<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, 1998
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, 1998 was approximately $75,879,648.  On that date,
there were 2,563,148 shares of common stock outstanding, net of Treasury Stock.

     Certain sections of Registrant's definitive Proxy Statement for its
1998 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 1998 Annual Meeting of Stockholders.

                                  Page 1 of 38 pages
                              Exhibit Index on Page 23 
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                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                           Page
<S>                 <C>       <C>                                          <C>
 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                      10
                              H. Employees                                  11
                              I. Advertising and Promotion                  11
                              J. Manufacturing                              11
                              K. Subsequent Event                           12

                    Item 2.   Properties                                    12

                    Item 3.   Legal Proceeding                              12

                    Item 4.   Submission of Matters to a Vote of
                              Security Holders                              12
 PART II
                    Item 5.   Market for the Registrant's Common
                              Stock and Related Stockholder     
                              Matters                                       13
                                                                             
                    Item 6.   Selected Financial Data                       14

                    Item 7.   Management's Discussion and
                              Analysis of Financial Condition and           
                              Results of Operations                         15

                    Item 8.   Financial Statements and
                              Supplementary Data                            18

                    Item 9.   Changes in and Disagreements with
                              Accountants on Accounting and
                              Financial Disclosures                         18
 PART III
                    Item 10.  Directors and Executive Officers              19
                    
                    Item 11.  Executive Compensation                        21

                    Item 12.  Security Ownership of Certain
                              Beneficial Owners and Management              21

                    Item 13.  Certain Relationships and Related
                              Transactions                                  21
 PART IV
                    Item 14.  Exhibits, Financial Statement
                              Schedules and Reports on Form 8-K             21
</TABLE>


                                          2
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                                        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, and Sanova food 
antimicrobial.

     Total product sales for the fiscal year ended May 31, 1998 were
$12,998,952.  Export sales to international distributors, plus product exported
by ABS Global, Inc. accounted for $4,758,346, 37% of total sales.

     1.   DAIRY INDUSTRY

     Worldwide sales of dairy line products during fiscal year 1998 were
$10,114,845 as compared with $10,365,001 in FY 1997.  In FY 1998 sales to the
dairy industry accounted for 78% 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>

     U.S. DAIRY INDUSTRY

     In the United States, sales to the dairy industry are through two
distributors, ABS Global, Inc. and IBA, Inc.  In fiscal 1998, dairy industry
sales in the United States were $5,356,499, 53% of total Alcide sales to the
dairy industry.

     INTERNATIONAL DAIRY INDUSTRY

     Alcide products are sold to the dairy industry in Canada, Latin
America and Europe through a network of five distributors.  Sales to the
international dairy industry were $4,758,346 in fiscal 1998, 47% of total sales
to the dairy industry.

     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 1998 sales of hard surface sterilants and disinfectants
were $390,178, or 3% of total sales, as compared with $364,869 in fiscal year
1997.

     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.  Sales to Novus for fiscal year 1998 were $2,445,106 or 19% 
of total sales.

     4.   AUTOMOTIVE INDUSTRY

     Fiscal year 1998 sales of RenNew-A/C Air Conditioning System Disinfectant 
were $48,823 as compared with $37,638 in fiscal year 1997.  All RenNew-A/C Air 
Conditioning System Disinfectant sales in both fiscal year 1998 and fiscal 
year 1997 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. 

     Alcide had $2,062,834 of firm orders for future delivery at May 31, 1998, 
as compared to orders for future delivery at May 31, 1997 of $2,014,234. The 
Company's distributors typically place orders one to four months in advance.

     6.   DISTRIBUTION ARRANGEMENTS

     All Alcide sales to the dairy industry and to the poultry processing 
industry are to distributors who have contracted with the Company to provide 
sales and marketing services to distribute the Company's products.  In each 
case the distributor purchases product from Alcide for resale to the 

                                      4
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end user. Loss of any of the Company's distributors can have a material impact 
on the Company's sales and earnings.

     The Company's distribution contracts with ABS Global, Inc. for the U.S. 
market and for several international markets will expire on October 31, 1998.  
Discussions are presently underway between Alcide and ABS Global regarding a 
new multi-year nonexclusive distribution arrangement for the markets served by 
ABS.

     The Company's distribution contract with OHF Sante Animale, subsequently 
assigned to Rhone Merieux and Merial for distribution of Alcide's dairy 
industry products in France, expired on May 31, 1998.  A new, multi-year, 
nonexclusive agreement has been negotiated and is pending Merial approval.

C.   RESEARCH AND PRODUCT DEVELOPMENT

     During fiscal year 1998 the Company's efforts continued to focus on the 
development of 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 the new food antimicrobial 
business area may be funded jointly by the company and its distributors.  
Other development 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 1998 are 
described below:

     1.   PREOPERATIVE SKIN ANTISEPTIC

     During fiscal 1998, delays were experienced in the finalization of the 
Company's New Drug Application (NDA) arising from the process of identifying 
and certifying a Good Manufacturing Practices (GMP) compliant supplier of the 
active material.   This process was finalized during the fourth quarter of 
fiscal 1998 and a final NDA update to the Food and Drug Administration (FDA) 
relating to the chemical and pharmaceutical issues is now expected to be made 
during the first half of fiscal 1999.  This submission will complete the 
requirements for the NDA.

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

                                      5
<PAGE>

expanded use will be submitted to FDA and this is now targeted for late in 
fiscal 1999 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.   UDDER CARE BUSINESS

     The process of product registration in foreign markets continued during 
fiscal 1998.  In addition, significant new formulation developments for 
potential new market sectors and for patent extension were also completed. 
Several new products have been successfully formulated.  These have undergone 
"proof of principle" testing during fiscal 1998 and will continue to undergo 
field efficacy and toleration testing prior to market introduction during 
fiscal 1999.

     3.   ANTI-INFECTIVE ORAL RINSE

     While it was the Company's intention to proceed into the broader human 
clinical phase of evaluations for efficacy of the mouth rinse product versus 
gingivitis within the United States during fiscal 1998, discussions and 
investigations with potential licensees led instead to the conduct of an 
alternative  series of tests on oral cavity changes following treatment.  
These were completed during the last quarter.  A broader series of human 
clinical tests is now planned to begin during the first half of fiscal 1999.

     4.   FOOD DISINFECTION

     During fiscal 1998, the Company received final USDA approval to commence 
the commercial plant installation and operation of a purpose designed system 
for the application of acidified sodium chlorite to poultry carcasses. The 
process, known as the Sanova Food Quality System (SFQ), is intended to 
eliminate or substantially reduce food borne microorganisms of potential harm 
to humans on poultry carcasses during the slaughter process.  The Company 
successfully introduced the system in the United States during 1998 and will 
continue to broaden the business base through further installations during 
fiscal 1999.  In addition, the registration process for the SFQ system has 
been expanded outside of the USA to include preparation of the support 
documentation that is necessary for approvals for use in Europe, Canada and 
South America.

     During January, 1998, the FDA issued a notice of approval permitting the 
use of the Sanova system on red meats (beef, pork and sheep).  A protocol 
proposing the commercial plant testing of the Sanova system to establish 
performance to USDA satisfaction was also submitted and approved during 1998. 
As a result, the first commercial plant installation for a beef plant is now 
scheduled to commence testing during the second quarter of fiscal 1999.

     The evaluation of the use of acidified sodium chlorite solutions for 
microbial reductions on fresh fruits and vegetables was successfully completed 
during fiscal 1998.  At present the U.S. Environmental Protection Agency (EPA) 
regulates this field.  The Company expects to submit an approval request 
during the first fiscal quarter.

     Evaluations into the potential for expansion into the fish (shrimp and 
shellfish) areas continued during fiscal 1998.

                                      6
<PAGE>

     5.   INTRAMAMMARY INFUSION

     The objective of this program is to provide safe and effective treatment 
and control of bovine clinical and/or subclinical mastitis in lactating dairy 
cattle with no milk-withholding requirements which would provide the Alcide 
product with distinct market advantages as compared to antibiotics, which 
require milk withdrawal during treatment and several days thereafter. 
Evaluations completed during fiscal 1998 finalized the formulation development 
effort and confirmed the creation of a well tolerated product for therapeutic 
treatment schedules.  The fiscal 1999 program will evaluate residue profiles 
and dose rate/treatment regimes.  On the successful completion of these 
programs it is anticipated that a Investigational New Animal Drug (INAD) 
submission will be made to the FDA.

     On an ongoing basis the Company continues to examine the potential for 
new, more effective formulations to protect and possibly enhance its market 
position in the surface area sterilant/disinfectant field, in the disinfection 
of foods and in the bovine mastitis treatment/prevention field.

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, enforceability 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 sixteen 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"

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     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"

     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"

     14)  U.S. Patent No. 5,651,977
          "Adherent Disinfecting Compositions and Methods Related Thereto"

     15)  U.S. Patent No. 5,667,817
          "Method and Composition for the Prevention and Treatment of
          Female Lower Genital Tract Microbial Infections"

     16)  "U.S. Patent No. 5,772,985
          "Composition and Methods for Treatment of Skin Lesions"

     Two new U.S. patent applications were filed during fiscal year 1998. Four 
additional U.S. patent applications are pending, as well as two reissue 
applications corresponding to patents 7) and 8) above.  Numerous corresponding 
foreign applications are issued or 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.

     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 

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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.

     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
DIPPINguld-Registered Trademark- has been determined to be more appropriate than
DIPPINgold-Registered Trademark- in certain foreign countries.  Therefore, the
spelling variant DIPPINguld-Registered Trademark- has been registered in
Denmark, Norway, Finland and Sweden.

     The Company markets its antimicrobial to the poultry processing
industry through Novus International, Inc. under the mark Sanova-TM-, which has
been registered to Novus.  Under the terms of the agreement with Novus the
Sanova mark is being transferred and will be owned by Alcide Corporation.  This
mark will cover antimicrobial applications in other food processing applications
once such applications are approved by the appropriate regulatory authority.

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 acidified 
sodium chlorite chemistry represents a novel chemical class.  It, accordingly, 
necessitates obtaining regulatory approval or registration in most countries 
in which it is 

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commercialized.  The Company sells its teat dips in each country via either an 
animal health or an artificial insemination company.

     The market for disinfection of poultry and other food products is
dynamic and rapidly emerging as a result of consumer concern and U.S. Government
regulatory activity.  A number of technologies are directed at reduction of food
borne pathogens.  Of these, trisodium phosphate is used in a manner similar to
the Company's product, Sanova.  Chlorine dioxide and ozone have been tested in
poultry chiller waters but have not been broadly accepted by the industry. 
Irradiation technology has been approved by USDA and FDA but is not broadly used
by the poultry industry and, in the limited cases where irradiation is used, the
process involves a secondary treatment outside the poultry processing plant. 
Market conditions within the food processing industry are such that additional
competition is likely.

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,
Chile, Argentina 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
filed an appeal to the German court but this has also been rejected.  A new
registration application is being prepared for filing.  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, Chile, Argentina, 
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.   FOOD PROCESSING ANTIMICROBIALS:

          a.   Poultry

          The Company's Food Additive Petition was approved by FDA in April, 
1996 and by USDA in January, 1998.  The product is now actively marketed and 
is being utilized by a number of major poultry processing companies.

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          b.   Red Meats

          The Company's Food Additive Petition was approved by FDA in March, 
1998.  Alcide plans to begin conducting a commercial plant test under 
supervision of the USDA in late 1998, as a necessary step in obtaining the 
agency's required approval.

          c.   Fruits and Vegetables

          Alcide has conducted tests that it believes necessary to obtain
regulatory approval to market its product as an antimicrobial intervention for
fruits and vegetables.  The Company plans to submit its application to the EPA
in September, 1998.

     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.

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.

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K.   SUBSEQUENT EVENT

     On August 3, 1998, the Company agreed with Novus International, Inc. to 
open discussions regarding renegotiation of the agreement between Alcide and 
Novus dated May 21, 1997, for distribution of the Company's products to the 
poultry industry.  The terms and conditions that govern the relationship 
between Novus and Alcide during the renegotiation period, which ends October 
31, 1998, were filed on Form 8-K on August 11, 1998.

ITEM 2.   PROPERTIES

     The five-year lease for the Company's Redmond facility provides for a
monthly rent of $5,188  through May, 1999.  Management believes the space will
adequately support the Company's office and laboratory needs for at least the
next year.

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.

     On November 17, 1997, the Company moved for leave to file an amended 
answer, including a counter claim, against certain plaintiffs.  The proposed 
amended answer alleges that plaintiffs are precluded from obtaining the relief 
sought in their complaint because, if the agreements at issue were found to 
support such relief, they would constitute an unfair transaction from the 
Company's point of view and a breach of fiduciary responsibility by the 
plaintiffs who were officers and directors of the Company at the time of those 
agreements and who were self interested in approving the agreements on the 
Company's behalf.  Further, if the Company is held liable in whole or part for 
any of the obligations asserted by the plaintiffs, the Company is entitled to 
recover all such obligations from the plaintiffs.  The motion has been fully 
briefed but the court has not yet issued a decision or scheduled oral argument.

     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.

                                      12
<PAGE>

                                      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 
qfor the fiscal quarters indicated, as reported by NASDAQ.

<TABLE>
<CAPTION>
                                                   HIGH           LOW
                                                 -------         ------
     <S>                                         <C>             <C>
     COMMON STOCK

     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

     YEAR ENDED MAY 31, 1998
     First Quarter                               56 1/2          31 1/2
     Second Quarter                              67 1/8          49 7/8
     Third Quarter                               64              48
     Fourth Quarter                              60              38 1/4
</TABLE>

     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, 1998, there were approximately 1,731 Common stockholders of
     record.

                                      13
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                             FISCAL YEARS ENDED
                                             ------------------
                    MAY 31, 1994  MAY 31, 1995  MAY 31, 1996  MAY 31, 1997  MAY 31, 1998
<S>                 <C>           <C>           <C>           <C>           <C>
Net sales            $7,645,350    $9,153,104    $11,145,826   $11,768,504   $12,998,952

Net income            1,066,124     1,663,213      2,325,062     2,881,295     3,222,723

Diluted earnings per
common share and
equivalents                 .40           .60            .82          1.04          1.16

Total assets         10,347,770    11,910,992     13,768,614    15,113,672    16,369,337

Long term debt              ---           ---            ---           ---           ---

Redeemable
Preferred Stock         272,736       261,022        249,380       233,105       212,936
</TABLE>


                       SELECTED QUARTERLY FINANCIAL DATA FOR THE
                       YEARS ENDED MAY 31, 1997 AND MAY 31, 1998

<TABLE>
<CAPTION>
                                                              Net Income
                  Net Sales    Gross Profit    Net Income     per Share
<S>              <C>           <C>             <C>            <C>
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
                 -----------    ----------      ----------
                 -----------    ----------      ----------

Year Ended
May 31, 1998
1st Quarter      $ 3,192,396    $2,089,395      $  723,050       $ .26
2nd Quarter        3,231,276     2,206,822         795,155         .28
3rd Quarter        3,189,789     2,149,403         891,025         .31
4th Quarter        3,385,491     2,234,090         813,493         .29
                 -----------    ----------      ----------
Total for Year   $12,998,952    $8,679,710      $3,222,723       $1.16
                 -----------    ----------      ----------
                 -----------    ----------      ----------
</TABLE>

                                       14
<PAGE>

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

RESULTS OF OPERATIONS

FISCAL YEAR 1998 AS COMPARED WITH 1997

     Fiscal year 1998 sales of $12,998,952 were 10% higher than fiscal year 1997
sales of $11,768,504.  The sales increase was caused primarily by the $2,445,106
sales of Sanova food antimicrobial to Novus International, Inc.  During fiscal
1997, sales to Novus were $1 million, representing an up-front, one time
purchase by Novus of Alcide's prototype application equipment and inventory at
the time that Novus entered into a distribution agreement with Alcide.

     Interest income for fiscal 1998 was $638,016, a 49% increase over fiscal
1997 interest income of $427,316.  The increase is due entirely to an increase
of funds available for investment.

     Cost of goods sold was $4,319,242 in fiscal year 1998, or 33% of net 
sales as compared to  $3,853,875 in fiscal year 1997, which was also 33% of 
net sales. During the fiscal year there were no material changes in the unit 
cost components of cost of goods, nor did Alcide change its selling prices 
during the year, and therefore, on balance, cost of goods as a percentage of 
sales remained essentially unchanged.

     ROYALTY OBLIGATIONS

     The Company has an 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 1998, 
net sales of $4,161,018 were covered by the royalty and consolidation 
agreements compared to $4,248,923 in fiscal 1997.

     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.

     RESEARCH AND DEVELOPMENT

     Research and Development expenses in fiscal year 1998 were $1,633,925 as 
compared to $1,546,285 in fiscal 1997.  The 6% increase over fiscal 1997 was 
caused primarily by inflationary increases for salaries and laboratory 
supplies and by the testing required to support USDA approval of Sanova for 
poultry processing plants.

                                     15
<PAGE>

     SELLING AND ADMINISTRATIVE EXPENSE

     Other selling, general and administrative expenses were $2,148,949 in 
fiscal 1998, a 6% increase over fiscal 1997 expenses of $2,026,284.  The 
difference was primarily due to an increase in marketing and promotion expense 
and an increase in legal fees due to product litigation, offset by a $185,415 
reduction in executive bonus expense.

     INCOME TAX

     The Company's Statements of Operations for fiscal 1998 includes a 
provision for income taxes of $1,848,358 which is a tax rate of 36.4% of 
income before provision for income taxes.  The provision for income taxes in 
fiscal 1997 was $1,423,698, or a tax rate of 33.1%.  The difference in tax 
rates is due primarily to a 2.4% provision for state taxes in fiscal 1998, 
while no such provision was made in fiscal 1997.

     NET INCOME

     Net income for fiscal 1998 was $3,222,723, an increase of $341,428 or 12% 
over the previous fiscal year.  The increase was achieved as a result of the 
net sales increase and interest income increases noted above, offset by an 
increase in operating expenses and the income tax provision.

     LIQUIDITY

     The Company's cash, cash equivalents and investments in U.S. Government 
securities totaled $12,131,229 at May 31, 1998, a $2,220,555 increase over the 
previous fiscal year end.  The increase was generated from operations 
primarily offset by a $2,934,369 repurchase of Alcide Common Stock.

     The Company anticipates that income during fiscal 1999 will be adequate 
to sustain the Company and that its cash resources will enable it to meet its 
operating requirements and support its capital needs 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 on 30-day terms.  Sales 
to international distributors are on 60-day terms.  During the past three 
fiscal years Alcide offered extended terms up to 120 days to ABS Global, Inc., 
its largest distributor, in exchange for a finance charge equal to 2% of 
invoice amounts.  In February, 1998, ABS resumed normal 30-day payment terms 
to Alcide. This had the effect of reducing accounts receivable from ABS by 
$1,308,876 at May 31, 1998 as compared with May 31, 1997.

     LEASES AND CAPITAL EXPENDITURES

     The Company's office and laboratory space is leased under operating 
leases from unaffiliated lessors.  During fiscal 1998 the Company spent 
$25,158 on the purchase of fixed assets.  Planned capital expenditures for 
laboratory and office equipment for fiscal year 1999 are expected to be less 
than $100,000. In addition, the Company may elect to invest capital to supply 
Sanova Food Quality 

                                     16
<PAGE>

Systems to poultry processing plants to expand the sale of the Company's 
Sanova antimicrobial compound.  Investments in Sanova equipment are estimated 
to be $300,000 to $500,000 per processing plant and as many as 20 plants may 
be started in fiscal 1999.  If such capital investments were made in Sanova 
Food Quality Systems, the Company would expect to offset a portion of the 
capital investment cost with increased sales revenue.

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 investable 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 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.

     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%.

                                     17
<PAGE>

     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.

     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.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to pages 14 and 25 through 36 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 
1998, 1997 and 1996.  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.

                                     18
<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, 1998 is listed in the following table:

<TABLE>
<CAPTION>
                         POSITIONS WITH THE COMPANY AND      DIRECTOR OR
                         PRINCIPAL OCCUPATION OR EMPLOYMENT  EXECUTIVE OFFICER
NAME               AGE   DURING THE PAST FIVE YEARS          SINCE
<S>                <C>   <C>                                 <C>
Thomas L. Kempner  71    Director and Chairman of the Board         1983
                         of the Company; Chairman 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.
                         (Emeritus); and CCC Information
                         Services Group, Inc.

Kenneth N. May     67    Director of the Company; Retired           1995
                         in August, 1989 as 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.  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.

                                     19
<PAGE>

Joseph A. Sasenick 58    Director of the Company; President         1991
                         and Chief Executive Officer of the
                         Company since February 1992;
                         President and Chief Operating
                         Officer of the Company from
                         February 1991 to February 1992. 
                         Presently serves on the Executive
                         Committee and Board of Directors
                         of the Washington Biotechnology
                         and Biomedical Association and
                         Board of Directors of the
                         Technology Alliance, a special
                         program of the Greater Seattle
                         Chamber of Commerce.  Previously
                         held senior management positions
                         at Abbott Laboratories and The
                         Gillette Company.

William G. Spears  60    Director of the Company; Chairman          1989
                         and CEO of Key Asset Management,
                         the investment advisory subsidiary
                         of KeyCorp. since 1996.  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.

John P. Richards   56    Executive Vice President, Chief            1991
                         Financial Officer of the 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.

G. Kere Kemp       48    Executive Vice President, Chief            1992
                         Scientific Officer of the Company. 
                         Previously held clinical research
                         positions with Pfizer, Inc.  His
                         fifteen year term at Pfizer
                         included assignments in New
                         Zealand, the United Kingdom and
                         New York, from 1976 to 1991.
</TABLE>

                                       20
<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 1998 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 1998 
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 1998 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, 1997 and May 31, 1998.
                    Statements of Operations for each of the years ended
                    May 31, 1996, May 31, 1997 and May 31, 1998.
                    Statements of Changes in Shareholders' Equity for each
                    of the years ended May 31, 1996, May 31, 1997 and May
                    31, 1998.
                    Statements of Cash Flows for each of the years ended
                    May 31, 1996, May 31, 1997 and May 31, 1998.

               2.   FINANCIAL STATEMENT SCHEDULE

                    Notes to Financial Statements.
                    Selected Quarterly Financial Data for the Years Ended
                    May 31, 1997 and May 31, 1998, on Page 14.

               3.   EXHIBITS

                    See Index to Exhibits on Page 23.

          (b)  Reports on Form 8-K.
 
               None

                                       21
<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, 1998

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, 1998
-------------------------------
Thomas L. Kempner


/s/Kenneth N. May                       Director                 July 15, 1998
-------------------------------
Kenneth N. May


/s/Joseph A. Sasenick                   Director, President,     July 15, 1998
-------------------------------         Chief Executive Officer
Joseph A. Sasenick


/s/William G. Spears                    Director                 July 15, 1998
-------------------------------
William G. Spears

                                     22
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT NO.
-----------
<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).

10.16     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).

10.19     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
          of the Registrant on May 30, 1997, and incorporated herein by
          reference).

10.24     Distributor Agreement by and between the Company and Ingenieursbureau
          lr. P.C. Heemskerk b.v., dated June 1,1997, covering territories of
          The Netherlands, Denmark, Belgium, Germany, Luxembourg, Sweden and
          Finland (previously filed as an exhibit to Form 10-Q of the Registrant
          for the quarter ended February 28, 1998, and incorporated herein by
          reference).

10.25     Distributor Agreement by and between the Company and Ingenieursbureau
          lr. P.C. Heemskerk b.v., dated September 4, 1997, covering the
          territory of France (previously filed as an exhibit to Form 10-Q of
          the Registrant for the quarter ended February 28, 1998, and
          incorporated herein by reference).

10.26     Distributor Agreement by and between the Company and Universal
          Marketing Services, Inc., dated January 30, 1998, covering territories
          of the United Kingdom, Spain and the Republic of Ireland (previously
          filed as an exhibit to Form 10-Q of the Registrant for the quarter
          ended February 28, 1998, and incorporated herein by reference).

10.27     Amendment dated August 3, 1998 to Distributor Agreement by and between
          the Company and Novus International, Inc., dated May 21, 1997
          (previously filed on Form 8-K of the Registrant on August 11, 1998,
          and incorporated herein by reference).

23.1      Consent of Independent Public Accountants.
</TABLE>

                                     23
<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, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity and cash flows for each of the three
years ended May 31, 1998.  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,
1998 and 1997, 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
June 19, 1998



                                      24
<PAGE>

                      ALCIDE CORPORATION BALANCE SHEETS MAY 31,

<TABLE>
<CAPTION>
                                                                 MAY 31,
                                                        -------------------------
                                                           1997           1998
                                                        -----------   -----------
<S>                                                     <C>           <C>
ASSETS:
     Current assets:
          Cash and cash equivalents                     $ 6,723,154   $ 7,844,217
          Short term investments                          2,086,900     3,782,752
          Accounts receivable - trade                     2,498,981     2,268,264
          Inventory                                       1,115,627     1,353,870
          Prepaid expenses and other current assets         285,971       213,269
                                                        -----------   -----------
               Total current assets                      12,710,633    15,462,372
                                                        -----------   -----------

     Equipment and leasehold improvements:
          Office equipment                                  100,010       112,280
          Laboratory and manufacturing equipment            132,404       145,292
          Leasehold improvements                             56,152        56,152
     Less:  Accumulated depreciation and amortization      (143,604)     (202,318)
                                                        -----------   -----------
     Total equipment and leasehold improvements, net        144,962       111,406
                                                        -----------   -----------
     Deferred income tax asset                            1,090,229       285,618
                                                        -----------   -----------
     Other assets                                         1,167,848       509,941
                                                        -----------   -----------
TOTAL ASSETS                                            $15,113,672   $16,369,337
                                                        -----------   -----------
                                                        -----------   -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
     Current liabilities:
          Accounts payable                              $   329,808   $   269,801
          Accrued expenses                                  477,793       157,812
          Income taxes payable                               15,253       125,000
                                                        -----------   -----------
               Total liabilities                            822,854       552,613
                                                        -----------   -----------
     COMMITMENTS AND CONTINGENCIES                     
                                                       
     Redeemable Class B Preferred Stock -              
     noncumulative convertible $.01 par value;         
          authorized 10,000,000 shares                 
          issued and outstanding:                      
          May 31, 1997 - 88,802                        
          May 31, 1998 - 81,119                             233,105       212,936
                                                        -----------   -----------
     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, 1997 - 2,799,408                     
          May 31, 1998 - 2,872,313                           27,994        28,723
     Treasury stock at cost                              (3,191,425)   (6,125,794)
     Additional paid-in capital                          18,302,377    19,559,369
     Retained Earnings (Accumulated Deficit)             (1,216,540)    2,006,183
                                                        -----------   -----------
          Total Shareholders' Equity                     14,057,713    15,603,788
                                                        -----------   -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $15,113,672   $16,369,337
                                                        -----------   -----------
                                                        -----------   -----------
</TABLE>

See notes to financial statements.

                                       25
<PAGE>

                               ALCIDE CORPORATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED MAY 31,
                                                             ---------------------------
                                                          1996           1997           1998
                                                          ----           ----           ----
<S>                                                   <C>            <C>            <C>
NET SALES                                             $11,145,826    $11,768,504    $12,998,952
                                                      -----------    -----------    -----------
EXPENDITURES:
     Cost of goods sold                                 3,737,957      3,853,875      4,319,242
     Royalty expense                                      807,940        437,877        332,881
     Research and development expense                   1,176,563      1,546,285      1,633,925
     Depreciation and amortization                         49,454         57,022         58,714
     Consulting expense to related parties                 96,150         96,014         96,012
     Other selling, general/administrative              2,070,570      2,026,284      2,148,949
                                                      -----------    -----------    -----------
                                                        7,938,634      8,017,357      8,589,723
                                                      -----------    -----------    -----------
Operating income                                        3,207,192      3,751,147      4,409,229

Interest income                                           294,881        427,316        638,016
Other income                                               23,796        126,530         23,836
                                                      -----------    -----------    -----------
Income before provision for income taxes                3,525,869      4,304,993      5,071,081

Provision for income taxes                              1,200,807      1,423,698      1,848,358
                                                      -----------    -----------    -----------
Net income                                            $ 2,325,062    $ 2,881,295    $ 3,222,723
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
Basic earnings per common share                       $      0.89    $      1.12    $      1.24
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
Diluted earnings per common share and equivalents     $      0.82    $      1.04    $      1.16
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
Weighted average common shares outstanding              2,623,355      2,578,945      2,607,192
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
Weighted average common shares & common share
equivalents                                             2,832,088      2,783,064      2,789,491
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
</TABLE>

See notes to financial statements.

                                       26
<PAGE>

                               ALCIDE CORPORATION
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                     Class "A"                                  Additional
                                  Preferred Stock          Common Stock          Paid In        Common Treasury Stock
                                                                                 Capital
------------------------------------------------------------------------------------------------------------------------
                                  Shares     Amount      Shares      Amount                     Shares        Amount
------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>         <C>          <C>        <C>            <C>          <C>
Balance May 31, 1995               1000     $135,307    2,787,838    $27,878    $18,164,399    (153,380)    ($1,441,132)

Exercise of Stock Options                                   3,700         37         26,013

Purchase Treasury Stock                                                                         (38,957)       (772,713)

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    (192,337)    ($2,213,845)

Exercise of Stock Options                                   7,870         79         69,965

Purchase Treasury Stock                                                                         (48,382)       (977,580)

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    (240,719)    ($3,191,425)

Exercise of Stock Options                                  72,905        729        394,617

Purchase Treasury Stock                                                                         (68,446)     (2,934,369)

Tax Benefit from Exercise of 
Non-Qualified Stock Options                                                         862,375

Net Income

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

Balance May 31, 1998               1,000    $135,307    2,872,313    $28,723    $19,559,369    (309,165)    ($6,125,794)
                                   -----    --------    ---------    -------    -----------    --------     -----------
                                   -----    --------    ---------    -------    -----------    --------     -----------


                                    Retained          Total
                                    Earnings       Shareholders'
                                  (Accumulated        Equity
                                    Deficit)
----------------------------------------------------------------

----------------------------------------------------------------
<S>                               <C>              <C>
Balance May 31, 1995              ($6,422,897)     $10,463,555

Exercise of Stock Options                               26,050

Purchase Treasury Stock                               (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              ($4,097,835)     $12,060,954

Exercise of Stock Options                               70,044

Purchase Treasury Stock                               (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              ($1,216,540)     $14,057,713

Exercise of Stock Options                              395,346

Purchase Treasury Stock                             (2,934,369)

Tax Benefit from Exercise of      
Non-Qualified Stock Options                            862,375

Net Income                          3,222,723        3,222,723
----------------------------------------------------------------

Balance May 31, 1998               $2,006,183      $15,603,788
                                   ----------      -----------
                                   ----------      -----------
</TABLE>

See notes to financial statements.

                                       27
<PAGE>

                  ALCIDE CORPORATION STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 FOR THE YEARS ENDED MAY 31,
                                                                 ---------------------------
                                                              1996           1997           1998
                                                              ----           ----           ----
<S>                                                        <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                      $2,325,062    $ 2,881,295    $ 3,222,723
     Net income
     Adjustments to reconcile net income to
          net cash provided by operating activities:
          Depreciation                                         49,454         57,022         58,714
          Amortization                                        (50,959)       (53,359)       (82,512)
          Common Stock issued to directors, 
            consultants and the employee 
            stock ownership plan                               62,003         52,000         55,081
          Deferred income tax                               1,103,218      1,330,962        804,611

          Decrease (increase) in assets:
               Inventory                                     (366,303)      (187,127)      (238,243)
               Accounts receivable - trade                     (1,522)        86,446        230,717
               Prepaid expenses and other current assets       55,163       (137,424)        72,702
               Other assets                                    10,273        (53,058)       657,907

          Increase (decrease) in liabilities:
               Accounts payable                                (4,758)       (44,632)       (60,007)
               Accrued expenses and
               taxes payable                                  276,623       (590,794)       652,141
                                                           ----------    -----------    -----------
     Net cash provided by operating activities              3,458,254      3,341,331      5,373,834
                                                           ----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of investments                              (997,786)    (2,050,907)    (3,720,340)
     Redemption of investments                              1,000,000      1,050,000      2,107,000
     Acquisition of equipment                                 (44,422)        (7,354)       (25,158)
                                                           ----------    -----------    -----------
     Net cash provided by (used in)
     investing activities                                     (42,208)    (1,008,261)    (1,638,498)
                                                           ----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchase of Alcide Common and
     redemption of Class B
     Preferred Stock                                         (846,358)    (1,045,855)    (3,009,619)
     Stock Options exercised                                   26,050         70,044        395,346
                                                           ----------    -----------    -----------
Net cash (used in) financing activities                      (820,308)      (975,811)    (2,614,273)
                                                           ----------    -----------    -----------
Net increase (decrease) in cash and
cash equivalents                                            2,595,738      1,357,259      1,121,063

Cash and cash equivalents at beginning of year              2,770,157      5,365,895      6,723,154
                                                           ----------    -----------    -----------
Cash and cash equivalents at end of year                   $5,365,895    $ 6,723,154    $ 7,844,217
                                                           ----------    -----------    -----------
                                                           ----------    -----------    -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the year for interest                       ---            ---
     Cash paid during the year for income taxes            $   87,000    $    41,000    $    71,625
</TABLE>

See notes to financial statements.

                                       28
<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.

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 at the end of each fiscal quarter.  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
     $7,905,048 or 71% of net sales and $6,891,749 or 59%, and $6,532,471 or 50%
     in the years ended May 31, 1996, May 31, 1997 and May 31, 1998,
     respectively.  Accounts receivable due from this customer were $1,646,162
     at May 31, 1997 and $337,286 at May 31, 1998.   Sales through the Company's
     four European distributors accounted for $2,697,254 or 24% of net sales in
     1996, $3,194,221 or 27% of net sales in 1997 and $2,915,591 or 22% of net
     sales in 1998.  Accounts receivable due from these customers were $672,983
     at May 31, 1997 and $1,111,750 at May 31, 1998.

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

     b.  Cash and cash equivalents consist of short-term interest-bearing
     instruments, primarily U.S. Treasury based money market accounts redeemable
     on demand.  These investments are carried at amortized 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.

                                       29
<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.  Certain reclassifications have been made to prior year financial
     statements to conform to the current year presentation.

3.   INVESTMENTS:

     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 and May 31,
     1998, is as follows:

<TABLE>
<CAPTION>
                                 Amortized Cost              Fair Value
                                 --------------              ----------
Investment Classification      1997          1998         1997         1998
-------------------------      ----          ----         ----         ----
<S>                         <C>           <C>          <C>          <C>
Held-to-maturity:
Current                     $2,086,900    $3,782,752   $2,098,013   $3,783,746
Long Term                    1,100,620       504,259    1,102,750      511,875
                            ----------    ----------   ----------   ----------
                            $3,187,520    $4,287,011   $3,200,763   $4,295,621
                            ----------    ----------   ----------   ----------
                            ----------    ----------   ----------   ----------
</TABLE>

<TABLE>
<CAPTION>
                              Gross Unrealized Gains          Maturity
                              ----------------------          --------
Investment Classification      1997          1998         1997         1998
-------------------------      ----          ----         ----         ----
<S>                           <C>           <C>         <C>         <C>
Held-to-maturity              $13,243       $8,610      1-2 years   1-5 years
</TABLE>

     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:

<TABLE>
<CAPTION>
                                  May 31, 1997      May 31, 1998
                                  ------------      ------------
<S>                               <C>               <C>
Raw Materials                      $  973,907        $  947,243
Finished Products                     141,720           406,627
                                   ----------        ----------
Total                              $1,115,627        $1,353,870
                                   ----------        ----------
                                   ----------        ----------
</TABLE>

                                       30
<PAGE>

5.   ACCRUED EXPENSES:

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

<TABLE>
<CAPTION>
                                                           1997            1998
                                                           ----            ----
<S>                                                    <C>             <C>
      Accrued royalties                                $108,549        $113,655
      Accrued employee salaries, incentive and 
      benefits                                          267,228          29,147
      Reserve for defending against potential
      royalty claim                                      87,000             -0-
      Other accrued expenses                             15,016          15,010
                                                       --------        --------
                                                       $477,793        $157,812
                                                       --------        --------
                                                       --------        --------
</TABLE>

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 commitment for the Redmond, Washington facility is $62,256
     in fiscal year 1999.

     b.  Employment Agreements:
     One officer has an employment agreement which obligates the Company to a
     salary of $210,109 per year.  Bonus compensation of 100% of base pay can be
     earned.

     c.  Royalty Agreement:
     The Company has an 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 $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. 
     No reserve was established in FY 1998.  During fiscal 1998, the Company
     incurred legal fees of $131,666 to defend its position in this lawsuit;
     $87,000 of those fees were charged against the previously established
     reserve.  It is believed that the Company has completed substantially all
     discovery work in connection with the dispute (see Note 5).


                                      31
<PAGE>

     Royalty payments earned by patent holders for the fiscal years ended May
     31, 1996, 1997, and 1998 were $305,167, $352,380, and $332,881,
     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, 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:

<TABLE>
<CAPTION>
                                     FY 1996           FY 1997          FY 1998
                                     -------           -------          -------
<S>                               <C>               <C>              <C>
   Current
    Federal                       $   97,589        $   93,166       $  854,353
    State and local                      ---                --          189,394
                                  ----------        ----------       ----------
                                  $   97,589        $   93,166       $1,043,747

   Deferred
    Federal                       $1,103,218        $1,330,532       $  804,611
                                  ----------        ----------       ----------
                                  $1,200,807        $1,423,698       $1,848,358
                                  ----------        ----------       ----------
                                  ----------        ----------       ----------
</TABLE>

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

<TABLE>
<CAPTION>
                                                   FY 1996   FY 1997  FY 1998
                                                   -------   -------  -------
<S>                                                <C>       <C>      <C>
        Statutory federal income tax rate            34.0%    34.0%    34.0%
        State taxes                                   0.0%     0.0%     2.4%
        Other                                         0.1%    (0.9%)    0.0%
                                                     -----    -----    -----
        Effective income tax rate                    34.1%    33.1%    36.4%
                                                     -----    -----    -----
                                                     -----    -----    -----
</TABLE>

     At May 31, 1997 and May 31, 1998, the deferred tax assets were comprised of
     the following:

<TABLE>
<CAPTION>
                                                     1997            1998
                                                     ----            ----
<S>                                            <C>               <C>
        Operating loss carry forward           $  632,897             ---
        Temporary differences                       1,188        $ 27,414
        Credits carry forward                     194,837             ---
        Alt. minimum tax carry forward            261,307         258,204
                                               ----------        --------
        Total deferred tax asset               $1,090,229        $285,618
                                               ----------        --------
                                               ----------        --------
</TABLE>

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

                                      32
<PAGE>

8.   EARNINGS PER SHARE

     The Company has adopted Statement of Financial Accounting Standards 128
     ("SFAS 128"), "Earnings Per Share" which replaced the calculation of
     primary and fully diluted earnings per share with Basic and Diluted
     earnings per share.  Basic earnings per share is computed by dividing net
     income by the weighted average number of common shares outstanding during
     the year.  Diluted earnings per share is computed by dividing net income by
     the weighted average number of common shares and common stock equivalents
     outstanding during the year.  Common stock equivalents of the Company
     include the dilutive effect of outstanding stock options.

     Basic and Diluted earnings per share were calculated as follows:


                    COMPUTATION OF EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>
                                                     For the Years Ended May 31,
                                                     ---------------------------
                                                  1996          1997          1998
                                                  ----          ----          ----
<S>                                         <C>           <C>           <C>
        Net Income                          $2,325,062    $2,881,295    $3,222,723

        Weighted average number of
        common shares outstanding            2,623,355     2,578,945     2,607,192

        Basic EPS                           $      .89    $     1.12    $     1.24

        Assuming exercise of options
        reduced by the number of shares
        which could have been purchased
        with the proceeds from exercise of
        such options                           208,733       204,119       182,299
                                            ----------    ----------    ----------

        Weighted average common shares
        outstanding and common share
        equivalents                          2,832,088     2,783,064     2,789,491
                                            ----------    ----------    ----------
                                            ----------    ----------    ----------
        Diluted EPS                         $      .82    $     1.04    $     1.16
                                            ----------    ----------    ----------
                                            ----------    ----------    ----------
</TABLE>

9.      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


                                      33
<PAGE>

        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 7,683 shares of Series 2 Stock on 
        September 30, 1997, for $20,169.  Based on fiscal 1998 net income, 
        the Company will redeem 8,594 shares of Series 2 stock for $22,559 on 
        September 30, 1998.  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.

10.     STOCK OPTIONS:

        The Company had an incentive stock option plan, which expired in May 
        1993.  No additional grants may be issued under this plan. The 
        Company replaced this plan with a new plan effective December, 1993, 
        which includes both incentive stock options and nonstatutory stock 
        options.  Nonstatutory stock options may be granted to employees, 
        directors, officers and consultants.  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.  Under this plan there are 120,750 options 
        available for grant as of May 31, 1998.

        The Company also has a stock option plan for nonemployee directors.  
        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.  Under this plan there are 45,071 options available 
        for grant as of May 31, 1998.

        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 2008.  The Company accounts for its stock option 
        plans under the guidelines of Accounting Principles Board Opinion 25 
        ("APB 25"), under which no compensation cost has been recognized.  In 
        1996, the Company adopted the disclosure provisions of Statement of 
        Financial Accounting Standards 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.


                                      34
<PAGE>

     The status of the plan is as follows:

<TABLE>
<CAPTION>
                                              FY 1996                  FY 1997                   FY 1998
                                              -------                  -------                   -------

                                         No. of      Weighted      No. of     Weighted       No. of        Weighted
                                         Shares   Avg. Share $     Shares   Avg. Share $     Shares    Avg. Share $
                                         ------   ------------     ------   ------------     ------    ------------
<S>                                     <C>       <C>             <C>       <C>            <C>         <C>
 Outstanding at  beginning of year      304,834          $7.50    337,634          $8.84    344,366           $9.22
 Granted                                 39,750          20.58     17,602          22.01     20,897           35.90
 Exercised                               (3,700)          7.04     (7,870)          8.90    (75,325)           6.87
 Canceled                                (3,250)         28.35     (3,000)         42.03       (750)          20.25
                                        -------                   -------                   -------           
 Outstanding at end of  year            337,634          $8.84    344,366          $9.22    289,188           11.78
                                        -------                   -------                   -------           
                                        -------                   -------                   -------           

 Exercisable at end of  year            275,225          $7.31    286,338          $7.44    233,888           $8.76
                                        -------          -----    -------          -----    -------           -----
                                        -------          -----    -------          -----    -------           -----
</TABLE>

     Information relating to stock options outstanding and stock options
     exercisable at May 31, 1998 is as follows:

<TABLE>
<CAPTION>

  Range of Exercise
       Prices                          Options Outstanding                                 Options Exercisable
  ----------------- ----------------------------------------------------------        -----------------------------

                    No. of Shares    Weighted Avg. Life    Weighted Avg. $/Sh.        No. Shares    Wtd. Avg. $/Sh.
                    -------------    ------------------    -------------------        ----------    ---------------
<S>                 <C>              <C>                   <C>                        <C>           <C>
 $4.10 - $7.75            143,120                  2.90                 $ 5.93           142,520             $5.92
 $8.63 - $11.63            73,739                  5.23                   9.82            68,339              9.68

 $19.75 - $63.00           72,329                  7.98                  25.35            23,029             23.59
                          -------                                                        -------
                          289,188                  4.76                 $11.78           233,888             $8.76
                          -------                                                        -------
                          -------                                                        -------
</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, 1997 and 1998:

<TABLE>
<CAPTION>
                                             FY 1996       FY 1997      FY 1998
                                             -------       -------      -------
<S>                         <C>           <C>           <C>          <C>
 Net Income                 As reported   $2,325,062    $2,881,295   $3,222,723

                            Pro forma     $2,254,515    $2,780,416   $2,983,590
 Basic earnings per common
 share                      As reported   $      .89    $     1.12   $     1.24

                            Pro forma     $      .86    $     1.08   $     1.14

 Diluted earnings per
 common share and
 equivalents                As reported   $      .82    $     1.04   $     1.16

                            Pro forma     $      .80    $     1.00   $     1.07
</TABLE>


     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.


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<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 1998 was $26.99 per share using the assumptions of expected 
          volatility of 72.2%, expected option lives of 7.5 years, risk-free 
          rate of interest of 6.6% and no expected dividends.  During 1997, 
          the weighted average grant-date fair value of stock options granted 
          was $14.05 per share using the assumptions of expected volatility 
          of 51%, expected option lives of 7.5 years, risk-free rate of 
          interest of 6.7% and no expected dividends.  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, risk-free rate of interest 
          of 6.0% and no expected dividends.

11.       RELATED PARTY TRANSACTIONS:

          a.  Consulting Agreements
          Loeb Partners Corporation.  During the fiscal year ended May 31, 1998,
          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, 1998, the
          Company paid Dr. Kenneth N. May 264 shares of Alcide Common stock
          having an aggregate purchase price of $12,012 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 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 $3,573,937 since 1983.  During fiscal years 1998 and 
          1997, 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., $21,865 and $22,114; Loeb 
          Investors Co. VIII, $863 and $873, respectively.

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

12.       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 1998, 1997 and 1996 were 
          approximately $67,000, $60,500, and $62,000, respectively.


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<PAGE>

CORPORATE OFFICE
8561 154th Avenue NE
Redmond, Washington 98052
Phone:  (425) 882-2555
Fax:    (425) 861-0173



AUDITORS
Arthur Andersen LLP
801 Second Avenue, Suite 800
Seattle, WA   98104



COMMON STOCK LISTING
NASDAQ
(Symbol - ALCD)



TRANSFER AGENT AND REGISTRAR
American Securities Transfer and Trust, Incorporated
938 Quail Street, Suite 101
Lakewood, Colorado  80515


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