occurrence atof litigation or claims; the loss or insolvency of a major customer, ~~site~~distributor ~~and~~or ~~connect~~supplier; losses of or changes in executive management; the ~~components~~Company’s ability to continue product introductions and ~~with~~technological ~~plumbing~~innovations; and ~~electrical~~other ~~interfaces~~uncertainties and risks reported from time to ~~put~~time in our reports filed with the ~~system~~Securities ~~into~~and ~~operation~~Exchange Commission. ~~Installation~~In ~~costs~~addition, ~~are~~the ~~depreciated~~Company ~~over~~notes ~~the~~that its ~~shorter~~stock ofprice acan ~~five-year~~be ~~life~~affected orby fluctuations in quarterly earnings. There can be no assurance that the ~~contract~~Company’s earnings ~~term~~level will meet investors’ expectations.

The ~~economic~~March ~~vitality~~11, 2004 announcement of the proposed ~~industries~~transaction ~~served~~with byEcolab could have an adverse effect on the revenue of the Company’s ~~products~~in ~~can~~the ~~have~~near-term anif ~~impact~~customers ondelay, ~~Alcide’s~~defer or cancel purchases ~~ability~~pending consummation of the planned transaction due to ~~sell~~potential ~~its~~uncertainty about ~~products,~~the ~~expand~~direction ~~sales~~of ~~and~~the ~~maintain~~combined company’s product ~~price~~offerings and its support ~~levels. Within~~and ~~the~~service ~~Animal~~of ~~Health~~existing ~~business~~products. To ~~segment,~~the extent that the Company’s ~~products~~announcement ~~are~~of ~~premium~~the ~~priced~~transaction ~~consistent~~creates uncertainty ~~with~~among ~~their superior~~customers ~~performance. However~~such that one or more large customers, asor ~~dairy~~a ~~industry~~significant ~~product~~group ~~margins~~of ~~are~~small ~~compressed~~customers, ~~some~~delays ~~farmers~~purchase ~~may~~decisions ~~discontinue~~pending consummation of the ~~use of~~planned ~~Alcide~~transaction ~~products~~or incancels ~~favor~~existing agreements, the results of ~~lower~~operations ~~priced~~of ~~competitors’~~the ~~products~~Company could be negatively affected. ~~Likewise~~Decreased revenue could have a variety of adverse effects, including negative consequences to the Company’s ~~ability~~relationships with, and ongoing obligations to, ~~sell~~customers, suppliers and others with whom the ~~expand~~Company ~~sales~~has ofbusiness ~~its~~relationships. In addition, ~~Food~~any ~~Safety~~resulting ~~products~~negative ~~may~~impact beon ~~impacted~~the byCompany’s ~~economic~~quarterly ~~conditions~~operating ~~within~~results and revenue could cause a decline in the ~~poultry~~stock ~~and~~price ~~red~~of ~~meat~~the ~~industries~~Company.

~~Critical~~If the planned merger with Ecolab is not ~~Accounting~~completed, ~~Policies~~the Company could suffer a number of consequences that may adversely affect the Company’s business, results of operations and stock price, including the following:

• ~~Revenue~~ Alcide ~~Recognition~~would not realize the benefits we expect from becoming part of a combined company with Ecolab, including the potentially enhanced financial and operational position;

~~Revenue~~• activities ~~from~~relating to ~~sales~~the ofmerger ~~SANOVA is~~and ~~recognized~~related ~~based~~uncertainties onmay ~~the~~divert ~~terms~~management’s ofattention from the Company’s ~~contracts~~day-to-day ~~with~~business ~~individual customers. For~~and ~~customers~~cause ~~using~~disruptions ~~more than~~among ~~15,000~~the ~~gallons~~Company’s employees ofand ~~SANOVA~~to ~~per~~its ~~month,~~relationships ~~Alcide~~with ~~provides~~customers ~~bulk~~and ~~shipments~~business ofpartners, thus ~~inventory~~detracting tofrom the ~~customer~~Company’s ~~and~~ability ~~the~~to ~~customer~~increase isrevenue ~~invoiced~~and atminimize ~~month-end with~~costs ~~revenue~~and ~~recognized~~possibly ~~based~~leading onto ~~the~~a ~~amount~~loss of ~~product~~revenue ~~processed or gallons of SANOVA used. All other customers are invoiced~~ and ~~revenue~~market isposition ~~recognized~~that at the ~~time~~Company may ~~SANOVA~~not isbe ~~shipped~~able to ~~their facilities. Payment~~regain inif ~~either~~the ~~case~~transaction ~~is due~~does ~~fifteen~~not ~~to thirty days after billing.~~occur;

~~Animal~~• the ~~Health~~market ~~and~~price ~~Surface~~of ~~Disinfectant sales are recognized at~~ the ~~time of shipment to distributors or to end users. The~~ Company’s ~~provides~~common ~~a limited~~stock ~~warranty~~could todecline ~~its~~following ~~distributors~~an ~~which~~announcement ~~limits~~that the ~~Company’s obligation to~~ ~~replacement~~merger ofhas ~~defective~~been ~~product. Such replacements have~~abandoned, ~~for~~to the ~~past~~extent ~~several~~that ~~years,~~the ~~been~~current ~~less~~market ~~than~~price ~~.1% of net~~reflects ~~sales. The~~a ~~distributors~~market ~~have~~assumption ~~no contractual~~that ~~right~~the tomerger ~~return~~will ~~unsold~~be ~~product. Payment terms are generally sixty days for international distributors and thirty days for domestic distributors.~~completed;

12• Alcide could be required to pay Ecolab a $2.5 million termination fee if the merger agreement is terminated under certain specified conditions;

• ~~Depreciation~~ Alcide ~~and~~would remain ~~Book~~liable ~~Value~~for ofcertain ~~SANOVA~~costs ~~Plant~~related ~~Assets~~to the transaction, such as legal, accounting, financial advisor and financial printing fees; and

~~Capital~~• Alcide ~~investments~~may for SANOVA plant assets are depreciated over a five-year life, while customer contracts range from one year to four years. As the SANOVA food antimicrobial business has been in existence for only five years, the Company has a limited, practical basis on which to assign depreciable life. Management believes, however, based on five years experience in three plants, that well-maintained assets will be operational beyond five years and, further, that if customers decide not ~~to renew their contracts major portions of the assets can~~ be ~~relocated~~able to ~~new~~take ~~customer~~advantage ~~sites. As~~ of ~~November 30,~~ ~~2003,~~alternative ~~plant~~business ~~assets~~opportunities ~~from~~or ~~three installations have been~~effectively ~~successfully~~respond ~~redeployed~~ to ~~new~~competitive ~~sites~~pressures. ~~The cost to maintain the assets is charged to operations.~~

InSubstantially ~~the~~all ~~event~~of ~~that~~the aCompany’s ~~SANOVA~~products ~~contract~~are issubject ~~terminated~~to ~~prior~~regulatory toapproval of or control by various governmental agencies such as the ~~end~~FDA, ofUSDA and EPA in the ~~asset’s~~United ~~five-year~~States ~~depreciable~~and their ~~life,~~equivalents ain ~~portion~~international markets. The exercise of ~~the~~control ~~cost~~and ~~related~~regulatory toauthority ~~placing~~by these agencies can have a material effect on the ~~asset~~Company’s inbusiness ~~operation~~directly ~~would~~as beit relates to the ~~expensed~~Company’s products and indirectly as ~~“impairment~~it ~~costs~~relates to competitors’ products.”

~~Commitments~~Within the Animal Health and Surface ~~Contingencies~~Disinfectant business segment, all of the Company’s Animal Health products are sold through distributors having exclusive or semi-exclusive rights to specified geographical

Leases: The Company leases certain property under non-cancelable operating leases that expire through July 2009. Insurance, utilities and maintenance expenses are borne by the Company. There are no contingent rentals or subleased rentals.13

~~SANOVA Agreements:~~ territories. The ~~Company~~loss ~~has~~of ~~signed~~a ~~contracts~~distributor ~~with~~can ~~poultry~~have ~~and~~a ~~beef~~material ~~processing plants~~effect ~~for~~on ~~SANOVA~~the ~~systems~~Company’s sales, toparticularly, ~~be installed~~ in the ~~third~~short-term ~~quarter~~until ofa FYreplacement ~~2004~~is ~~which~~found, contracted ~~will~~and ~~cost~~trained ~~approximately~~in ~~$1,160,000~~the sale of the Company’s products. AsFurther, the Company faces well established competition in each of ~~November 30,~~the ~~2003,~~markets ~~$735~~where its Animal Health products are sold. Such competition,~~000~~ particularly ofcompetition claiming equivalence to the ~~equipment~~Company’s ~~required~~products, ~~was~~can limit onthe ~~hand~~sales potential for ~~these~~ ~~installations~~Alcide’s products.

~~Employment~~Alcide’s ~~Agreements: One~~SANOVA ~~officer~~Food ~~has~~Antimicrobial aproducts participate ~~one~~in ~~year,~~a ~~automatically renewable,~~rapidly ~~employment~~evolving ~~agreement~~marketplace which ~~currently~~by ~~obligates~~its ~~the~~nature ~~Company~~attracts innovation toand acompeting ~~base~~technologies. ~~salary~~The ofCompany’s ~~$287~~SANOVA sales are based on performance,~~929~~ ~~per~~price ~~year~~and convenience. ~~Bonus compensation~~Introduction of competitive ~~100%~~products ofbetter ~~base~~meeting ~~pay~~these customer needs can behave ~~earned~~a atmaterial impact on the ~~discretion~~Company’s ofability to sell and expand the ~~Board~~ use of ~~Directors~~its SANOVA products.

~~Redeemable~~The ~~Class~~Company’s ~~“B” Preferred~~business ~~Stock: On~~model ~~September 30th of~~for ~~each~~its ~~year,~~SANOVA business ~~the~~involves ~~Company redeems~~ a ~~portion~~capital ofinvestment ~~its~~ranging ~~outstanding~~from ~~Series~~$20,000 2to ~~Class~~$500,000 for ~~“B”~~each ~~Preferred~~user ~~Stock. The~~plant ~~amount redeemed~~site is(depending ~~equal~~on tothe ~~.7%~~size of the ~~Company’s~~operation ~~prior~~to ~~year~~mix, ~~net~~dilute ~~income~~and distribute SANOVA). AsThe ~~the~~capital ~~Company recorded net income of~~investments ~~$1,129,610~~are indepreciated ~~fiscal~~over ~~2003,~~a itfive-year ~~redeemed~~life ~~3,012~~while ~~shares~~customer ofcontracts ~~Series~~range 2from ~~Stock on~~one ~~September 30,~~to ~~2003~~four ~~for $7,906~~years. ~~This~~ If ~~leaves~~ a ~~total~~substantial number of ~~$159,239~~customers ofelect ~~Class~~not ~~“B” Preferred Stock~~ to ~~be redeemed~~renew intheir ~~subsequent~~contracts, ~~fiscal~~non-productive ~~years. The~~assets ~~amounts to be redeemed subsequent to September 2003 depend upon~~would ~~future~~exist ~~net~~until ~~income~~new ~~and~~customers are ~~not yet known~~found.

~~The~~Occasionally, ~~following~~the ~~table~~Company ~~summarizes~~also incurs installation costs of between $80,000 and $120,000 to install the ~~above~~SANOVA ~~commitments:~~equipment components at the customer site and connect the components with plumbing and electrical interfaces to put the system into operation. Installation costs are depreciated over the shorter of a five-year life or the contract term.

	Less than 1 year		FY 2005		FY 2006		FY 2007		FY 2008		FY 2009
Operating Leases	$	125,294	$	135,544	$	137,999	$	140,946	$	141,437	$	23,573
SANOVA Agreements	425,000		—		—		—		—		—
Employment Agreements	287,929		—		—		—		—		—
Total Contractual Commitments	$	838,223	$	135,544	$	137,999	$	140,946	$	141,437	$	23,573

The economic vitality of the industries served by the Company’s products can have an impact on Alcide’s ability to sell its products, expand sales and maintain product price levels. Within the Animal Health business segment, the Company’s products are premium priced consistent with their superior performance. However, as dairy industry product margins are compressed, some farmers may discontinue the use of Alcide products in favor of lower priced competitors’ products. Likewise, the Company’s ability to sell and expand sales of its Food Safety products may be impacted by economic conditions within the poultry and red meat industries.

~~Financial Condition~~Critical ~~and~~Accounting ~~Results of Operations~~Policies

~~Management Overview~~• Revenue Recognition

~~Earnings~~Revenue from sales of SANOVA is recognized ~~for~~based on the ~~quarter~~terms of the Company’s contracts with individual customers. For customers using more than 15,000 gallons of SANOVA per month, Alcide provides bulk shipments of inventory to the customer and ~~six~~the customer is invoiced at month-end ~~periods~~with ~~ended~~revenue ~~November 30,~~recognized based ~~2003~~on ~~were~~the amount of product processed or gallons of SANOVA used. All other customers are invoiced and revenue ~~adversely~~is ~~affected~~recognized byat ~~two~~the ~~occurrences:~~time SANOVA is shipped to their facilities. Payment in either case is due fifteen to thirty days after billing.

13Animal Health and Surface Disinfectant sales are recognized at the time of shipment to distributors or to end users. The Company provides a limited warranty to its distributors which limits the Company’s obligation to replacement of defective product. Such replacements have, for the past several years, been less than .1% of net sales. The distributors have no contractual right to return unsold product. Payment terms are generally sixty days for international distributors and thirty days for domestic distributors.

~~1. The~~• Depreciation ~~Company expensed $360,357 during the quarter~~ and ~~$402,480 during the six month periods ended November 30, 2003~~ toBook ~~remove~~Value ~~and write down the value~~ of SANOVA ~~assets~~Plant idled during the economic downturn and subsequent consolidation that occurred within the poultry industry during the past 18 months. During this period, one SANOVA customer switched to a lower-priced competitor’s product, three customers ceased using antimicrobials altogether for economic reasons and three customers closed their plants and consolidated operations primarily in other plants served by SANOVA. The SANOVA assets from three of these sites have now been redeployed and are again revenue generating. Nonproductive assets were also removed from one red meat plant. The initial cost to install and put these assets in service has been expensed as SANOVA plant asset impairment charges. This expense has no cash flow impact.Assets

~~2. The~~Capital ~~Company~~investments ~~incurred~~for ~~legal~~SANOVA ~~expenses~~plant ofassets ~~$312,667~~are ~~for~~depreciated ~~the~~over ~~quarter~~a ~~and~~five-year ~~$409~~life,~~790~~ ~~for~~while ~~the~~customer ~~six~~contracts ~~month~~range ~~period~~from ~~ended~~one ~~November 30,~~year ~~2003~~to ~~related~~four toyears. As ~~its~~the ~~patent~~SANOVA ~~infringement~~food antimicrobial ~~lawsuit~~business ~~against~~has ~~Bio-Cide International. The~~been ~~suit~~in ~~was~~existence ~~settled~~for just over five years, the ~~through~~Company has a ~~negotiated~~limited, ~~agreement~~practical basis on ~~October 2,~~which ~~2003~~to ~~and~~assign ~~Bio-Cide~~depreciable life. Management ~~has~~believes, ~~agreed~~however, ~~not~~based toon ~~market~~five ~~products~~years toexperience ~~the~~in ~~red~~three ~~meat~~plants, ~~industry~~that atwell-maintained ~~less~~assets will ~~than~~be pHoperational ~~5.5~~beyond five years and, tofurther, ~~pay~~that if customers decide ~~Alcide~~not ato ~~royalty~~renew ontheir ~~Bio-Cide~~contracts ~~products~~major ~~sold~~portions toof the ~~red~~assets ~~meat~~can ~~industry~~be relocated to new customer sites. ~~Bio-Cide~~As ~~also~~of ~~agreed~~February 29, 2004, plant assets from four installations have been redeployed to ~~restrictions~~new onsites. ~~products~~The ~~sold~~cost to ~~other~~maintain ~~food~~the ~~processing~~assets ~~industries~~is charged to operations.

There is no assurance that similar expenses will not occur in the future as the Company is certainly dependent on the economic vitality of the industries it serves and Alcide will aggressively defend its Intellectual Property against infringement. However, Alcide has no patent infringement lawsuit activity ongoing or contemplated at present. Further, the Company has modified its contracts to mitigate the impact of future economic downturns to the extent that most new agreements contain minimum payment provisions and/or require the customer to be responsible for installation costs.14

~~Adjusted for~~Commitments ~~these occurrences, both of the Company’s business segments are growing, profitable, cash positive~~ and expanding their share of market. In the SANOVA Food Safety business segment, Alcide continues to expand at the rate of one to two new operations per month. Since the beginning of the year, the Company has started six new poultry operations and eight new red meat operations. In addition, its Chilean distributor has started one new small poultry operation and one new produce operation.Contingencies

~~The~~Leases: ~~Animal~~The ~~Health~~Company ~~and~~leases ~~Surface~~certain ~~Disinfectant~~property ~~business~~under ~~unit~~non-cancelable ~~has been helped by improving~~operating ~~U.S.~~leases ~~milk~~that ~~prices~~expire ~~and~~through ~~strong~~July ~~performance by the Company’s ancillary product lines~~2009. ~~In the second quarter, UDDERgold~~ ~~Platinum~~Insurance, ~~the~~utilities ~~next~~and ~~generation~~maintenance ~~UDDERgold~~expenses ~~product,~~are ~~was~~borne ~~launched~~by ~~in Italy and~~ the ~~United Kingdom~~Company. ~~Also,~~There ~~UDDERgold~~are ~~Dry,~~no acontingent ~~new~~rentals ~~product~~or ~~developed~~subleased ~~for use on dairy cows at dry-off, was launched in North America and Northern Europe~~rentals.

~~Alcide’s net~~SANOVA ~~cash provided by operating activities was $2,346,358 for the half-year ended November 30, 2003 versus $861,215 for the equivalent six month period last year.~~Agreements: The Company has ~~no debt~~signed ~~and~~contracts ~~its~~with ~~cash~~poultry and ~~cash~~beef ~~equivalents on November 30, 2003 were~~processing ~~$2,969,633~~plants anfor ~~improvement~~SANOVA ofsystems ~~$682,992~~to ~~since~~be ~~May 31,~~installed ~~2003. The~~in ~~Company~~the ~~expects~~fourth toquarter ~~fund~~of ~~its~~FY ~~existing operations~~2004 and first ~~growth~~quarter ~~with~~of ~~its~~2005 ~~current~~which ~~cash~~will ~~balance~~cost ~~plus~~approximately ~~cash~~$3.0 ~~generated by operations~~million. IfAs ~~growth~~of ~~exceeds~~February ~~current expectations~~29, it2004, ~~may~~$1.2 bemillion ~~necessary~~of tothe equipment ~~draw~~required was on ~~the~~hand ~~Company’s~~for ~~line~~these ~~of credit~~installations.

~~Net~~Employment Agreements: One officer has a one year, automatically ~~Sales~~renewable, employment agreement which currently obligates the Company to a base salary of $287,929 per year. Bonus compensation of 100% of base pay can be earned at the discretion of the Board of Directors.

~~Net~~Preferred Stock: On September 30th of each year, the Company redeems a portion of ~~sales~~its ~~and~~outstanding ~~license~~Series ~~revenue~~2 ~~totaling~~Class “B” Preferred Stock. The amount redeemed is equal to .7% of the Company’s prior year net income. As the Company recorded net income of $61,~~229~~129,~~317~~610 ~~for~~in ~~the~~fiscal ~~quarter~~2003, ~~ended~~it redeemed 3,012 shares of Series 2 Stock ~~November~~ on September 30, 2003 for $7,906. This leaves ~~were~~a 8%total ~~higher~~of ~~than~~$159,239 ~~the~~of ~~equivalent~~Class ~~quarter~~“B” ~~last year~~Preferred Stock to be redeemed. ~~Fiscal~~The ~~2003~~Company ~~first~~also ~~half~~has ~~net~~a ~~sales~~Class “A” Preferred ~~and~~Stock ~~license~~having ~~revenue~~a value of $1118,~~425,913~~636. The provisions ~~were~~of 6%the ~~higher~~Class ~~than~~“A” ~~first~~Preferred ~~half~~allow ~~sales~~the inCompany to redeem the stock at ~~fiscal~~its ~~2002~~face value. The Ecolab Merger Agreement requires the Company to redeem all of the outstanding Class “A” and Class “B” Preferred stock and, therefore, the amounts to be redeemed are $177,875.

~~Sales of~~The ~~SANOVA~~following ~~food~~table ~~antimicrobial~~summarizes to the ~~food processing industries totaled~~above $3,782,189 for the quarter ended November 30, 2003 an amount $239,117 or 7% higher than for the second fiscal quarter last year. SANOVA sales during the six months ended November 30, 2003 were $7,309,820 an amount $412,362 or 6% higher than the first half last year.commitments:

The Company’s Animal Health and Surface Disinfectant revenues for the quarter ended November 30, 2003 were $2,447,128 including $287,143 in license revenue. During the second quarter last fiscal year, Animal Health and Surface Disinfectant revenues were $2,235,480 including $230,757 in license revenue. During the fiscal first half, the Company’s Animal Health and Surface Disinfectant revenues were $4,116,093 including

	Less than 1 year		FY 2005		FY 2006		FY 2007		FY 2008		FY 2009

Operating Leases	$	62,647	$	135,544	$	137,999	$	140,946	$	141,437	$	23,573

SANOVA Agreements	1,100,000		700,000		—		—		—		—

Preferred Stock Redemption	177,875		—		—		—		—		—

Employment Agreements	287,929		—		—		—		—		—

Total Contractual Commitments	$	1,628,451	$	835,544	$	137,999	$	140,946	$	141,437	$	23,573

14Financial Condition and Results of Operations

~~$595,414 in~~Management ~~license revenue as compared to fiscal 2003 first half revenue of $3,926,286 which included $260,154 in license revenue.~~Overview

~~Cost~~On March 11, 2004, Alcide announced an agreement to be acquired by Ecolab Inc. (“Ecolab”) in a merger transaction. The proposed transaction is anticipated to close late in the fourth quarter of ~~Goods~~fiscal ~~Sold,~~2004 ~~Exclusive~~or in the first quarter of fiscal ~~Impairment~~2005. The ~~Charges~~announcement of the transaction and actions taken by the Company in preparing for the submission of the transaction to the stockholders and in planning for the integration with Ecolab may impact the results of operations and liquidity of the Company in future periods. For more information on the proposed merger see “Other Information” on page 19 and for more information on the risks associated with the merger agreement see “Risks and Uncertainties” above. A proxy statement/prospectus will be filed with the Securities and Exchange Commission in connection with the proposed merger. The proxy statement/prospectus will be

The cost of goods sold before SANOVA plant asset impairment charges was 57% of total revenue for the quarter and 58% of total revenue for the six month period ended November 30, 2003 as compared to 53% for the quarter and 54% for the corresponding six month period one year ago.15

~~Cost of~~mailed ~~goods~~to ~~sold~~all ~~before~~holders ~~impairment~~of ~~for~~our ~~the~~stock ~~SANOVA~~and ~~business~~will ~~segment was 68% for the~~contain ~~quarter~~important ~~ended~~information ~~November 30,~~about ~~2003~~Alcide, asEcolab ~~compared~~and ~~to 62% of net sales for~~ the ~~same~~ ~~period~~proposed ~~last~~transaction, ~~year. The six point~~risks ~~increase~~relating ~~in costs of goods as a percentage of sales was caused by three factors. SANOVA raw material usage increased in four plants concurrent with a transition~~ to ~~post-chill~~the ~~dip operations.~~transaction ~~Secondly,~~and the ~~unabsorbed~~combined ~~depreciation~~company, ~~expense~~and related tomatters. The ~~the under-utilization~~Company ofurges ~~equipment~~all ~~idled at five sites late in the first quarter~~ of ~~2003~~ ~~continued~~its ~~into~~stockholders ~~the first quarter of 2004 and lastly, capital investments made~~ to read ~~transition into post-chill operations added to~~ the ~~depreciation~~proxy ~~expense component~~statement/prospectus ofwhen ~~cost~~it ofbecomes ~~goods~~available.

~~Cost~~The economic conditions ofin ~~goods~~the ~~before~~meat ~~impairment~~and ~~during~~poultry ~~the~~processing ~~six~~industries ~~month~~have ~~period~~stabilized. Within ~~ended~~the ~~November 30~~poultry industry, ~~2003~~ ~~was~~processors ~~68%~~and the Department of ~~sales~~Agriculture ashave ~~compared~~successfully met the challenges posed by the recent Avian Influenza outbreak to ~~61%~~a ~~for~~far greater degree than international competitors in China, the ~~first~~Netherlands ~~half~~and Thailand. This coupled with an increase in ~~fiscal~~the ~~2003,~~export quota to Russia have led to improved product pricing for U.S. poultry processors. Alcide expects to add three major new poultry customers during the ~~reasons~~fiscal ~~noted~~fourth ~~above~~quarter.

~~Cost~~The beef processing ofindustry ~~goods~~has ~~sold~~also ~~for~~reacted ~~the~~appropriately ~~Animal~~to ~~Health~~the ~~and~~recent ~~Surface~~“mad ~~Disinfectant~~cow” ~~business~~scare ~~unit~~and ~~segment~~economic ~~was~~conditions ~~45%~~within ofthe ~~net~~industry ~~sales~~appeared ~~(excluding~~to ~~license~~have ~~revenue)~~stabilized. During ~~for both~~ the fourth quarter ~~and~~ ~~six~~of ~~month~~fiscal ~~period ended November 30~~2004, ~~2003 as compared to 44% of net~~ ~~sales for~~ the ~~quarter~~Company ~~and~~expects ~~45%~~to ~~for~~start ~~the~~SANOVA ~~six~~application ~~month~~in ~~period~~ten ~~last~~to ~~year~~fifteen beef operations.

~~Impairment~~The Animal Health and Surface Disinfectant business unit has been helped by improving U.S. milk prices however, sales of ~~SANOVA~~the Company’s ~~Plant~~ancillary ~~Assets~~product lines were down for the quarter because of an inventory build up in the second quarter. In the second quarter, UDDERgold Platinum, the next generation UDDERgold product, was launched in the Netherlands as we continue the strategy of replacing global UDDERgold sales with UDDERgold Platinum.

~~(See~~Alcide’s net cash ~~explanation~~provided atby operating activities was $4,253,285 for the ~~top~~nine month period ended February 29, 2004 versus $2,740,074 for the equivalent nine month period last year. The Company has no debt and its cash and cash equivalents on February 29, 2003, were $4,567,517 an improvement of ~~page~~$2,280,876 ~~14)~~since May 31, 2003. The Company expects to fund its existing operations and growth with its current cash balance plus cash generated by operations. If growth exceeds current expectations, it may be necessary to draw on the Company’s line of credit.

~~Research and~~Net ~~Development Expense~~Sales

~~Reflecting the~~Net ~~conclusion~~sales ~~of development activities related to the Company’s new Animal Health products~~ and ~~reduction~~license inrevenue ~~the~~totaling ~~scope of SANOVA process validation trials~~$5,843,792 ~~research and development expenses~~ for the quarter ended ~~November 30~~February 29, ~~2003 were $470~~2004,~~177~~ anwere ~~amount~~6% ~~$93,157~~higher ~~lower~~ than ~~for~~ the equivalent quarter ~~period~~last a year ~~ago~~. ~~R&D~~Fiscal ~~expenses~~2004 ~~for~~nine month ~~the~~net ~~first~~sales ~~half~~and ~~of fiscal~~license ~~2004~~revenue ~~were~~of $~~949~~17,~~591~~269,704 orwere ~~$204,368~~6% ~~lower~~higher than ~~first~~nine month ~~half~~sales ~~expenses~~ in fiscal 2003.

~~Selling~~Sales of SANOVA food antimicrobial to the food processing industries totaled $3,723,277 for the quarter ended February 29, ~~General~~2004, ~~and~~an ~~Administrative~~amount ~~Expense~~$499,542, or 15% higher than for the third fiscal quarter last year. SANOVA sales during the nine months ended February 29, 2004, were $11,033,097 an amount $911,904, or 9% higher than the nine months last year.

~~Fiscal~~The Company’s Animal Health and Surface ~~2004~~Disinfectant ~~second~~revenues for the quarter ~~expenses~~ended ofFebruary $129,~~785,128~~ 2004 were $~~394~~2,~~925~~120,515 including ~~higher~~$321,974 ~~than~~in ~~second~~license revenue. ~~quarter~~During ~~expenses~~the inthird quarter last fiscal ~~2003. First~~year, Animal Health and Surface ~~half~~Disinfectant ~~expenses~~revenues ofwere $32,~~313~~279,~~040~~859 ~~were~~including $~~387~~330,~~463~~722 ~~higher~~in ~~than for the first half last~~license ~~year~~revenue. ~~The~~During ~~expense~~the ~~increases~~fiscal ~~for~~nine ~~both~~months, the ~~quarter~~Company’s Animal Health and ~~first~~Surface ~~half~~Disinfectant revenues were ~~caused~~$6,236,607 including ~~predominantly~~$917,387 byin ~~the~~license ~~patent~~revenue ~~infringement lawsuit~~as ~~against~~compared ~~Bio-Cide~~to ~~International~~fiscal ~~($312,667~~2003 ~~for~~nine ~~the~~month revenue ~~quarter~~of ~~and~~ $~~409~~6,~~790 for~~206,145 ~~the~~which ~~six~~included ~~month~~$590,876 ~~period)~~in license revenue.

~~Interest Income~~Cost of Goods Sold, Exclusive of Impairment Charges

~~Interest~~The cost of goods sold before SANOVA plant asset ~~income~~impairment charges was ~~$4,176~~59% of total revenue for the quarter and ~~$8,263~~58% of total revenue for the ~~six~~nine month period ended ~~November 30,~~ ~~2003~~February ~~versus $6~~29,~~201~~ ~~and~~2004 ~~$14,068~~as compared to 56% for the quarter and ~~six~~55% ~~month period~~for ~~last~~the ~~year. The~~corresponding ~~decrease~~nine ~~was~~month ~~due to~~period ~~lower~~one ~~prevailing~~year ~~short-term interest rates~~ago.

~~Interest~~SANOVA business segment cost of goods sold were 69% ~~Expense~~of SANOVA sales for the quarter ended February 29, 2004, as well as for the equivalent quarter last year.

~~The Company~~Cost ~~incurred~~of nogoods ~~interest~~sold ~~expense~~before ~~for~~plant ~~either~~asset impairment charges for the ~~quarter~~SANOVA orbusiness ~~six~~segment was 68% for the nine month period ended February ~~November 30~~29, ~~2003~~2004, as compared to 64% of net sales for the same period last year. The four point

~~Outlook~~16

~~• Animal~~increase ~~Health~~in cost of goods as a percentage of sales was caused by three factors. SANOVA raw material usage increased in six plants as a result of a transition to post-chill dip operations. Secondly, the unabsorbed depreciation expense related to underutilization of equipment idled in the first quarter of 2003 continued through fiscal 2004 and lastly, ~~Surface~~capital ~~Disinfectant~~investments ~~Products~~made to transition to post-chill operations added to the depreciation expense component of cost of goods.

~~The~~Cost ~~worldwide~~of ~~dairy~~goods ~~herd~~sold isfor ~~decreasing~~the ~~slightly~~Animal asHealth and ~~cows~~Surface ~~become~~Disinfectant ~~more~~business ~~productive,~~unit ~~partly~~segment ~~through~~was ~~use~~48% of ~~mastitis~~net ~~prevention~~sales ~~products~~(excluding ~~such~~license asrevenue) ~~those~~for ~~marketed~~the byquarter ~~Alcide. In addition,~~and 46% for the ~~Company~~nine ~~faces~~month ~~direct~~period ~~competition~~ended February ~~from~~29, ~~products~~2004 ~~similar~~as compared to ~~its~~45% of net sales for the quarter and the nine ~~products,~~month ~~UDDERgold,~~period ~~UDDERgold~~last ~~Plus,~~year. The ~~UDDERgold~~increase was ~~5-Star,~~caused primarily by product mix favoring growth in the lower margin ancillary product lines.

15Research and Development Expense

~~UDDERgold~~Expenditures ~~Platinum~~for ~~and~~the ~~4XLA. The~~quarter ~~Company’s~~ended ~~strategy~~February is29, 2004 towere ~~maintain~~$550,180 ~~a performance~~an ~~edge~~amount ~~over~~6% ~~competing~~higher ~~products. However,~~than ~~because~~for the ~~Company~~equivalent ~~sells~~period ~~through~~last year. The ~~distributors,~~increase ~~both~~reflects ~~changes in~~primarily the ~~distribution~~timing ~~network and the introduction~~ of ~~new~~expenditures ~~products can cause the Company’s sales to shift from quarter to quarter~~ as ~~distributors~~nine ~~increase~~month ~~or decrease~~R&D ~~their~~expenses ~~inventories~~ of ~~Alcide~~$1,499,771 ~~products.~~ were ~~On an ongoing basis~~$174,865 ~~management~~or ~~believes~~10% ~~that~~lower ~~its~~than ~~distribution~~for ~~network, combined with Alcide’s evolving new product introductions, will enable~~ the ~~Company~~ tofirst ~~maintain~~nine ~~its~~months ~~share~~ of ~~market. In~~fiscal ~~the~~2003 ~~short-term,~~ reflecting the ~~recently~~conclusion ~~improved~~of ~~pricing~~development ~~for~~activities ~~milk~~related ~~products~~to ~~is a positive business factor for~~ the Company’s ~~premium~~new ~~priced~~animal health products~~. The~~ ~~recent~~and ~~“mad~~reduction ~~cow”~~in ~~incident could conceivably, negatively impact~~ the ~~dairy~~scope ~~industry~~of ifSANOVA ~~the~~process ~~problem~~validation ~~becomes widespread~~trials. ~~However, at this point the problem appears to be isolated to a few cows born several years ago.~~

~~• SANOVA~~Selling, General and Administrative Expense

~~Management expects~~Fiscal ~~that~~2004 ~~the~~third ~~size~~quarter expenses of ~~the Company’s food antimicrobial business will~~$1,542,210 ~~continue~~were to$111,831 ~~expand.~~higher ~~The~~than ~~poultry~~third ~~industry~~quarter ~~has~~expenses ~~continued~~in tofiscal ~~recover~~2003. Nine ~~from~~month ~~last year’s~~expenses ~~economic~~of ~~downturn~~$4,855,250 ~~and as a result Alcide has been able to redeploy~~were ~~SANOVA~~$499,293 ~~systems~~higher ~~from~~than ~~three~~for of the ~~idled~~first ~~sites~~nine ~~to new customer operations. During the six~~ months ~~ended~~last ~~November 30, 2003, the Company started four new poultry operations and five new red meat operations~~year. ~~Subsequent~~ toThe ~~November 30,~~expense ~~2003, two new poultry operations~~increase ~~and~~was ~~one~~caused ~~new~~predominantly ~~red~~by ~~meat~~the ~~operation~~patent ~~have~~infringement ~~been~~lawsuit ~~added. Contracts~~against ~~are in~~Bio-~~hand~~Cide International to($416,579 ~~start~~for ~~four additional new operations within~~ the ~~next~~nine ~~two months. Management expects to contract and start one to two new SANOVA operations per~~ month ~~during the current fiscal year~~period).

~~Management does~~In ~~not~~connection ~~believe~~with ~~that~~ the ~~recent~~proposed ~~mad~~acquisition ~~cow~~of Alcide ~~incident~~by ~~will~~Ecolab, ~~have~~Alcide aincurred ~~lasting~~significant ~~negative~~legal and financial advisor ~~impact~~expenses, $250,000 of which was reimbursed by Ecolab on ~~development~~March of16, 2004 pursuant to the ~~Company’s~~terms ~~SANOVA~~of ~~business~~the merger agreement. The ~~prompt~~Company ~~USDA~~expects ~~and~~general ~~industry~~administrative ~~reaction~~costs to increase in the ~~incident~~coming ~~appears~~period toas bea ~~mitigating~~result ~~potential~~of ~~damage~~expenses toincurred ~~the~~in ~~industry~~connection ~~and~~with the proposed ~~industry~~acquisition ~~reports~~of ~~that~~the ~~thus~~Company ~~far~~by Ecolab, ~~there~~regardless ~~has~~of ~~been~~consummation ~~very~~of ~~little~~the transaction, ~~impact~~which onexpenses ~~U.S.~~will ~~red meat~~be ~~demand~~offset ~~although~~in apart ~~number~~by ofEcolab’s ~~countries~~agreement to reimburse ~~which~~the ~~U.S.~~Company, ~~beef~~subject isto ~~exported~~certain ~~have temporarily~~limitations, ~~closed~~for ~~their~~certain ~~borders~~of ~~to U~~these expenses.S. In ~~beef.~~ addition, if the merger Itagreement iswith ~~management’s~~Ecolab ~~belief~~is ~~that~~terminated ifby ~~there~~Ecolab ~~were~~because aits ~~decreased~~stock ~~demand~~price for ~~red~~the ~~meat,~~ten-day ~~there~~period ~~would~~ending beon athe ~~corresponding~~fifth ~~increase~~day inprior ~~demand~~to ~~for~~the ~~poultry~~effective ~~products,~~date aof the ~~sector~~merger inis ~~which~~less ~~SANOVA~~than ~~enjoys~~$21.00 ~~stronger~~per ~~market~~ share, asAlcide anwill ~~antimicrobial~~be entitled to receive ~~intervention~~reimbursement for certain expenses Alcide incurs in connection with the transaction.

~~ITEM~~Interest ~~3. Quantitative and Qualitative Disclosures About Market Risk~~Income

~~The~~Interest ~~Company~~income iswas ~~not significantly~~$5,772 ~~exposed~~for tothe ~~market~~quarter ~~risks~~and $14,036 ~~from~~for ~~changes~~the innine ~~interest~~month ~~rates.~~period Atended ~~its present~~February ~~growth rate~~29, ~~the~~2004 ~~Company~~versus ~~expects~~$5,945 toand $20,012 befor inthe aquarter ~~balanced~~and ~~cash~~nine ~~position during~~month ~~fiscal~~period ~~2004~~last year. The ~~Company’s policy~~decrease iswas due to ~~invest~~lower ~~any excess cash resources in low risk,~~ prevailing short-term ~~and intermediate-term~~interest Urates.~~S. Treasury instruments and bank money market funds to minimize market risks.~~

~~The~~Interest ~~Company has no direct foreign currency exposure. All of its present transactions with international distributors are denominated in U.S. dollars.~~Expense

~~ITEM~~The ~~4. Controls~~Company ~~and~~incurred ~~Procedures~~no interest expense for either the quarter or nine month period ended February 29, 2004.

a) The Company’s Chairman and CEO, and President and CFO, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of the end of the period covered by this quarterly report, have concluded that, as of that date, the Company’s disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its consolidated subsidiary would be made known to them by others within those entities.Outlook

~~b) There~~• Animal ~~were~~Health ~~no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls~~ and ~~procedures~~Surface ~~subsequent~~Disinfectant ~~to the end of the period covered by this quarterly report. There were no significant deficiencies or material weaknesses, and therefore, there were no corrective actions taken.~~Products

16The worldwide dairy herd continues to decline but milk supplies continue to grow as a result of the implementation of modern dairy farming practices including the use of superior teat dip products like those sold by the Company. This increase in supply has caused milk prices in key European markets to decline over the past several years putting pressure on the profitability of dairy farms in those markets. Recently the global trend of lower milk prices has reversed in the U.S. for a number of reasons including

~~PART II~~17

~~OTHER~~a reduction ~~INFORMATION~~in the use of Somatatropin, a hormone used to enhance milk production. The Company faces increased direct competition from products similar to its products, UDDERgold, UDDERgold Platinum, UDDERgold 5-Star and 4XLA. The Company’s strategy is to maintain a performance edge over competing products. However, with increasing regulatory demands on animal health products in key global markets the time required to introduce enhanced products is longer than the Company anticipated. Because Alcide sells through distributors, both changes in the distribution network and the introduction of new products can cause the Company’s sales to shift from quarter to quarter as distributors increase or decrease their inventories of Alcide products. On an ongoing basis, management believes that its distribution network, combined with Alcide’s evolving new product introductions, will enable the Company to maintain its share of market. In the short-term, the recently improved pricing for milk products is a positive business factor for the Company’s premium priced products in the U.S. marketplace. The recent “mad cow” incident has not had a major negative impact on the U.S. dairy industry but new regulations implemented by USDA have been projected to negatively impact dairy profitability in the short run.

~~ITEM 4. Submission of Matters to a Vote of Security Holders~~• SANOVA

~~Shareholders voted~~Management onexpects ~~three~~that ~~proposals~~the size atof the ~~Annual~~Company’s ~~Meeting~~food antimicrobial business will continue to expand. The poultry industry has continued to recover from last year’s economic downturn and as a result Alcide has been able to redeploy SANOVA systems from four of the ~~stockholders~~idled onsites to new customer operations. During the nine months ended ~~October 21~~February 29, ~~2003~~2004, asthe ~~described~~Company started four new poultry operations and seven new red meat operations. Subsequent to February 29, 2004, one new poultry operations and six new red meat operations have been added. Contracts are in-hand to start eighteen additional new operations within the ~~Company’s~~next ~~proxy~~two ~~statement~~quarters.

1ITEM 3. ~~Votes~~ ~~for~~Quantitative ~~election~~and ofQualitative ~~Directors of the~~Disclosures ~~Corporation~~About ~~for~~Market ~~the ensuing year were as follows:~~Risk

	FOR	WITHHELD AUTHORITY
Thomas L. Kempner	2,022,041	336,516
Charles A. Baker	2,209,649	148,908
Joseph A. Sasenick	2,032,351	424,576
William G. Spears	2,163,858	194,699

The Company is not significantly exposed to market risks from changes in interest rates. At its present growth rate, the Company expects to be in a balanced cash position during fiscal 2004. The Company’s policy is to invest any excess cash resources in low risk, short-term and intermediate-term U.S. Treasury instruments and bank money market funds to minimize market risks.

~~2. Votes for the ratification of the Board’s~~The ~~selection~~Company ofhas ~~KPMG~~no ~~LLP~~direct asforeign ~~independent~~currency ~~auditors~~exposure. All of ~~the~~its ~~Company~~present ~~for~~transactions ~~the~~with ~~fiscal~~international distributors ~~year~~are ~~ended~~denominated ~~May 31,~~in ~~2004~~U.S. dollars.

		FOR		AGAINST		ABSTAIN
		2,315,007		22,865		67,157

ITEM 4. Controls and Procedures

3. a) The ~~Baxter~~Company’s ~~proposal~~Chairman onand CEO, ~~executive~~and ~~compensation for~~President ~~which~~and ~~488~~CFO,~~161~~ ~~shares~~after ~~were~~evaluating ~~cast~~the ineffectiveness ~~favor,~~of ~~representing~~the ~~approximately~~Company’s “disclosure ~~20%~~controls ofand procedures” (as defined in the ~~shares~~Securities ~~present~~Exchange inAct ~~person~~of or1934 byRules ~~Proxy~~13a-14(c) atand 15-d-14(c)) as of the ~~meeting. Since~~end of the period covered by this isquarterly ~~not~~report, ahave ~~majority~~concluded that, as of that date, the ~~shares~~Company’s disclosure controls and procedures were ~~represented~~adequate and ~~entitled~~designed to ~~vote~~ensure onthat ~~this~~material ~~matter,~~information relating to the Company ~~proposal~~and ~~was~~its ~~not~~consolidated ~~approved~~subsidiary would be made known to them by others within those entities.

		FOR		AGAINST		ABSTAIN		NOT VOTED
		488,161		1,194,355		69,645		652,868

b) There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the end of the period covered by this quarterly report. There were no significant deficiencies or material weaknesses, and therefore, there were no corrective actions taken.

~~ITEM 6. Exhibits and Reports on Form 8-K~~18

~~a) Exhibits:~~PART II

~~31.1 Certification~~OTHER ~~of Periodic Report by Chairman and Chief Executive Officer of Corporation.~~INFORMATION

31ITEM 1.~~2 Certification~~ ofLegal ~~Periodic report by President and Chief Financial Officer of Alcide Corporation.~~Proceedings

32On March 8, 2004, Alcide Corporation and Bio-Cide International Inc.~~1 Certification~~, ~~pursuant~~through their attorneys, confirmed that the Memorandum of Understanding signed by both parties on October 2, 2003 is the final agreement of the parties with regard to 18settlement ~~U.S.C.~~of ~~Section 1350~~the lawsuit between Alcide and Bio-Cide.

~~b) Reports~~On onMarch ~~Form~~15, ~~8-K:~~2004, a complaint was filed against Alcide and its Directors in the King County Superior Court of the State of Washington. The complaint which purports to be brought as a class action alleges that Alcide’s Directors breached their fiduciary duties in connection with their approval of the Ecolab Merger Agreement and seeks to enjoin the transaction. The Company believes that the actions of the Company and the Board were appropriate.

~~Report~~ITEM on5. ~~Form~~Other ~~8-K dated October 15, 2003 reporting results of operations for the quarter ended August 31, 2003.~~Information

17On March 11, 2004, Alcide issued a press release announcing the execution of an Agreement and Plan of Merger, dated as of March 11, 2004 (the “Merger Agreement”), by and among Ecolab, Bessy Acquisition Inc., a Delaware corporation and wholly-owned subsidiary of Ecolab (“Merger Sub”), and Alcide. In accordance with the Merger Agreement, Merger Sub will merge with and into Alcide, and Alcide will survive as a wholly-owned subsidiary of Ecolab. In the transaction, each stockholder of Alcide will receive $21.00 per share of Alcide common stock, to be paid in shares of Ecolab common stock based on the average of Ecolab’s closing stock price for a ten-day period ending on the fifth day prior to the effective date of the merger.

~~SIGNATURE~~The consummation of the merger is subject to the approval of the stockholders of Alcide and other customary closing conditions. The merger is intended to be a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended and is expected to be treated as a purchase for financial accounting purposes, in accordance with generally accepted accounting principles.

~~Pursuant~~In connection with the Merger Agreement, certain stockholders of toAlcide, including executive officers and directors of Alcide and certain of their affiliates, entered into voting agreements with Ecolab in which, among other things, each such stockholder agreed, until the ~~requirements~~earlier of ~~Section 13~~the consummation of the merger or 15the termination of the Merger Agreement, to vote shares of Alcide common stock in (di) favor of the ~~Securities~~adoption ~~Exchange~~of ~~Act~~the Merger Agreement and approval of ~~1934,~~the merger and (ii) against the ~~Registrant~~approval ~~has~~of ~~duly~~any ~~caused~~proposal ~~this~~that ~~report~~would result in a change in the directors of Alcide, any change in the present capitalization of Alcide, any amendment to beAlcide’s ~~signed~~Certificate onof Incorporation or Bylaws, a breach by Alcide of the Merger Agreement, impair Alcide’s ability to perform its ~~behalf~~obligations under the Merger Agreement or otherwise prevent or materially delay the consummation of the merger and the other transactions contemplated by the ~~undersigned,~~Merger ~~thereunto~~Agreement. These ~~duly~~stockholders ~~authorized~~collectively own approximately 22.4% of the outstanding Alcide stock as of March 11, 2004.

	ALCIDE CORPORATION
	The Registrant
Date: January 13, 2004	By /s/ John P. Richards
	John P. Richards
	President
	Chief Financial Officer

The foregoing description of the Merger Agreement and voting agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Merger Agreement and voting agreements. Copies of the Merger Agreement and other documents related to the transaction are attached as exhibits to the Current Report on Form 8-K Alcide filed with the Securities and Exchange Commission on March 12, 2004.

18ITEM 6. Exhibits and Reports on Form 8-K

a) Exhibits:

31.1 Certification of Periodic Report by Chairman and Chief Executive Officer of Corporation.

31.2 Certification of Periodic report by President and Chief Financial Officer of Alcide Corporation.

32.1 Certification pursuant to 18 U.S.C. Section 1350.

b) Reports on Form 8-K:

Report on Form 8-K dated January 14, 2004 reporting results of operations for the quarter ended November 30, 2003.

Report on Form 8-K dated March 11, 2004 announcing the execution of a merger agreement with Ecolab.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			ALCIDE CORPORATION
			The Registrant


Date: April 12, 2004			By /s/ John P. Richards
			John P. Richards
			President
			Chief Financial Officer

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