<PAGE>

                                      FORM 10-K
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

(Mark One)
[ x ]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended:  May 31, 1997
Commission file number 0-12395

                                          OR
[   ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                  to
Commission file number 0-12395

                                  ALCIDE CORPORATION
                (Exact name of registrant as specified in its charter)

    Delaware                                22-2445061
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)             Identification No.)


                   8561 154th Avenue NE, Redmond, Washington 98052
                       (Address of principal executive offices)

Registrant's telephone number, including Area Code (425) 882-2555

Securities Registered Pursuant to Section 12(b) of the Act:

                                               Name of each exchange on
Title of each class                                  which registered
-------------------                         -------------------------------
None                                                        None

             Securities registered pursuant to Section 12(g) of the Act:

                            Common Stock - $.01 par value
                                   (Title of Class)

    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   X      NO
                                                 -----       -----
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
           -----
    The aggregate  market value of voting stock held by non-affiliates of the
Registrant on August 1, 1997 was approximately $84,634,721.  On that date, there
were 2,598,795 shares of common stock outstanding, net of Treasury Stock.

    Certain sections of Registrant's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders are incorporated by reference into Items 11, 12
and 13 of Part III hereof.  Certain sections of Part I of this Form 10-K Annual
Report are incorporated by reference into the Registrant's definitive Proxy
Statement for its 1997 Annual Meeting of Stockholders.

                                  Page 1 of 38 pages
                              Exhibit Index on Page 22
<PAGE>

TABLE OF CONTENTS


                                                                 Page
PART I   Item 1.   Business                                         3

                   A. Introduction                                  3
                   B. Sales Development                             3
                   C. Research and Product Development              5
                   D. Patents and Trademarks                        7
                   E. Raw Materials                                 9
                   F. Competition                                   9
                   G. Government Regulation                         9
                   H. Employees                                    10
                   I. Advertising and Promotion                    10
                   J. Manufacturing                                11

         Item 2.   Properties                                      11

         Item 3.   Legal Proceedings                               11

         Item 4.   Submission of Matters to a Vote of
                   Security Holders                                11


PART II  Item 5.   Market for the Registrant's Common
                   Stock and Related Stockholder Matters           12

         Item 6.   Selected Financial Data                         13

         Item 7.   Management's Discussion and Analysis of
                   Financial Condition and Results of Operations   14

         Item 8.   Financial Statements and Supplementary Data     17

         Item 9.   Changes in and Disagreements with Accountants
                   on Accounting and Financial Disclosures         17

PART III Item 10.  Directors and Executive Officers                18

         Item 11.  Executive Compensation                          20

         Item 12.  Security Ownership of Certain Beneficial
                   Owners and Management                           20

         Item 13.  Certain Relationships and Related Transactions  20

PART IV  Item 14.  Exhibits, Financial Statement Schedules and
                   Reports on Form 8-K                             20



                                          2
<PAGE>
                                        PART I

ITEM 1.   BUSINESS


A.   INTRODUCTION

     Alcide-Registered Trademark- Corporation (the "Company") is a Delaware
Corporation organized in 1983 which has its executive offices and research
laboratories at 8561 154th Avenue, N.E., Redmond, Washington 98052.

     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.

     This report includes forward-looking statements which involve risk and 
uncertainty including, without limitation, risk of dependence on patents and 
trademarks, third party suppliers, market acceptance of and demand for the 
Company's products, distribution capabilities, development of technology and 
regulatory approval thereof.  Sentences or phrases that use the words such as 
"believes," "anticipates," "hopes," "plans," "may," "can," "will," and 
others, are often used to flag such forward-looking statements, but their 
absence does not mean a statement is not forward-looking.  Such statements 
reflect management's current opinion and are designed to help readers 
understand management's thinking.  By their very nature, however, such 
statements are subject to certain risks and uncertainties that could cause 
actual results to differ materially from those projected.  Readers are 
cautioned not to place undue reliance on these forward-looking statements 
which speak only as of the date hereof.  The 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 events.

B.   SALES DEVELOPMENT

     The Company presently sells products to the dairy, health care, poultry 
processing and automotive industries.  Its products include: 
UDDERgold-Registered Trademark- Plus and UDDERgold-Registered 
Trademark-Germicidal Barrier Teat Dips, Pre-Gold-Registered Trademark- 
Germicidal Pre-Milking Teat Dip, silverQUICK-Registered Trademark- Udder Wash 
and 4XLA-Registered Trademark- Pre- and Post-Milking Teat Dip to the dairy 
industry; Exspor-Registered Trademark- Sterilant-Disinfectant and 
LD-Registered Trademark-Disinfectant to the health care industry; Sanova-TM- 
antimicrobial intervention to the poultry processing industry; and 
RenNew-Registered Trademark-A/C Air Conditioning System Disinfectant to the 
automotive industry.  The Company's sales to date have primarily been derived 
from UDDERgold Plus, UDDERgold and 4XLA teat dips.

     Total product sales for the fiscal year ended May 31, 1997 were
$11,768,504, with direct export sales representing approximately 31% of total
sales.  Export sales were predominantly for distribution in Europe.

     1.   DAIRY INDUSTRY

     Worldwide sales of dairy line products during fiscal year 1997 accounted
for approximately 88% of the Company's total sales.  Should there be a loss of
the sales generated by dairy line products, it would have a material adverse
effect on the Company.

                                          3
<PAGE>

     Dairy line sales to ABS Global, Inc. for distribution in North and South
America totalled $6,473,827 for fiscal year 1997, as compared to $7,361,885 for
fiscal year 1996.  The decrease in sales reflects an estimated $800,000
reduction by ABS of its Alcide product inventory during the fiscal year.

     Dairy industry sales in Europe are conducted through a network of five
distributors.  Their purchases accounted for $3,617,382 of sales in fiscal year
1997 and $3,282,180 in fiscal year 1996.

     2.   HEALTH CARE INDUSTRY

     The Company markets a line of hard surface sterilants and disinfectants
which kill harmful microorganisms and help reduce the potential for disease
transmission via contaminated surfaces.  The Company's LD Disinfectant and
Exspor Sterilant-Disinfectant offer users a combination of broad spectrum
efficacy, speed and relative safety.

     Fiscal year 1997 sales of hard surface sterilants and disinfectants were
$364,869, or 3% of total sales, as compared with $359,628 in fiscal year 1996.

     3.   POULTRY PROCESSING INDUSTRY

     In May, 1997 the Company entered into an agreement with Novus
International, Inc. for Novus distribution of Sanova antimicrobial to the
poultry industry.  Concurrent with signing a distribution agreement on May 21,
1997 with Novus, the Company recognized its first revenue in the poultry
processing industry.  Ultimate sales to poultry processors by Novus are planned
to begin during the fiscal year 1998 (following successful conclusion of
commercial plant testing).

     4.   AUTOMOTIVE INDUSTRY

     Fiscal year 1997 sales of RenNew-A/C Air Conditioning System Disinfectant
were $37,638 as compared with $142,134 in fiscal year 1996.  All RenNew-A/C Air
Conditioning System Disinfectant sales in both fiscal year 1997 and fiscal year
1996 were to the General Motors Corporation.

     5.   INDUSTRY PRACTICES AND BACKLOG ORDERS

     The Company's invoice terms conform to those in the chemical industry in
general, which are:  domestic-30 days, export-60 days.  In January, 1995, the
Company extended 90 day terms to ABS in consideration for a 2% finance fee.

     The Company had $2,014,234 of firm orders for future delivery at May 31,
1997, as compared to orders for future delivery at May 31, 1996 of $1,284,194.
The Company's distributors typically place orders one to four months in advance.

     6.   DISTRIBUTION SYSTEM

     The line of Alcide products presently sold to the dairy industry has 
been typically distributed under exclusive arrangements by either a bovine 
artificial insemination company or a veterinary products company in each of 
the countries where Alcide's products are sold and registered.  The

                                          4
<PAGE>

distribution arrangements define the territory (usually a country), establish
prices at which Alcide sells products to the distributor, and specify minimum
expected product purchase volumes.

     On October 30, 1996, Alcide and ABS Global, Inc. entered into a new,
two-year nonexclusive distribution agreement for the Company's products in the
United States, and a new exclusive two-year agreement covering Canada, South
America and several other international markets.  On February 7, 1997, the
Company entered into a two-year agreement with IBA, Inc. under which Alcide
granted nonexclusive distribution rights for the Company's udder care products
for a portion of the United States market covering approximately 68% of total
U.S. dairy cows.

     On April 2, 1997, the Company notified Rhone Merieux, its exclusive
distributor in France, that Alcide had elected to terminate Rhone Merieux's
exclusive rights to the product line effective immediately.  Alcide's intent is
to appoint a second, nonexclusive distributor for France, with the objective of
obtaining broader coverage of the market, particularly for its 4XLA product.


C.   RESEARCH AND PRODUCT DEVELOPMENT

     In fiscal year 1997, the Company's efforts continued to focus on the
development of its products for which its technology provides clear advantages
in the marketplace and for which weaknesses pose minimal impediment or
competitive disadvantage.  Major strengths of the Company's patented technology
are:  broad spectrum of antimicrobial activity, rapidity of cidal activity, safe
residues and minimal or nonexistent resistant strains.  Primary weaknesses are
the inconvenience of a two-part system and potential for corrosive oxidation.

     Additions and improvements to existing business units are expected to be
funded primarily by the Company.  Programs for new business areas may require
initial Company investment followed by major financial support from corporate
partners who would ultimately introduce the products into the marketplace.

     While many of the research and development programs undertaken by the
Company, and described hereafter, give evidence of possible success, the nature
of research, coupled with the necessity for regulatory approval, is such that
there can be no assurance of ultimate program success or that any resulting
product will be commercially successful.

     Significant highlights of programs active during fiscal year 1997 are
described below:

     1.   PREOPERATIVE SKIN ANTISEPTIC

     The Company successfully completed the additional clinical and 
pre-clinical studies necessary to respond to the Food and Drug 
Administration's (FDA) initial response to the New Drug Application (NDA) 
filed in September, 1994.  An addendum reporting the results of these studies 
was submitted to the FDA in May, 1997.  A second addendum to respond to 
questions relating to chemical and pharmaceutical issues is planned to be 
submitted in early fiscal 1998.

     Further testing of the preoperative skin antiseptic product to evaluate 
use of the formulation as an antiseptic for injection sites or in-dwelling 
catheter sites has continued on hold, pending responses to and final 
resolution of FDA's questions on the preoperative skin antiseptic NDA 
submission.  It is the Company's intention that an addendum to the original 
NDA (to cover this

                                          5
<PAGE>

expanded use) will be submitted to the FDA, and this addendum is now targeted
for late in fiscal 1998, following the completion of additional clinical
testing.

     Wherever possible, it is the Company's strategy to further the development
of new use areas for the skin disinfectant range by the development and
submission of addenda to the original NDA.

     2.   ANTI-INFECTIVE ORAL RINSE

     Two human clinical tests were successfully completed in the United 
Kingdom (under Certificate of Exemption status) during fiscal 1997.  The 
results of these two tests confirmed that the optimization program completed 
in 1995 had successfully elevated the level of performance of the Oral Rinse 
product to that of the leading prescription product.  An Investigational New 
Drug submission (IND) was filed with the FDA in April, 1997.  It is the 
Company's intention to identify a marketing partner which will support human 
clinical evaluations of efficacy versus gingivitis.

     3.   FOOD DISINFECTION

     In February of 1997, the Company received USDA approval to commence 
commercial plant evaluations of the direct application of acidified sodium 
chlorite chemistry to poultry carcasses during the slaughter process for the 
purpose of eliminating or substantially reducing food borne microorganisms 
harmful to humans.  This testing process is planned to be completed by the 
end of the first quarter of fiscal 1998.  It is believed that USDA approval 
to begin marketing to the poultry industry will follow shortly thereafter.

     A Secondary Direct Food Additive Petition (FAP) for the use of acidified
sodium chlorite solutions on red meats was submitted to the FDA in December,
1996.  Testing in red meat processing plants will commence on receipt of FDA
approval.

     Evaluations into the potential for use of Alcide antimicrobials in the
fish, fruits and vegetables processing industries were also conducted during
fiscal 1997.

     4.   INTRAMAMMARY INFUSION

     The objective of this program is to provide safe and effective treatment
and control of  clinical and/or subclinical mastitis in lactating dairy cattle
with no milk-withholding requirements.  The majority of products presently
marketed are antibiotics, the use of which requires discarding milk for up to
three days following treatment.  Evaluations completed during fiscal 1997
demonstrated that the use of aseptically manufactured pyrogen-free  product
produces an acceptable toleration profile in dairy cows.  The program will
therefore be expanded in fiscal 1998 to include evaluations of dose rate and
treatment regimes as well as to develop additional information on efficacy.

                                          6
<PAGE>


D.   PATENTS AND TRADEMARKS

     The Company considers protection of its technologies by United States 
and foreign patents to be an important aspect of its business.  No assurance 
can be given, however, as to the validity, efficacy or scope of its patent 
protection. Should the patents be held invalid, become ineffective against 
competition or expire prior to the Company's successful development of a 
market for its products, there may be a material adverse impact on the 
Company's business. Furthermore, the possibility of patent infringement by 
third parties cannot be entirely eliminated.  In the event of such 
infringement by third parties, if the Company is not successful in 
terminating such infringement, the viability of the Company could be severely 
and adversely affected.

     Conversely, no assurances can be given that the manufacture, use or sale 
of the Company's products will not infringe the patent rights of others.  In 
the event of infringement or alleged infringement, the Company's ability to 
market its products could be adversely affected and the viability of the 
Company could be severely and adversely affected.

     PATENTS -- The Company owns the following thirteen issued United States
patents:

          1)   U.S. Patent No. 4,330,531
               "Germ-Killing Materials"

          2)   U.S. Patent No. 4,891,216
               "Disinfecting Compositions and Methods Therefor"

          3)   U.S. Patent No. 4,956,184
               "Topical Treatment of Genital Herpes Lesions"

          4)   U.S. Patent No. 4,986,990
               "Disinfection Method and Composition Therefor"

          5)   U.S. Patent No. 5,019,402
               "Composition and Procedure for Disinfecting Blood and Blood
               Components"

          6)   U.S. Patent No. 5,100,652
               "Disinfecting Oral Hygiene Compositions and Process for 
               Using the Same"

          7)   U.S. Patent No. 5,185,161
               "Disinfection Method and Composition Therefor"

          8)   U.S. Patent No. 5,252,343
               "Method and Composition for Preventing and Treatment of 
               Bacterial Infections"

          9)   U.S. Patent No. 5,384,134
               "Anti-Inflammatory Formulations for Inflammatory Diseases"

          10)  U.S. Patent No. 5,389,390
               "Process for Removing Bacteria from Poultry and Other Meats"

                                          7
<PAGE>


          11)  U.S. Patent No. 5,597,561
               "Adherent Disinfecting Compositions and Method of Use in Skin
               Disinfection"

          12)  U.S. Patent No. 5,622,725
               "Wound Disinfection and Repair"

          13)  U.S. Patent No. 5,628,959
               "Composition and Method for Sterilizing Dialyzers"


     Comparable protection has either been obtained or is being sought in
selected foreign patent offices.

     One new U.S. patent application was filed during fiscal year 1997.  
Eight additional U.S. patent applications are pending.  Numerous 
corresponding foreign applications are also pending.

     The Company's original patent, U.S. Patent No. Re. 31,779, expired in the
United States on April 18, 1995.  That patent was directed to disinfecting a
substrate using a lactic acid/sodium chlorite composition.

     PATENT LITIGATION

     ALCIDE V. BABSON BROTHERS.  On August 19, 1996, Alcide filed suit against
Babson Brothers Company because it believed that Babson Brothers' InterSept-TM-
product, which was launched that month, infringed the claims of Alcide's United
States Patent No. 4,330,531.  Alcide moved for a preliminary injunction.  On
September 19, 1996, the court granted Alcide's motion for a preliminary
injunction, and on June 3, 1997, the court granted Alcide's motion for summary
judgment of infringement.  The case settled on June 30, 1997, with a cash
payment to Alcide and a Consent Agreement whereby Babson Brothers was
permanently enjoined for the remaining term of the patent from making and
selling the InterSept-TM- product.

     ALCIDE V. EIMERMACHER.  Alcide Corporation filed suit against 
Eimermacher for infringement of Alcide's German Patent No. P 28 17 942.2.  On 
April 17, 1997, the court held that Eimermacher was liable for infringement.  
The court entered an injunction on May 22, 1997 against further manufacture 
or sale of the Eimermacher product in Germany for the remaining term of the 
patent.  The case is in the damages stage.  The Company expects the court to 
enter a monetary judgment in favor of Alcide Corporation.

     TRADEMARKS -- The Company has sought to acquire trademark protection, 
primarily by the filing of applications for registration of its marks in a 
large number of countries.  There can be no assurances that a filed 
application will result in a registration, that the issuance of a trademark 
registration to the Company or the acquisition of rights through use will 
provide the Company with adequate protection against infringement in a 
selected territory, that the Company will be able to expand its product line 
under a registered mark in some territories or that the Company's trademark 
rights cannot be terminated in some territories, such as by petition by 
others claiming superior rights.

     No assurances can be given that the Company's use of the marks and 
business name will not infringe the rights of others in some territories 
resulting in the exposure of the Company to liability to the holder of the 
rights and a possible obligation to terminate use in such territory.

                                          8
<PAGE>


     If rights to trademarks selected by the Company were unavailable in a 
territory, if a Company trademark registration were to become invalid, or if 
the Company's business name or trademarks were to infringe the rights of 
another in a territory, there would be an adverse impact on the Company.

     In addition to the Company's mark Alcide-Registered Trademark-,  the 
other Company marks registered in the U.S. are Exspor-Registered Trademark-, 
LD-Registered Trademark-, UDDERgold-Registered Trademark-, 4XLA-Registered 
Trademark-, Pre-Gold-Registered Trademark-, DIPPINgold-Registered 
Trademark-silverQUICK-Registered Trademark- and RenNew-Registered Trademark-.

     These same marks have been registered outside of the U.S. in markets 
where the Company has determined that there is a commercial opportunity for 
the appropriate product area. For translation reasons, the mark 
DIPPINgold-Registered Trademark- has been determined to be more appropriate 
than UDDERgold and has therefore been registered in a number of foreign 
countries. The spelling variant DIPPINguld-Registered Trademark- has been 
registered in Denmark, Norway, Finland and Sweden.

E.   RAW MATERIALS

     Various Alcide products include in their formulations chemical components
available from few (and in some cases only one) suppliers.  Formulation
alternatives exist for each single-sourced material; however, changing
formulations could result in higher raw material costs and/or the necessity to
obtain regulatory clearance for the modified formulation.

F.   COMPETITION

     The Company competes in substantially all of its markets on the basis of
quality and technical innovation.  A number of companies have announced their
intention to introduce, or are believed to be in the process of developing, a
variety of products designed to perform some of the functions of Alcide
products.  Additionally, there exist in the marketplace products that are known
to be competitive with the Company's products.

     The dairy hygiene market into which UDDERgold Plus, UDDERgold, Pre-Gold 
and 4XLA teat dips are sold is a highly fragmented worldwide market in which 
major specialty chemical companies compete.  The major classes of products 
sold in this market are iodophors and chlorhexidines.  The Company's chlorous 
acid/chlorine dioxide chemistry represents a novel chemical class.  It, 
accordingly, necessitates obtaining regulatory approval or registration in 
most countries in which it is commercialized.  The Company sells its teat 
dips in each country via either an animal health or an artificial 
insemination company.

G.   GOVERNMENT REGULATION

     1.   DAIRY INDUSTRY

     The Company's products sold to the dairy industry require registration for
sale in a number of international markets.  UDDERgold Teat Dip has been
registered in Canada, the United Kingdom, Republic of Ireland, Denmark, The
Netherlands, Italy, Spain, Portugal, Belgium, New Zealand, Brazil, France and
India.  The product is legally sold without formal registration in the United
States, Greece, Hungary and Mexico.  Registrations are pending in Poland, South
Africa and Switzerland.

     In West Germany, a New Drug Application for UDDERgold Teat Dip was filed 
in February, 1989.  The application was rejected in March, 1997.  Alcide has 
filed notice of suit in Germany to

                                          9
<PAGE>

appeal the decision and has also filed a new registration application.  The
Company's distributor in The Netherlands is selling product to German customers
who buy the product in The Netherlands.

     4XLA Teat Dip has been registered in New Zealand, Canada and Denmark.  The
product is sold without registration in France, The Netherlands, Belgium, Italy
and the United States.

     In the event the Company employs distributors in other countries,
registration documents will be filed either directly by the Company or by the
specific distributor.

     It is expected that substantially all new products presently under
development by Alcide Corporation will require regulatory approval.

     2.   POULTRY PROCESSING ANTIMICROBIALS

     A Food Additive Petition for the Company's antimicrobial intervention for
poultry processing plants was submitted to the FDA in September, 1994 and
approved by the FDA in April, 1996.  The Company is presently conducting
commercial plant tests under supervision of the United States Department of
Agriculture (USDA) as a necessary step in obtaining the agency's required
approval.

     3.   PREOPERATIVE SKIN ANTISEPTIC

     A New Drug Application for the Company's preoperative skin antiseptic was
submitted to the FDA in September, 1994.  In October, 1995, the FDA requested
substantial supplemental testing and additional support for the NDA.  Such
testing and support was completed in FY 1997 and submitted to the FDA in May,
1997.  The product cannot be marketed without FDA approval.

     4.   STERILANTS/DISINFECTANTS

     The Company's line of hard surface sterilants and disinfectants are 
regulated in the U.S. by the EPA and FDA.  Appropriate EPA and FDA approvals 
for sale and manufacturing have been obtained.

H.   EMPLOYEES

     The corporate office and laboratory staff of 12 employees occupy a 5,461
square foot facility in Redmond, Washington.

     The Company has relationships with, and from time to time engages the
services of, university professors and other qualified consultants to assist it
in technological research and development.

     The Company is not a party to any collective bargaining agreement and
considers its employee relations to be excellent.

I.   ADVERTISING AND PROMOTION

     The Company's advertising and promotion activities consist of cooperative
advertising of dairy line products with its distributors and the publication of
product, financial and corporate literature.

                                          10
<PAGE>

J.   MANUFACTURING

     All manufacturing of the Company's products is performed by contract 
manufacturers having appropriate FDA registration approval for such 
manufacturing.  Product release for sale is dependent on quality control 
testing by Alcide.  The Company is not dependent on any one manufacturer.  
Many qualified manufacturers regularly compete in the contract packaging 
marketplace.

ITEM 2.   PROPERTIES

     The five-year lease for the Company's Redmond facility provided for a 
monthly rent of $4,915 through May, 1997 and a monthly rent of $5,188 from 
June, 1997 through May, 1999.  Management believes the space will adequately 
support the Company's needs for at least the next two years.

ITEM 3.   LEGAL PROCEEDING

     On February 20, 1996, the Company was named as a defendant in a lawsuit 
filed in United States District Court for the Southern District of New York 
by Howard Alliger, Old Hill Associates, and other individuals who have rights 
to receive royalties with respect to certain patents assigned to the Company. 
The complaint alleges that the Company has not paid the required amount of 
royalties due the plaintiffs pursuant to Royalty and Consolidation 
Agreements.  The complaint seeks damages for unpaid royalties and unjust 
enrichment, injunctions, and other relief.

     The Company has denied any wrongdoing in connection with the matters that
have been alleged and intends to defend the lawsuit vigorously.  (There can be
no assurance, however, that the Company's defense will be successful, or that
the lawsuit, or any settlement or trial with regard thereto, will not have an
adverse effect on the Company or its financial condition.)

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                          11
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                                       PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS

     The Company's common stock ("Common Stock") has been publicly traded since
May 26, 1983 in the over-the-counter market on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol ALCD.


     The following table sets forth the range of the Common Stock on NASDAQ for
the fiscal quarters indicated, as reported by NASDAQ.




                                                   HIGH                LOW

                   COMMON STOCK

                   YEAR ENDED MAY 31, 1996
                   First quarter                 26 1/4              10 1/2
                   Second quarter                33                  16 1/2
                   Third quarter                 29 1/4              19 3/4
                   Fourth quarter                26 1/4              19 1/4

                   YEAR ENDED MAY 31, 1997
                   First quarter                 25 1/4               20 3/4
                   Second Quarter                22 1/4               18 1/2
                   Third Quarter                 25 3/4               18
                   Fourth Quarter                31 1/2               17 3/4


No dividends were declared or paid for these periods.
Prices represent final daily transactions between dealers without retail
mark-up, mark-down or commissions, and may not represent actual transactions.
On August 1, 1997, there were approximately 2,083 Common stockholders of record.

                                          12
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA



<TABLE>
<CAPTION>

                             FISCAL YEARS ENDED

                   MAY 31, 1993        MAY 31, 1994        MAY 31, 1995     MAY 31, 1996      MAY 31, 1997
<S>                 <C>                <C>                 <C>                <C>                 <C>
Net sales             $6,471,407       $7,645,350          $9,153,104         $11,145,826         $11,768,504

Net income (Loss)       810,191*        1,066,124           1,663,213           2,325,062           2,881,295

Net income (Loss)
 per Common Share           .29*              .40                 .60                 .82                1.04
Total assets          10,305,486       10,347,770          11,910,992          13,768,614          15,113,672

Long term debt               ---              ---                 ---                 ---                 ---
Redeemable Preferred
Stock                  3,771,682          272,736             261,022             249,380             233,105

</TABLE>
 
     *Restated to reflect adoption of SFAS 109 on a retroactive basis to May 31,
     1991.


                SELECTED QUARTERLY FINANCIAL DATA FOR THE YEARS ENDED
                            MAY 31, 1996 AND MAY 31, 1997


                    Net Sales  Gross Profit  Net Income   Net Income per Share
Year Ended
May 31, 1996
1st Quarter       $ 2,608,746  $ 1,707,445  $  504,139         $.18
2nd Quarter         2,980,208    2,015,435     599,958          .21
3rd Quarter         3,044,506    1,975,454     653,951          .23
4th Quarter         2,512,366    1,709,535     567,014          .20
                  -----------   ----------  ----------         ----
Total for Year    $11,145,826   $7,407,869  $2,325,062         $.82
                  -----------   ----------  ----------         ----
                  -----------   ----------  ----------         ----


Year Ended
May 31, 1997
1st Quarter        $2,042,222   $1,419,797    $376,296         $.13
2nd Quarter         2,744,874    1,850,961     601,724          .22
3rd Quarter         2,963,436    1,856,327     707,544          .25
4th Quarter         4.017,972    2,787,544   1,195,731          .43
                  -----------   ----------  ----------         ----
Total for Year    $11,768,504   $7,914,629  $2,881,295        $1.04
                  -----------   ----------  ----------         ----
                  -----------   ----------  ----------         ----


                                          13
<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

FISCAL YEAR 1997 AS COMPARED WITH 1996

     The Company's net sales in fiscal year 1997 were $11,768,504, an increase
of 6% from the previous fiscal year's $11,145,826.  During the fiscal year, ABS
Global, Inc. reduced its inventory of Alcide products by an estimated $800,000.
This sales reduction was offset by sales of $273,792 to IBA, Inc., which began
distributing Alcide udder care products in February, 1997, and by a Novus
International, Inc's. $1 million purchase of Alcide poultry antimicrobial
inventory and equipment, concurrent with the May 21, 1997 distribution
agreement.

     Interest and nonoperating income for the fiscal year 1997 was $553,846, an
increase of 74% from the prior year's $318,677.  The increase reflects the
impact of higher investible liquid assets and a $100,000 payment to Alcide by
Novus on February 6, 1997 to secure negotiating rights for a distribution
agreement.

     Cost of goods sold was $3,853,875 in fiscal year 1997, or 33% of sales, as
compared to $3,737,957 in fiscal year 1996, or 34% of sales.  The lower cost of
goods as a percentage of sales reflects the impact of the sale to Novus.

   ROYALTY OBLIGATIONS

     The Company has an ongoing obligation pursuant to certain royalty and 
consolidation agreements to pay patent holders, some of whom were early 
investors in the Company, a royalty of 50% of its license revenues and 8% of 
its net cash sales of products subject to such agreements.  In fiscal 1997, 
net sales of $4,248,923 were covered by the royalty and consolidation 
agreements.

     The Company anticipates paying a royalty of 8% of the net cash sales of 
its products to the extent they are subject to royalty payments, which 
payments will increase the Company's costs by such amount.  The Company 
believes that it has the ability to provide for these payments in the selling 
prices of its products.

     On February 20, 1996, the Company was named as a defendant in a lawsuit 
filed in United States District Court for the Southern District of New York 
by Howard Alliger, Old Hill Associates, and other individuals who have rights 
to receive royalties with respect to certain patents assigned to the Company. 
The complaint alleges that the Company has not paid the required amount of 
royalties due the plaintiffs pursuant to Royalty and Consolidation 
Agreements.  The complaint seeks damages for unpaid royalties and unjust 
enrichment, injunctions, and other relief.

     Alcide management believes that the Company has properly paid royalties 
on products subject to such payment, and has established a reserve as of 
May 31, 1997, of $87,000 for the purpose of defending its position in this 
legal dispute.  (See Notes to Financial Statements.)

                                          14
<PAGE>

   RESEARCH AND DEVELOPMENT

     Research and development expenses in fiscal year 1997 were $1,546,285, as
compared to $1,176,563 in fiscal year 1996, an increase of 31%.  The increase
resulted primarily from fees paid to third parties for clinical testing and
outside laboratory testing related to the Company's new product development
program and expenses related to commercial plant testing of Sanova, the
Company's new poultry processing antimicrobial.  All research and development
expenditures were funded by the Company in both fiscal years 1996 and 1997.

   SELLING AND ADMINISTRATIVE EXPENSE

     Selling and administrative expenses were $2,026,284 in fiscal year 1997, 
as compared with $2,070,570 in fiscal year 1996, a decrease of 2%.

   INCOME TAXES

     The Company had available carry forward losses aggregating approximately
$1,861,462 at May 31, 1997 and which expire during the years 2000 to 2008.  At
the present pace of operations, it is likely that the carry forward losses will
be exhausted in FY 1998.

   NET INCOME

     Net Income for fiscal 1997 was $2,881,295, an increase of $556,233 or 
24% over the previous fiscal year.  The increase was achieved as a result of 
the net sales increase and interest and non-operating income increases noted 
above, offset by cost of goods and expense increases.

   LIQUIDITY

     The Company's cash, cash equivalents and short-term investments, and U.S.
Government securities totaled $9,910,674 at May 31, 1997, an increase of
$2,402,237 over the previous fiscal year.  The increase was generated from
operations, primarily offset by a $977,580 investment in the repurchase of
Alcide Common Stock.

     The Company anticipates that income during fiscal year 1998 will be
adequate to sustain the Company and that its cash resources will enable it to
meet its operating requirements and support capital expenditures in the ensuing
fiscal year.

   ACCOUNTS RECEIVABLE

     The Company sells its products to customers and distributors on terms
typical of the industry.  Sales to U.S. customers are 30-day terms.  Sales to
international distributors are 60-day terms.  During 1995, 90 day terms were
offered to ABS, the Company's largest distributor, in exchange for a finance
charge equal to 2% of invoice amounts.  In FY 1997, Alcide recorded finance fee
revenue of $156,145.  At May 31, 1997, ABS receivables over 30 days accounted
for $929,903 of accounts receivable.


                                          15
<PAGE>

   LEASES AND CAPITAL EXPENDITURES

     The Company's office and laboratory space is leased under operating leases
from unaffiliated lessors.  During fiscal 1997, the Company spent $7,354 on
purchases of fixed assets.  Planned capital expenditures for fiscal year 1998
are expected to be less than $100,000.


FISCAL YEAR 1996 AS COMPARED WITH 1995


     The Company's net sales in fiscal year 1996 were $ 11,145,826, an increase
of 22% from the previous fiscal year's $9,153,104.  The increase in fiscal year
1996 was due primarily to an 18% increase in dairy line product sales, which
products include:  UDDERgold Plus and UDDERgold Germicidal Barrier Teat Dip,
silverQUICK Udder Wash, 4XLA Pre- and Post-Milking Teat Dip and Pre-Gold
Germicidal  Pre-Milking Teat Dip.  Exports accounted for 29% or $3,282,180 of
net sales, as compared with 30% or $2,784,474 in fiscal year 1995.

     Interest and nonoperating income for fiscal year 1996 was $318,677, an
increase of 16% from the prior year's $274,180.  The increase reflects the
impact of higher investible liquid assets.

     Cost of goods sold was $3,737,957 in fiscal year 1996, or 34% of sales, as
compared to $3,127,529 in fiscal year 1995 or 34% of sales.  The stable cost of
goods as a percentage of sales is the result of a similar product mix in both
years.

   ROYALTY OBLIGATIONS

     The Company has an ongoing obligation pursuant to certain royalty and 
consolidation agreements to pay patent holders, some of whom were early 
investors in the Company, a royalty of 50% of its license revenues and 8% of 
its net cash sales of products subject to such agreements.  In fiscal 1996, 
net sales of $3,814,589 were covered by the royalty and consolidation 
agreements.

   RESEARCH AND DEVELOPMENT

     Research and development expenses in fiscal year 1996 were $1,176,563, as
compared to $959,158 in fiscal year 1995, an increase of 23%.  The increase
resulted primarily from fees paid to third parties for clinical testing and
outside laboratory testing related to the Company's new product development
program.  All research and development expenditures were funded by the Company
in both fiscal years 1995 and 1996.

   SELLING AND ADMINISTRATIVE EXPENSE

     Selling and administrative expenses were $2,070,570 in fiscal year 1996, 
as compared with $1,935,760 in fiscal year 1995, an increase of 7%.

   INCOME TAXES

     The Company had available carry forward losses aggregating approximately
$5,539,000 at May 31, 1996 and which expire during the years 2000 to 2008.

                                          16
<PAGE>


   NET INCOME

     Net income for fiscal 1996 was $2,325,062, an increase of $661,849 or 40%
over the previous fiscal year.  The increase was achieved by expanded domestic
and international distribution of the Company's products and by continued
control of overhead expenses, somewhat offset by increased research and
development investment.

   LIQUIDITY

     The Company's cash, cash equivalents and short-term investments, and U.S.
Government securities totaled $7,508,437 at May 31, 1996, an increase of
$2,639,759 over the previous fiscal year.  The increase was generated from
operations, primarily offset by a $772,713 investment in the repurchase of
Alcide Common Stock.

   ACCOUNTS RECEIVABLE

     The Company sells its products to customers and distributors on terms
typical of the industry.  Sales to U.S. customers are 30-day terms.  Sales to
international distributors are 60-day terms.  During 1995, 90 day terms were
offered to ABS, the Company's largest distributor, in exchange for a finance
charge equal to 2% of invoice amounts.  In 1996, Alcide recorded finance fee
revenue of $230,895.  At May 31, 1996, ABS receivables over 30 days accounted
for $1.4 million of accounts receivable.

   LEASES AND CAPITAL EXPENDITURES

     The Company's office and laboratory space is leased under operating leases
from unaffiliated lessors.  During fiscal 1996, the Company spent $44,422 on
purchases of fixed assets.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to pages 13 and 24 through 35 of Form 10-K.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURES

     There have been no disagreements on accounting and financial disclosures 
with Arthur Andersen LLP with regard to the financial statements for fiscal 
1997, 1996 and 1995.  The principal accountants' reports on financial 
statements of the Company for the past year did not contain an adverse 
opinion or a disclaimer of opinion nor were they qualified or modified as to 
uncertainty of audit scope or accounting principles.

                                          17
<PAGE>

                                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

     Pursuant to the Company's by-laws, Directors are elected to a one-year 
term of office by the shareholders of the Company at its Annual Meeting.

     Information regarding the Directors and Executive Officers of the Company
as of May 31, 1997 is listed in the following table:
 
<TABLE>
<CAPTION>


                                      POSITIONS WITH THE COMPANY AND PRINCIPAL OCCUPATION OR       DIRECTOR OR EXECUTIVE OFFICER
Name                         Age      EMPLOYMENT DURING THE PAST FIVE YEARS                        SINCE
<S>                          <C>      <C>                                                          <C>

Thomas L. Kempner            70       Director and Chairman of the Board of the Company; Chairman               1983
                                      and Chief  Executive Officer of Loeb Partners Corporation,
                                      a private investment banking firm, since 1979.   Presently
                                      serves on the Boards of  Directors of  Energy Research
                                      Corporation; IGENE Biotechnology, Inc.; Roper Starch
                                      Worldwide, Inc.; Intermagnetics General; Northwest
                                      Airlines, Inc.; and CCC Information Services Group, Inc.

Kenneth N. May               66       Director of the Company; Retired in August, 1989 as                       1995
                                      Chairman, Chief Executive Officer and a director of Holly
                                      Farms Foods, Inc., completing 19 years with that company.
                                      Previously held positions as Professor of Poultry Science
                                      at Mississippi State University and the University of
                                      Georgia.  Consultant for and director of Hudson Foods,
                                      Inc.; technical advisor and consultant to the National
                                      Broiler Council on food safety matters.  Serves on the
                                      Board of Directors of Embrex, Inc.  Dr. May has been active
                                      in the Poultry Science Association and the National Broiler
                                      Council, and has served on various committees for the USDA.

John P. Richards             55       Executive Vice President, Chief Financial Officer of the                  1991
                                      Company; President of Tartan Marine Company from June 1983
                                      to November 1990.  Previously held various financial and
                                      operational management positions at Abbott Laboratories
                                      from 1968 to 1983.


</TABLE>
                                                                     18
<PAGE>
 
<TABLE>
<S>                          <C>      <C>                                                          <C>

Joseph A. Sasenick           57       Director of the Company; President and Chief Executive                    1991
                                      Officer of the Company since February 1992; President and
                                      Chief Operating Officer of the Company from February 1991
                                      to February 1992.  Presently serves as Chairman of the
                                      Washington Biotechnology and Biomedical Association.
                                      Previously held top management positions at Abbott
                                      Laboratories  and The Gillette Company.

William G. Spears            59       Director of the Company; Chairman of the Board of Spears,                 1989
                                      Benzak, Salomon & Farrell, an investment advisory
                                      subsidiary of KeyCorp. since 1994.  Presently serves on the
                                      Board of Directors of United HealthCare Corp.  Chairman,
                                      HealthCare Chaplaincy Board of Trustees and Vice Chairman
                                      of Quinnipiac College Board of Trustees.

Aaron Stern                  72       Director of the Company; Chairman of the Board and Chief                  1989
                                      Executive Officer of Dr. Aaron Stern, M.D., Ph.D., P.C., a
                                      professional corporation; practicing psychoanalyst;
                                      corporate consultant; corporate director and Adjunct
                                      Professor of Psychology and Psychoanalysis at Columbia
                                      University, all of which positions have been held for more
                                      than the past five years; Director and Senior Advisor,
                                      Tiger Management Corporation.

</TABLE>

                                                                     19
<PAGE>
 

ITEM 11. EXECUTIVE COMPENSATION

    This information is incorporated by reference from the Section captioned
"Executive Compensation" contained in the Company's definitive Proxy Statement
for its 1997 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    This information is incorporated by reference from the Section captioned 
"Share Ownership by Directors, Executive Officers and Certain Beneficial 
Owners" contained in the Company's definitive Proxy Statement for its 1997 
Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    This information is incorporated by reference from the Section captioned 
"Certain Transactions" contained in the Company's definitive Proxy Statement 
for its 1997 Annual Meeting of Shareholders.

                                       PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

              (a)  Documents filed with Report:

                   1.   FINANCIAL STATEMENTS

                        Independent Auditors' Report.
                        Balance Sheets as of May 31, 1996 and May 31, 1997.
                        Statements of Operations for each of the years ended
                        May 31, 1995, May 31, 1996 and May 31, 1997.
                        Statements of Changes in Shareholders' Equity for each
                        of the years ended May 31, 1995, May 31, 1996 and May
                        31, 1997.
                        Statements of Cash Flows for each of the years ended
                        May 31, 1995, May 31, 1996 and May 31, 1997.

                   2.   FINANCIAL STATEMENT SCHEDULE

                        Notes to Financial Statements
                        Selected Quarterly Financial Data for the Years Ended
                        May 31, 1996 and May 31, 1997, on Page 13.

                   3.   EXHIBITS

                        See Index to Exhibits on Page 22.

              (b)  Reports on Form 8-K.

                        On May 30, 1997, the Company filed Form 8-K,
                        Distributor Agreement by and between Alcide Corporation
                        and Novus International, Inc., dated May 21, 1997.

                                          20
<PAGE>

SIGNATURES
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
                             (Registrant)

                             By s/JOSEPH A. SASENICK
                                -------------------------------------
                             Joseph A. Sasenick, President
                             Chief Executive Officer

                             By s/JOHN P. RICHARDS
                                -------------------------------------
                             John P. Richards, Executive Vice President
                             Chief Financial Officer (Principal Accounting
                             Officer)

Date:  July 15, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:





s/THOMAS L. KEMPNER                    Director                 July 15, 1997
---------------------------------
Thomas L. Kempner




s/KENNETH N. MAY                       Director                 July 15, 1997
---------------------------------
Kenneth N. May




s/JOSEPH A. SASENICK                   Director, President,     July 15, 1997
---------------------------------      Chief Executive Officer
Joseph A. Sasenick




s/WILLIAM G. SPEARS                    Director                 July 15, 1997
---------------------------------
William G. Spears




s/AARON STERN                           Director                July 15, 1997
---------------------------------
Aaron Stern


                                          21
<PAGE>

INDEX TO EXHIBITS

EXHIBIT NO.
<TABLE>
<S>      <C>
3.1      Certificate of Incorporation (previously filed as an exhibit to
         Registration Statement No. 2-79954 on Form S-1 filed October 22, 1982,
         and incorporated herein by reference).

3.2      By-Laws (previously filed as an exhibit to Form 10-K of the Registrant
         for the fiscal year ended May 31, 1984, and incorporated herein by
         reference).

10.3     1983 Incentive Stock Option Plan as amended (previously filed as an
         exhibit to Form 10-K of the Registrant for the fiscal year ended May
         31, 1984, and incorporated herein by reference).

10.14    Agreement by and between the Company and Holstein Genetika KFT dated
         May 1, 1992 (previously filed as an exhibit to Form 10-K of the
         Registrant for the fiscal year ended May 31,1992, and incorporated
         herein by reference).

10.15    Agreement by and between the Company and Handelsonderneming E.
         Heemskerk dated May 31, 1992 (previously filed as an exhibit to Form
         10-K of the Registrant for the fiscal  year ended May 31, 1992, and
         incorporated herein by reference).

10.16    Second amendment dated April 8, 1993 to employment agreement for
         Joseph A. Sasenick dated February 11, 1991 and first amendment to
         employment agreement dated February 4, 1992 (previously filed as
         exhibits to Form 10-K of the Registrant for the fiscal years ended May
         31, 1991 and 1992, respectively and incorporated herein by reference).

10.17    Agreement by and between the Company and Universal Marketing Services
         dated May 3, 1993 (previously filed as an exhibit to Form 10-K of the
         Registrant for the fiscal year ended May 31, 1993,  and incorporated
         herein by reference).

10.19    1993 Incentive Stock Option Plan (previously filed as an Exhibit to
         Proxy Statement for meeting held December 7, 1993, and incorporated
         herein by reference).

10.20    Distributor Agreement by and between the Company and ABS Global, Inc.,
         dated October 30, 1996, covering the United States (previously filed
         as an exhibit to Form 10-Q of the Registrant for the quarter ended
         November 30, 1996, and incorporated herein by reference).

10.21    Distributor Agreement by and between the Company and ABS Global, Inc.,
         dated October 30, 1996, covering several international markets
         (previously filed as an exhibit to Form 10-Q of the Registrant for the
         quarter ended November 30, 1996, and incorporated herein by
         reference).

10.22    Distributor Agreement by and between the Company and IBA Inc., dated
         February 7, 1997, covering territories in the United States
         (previously filed as an exhibit to Form 10-Q of the Registrant for the
         quarter ended February 28, 1997, and incorporated herein by
         reference).

10.23    Distributor Agreement by and between the Company and Novus
         International, Inc., dated May 21, 1997 (previously filed on Form 8-K
         on May 30, 1997, and incorporated herein by reference).

11.0     Computation of Earnings Per Share of Common Stock of the Company.

23.1     Consent of Independent Public Accountants.
</TABLE>

                                          22

<PAGE>

                                 ARTHUR ANDERSEN LLP

                       REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders of
Alcide Corporation:

We have audited the accompanying balance sheets of Alcide Corporation (a
Delaware corporation) as of May 31, 1997 and 1996, and the related statements of
operations, changes in shareholders' equity and cash flows for each of the three
years ended May 31, 1997.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material aspects, the financial position of Alcide Corporation as of May 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the three years then ended in conformity with generally accepted accounting
principles.



                                            /s/ Arthur Andersen LLP



Seattle, Washington,
  July 1, 1997


                                          23
<PAGE>

                          ALCIDE CORPORATION BALANCE SHEETS

                                                             May 31,
                                                  --------------------------

                                                       1996            1997
                                                       ----            ----
ASSETS:
  Current assets:
       Cash and cash equivalents                   $ 5,365,895   $ 6,723,154
       Short term investments                        1,032,634     2,086,900
       Accounts receivable - trade                   2,585,427     2,498,981
       Inventory                                       928,500     1,115,627
       Prepaid expenses and other current assets       125,547       285,971
                                                    ----------    ----------
              Total current assets                  10,038,003    12,710,633
                                                    ----------    ----------

  Equipment and leasehold improvements:
       Office equipment                                 92,656       100,010
       Laboratory and manufacturing equipment          132,404       132,404
       Leasehold improvements                           56,152        56,152
  Less:  Accumulated depreciation and amortization     (86,582)     (143,604)
                                                    ----------    ----------

  Total equipment and leasehold improvements, net      194,630       144,962
                                                    ----------    ----------

  Deferred income tax asset                          2,421,191     1,090,229
                                                    ----------    ----------

  Other assets                                       1,114,790     1,167,848
                                                    ----------    ----------

TOTAL ASSETS                                       $13,768,614   $15,113,672
                                                    ----------    ----------
                                                    ----------    ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities:
       Accounts payable                               $374,440      $329,808
       Accrued expenses and taxes payable            1,083,840       493,046
                                                    ----------    ----------

              Total liabilities                      1,458,280       822,854
                                                    ----------    ----------

  COMMITMENTS AND CONTINGENCIES

  Redeemable Class B Preferred Stock -
  noncumulative convertible $.01 par value;
       authorized 10,000,000 shares
       issued and outstanding:
       May 31, 1996 -   95,002
       May 31, 1997 -   88,802                         249,380       233,105
                                                    ----------    ----------

  Shareholders' equity:
  Class A Preferred Stock - no par value
       authorized 1,000 shares; issued and
       outstanding 1,000 shares                        135,307       135,307
  Common Stock $.01 par value;
       authorized 100,000,000 shares;
       issued and outstanding:
       May 31, 1996 - 2,791,538
       May 31, 1997 - 2,799,408                         27,915        27,994
  Treasury stock at cost                            (2,213,845)   (3,191,425)
  Additional paid-in capital                        18,209,412    18,302,377
  Accumulated Deficit                               (4,097,835)   (1,216,540)
                                                    ----------    ----------

       Total Shareholders' Equity                   12,060,954    14,057,713
                                                    ----------    ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $13,768,614   $15,113,672
                                                    ----------    ----------
                                                    ----------    ----------

See notes to financial statements.


                                          24
<PAGE>

                                  ALCIDE CORPORATION
                               STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
 
                                                              FOR THE YEARS ENDED MAY 31,
                                                              ---------------------------

                                                         1995            1996           1997
                                                         ----            ----           ----

<S>                                                   <C>           <C>            <C>
NET SALES                                             $9,153,104    $11,145,826    $11,768,504
                                                      ----------    -----------    -----------

EXPENDITURES:
            Cost of goods sold                         3,127,529      3,737,957      3,853,875
            Royalty expense                              697,531        807,940        437,877
            Research and development expense             959,158      1,176,563      1,546,285
            Depreciation and amortization                 30,390         49,454         57,022
            Consulting expense to related parties         60,000         96,150         96,014
            Other selling, general/administrative      1,935,760      2,070,570      2,026,284
            Relocation expense                            73,355            ---            ---
                                                      ----------    -----------    -----------

                                                       6,883,723      7,938,634      8,017,357
                                                      ----------    -----------    -----------

Operating income                                       2,269,381      3,207,192      3,751,147

Interest income                                          227,841        294,881        427,316
Other income                                              46,339        23,796         126,530
                                                      ----------    -----------    -----------

Income before provision for income taxes               2,543,561      3,525,869      4,304,993
Provision for income taxes                               880,348      1,200,807      1,423,698
                                                      ----------    -----------    -----------

Net income                                           $ 1,663,213    $ 2,325,062     $2,881,295
                                                      ----------    -----------    -----------
                                                      ----------    -----------    -----------

Net income per common share                          $      0.60    $      0.82        $  1.04
                                                      ----------    -----------    -----------
                                                      ----------    -----------    -----------
Weighted average common shares &
 common share equivalents                              2,765,962      2,832,088      2,783,064
                                                      ----------    -----------    -----------
                                                      ----------    -----------    -----------

</TABLE>
 
See notes to financial statements.


                                          25
<PAGE>

                                  ALCIDE CORPORATION
                    STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
 
                                                           CLASS "A"                                     ADDITIONAL
                                                        PREFERRED STOCK              COMMON STOCK          PAID IN
                                                                                                            CAPITAL
-----------------------------------------------------------------------------------------------------------------------------
                                                   SHARES         AMOUNT       SHARES           AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>           <C>              <C>        <C>
Balance May 31, 1994                                1,000       $135,307      2,766,721        $27,667    $18,158,618
Accretion of Series 1 Redemption Value                                                                           (167)
Exercise of Stock Options                                                           412              4             (4)
Purchase Treasury Stock
Exchange of Series 1 for Common Stock
and Series 2 Stock                                                               20,705            207          5,952
Net Income
-----------------------------------------------------------------------------------------------------------------------------
Balance May 31, 1995                                 1000       $135,307      2,787,838        $27,878    $18,164,399
Exercise of Stock Options                                                         3,700             37         26,013
Purchase Treasury Stock
Tax Benefit from Exercise of Non-Qualified
Stock Options                                                                                                  19,000
Net Income
-----------------------------------------------------------------------------------------------------------------------------
Balance May 31, 1996                                1,000       $135,307      2,791,538        $27,915    $18,209,412
Exercise of Stock Options                                                         7,870             79         69,965
Purchase Treasury Stock
Tax Benefit from Exercise of Non-Qualified
Stock Options                                                                                                  23,000
Net Income
-----------------------------------------------------------------------------------------------------------------------------
Balance May 31, 1997                                1,000       $135,307      2,799,408        $27,994    $18,302,377
                                                    -----       --------      ---------        -------    -----------
                                                    -----       --------      ---------        -------    -----------

</TABLE>

<TABLE>
<CAPTION>

<CAPTION>

                                                                                                TOTAL
                                                     COMMON TREASURY STOCK    ACCUMULATED  SHAREHOLDERS'
                                                                                DEFICIT        EQUITY
-----------------------------------------------------------------------------------------------------------
                                                   SHARES       AMOUNT
-----------------------------------------------------------------------------------------------------------
<S>                                               <C>        <C>            <C>             <C>
Balance May 31, 1994                              (97,280)   ($1,002,391)   ($8,086,110)    $9,233,091
Accretion of Series 1 Redemption Value                                                            (167)
Exercise of Stock Options                                                                         ----
Purchase Treasury Stock                           (56,100)      (438,741)                     (438,741)
Exchange of Series 1 for Common Stock
and Series 2 Stock                                                                               6,159
Net Income                                                                    1,663,213      1,663,213
-----------------------------------------------------------------------------------------------------------
Balance May 31, 1995                             (153,380)   ($1,441,132)   ($6,422,897)   $10,463,555
Exercise of Stock Options                                                                       26,050
Purchase Treasury Stock                           (38,957)      (772,713)                     (772,713)
Tax Benefit from Exercise of Non-Qualified
Stock Options                                                                                   19,000
Net Income                                                                    2,325,062      2,325,062
-----------------------------------------------------------------------------------------------------------
Balance May 31, 1996                             (192,337)   ($2,213,845)   ($4,097,835)   $12,060,954
Exercise of Stock Options                                                                       70,044
Purchase Treasury Stock                           (48,382)      (977,580)                     (977,580)
Tax Benefit from Exercise of Non-Qualified
Stock Options                                                                                   23,000
Net Income                                                                    2,881,295      2,881,295
-----------------------------------------------------------------------------------------------------------
Balance May 31, 1997                             (240,719)   ($3,191,425)   ($1,216,540)   $14,057,713
                                                  -------     ----------     ----------    -----------
                                                  -------     ----------     ----------    -----------

</TABLE>
 
See notes to financial statements.


                                          26
<PAGE>

                     ALCIDE CORPORATION STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
 
                                                                 1995           1996           1997
                                                                 ----           ----           ----

<S>                                                        <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                               $1,663,213     $2,325,062     $2,881,295
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation and amortization                              30,390         49,454         57,022
    Common Stock issued to directors, consultant and
         the employee stock ownership plan                        ---         62,003         52,000
    Loss on sales of equipment                                  5,265            ---            ---
    Deferred income tax                                       822,940      1,103,218      1,330,962


    Decrease (increase) in assets:
         Inventory                                           (281,984)      (366,303)      (187,127)
         Accounts receivable - trade                       (1,588,883)        (1,522)        86,446
         Prepaid expenses and other current assets             34,042         55,163       (137,424)
         Other assets                                           5,456         10,273        (53,058)
    Increase (decrease) in liabilities:
         Accounts payable                                     147,586         (4,758)       (44,632)
         Accrued expenses and taxes payable                   196,886        276,623       (590,794)
                                                           ----------     ----------     ----------

  Net cash provided by operating activities                 1,034,911      3,509,213      3,394,690
                                                           ----------     ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of investments                               (1,993,958)    (1,048,745)    (2,104,266)
  Redemption of investments                                 1,000,000      1,000,000      1,050,000
  Acquisition of equipment                                   (212,265)       (44,422)        (7,354)
                                                           ----------     ----------     ----------

  Net cash provided by (used in) investing activities      (1,206,223)       (93,167)    (1,061,620)
                                                           ----------     ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Purchase of Alcide Common and redemption of Class B
  Preferred Stock                                            (444,463)      (846,358)    (1,045,855)
  Stock Options exercised                                         ---         26,050         70,044
                                                           ----------     ----------     ----------
Net cash (used in) financing activities                      (444,463)      (820,308)      (975,811)
                                                           ----------     ----------     ----------

Net increase (decrease) in cash and cash equivalents         (615,775)     2,595,738      1,357,259
Cash and cash equivalents at beginning of year              3,385,932      2,770,157      5,365,895
                                                           ----------     ----------     ----------

Cash and cash equivalents at end of year                   $2,770,157     $5,365,895     $6,723,154
                                                           ----------     ----------     ----------
                                                           ----------     ----------     ----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest                          ---            ---            ---
  Cash paid during the year for income taxes                  $29,000        $87,000        $41,000

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Accretion of Series 1 redemption value                        $167             ---            ---

</TABLE>
 

See notes to financial statements.


                                          27
<PAGE>

                                  ALCIDE CORPORATION
                            NOTES TO FINANCIAL STATEMENTS
1.  GENERAL:

    Alcide Corporation (the "Company") 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.

    All of the products presently sold by the Company are surface area
    disinfectants; therefore, financial information by business segment is not
    provided.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    a.  Revenue Recognition:  Sales to Novus International, Inc. are recorded
    at the greater of minimum payments set forth in the contract or actual
    products shipped.  All other sales are recorded at the time of shipment to
    end users or to distributors who take title to products at the time of
    shipment.  One distributor accounted for $6,584,970 or 72% of net sales and
    $7,905,048 or 71% of net sales and $6,891,749 or 59% in the years ended May
    31, 1995, May 31, 1996 and May 31, 1997, respectively.  Accounts receivable
    due from this customer were $1,879,670 at May 31, 1996 and $1,646,162 at
    May  31, 1997.  Export sales were $2,784,474 or 30% of net sales in 1995
    and $3,282,180 or 29% of net sales in 1996 and $3,617,382 or 31% of net
    sales in 1997.  All such direct export sales transactions occurred in the
    United States for ultimate distribution predominantly in Europe.

    The Company provides a limited warranty to distributors of its products
    which limits the Company's obligation to replacement of defective product.
    Such returns for replacements have for the past several years been less
    than .1% of net sales.

    b.  Cash and cash equivalents consist of short-term interest-bearing
    instruments, primarily money market accounts with maturities of three
    months or less.  These investments are carried at cost which approximates
    market.

    c.  Royalties:  Provisions in royalty agreements provide for the payment of
    8% of net cash sales of applicable products.

    d.  Litigation Expense:  The expected costs to defend the Company in law
    suits filed against it are recorded in the period in which the Company
    becomes aware of the action.

    e.  Depreciation and Amortization:  Office, laboratory and manufacturing
    equipment is being depreciated over the five-year estimated useful life of
    the assets by the straight-line method.

    Leasehold improvements are being amortized over the lives of leases by the
    straight-line method.

    f.  Income Taxes:  The Company accounts for income taxes using the
    liability method.  Under this method, the Company computes deferred income
    taxes based on the difference between the financial statement and tax basis
    of assets and liabilities using enacted tax rates in effect in the years in
    which the differences are expected to reverse.



                                          28
<PAGE>

    g.  Use of Estimates:  The preparation of financial statements in
    conformity with generally accepted accounting principles requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities, the disclosure of contingent assets and
    liabilities at the date of the financial statements and the reported
    amounts of revenues and expenses during the reporting period.  Actual
    results could differ from those estimates.

    h.  Earnings per Share:  Earnings per share for the 1995, 1996 and 1997
    fiscal years were based upon the weighted average number of shares
    outstanding during each of the periods, plus the effect of Common Stock
    equivalents from stock options.

3.  INVESTMENTS:

    The Company adopted Statement of Financial Accounting Standards No. 115
    ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
    Securities," effective June 1, 1994.  Under SFAS 115, debt securities that
    the Company has both the intent and ability to hold to maturity are
    classified as "held-to-maturity" and are carried at amortized cost.
    Information regarding securities held at May 31, 1997, is as follows:

        INVESTMENT CLASSIFICATION       AMORTIZED COST          FAIR VALUE
        -------------------------       --------------          ----------

            Held-to-maturity:
                 Current                    $2,086,900          $2,098,013
                Long Term                    1,100,620           1,102,750
                                            ----------          ----------
                                            $3,187,520          $3,200,763
                                            ----------          ----------
                                            ----------          ----------

        INVESTMENT CLASSIFICATION     GROSS UNREALIZED            MATURITY
        -------------------------     ----------------            --------

                                  Gains            Losses

           Held-to-maturity    $ 13,243            $  -0-        1-2 years

    Investments consist entirely of debt obligations of the United States.

4.  INVENTORY:

    Inventory is recorded at the lower of cost or market on a first-in,
    first-out basis, as follows:


                                     May 31, 1996        May 31, 1997
                                     ------------        ------------

         Raw Materials                   $808,345            $973,907
         Finished Products               $120,155            $141,720
         Total                           $928,500          $1,115,627
                                         --------          ----------
                                         --------          ----------


                                          29
<PAGE>

5.  ACCRUED EXPENSES:

    At May 31, accrued expenses were comprised of the following:

                                                          1996           1997
                                                          ----           ----

    Accrued royalties                                  $87,670       $108,549
    Accrued employee salaries, incentive
    and benefits                                       296,170        267,228
    Reserve for defending against potential
    royalty claim                                      659,000         87,000
    Other accrued expenses                              41,000         30,269
                                                     ---------      ---------
                                                    $1,083,840       $493,046
                                                     ---------      ---------
                                                     ---------      ---------

6.  COMMITMENTS AND CONTINGENCIES:

    a.  Leases:

    Effective July, 1994, the Company occupied office and laboratory space in
    Redmond, Washington under a five-year noncancellable lease expiring May 31,
    1999.  Insurance, utilities and maintenance expenses are borne by the
    Company.

    There are no contingent rentals or sublease rentals.

    The annual lease commitments for the Redmond, Washington facility are
    $62,256 in fiscal year 1998 and fiscal year 1999.

    b.  Employment Agreements:

    Two officers have employment agreements, which combined obligate the
    Company to salaries of $330,000 per year.  Bonus compensation of 100% of
    base pay can be earned.

    c.  Royalty Agreement:

    The Company has an ongoing obligation pursuant to certain royalty and
    consolidation agreements to pay patent holders a royalty of 50% of license
    revenues and 8% of net cash sales of its covered products subject to such
    agreements.

    On February 20, 1996, the Company was named as a defendant in a lawsuit
    filed in United States District Court for the Southern District of New York
    by some of the individuals who have rights to receive royalties with
    respect to certain patents assigned to the Company.  The complaint alleges
    that the Company has not paid the required amount of royalties due the
    plaintiffs pursuant to Royalty and Consolidation Agreements.  The complaint
    seeks damages for unpaid royalties and unjust enrichment, injunctions and
    other relief.

    The Company has denied any wrongdoing in connection with the matters that
    have been alleged and intends to defend the lawsuit vigorously.  The
    Company has included in royalty expense in the accompanying income
    statement $292,800 in FY 1995, $514,977 in FY 1996, and $85,497 in FY 1997,
    to establish a reserve for the purpose of defending its position in this
    legal dispute.  During fiscal 1997, the Company incurred legal fees of
    $657,497 related to extensive discovery and legal research in connection
    with the dispute and to defend its position in this lawsuit.  Such costs
    were charged against a reserve established in prior periods.  It is



                                          30
<PAGE>

    believed that the Company has completed substantially all discovery work in
    connection with the dispute (see Note 5).

    Royalty payments earned by patent holders for the fiscal years ended May
    31, 1995, 1996, and 1997 were $369,208, $305,167 and $352,380 respectively.

    d.  Distribution Agreements:

    The Company has entered into agreements with each of its distributors of
    products sold to the dairy industry.  Such agreements describe the
    territories covered, product pricing, and expected product purchases during
    the term of the agreement.  Each such agreement has been filed with the SEC
    and is incorporated herein by reference.

    The Company has entered into an agreement with Novus International, Inc.
    for Sanova-TM-, its poultry processing antimicrobial.  The agreement grants
    worldwide rights to Novus for antimicrobials sold to the poultry processing
    industry and also grants negotiating rights to Novus for other food
    processing industries.

7.  INCOME TAXES:

    A summary of the provision for income taxes follows:

                                FY 1995        FY 1996        FY 1997
                                -------        -------        -------

         Current
            Federal             $51,998        $97,589        $93,166
            State and local       1,068            ---            ---
                               --------     ----------     ----------
                                $53,066        $97,589        $93,166

         Deferred
            Federal            $827,282     $1,103,218     $1,330,532
                               --------     ----------     ----------
                               $880,348     $1,200,807     $1,423,698
                               --------     ----------     ----------
                               --------     ----------     ----------

    A reconciliation between the statutory federal income tax rate and the
    effective income tax rate is as follows:

                                                  FY 1995   FY 1996   FY 1997
                                                  -------   -------   -------

         Statutory federal income tax rate          34.0%     34.0%     34.0%
         Other                                       0.6%      0.1%     (0.9%)
                                                    -----     -----     -----
         Effective income tax rate                  34.6%     34.1%     33.1%
                                                    -----     -----     -----
                                                    -----     -----     -----

    At May 31, 1996 and May 31, 1997, the deferred tax assets were comprised of
    the following:

                                                       1996           1997
                                                       ----           ----

         Operating loss carry forward            $1,883,353       $632,897
         Temporary Differences                      239,807          1,188
         Credits carry forward                      110,509        194,837
         Alt. Minimum tax carry forward             187,522        261,307
                                                 ----------     ----------
         Total deferred tax asset                $2,421,191     $1,090,229
                                                 ----------     ----------
                                                 ----------     ----------

    The temporary differences result primarily from reserves recorded in the
    financial statements which will be deductible for tax reporting when paid. 
    The Company had available carry forward


                                          31
<PAGE>

    losses aggregating $1,861,462 at May 31, 1997 and which expire during the
    years 2000 to 2008.  The Company anticipates that the carry forward losses
    will be utilized in FY 1998.

8.  SHAREHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK:

    a.  Authorized Capital

    The authorized capital of the Company is 100,000,000 shares of $.01 par
    value Common Stock, 1,000 shares of no par value Class A Preferred Stock
    and 10,000,000 shares of $.01 par value Class B Preferred Stock.

    The Company has not declared dividends on any of its classes of stock.

    b.  Class A Preferred Stock

    The nonvoting Class A Preferred Stock has preference in liquidation for
    $135,307, its stated value.  Holders have the right to receive an annual
    noncumulative dividend of 6% of the stated value amount, if a dividend is
    declared and paid on Common Stock.  The stock is redeemable at any time by
    the Company.

    c.  Redeemable Class B Preferred Stock - Series 1 and 2.

    On September 30, 1994, the Company issued to holders of any outstanding
    Series 1 Stock, in a recapitalization, one share of Class B Stock to be
    designated as Series 2 Redeemable Preferred Stock ("Series 2 Stock") and
    0.2 share of Common Stock.  Commencing on September 30, 1994, the Company
    created a sinking fund to be funded, on that day and on the 30th day of
    September of each year thereafter, at a rate equal to 0.7% of the Company's
    prior fiscal year's net income, if any, at $2.625 per share plus declared
    and unpaid dividends in any amount equal to the sinking fund payment.  The
    Company was required to redeem 6,200 shares of Series 2 Stock on September
    30, 1996, for $16,275.  Based on fiscal 1997 net income, the Company will
    redeem 7,683 shares of Series 2 stock for $20,169 on September 30, 1997.
    The Company may redeem any or all of the issued and outstanding Series 2
    Stock at its option, at any time, at the redemption price of $2.625 per
    share.

9.  STOCK OPTIONS:

    The Company had an Incentive Stock Option Plan, which expired in May 1993,
    and a nonstatutory stock option plan under which options may be granted to
    employees, directors, officers and consultants.  A new stock option plan
    was approved by the shareholders at the Company's December 7, 1993 Annual
    Meeting.  The option exercise price for incentive stock options may not be
    less than the fair market value of the Common Stock on the date of the
    grant of the option.  Non-qualified stock options are granted with an
    exercise price equal to 100% or greater of the fair market value of the
    Common Stock on the date of grant.

    The Stock Option Plan for Nonemployee Directors was approved by the
    shareholders at the Company's October 15, 1996 annual meeting.  Options
    granted under the Plan are granted with an exercise price equal to 100% of
    the fair market value of the Common Stock on the date of grant.

    Options are exercisable within 10 years from the date the option was
    granted.  Options outstanding were granted at the market price or higher on
    the date of grant and will expire during the period July 2000 through June
    2007.  The Company accounts for its stock option plans under the guidelines
    of Accounting Principles Board Opinion No. 25 ("APB 25"), under


                                          32
<PAGE>

    which no compensation cost has been recognized.  In 1996, the Company
    adopted Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
    "Accounting for Stock-Based Compensation," effective for years beginning
    after May 31, 1996.  The Company has continued to measure compensation cost
    for employee stock compensation plans under the guidelines of APB 25, as
    allowed by SFAS 123.

    The status of the plan is as follows:

<TABLE>
<CAPTION>
 
                                               FY 1995                     FY 1996                        FY 1997
                                               -------                     -------                        -------

                                         No. of  Weighted Avg.      No. of   Weighted Avg         No. of   Weighted Avg
                                         ------  -------------      ------   ------------         ------   ------------
                                         Shares        Share $      Shares        Share $         Shares        Share $
                                         ------        -------      ------        -------         ------        -------

<S>                                     <C>      <C>               <C>       <C>                 <C>       <C>
    Outstanding at beginning of year    281,210          $7.66     302,756          $7.55        335,556          $8.90
    Granted                              30,000           8.63      39,750          20.58         17,602          22.01
    Exercised                            (1,000)          5.00      (3,700)          7.04         (7,870)          8.90
    Canceled                             (7,454)         16.39      (3,250)         28.35         (3,000)         42.03
                                        -------          -----     -------          -----        -------          -----
    Outstanding at end of year          302,756          $7.55     335,556          $8.90        342,288          $9.28
                                        -------          -----     -------          -----        -------          -----
                                        -------          -----     -------          -----        -------          -----

    Exercisable at end of year          254,925          $7.47     275,225          $7.31        286,338          $7.44
                                        -------          -----     -------          -----        -------          -----
                                        -------          -----     -------          -----        -------          -----

</TABLE>
 
    Information relating to stock options outstanding and stock options
    exercisable at May 31, 1997 is as follows:

<TABLE>
<CAPTION>
 
    Range of Exercise Prices                  Options Outstanding                              Options Exercisable
    ------------------------     ------------------------------------------                ----------------------------

                        No. of Shares  Weighted Avg. Life   Weighted Avg. $/Sh.       No. of Shares      Wtd. Avg.$/Sh.
                        -------------  ------------------   -------------------       -------------      --------------

<S>                     <C>            <C>                  <C>                       <C>                <C>
    $4.10 - $7.75             211,469                3.93                 $6.08             209,269               $6.07
    $8.63 - $11.63             76,787                6.16                  9.79              65,787                9.49
    $19.75 - $25.00            54,032                8.55                 21.09              11,282               20.96
                              -------                ----                 -----             -------               -----
                              342,288                5.16                 $9.28             286,338               $7.44
                              -------                ----                 -----             -------               -----
                              -------                ----                 -----             -------               -----


</TABLE>
 
    Had compensation cost for these stock option plans been determined in
    accordance with SFAS 123, the Company's "Net income" and "Net income per
    common share" would have decreased to the following pro forma amounts for
    the years ended May 31, 1996 and 1997:

                                                       FY 1996        FY 1997
                                                       -------        -------

       Net Income                      As reported  $2,325,062     $2,881,295
                                       Pro forma    $2,254,515     $2,780,416
       Net Income per common share     As reported        $.82          $1.04
                                       Pro forma          $.80          $1.00


    Because the SFAS 123 method of accounting has not been applied to stock
    options granted before January 1, 1995, the resulting pro forma
    compensation cost may not be representative of that to be expected in
    future years.


                                          33
<PAGE>

    The fair value of each stock option granted is valued on the date of grant
    using the Black-Scholes option pricing model.  The weighted average
    grant-date fair value of stock options granted during 1997 was $14.05 per
    share using the assumptions of expected volatility of 51%, expected option
    lives of 7.5 years and a risk-free rate of interest of 6.7%.  During 1996,
    the weighted average grant-date fair value of stock options granted was
    $12.86 per share using the assumptions of expected volatility of 51%,
    expected option lives of 7.5 years and a risk-free rate of interest of
    6.0%.

10. RELATED PARTY TRANSACTIONS:

    a.  Consulting Agreements

    Loeb Partners Corporation.  During the fiscal year ended May 31, 1997, the
    Company paid Loeb Partners Corporation $60,000 in cash for executive and
    management services provided by Mr. Kempner and Mr. Mintz.  Mr. Kempner
    holds approximately 51% of the voting equity of Loeb Holding Corporation,
    of which Loeb Partners Corporation is a 100% wholly-owned operating
    subsidiary.

    Kenneth N. May.  During the fiscal year ended May 31, 1997, the Company
    paid Dr. Kenneth N. May 516 shares of Alcide Common stock having an
    aggregate purchase price of $12,014 plus $24,000 cash for consulting
    services in the field of pathogen control on poultry and other food
    products.

    b.  Royalty and Consolidation Agreement

    The Company has an ongoing obligation pursuant to certain royalty and
    consolidation agreements to pay to patent holders, some of whom were
    founders of and early investors in the Company, a royalty of 50% of its
    license revenues and 8% of its net sales of its covered manufactured
    products subject to said agreements.  As the Company does not presently
    anticipate entering into sublicense agreements for products requiring
    royalty payment, its obligation to pay a royalty of 50% of its license
    revenues should have no material impact on the financial condition of the
    Company.  The Company does anticipate paying a royalty of 8% of the net
    sales of its products to the extent they are subject to royalty payments,
    which payments will increase the Company's costs by such amount.  Payments
    have aggregated $3,241,055 since 1983.  During fiscal years 1997 and 1996,
    the amounts indicated below were paid to the following individuals and
    entities, certain of whose principals were members of the Board:  Loeb
    Investors Co. V., $22,114 and $19,543; Loeb Investors Co. VIII, $873 and
    $772, respectively.

    Thomas L. Kempner is the managing partner of both Loeb Investors Co. V and
    Loeb Investors Co. VIII.

11. EMPLOYEE STOCK OWNERSHIP PLAN:

    The Company has an employee stock ownership plan (the Plan).  Employees who
    are at least age 21 and have completed one year of service are eligible to
    participate. The Company may make discretionary contributions to the Plan.
    The Company's contributions for fiscal years 1997, 1996 and 1995 were
    approximately $60,500, $62,000, and $38,000, respectively.


                                          34
<PAGE>

12. NEW ACCOUNTING PRONOUNCEMENTS


    In February, 1997, the Financial Accounting Standards Board Issued
    Statement of Financial Accounting Standards No. 128, Earnings Per Share
    (SFAS 128), which is effective for periods beginning after December 15,
    1997.  SFAS 128 establishes new standards for computing and presenting
    earnings per share (EPS).  Companies will now report basic EPS and diluted
    EPS compared to primary and fully diluted EPS, which were previously
    reported.  Under the new standard, the Company's basic EPS for the year
    ended May 31, 1997, would be $1.12, and the diluted EPS would be $1.04.


                                          35