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SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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FORM 10-Q

|ý                                                                                          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------
|For the quarterly period ended November 30, 2002                                          
|or                                                                                        
|o                                                                                          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|for the transition period
from                            to            
                .
|Commission File Number: 0-12395                                                           

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ALCIDE CORPORATION

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

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

YES ý    NO o

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of November 30, 2002: 2,656,167, net of Treasury Stock.

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ALCIDE CORPORATION        INDEX

|                              |  |                                                                                                                            |  | PAGE
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION |  |                                                                                                                           
|Item 1.                       |  | Financial Statements (unaudited)                                                                                           |  |     
|                              |  | Condensed Consolidated Balance SheetsNovember 30, 2002 and May 31, 2002                                                   |  | 3   
|                              |  | Condensed Consolidated Statements of OperationsFor the three and six months ended November 30, 2002 and November 30, 2001 |  | 4   
|                              |  | Condensed Consolidated Statements of Shareholders' Equity                                                                  |  | 5   
|                              |  | Condensed Consolidated Statements of Cash FlowsFor the six months ended November 30, 2002 and November 30, 2001           |  | 6   
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                             |  | 7   
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 11  
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                 |  | 15  
|Item 4.                       |  | Evaluation of Disclosure Controls and Procedures                                                                           |  | 15  
|PART II. OTHER INFORMATION    |  |                                                                                                                           
|Item 1.                       |  | Legal Proceedings                                                                                                          |  | 16  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 16  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                           |  | 16  
|SIGNATURE                     |  | 17                                                                                                                        

2

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ALCIDE CORPORATION  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

|                                           |                                                                                                                                                                                    | November 30,
2002                                |                                                 | May 31,
2002 |           
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | ------------ | ----------
|Assets:                                    |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           | Current assets:                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    | Cash and cash equivalents                        |                                                 | $            | 2,240,456 
|                                           |                                                                                                                                                                                    | Accounts receivabletrade                        |                                                 |              | 4,140,841 
|                                           |                                                                                                                                                                                    | Inventory                                        |                                                 |              | 1,955,211 
|                                           |                                                                                                                                                                                    | Deferred and prepaid income taxes                |                                                 |              | 246,813   
|                                           |                                                                                                                                                                                    | Spare parts                                      |                                                 |              | 826,573   
|                                           |                                                                                                                                                                                    | Prepaid expenses and other current assets        |                                                 |              | 217,830   
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    |                                                  | Total current assets                            |              |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           | Equipment and leasehold improvements:                                                                                                                                              |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    | SANOVA plant assets                              |                                                 |              | 16,450,310
|                                           |                                                                                                                                                                                    | Construction in progress                         |                                                 |              | 2,254,881 
|                                           |                                                                                                                                                                                    | Office equipment                                 |                                                 |              | 562,812   
|                                           |                                                                                                                                                                                    | Laboratory, manufacturing equipment and vehicles |                                                 |              | 520,761   
|                                           |                                                                                                                                                                                    | Leasehold improvements                           |                                                 |              | 73,483    
|                                           |                                                                                                                                                                                    | Less: Accumulated depreciation and amortization  |                                                 |              | (7,889,826
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    |                                                  | Total equipment and leasehold improvements, net |              |           
|                                           | Goodwill                                                                                                                                                                           |                                                  |                                                 | 478,807      |           
|                                           | Other assets                                                                                                                                                                       |                                                  |                                                 | 16,430       |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|Total Assets                               |                                                                                                                                                                                    | $                                                | 22,095,382                                      |              | $         
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|Liabilities and Shareholders' Equity:      |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           | Current liabilities:                                                                                                                                                               |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    | Accounts payable                                 |                                                 | $            | 461,174   
|                                           |                                                                                                                                                                                    | Accrued expenses                                 |                                                 |              | 390,816   
|                                           |                                                                                                                                                                                    | Line of credit payable                           |                                                 |              | 2,000,000 
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           |                                                                                                                                                                                    |                                                  | Total current liabilities                       |              |           
|                                           | Deferred tax liability                                                                                                                                                             |                                                  |                                                 | 379,840      |           
|                                           | Other long-term liabilities                                                                                                                                                        |                                                  |                                                 |             |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|Total Liabilities                          |                                                                                                                                                                                    |                                                  | 3,231,830                                       |              |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           | Commitments and Contingencies                                                                                                                                                      |                                                  |                                                 |              |           
|                                           | Redeemable Class "B" Preferred Stocknoncumulative convertible $.01 par value: authorized 10,000,000 shares; issued and outstanding: November 30, 200263,675; May 31, 200268,425 |                                                  |                                                 | 167,145      |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|                                           | Shareholders' equity:                                                                                                                                                              |                                                  |                                                 |              |           
|                                           | Class "A" Preferred Stockno par value, authorized 1,000 shares; issued and outstanding: November 30, 2002138; May 31, 2002138                                                   |                                                  |                                                 | 18,636       |           
|                                           | Common Stock$.01 par value; authorized 100,000,000 shares; issued: November 30, 20023,032,126; May 31, 20023,031,292                                                            |                                                  |                                                 | 30,321       |           
|                                           | Common treasury stock at cost
November 30, 2002375,959; May 31, 2002375,959                                                                                                      |                                                  |                                                 | (7,144,721   | )         
|                                           | Additional paid-in capital                                                                                                                                                         |                                                  |                                                 | 21,392,164   |           
|                                           | Retained earnings                                                                                                                                                                  |                                                  |                                                 | 4,400,007    |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|Total Shareholders' Equity                 |                                                                                                                                                                                    |                                                  | 18,696,407                                      |              |           
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           
|Total Liabilities and Shareholders' Equity |                                                                                                                                                                                    | $                                                | 22,095,382                                      |              | $         
|                                           |                                                                                                                                                                                    |                                                  |                                                 |              |           

See
notes to Unaudited Condensed Consolidated Financial Statements.

3

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ALCIDE CORPORATION  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                               |                                             | For the Three Months Ended
November 30, |         | For the Six Months Ended
November 30, |          
|------------------------------------------------------------------------------ | ------------------------------------------- | --------------------------------------- | ------- | ------------------------------------- | ---------
|
|Revenue:                                                                       |                                             |                                         |         |                                       |          
|                                                                               | Net sales                                   |                                         | $       | 5,547,795                             |          
|                                                                               | License revenue                             |                                         |         | 230,757                               |          
|                                                                               |                                             |                                         |         |                                       |          
|                                                                               |                                             | Total revenue                           |         |                                       | 5,778,552
|Expenditures:                                                                  |                                             |                                         |         |                                       |          
|                                                                               | Cost of goods sold                          |                                         |         | 3,086,117                             |          
|                                                                               | Research and development expense            |                                         |         | 563,334                               |          
|                                                                               | Consulting expense to related parties       |                                         |         | 15,000                                |          
|                                                                               | Selling, general and administrative expense |                                         |         | 1,444,043                             |          
|                                                                               |                                             |                                         |         |                                       |          
|                                                                               |                                             | Total expenditures                      |         |                                       | 5,108,494
|                                                                               |                                             |                                         |         |                                       |          
|Operating income                                                               |                                             |                                         | 670,058 |                                       |          
|Interest income                                                                |                                             |                                         | 6,201   |                                       |          
|Interest expense                                                               |                                             |                                         | (16,805 | )                                     |          
|Other income                                                                   |                                             |                                         | 9,645   |                                       |          
|                                                                               |                                             |                                         |         |                                       |          
|Income before provision for income taxes                                       |                                             |                                         | 669,099 |                                       |          
|Provision for income taxes                                                     |                                             |                                         | 234,185 |                                       |          
|                                                                               |                                             |                                         |         |                                       |          
|Net income                                                                     |                                             | $                                       | 434,914 |                                       | $        
|                                                                               |                                             |                                         |         |                                       |          
|Basic earnings per common share                                                |                                             | $                                       | .16     |                                       | $        
|                                                                               |                                             |                                         |         |                                       |          
|Diluted earnings per common share and equivalents                              |                                             | $                                       | .16     |                                       | $        
|                                                                               |                                             |                                         |         |                                       |          
|Weighted average common stock and dilutive potential common stock outstanding: |                                             |                                         |         |                                       |          
|                                                                               | Basic                                       |                                         |         | 2,656,167                             |          
|                                                                               | Diluted                                     |                                         |         | 2,677,684                             |          

See
notes to Unaudited Condensed Consolidated Financial Statements.

4

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ALCIDE CORPORATION  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

|                          |  | Class "A" Preferred Stock |  |   |        |  |           |  |   | Common Treasury Stock |  |   |            | 
|------------------------- |  | ------------------------- |  | - | ------ |  | --------- |  | - | --------------------- |  | - | ---------- | 
|
|
|
|Balance May 31, 2002      |  | 138                       |  | $ | 18,636 |  | 3,031,292 |  | $ | 30,313                |  | $ | 21,386,417 | 
|Exercise of stock options |  |                           |  |   |        |  | 834       |  |   | 8                     |  |   | 5,747      | 
|Net income                |  |                           |  |   |        |  |           |  |   |                       |  |   |            | 
|                          |  |                           |  |   |        |  |           |  |   |                       |  |   |            | 
|Balance August 31, 2002   |  | 138                       |  | $ | 18,636 |  | 3,032,126 |  | $ | 30,321                |  | $ | 21,392,164 | 
|Net income                |  |                           |  |   |        |  |           |  |   |                       |  |   |            | 
|                          |  |                           |  |   |        |  |           |  |   |                       |  |   |            | 
|Balance November 30, 2002 |  | 138                       |  | $ | 18,636 |  | 3,032,126 |  | $ | 30,321                |  | $ | 21,392,164 | 
|                          |  |                           |  |   |        |  |           |  |   |                       |  |   |            | 

See notes to Unaudited Condensed Consolidated Financial Statements.

5

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ALCIDE CORPORATION  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                   |                                                                                   | For the Six Months Ended November 30                 |                                          
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------- | -----------------------------------------
|
|Cash Flows from Operating Activities:              |                                                                                   |                                                      |                                          
|Net income                                         |                                                                                   | $                                                    | 496,582                                  
|                                                   | Adjustments to reconcile net income to net cash provided by operating activities: |                                                      |                                          
|                                                   |                                                                                   | Depreciation                                         |                                          
|                                                   |                                                                                   | Amortization of investment premiums                  |                                          
|                                                   |                                                                                   | Tax benefit from exercise of stock options           |                                          
|                                                   |                                                                                   | Deferred income taxes                                |                                          
|                                                   |                                                                                   | Common stock issued to employee stock ownership plan |                                          
|                                                   |                                                                                   | Decrease (increase) in assets:                       |                                          
|                                                   |                                                                                   |                                                      | Accounts receivabletrade                
|                                                   |                                                                                   |                                                      | Inventory                                
|                                                   |                                                                                   |                                                      | Prepaid income taxes                     
|                                                   |                                                                                   |                                                      | Spare parts                              
|                                                   |                                                                                   |                                                      | Prepaid expenses and other current assets
|                                                   |                                                                                   |                                                      | Other assets                             
|                                                   |                                                                                   | Increase (decrease) in liabilities:                  |                                          
|                                                   |                                                                                   |                                                      | Accounts payable                         
|                                                   |                                                                                   |                                                      | Accrued expenses                         
|                                                   |                                                                                   |                                                      | Other long-term liabilities              
|                                                   |                                                                                   |                                                      |                                          
|                                                   |                                                                                   | Net cash provided by operating activities            |                                          
|                                                   |                                                                                   |                                                      |                                          
|Cash Flows from Investing Activities:              |                                                                                   |                                                      |                                          
|                                                   | Sale of investments                                                               |                                                      |                                          
|                                                   | Acquisition of equipment, net                                                     |                                                      |                                          
|                                                   |                                                                                   |                                                      |                                          
|                                                   | Net cash used in investing activities                                             |                                                      |                                          
|                                                   |                                                                                   |                                                      |                                          
|Cash Flows from Financing Activities:              |                                                                                   |                                                      |                                          
|                                                   | Redemption of Class "B" Preferred Stock                                           |                                                      |                                          
|                                                   | Borrowing on line of credit                                                       |                                                      |                                          
|                                                   | Exercise of stock options                                                         |                                                      |                                          
|                                                   |                                                                                   |                                                      |                                          
|                                                   | Net cash (used in) provided by financing activities                               |                                                      |                                          
|                                                   |                                                                                   |                                                      |                                          
|                                                   | Net decrease in cash and cash equivalents                                         |                                                      |                                          
|                                                   | Cash and cash equivalents at beginning of period                                  |                                                      |                                          
|                                                   |                                                                                   |                                                      |                                          
|                                                   | Cash and cash equivalents at end of period                                        |                                                      | $                                        
|                                                   |                                                                                   |                                                      |                                          
|Supplemental Disclosures of Cash Flow Information: |                                                                                   |                                                      |                                          
|                                                   | Cash paid during the period for income taxes                                      |                                                      |                                          
|                                                   | Cash paid during the period for interest                                          |                                                      | $                                        

See
notes to Unaudited Condensed Consolidated Financial Statements.

6

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ALCIDE CORPORATION  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In
the opinion of management, the accompanying unaudited financial statements of Alcide Corporation (the "Company") for the three and six-month periods ended November 30, 2002 and
2001 have been prepared in accordance with the instructions to Form 10-Q. Certain information and disclosures normally included in notes to financial statements have been condensed
or omitted according to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not
misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements contained in the Company's Annual Report on
Form 10-K for the year ended May 31, 2002. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair presentation. Certain reclassifications have been made to prior year financial statements to conform to current year
presentation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

November 30,
2002

May 31,
2002Domestic Distributors

$
510,219

$
349,942International Distributors


1,429,567


813,155SANOVA Customers


2,016,490


1,580,444Other Receivables


184,565


105,562Total Accounts ReceivableTrade

$
4,140,841

$
2,849,103


The
Company evaluates impairment of its trade receivables on a regular basis. No allowance has been made for doubtful accounts as the Company believes all receivables are collectible. This belief is
consistent with collection history.

November 30,
2002

May 31,
2002Raw Materials

$
461,228

$
307,922Finished Products


577,791


630,517SANOVA Inventory at Customer Sites


916,192


885,252Total Inventory

$
1,955,211

$
1,823,691


In
September 2002, the Company extended its $10,000,000 unrestricted line of credit with US Bank. The new expiration date is September 30, 2004.

Two
advances of $1,000,000 each have been taken on the line of credit. Currently, both advances are due in March 2003. The interest rates are approximately 3.1% for the first advance and 3.0%
for the second. Interest is paid monthly. Management believes the Company was in full compliance with all bank covenants as of November 30, 2002.

7

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As
of November 30, 2002, the Company had contracts for future startups of five meat processing operations. It is estimated that 65% to 75% of the assets required for such installations have
already been purchased and are classified on the balance sheet as construction in progress.

The
income tax provisions were as follows:

Three Months Ended
November 30,

Six Months Ended
November 30,2002

2001

2002

2001Federal Income Taxes

$
224,047

$
225,928

$
255,815

$
391,344State Income Taxes


10,138


10,222


11,575


17,707Total Income Tax Provisions

$
234,185

$
236,150

$
267,390

$
409,051


Basic
earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income
by the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares of the Company include the dilutive effect of outstanding stock
options and warrants. For the three and six-month periods ended November 30, 2002, potential common shares excluded because of their antidilutive effect were 267,392 and 247,892
shares, respectively. For the three and six-month periods ended November 30, 2001, 96,790 and 94,790 shares were excluded, respectively.

Basic
and diluted earnings per share were calculated as follows:

Three Months Ended
November 30,

Six Months Ended
November 30,2002

2001

2002

2001Net income

$
434,914

$
438,568

$
496,582

$
759,669Weighted average number of common shares outstanding


2,656,167


2,642,535


2,656,094


2,636,298Basic earnings per share

$
.16

$
.17

$
.19

$
.29Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options


21,517


75,156


27,206


91,574Weighted average common shares outstanding and dilutive potential common shares


2,677,684


2,717,691


2,683,300


2,727,872Diluted earnings per share

$
.16

$
.16

$
.19

$
.28


In
October 2001, the Financial Accounting Standards Board ("FASB") issued Standard of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December 15, 2001 (effective for the Company on June 1, 2002). This statement supersedes SFAS
No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and replaces the provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the
Effects of Disposal of

8

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Segments of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of segments of a business. SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 for the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be
disposed of by sale. Under SFAS No. 144, long-lived assets are measured at the lower of carrying amount of fair value less cost to sell. The Company adopted this standard
June 1, 2002 and following its provisions has not had a material effect on the Company's financial position or results of operations.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure," which is effective for fiscal years ending after
December 15, 2002 (effective for the Company in fiscal 2003). This Statement amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, the Statement amends the disclosure requirements of Statement 123 to require
prominent disclosure in both the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As
the Company is still evaluating its opinion to change to the fair value based method of accounting for stock-based employee compensation, management is still assessing the potential impact of this
Statement on its financial position and results of operations.

At
November 30, 2002 and 2001, the Company had orders for future delivery of $474,296 and $479,564, respectively. The $474,296 orders for future delivery are scheduled for shipment during the
period December 2002 through January 2003. Data for both years excludes expected sales of SANOVA because contracts with SANOVA customers do not require placement of purchase orders for
future delivery.

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

The
Company's reportable segments are strategic business units that offer similar products, but to entirely different customers at substantially different selling prices and cost of goods sold
structures. The Company does not have any inter-segment revenues.

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

9

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

|                                        |                           | Three Months Ended
November 30, |   | Six Months Ended
November 30,
|--------------------------------------- | ------------------------- | ------------------------------- | - | -----------------------------
|
|Animal Health and Surface Disinfectants |                           |                                 |   |                              
|                                        | License RevenueU.S.      |                                 | $ | 230,757                      
|                                        | Net SalesU.S.            |                                 | $ | 667,137                      
|                                        | Net SalesInternational   |                                 | $ | 1,337,586                    
|                                        |                           |                                 |   |                              
|                                        | Total Revenue             |                                 | $ | 2,235,480                    
|                                        | Gross Margin              |                                 | $ | 1,345,178                    
|                                        | Assets (at end of period) |                                 | $ | 3,571,146                    
|                                        | Fixed Asset Additions     |                                 |   |                             
|                                        | Depreciation Expense      |                                 | $ | 1,344                        
|SANOVA                                  |                           |                                 |   |                              
|                                        | Net SalesU.S.            |                                 | $ | 3,543,072                    
|                                        | Gross Margin              |                                 | $ | 1,347,257                    
|                                        | Assets (at end of period) |                                 | $ | 15,478,942                   
|                                        | Fixed Asset Additions     |                                 | $ | 225,538                      
|                                        | Depreciation Expense      |                                 | $ | 890,849                      
|Not Segment Related                     |                           |                                 |   |                              
|                                        | Assets (at end of period) |                                 | $ | 3,045,294                    
|                                        | Fixed Asset Additions     |                                 | $ | 22,212                       
|                                        | Depreciation Expense      |                                 | $ | 29,096                       
|Total                                   |                           |                                 |   |                              
|                                        | License Revenue           |                                 | $ | 230,757                      
|                                        | Net Sales                 |                                 | $ | 5,547,795                    
|                                        |                           |                                 |   |                              
|                                        | Total Revenue             |                                 | $ | 5,778,552                    
|                                        | Gross Margin              |                                 | $ | 2,692,435                    
|                                        | Assets (at end of period) |                                 | $ | 22,095,382                   
|                                        | Fixed Asset Additions     |                                 | $ | 247,750                      
|                                        | Depreciation Expense      |                                 | $ | 921,289                      

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

10

---



PART I.

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

Introduction

Alcide
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.

Risks and Uncertainty

This
report includes forward looking statements which involve risk and uncertainty including, without limitation, risk of dependence on patents, trademarks, third party suppliers, market acceptance of
and
demand for the Company's products, distribution capabilities and the development of technology and government regulatory approval thereof.

Sentences
or phrases that use words such as "believes", "anticipates", "hopes", "plans", "may", "can", "will", "expects" and others are often used to flag such forward looking statements, but their
absence does not necessarily 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 expected or projected. Readers are cautioned not to
place undo 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.

Substantially
all of the Company's products are subject to regulatory approval of or control by various governmental agencies, such as the Food and Drug Administration, Department of Agriculture and
Environmental Protection Agency in the United States and their equivalents in international markets. The exercise of control and regulatory authority by these agencies can have a material effect on
the Company's business directly as it relates to the Company's products and indirectly as it may relate to competitors' products.

Within
the Animal Health and Surface Disinfectant business segment, all of the Company's Animal Health products are sold through distributors having exclusive or semi-exclusive rights to
specified geographical territories. The loss of a distributor can have a material effect on the Company's sales, particularly, in the short-term until a replacement is found, contracted
and trained in the sale of the Company's products. Further, the Company faces well established competition in each of the markets where its Animal Health products are sold. Such competition,
particularly, competition claiming equivalence to the Company's products, can limit the sales potential for Alcide's products.

Alcide's
Food Safety products participate in a rapidly evolving marketplace which, by its nature, attracts innovation and competing technologies. The Company's SANOVA sales are based on performance,
price and convenience. Introduction of competitive products better meeting these customer needs can have a material impact on the Company's ability to sell and expand the use of its SANOVA products.

The
Company's business model for its Food Safety business involves a capital investment ranging from $20,000 to $500,000 for each user plant site, depending on the size of the operation. If a
substantial number of customers elect not to renew their contracts, non-productive assets would exist until new

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customers are found. The Company's experience after four years in the Food Safety business is that all but one of its customers have renewed their contracts.

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

Likewise,
the Company's ability to sell and expand sales of its Food Safety products, may be impacted by economic conditions within the poultry and red meat industries. During the quarter ended
November 30, 2003, three Alcide poultry customers elected not to use SANOVA as a direct result of economic conditions.

Critical Accounting Policies



Commitments and Contingencies

Leases:
The Company leases certain property under non-cancelable operating leases that expire through May 2004. Insurance, utilities and maintenance expenses are borne by the
Company. There are no contingent rentals or sublease rentals.

Line
of Credit Payable: In September 2002, the Company extended its $10,000,000 unrestricted line of credit with US Bank. The new expiration date is September 30, 2004.

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Two
advances of $1,000,000 each have been taken on the line of credit. Currently, both advances are due in March 2003. The interest rates are approximately 3.1% for the first advance and 3.0%
for the second. Interest is paid monthly. Management believes the Company was in full compliance with all bank covenants as of November 30, 2002.

New
SANOVA Installations: As of November 30, 2002, the Company had contracts for future startups of five meat processing operations. It is estimated that 65% to 75% of the assets required for
such installations have already been purchased and are classified on the balance sheet as construction in progress. An additional investment of $100,000 to $200,000 may be required for successful
startup of the five systems.

Employment
Agreements: One officer has a one year, automatically renewable, employment agreement which obligates the Company to a salary of $273,266 per year. Bonus compensation of 100% of base pay
for the officer can be earned at the discretion of the Board of Directors.

Redeemable
Class "B" Preferred Stock: On September 30th of each year, the Company redeems a portion of its outstanding Series 2 Class "B" Preferred Stock. The amount redeemed is equal to
..7% of
the Company's prior year net income. A total of $167,145 of Class "B" Preferred Stock remains to be redeemed in subsequent fiscal years, dependent on net income.

Financial Condition and Results of Operations

Net Sales

Net
sales and license revenue totaling $5,778,552 for the quarter ended November 30, 2002 were 1% higher than for the equivalent quarter last year. Fiscal 2003 first half net sales and license
revenue of $10,823,744 were 3% lower than first half sales in fiscal 2002.

Sales
of SANOVA food antimicrobial to the poultry and red meat industries totaled $3,543,072 for the quarter ended November 30, 2002, an increase of $636,237, or 22%, compared to the second
fiscal quarter last year. At the end of the fiscal 2003 quarter, SANOVA systems were contracted for and installed at thirty-eight poultry plants and seven red meat plants. Three of the poultry plants
were using SANOVA applications both pre-chill and post-chill, thus bringing the total to forty-eight operations at quarter's end. Three of the poultry operations and two of the
red meat operations did not contribute significant revenue during the quarter. SANOVA sales for the six-month period ended November 30, 2002 were $6,897,458, an increase of
$1,303,259, or 23%, compared to the equivalent six-month period last year.

The
Company's Animal Health and Surface Disinfectant revenues for the quarter ended November 30, 2002 were $2,235,480, which amount includes $230,757 in license revenue, which did not exist
prior to the first fiscal quarter of 2003. Net revenue for the fiscal 2003 quarter was $589,665 lower than for the second fiscal quarter last year, but was $544,674 higher than the fiscal year 2003
first quarter Animal Health net revenues. Six-month fiscal year-to-date Animal Health and Surface Disinfectant sales and license revenue of $3,926,286 were
$1,611,325 lower than for the six-month period last year reflecting primarily changes in distributor inventory levels which occurred during the first four months of the Company's fiscal
year 2003. In the United Kingdom, the Company established a new distributor relationship with Agri-Lloyd beginning September 15, 2002, while the Company's previous distributor
liquidated its inventory of Alcide products resulting in a $280,000 sales reduction from the prior year. In the United States, Alcide introduced UDDERgold 5-Star, an advanced new product,
in early October 2002, intended to maintain the Company's performance edge in the mastitis prevention market. In anticipation of the new product launch, U.S. distributors delayed their
purchases, accounting for a reduction of an estimated $350,000 in sales activity during the first four months this fiscal year. Lastly, IBA, the Company's largest distributor, transitioned from a
distributor arrangement with Alcide to a licensing arrangement and this transition had the effect of reducing sales to IBA by an estimated

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$500,000 during the first half of fiscal 2003. The gross margin impact of the sales reduction is estimated at $200,000, attributable entirely to inventory reduction.

Cost of Goods Sold

Cost
of goods sold was 53% of total revenue for the quarter and 54% of total revenue for the six-month period ended November 30, 2002, as compared to 52% and 51%, respectively, of
total revenue for the equivalent periods a year ago.

Cost
of goods sold as a percentage of sales for the SANOVA (food safety) business segment were at 62% for the quarter and 61% for the six-month period ended November 30, 2002 as
compared to 60% of net sales for the quarter and six-month period last year. The increase as a percentage of sales was caused primarily by the underutilization of equipment during
production stoppages at four SANOVA customers during fiscal 2003.

Cost
of goods sold for the Animal Health and Surface Disinfectant business segment was 44% of net sales (excludes license revenue) for the quarter ended November 30, 2002 and 45% of net sales
(excludes license revenue) for the first half of fiscal 2003 versus 43% of net sales for both the second quarter and half last year. The increased cost of goods sold as a percentage of net sales for
the segment was caused primarily by a shift in product mix as a result of the aforementioned distributor inventory reductions which affected sales of products UDDERgold Plus and UDDERgold to a greater
degree than lower margin ancillary products.

Research and Development Expense

Research
and development expenses of $563,334 for the quarter ended November 30, 2002 were $300,560 lower than for the equivalent quarter last year reflecting the conclusion of development
activities related to the Company's new Animal Health products and the reduction in the cost of SANOVA process validation trials. Research and development expenses of $1,153,959 for the
six-month period ended November 30, 2002 were $249,855 lower than for the six-month period a year ago.

Selling, General and Administrative Expense

Selling,
general and administrative expense of $1,444,043 for the quarter ended November 30, 2002 was $204,648, or 17%, higher than for the equivalent quarter last year. First half expense of
$2,979,417 was $159,852, or 6%, higher than for the first half of last year. Major components of the increase were a $78,000 increase in Animal Health marketing expenses to solidify the Animal Health
and Surface Disinfectant business segment and a $123,000 increase in food safety administrative expenses primarily related to additional staff to enter the red meat and fish markets, offset by a
$39,000 reduction in trade show/promotion expense.

Interest Income

Interest
income was $6,201 for the quarter and $14,068 for the six-month period ended November 30, 2002 versus $24,317 for the quarter and $52,133 for the half year last year. The
decrease was due to lower prevailing short-term interest rates.

Interest Expense

Interest
expense of $16,805 for the quarter and $37,853 for the six-month period ended November 30, 2002 compare favorably to the $21,854 and $46,958 for the quarter and half year
last year, respectively. The reduction is due entirely to lower prevailing interest rates.

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Liquidity and Capital Resources

The
Company's cash and cash equivalents totaled $2,240,456 on November 30, 2002, as compared to $2,847,581 on May 31, 2002. During the first half of fiscal 2003, the Company generated
cash from operating activities of $807,914 and invested a net of $1,408,325 in acquisition of new assets to support the expanding SANOVA business. At this time, the Company expects to fund its
existing operations and growth with its current cash balance plus cash generated by operations. If growth exceeds current expectations, it may be necessary to take additional advances on the Company's
line of credit.

Outlook







ITEM 3.Quantitative and Qualitative Disclosures About Market Risk

No
material changes have occurred in the disclosure of qualitative and quantitative market risk set forth in our Annual Report on Form 10-K for the fiscal year ended May 31,
2002.

ITEM 4.Evaluation of Disclosure Controls and Procedures

a)    The
Company's Chairman and CEO, and President and CFO, after evaluating the effectiveness of the Company's "disclosure controls and
procedures"(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date
(the"Evaluation Date")within 90 days before the filing date of this quarterly report, have
concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its consolidated
subsidiary would be made known to them by others within those entities.

b)    Changes
in internal controls: Not applicable.

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PART II.        OTHER INFORMATION

ITEM 1.Legal Proceedings

On
October 31, 2002, the Company filed a patent lawsuit against Biocide International Incorporated in the United States District Court, Western District of Washington.

The
lawsuit claims that "a reasonable opportunity for discovery will show that Biocide has infringed the 064 Patent (Alcide's Patent 36064) because it has made, offered for sale, distributed, used
and/or sold antimicrobial or biocidal products such as Oxine, Pro-Oxine and Purogene for use in food treatment and red meat industry that fall within one or more claims of the 064 Patent,
or when used in accordance with Biocide's instructions and teachings, fall within one or more claims of the 064 Patent".

The
lawsuit also claims that "Biocide has also made, offered for sale, distributed, used and/or sold Purogene antimicrobial or biocidal products through its distributor Aerosafe Products Incorporated
that fall within one or more claims of the 064 Patent, or when used in accordance with Biocide's instructions and teachings, fall within one or more claims of the 064 Patent".

The
first status conference in this matter is scheduled for February 25, 2003.

ITEM 4.Submission of Matters to a Vote of Security Holders

Shareholders
voted on two proposals at the Annual Meeting of stockholders on October 22, 2002 as described in the Company's proxy statement.



FOR

WITHHELD
AUTHORITYThomas L. Kempner

2,219,441

155,864Charles A. Baker

2,219,704

155,601Joseph A. Sasenick

2,371,587

235,771William G. Spears

2,226,969

148,336




FOR

AGAINST

ABSTAIN2,403,141

7,713

5,788


ITEM 6.Exhibits and Reports on Form 8-K

None.

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SIGNATURE

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

|                       |  | ALCIDE CORPORATION
The Registrant
|---------------------- |  | ---------------------------------
|Date: January 13, 2003 |  | By                               

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CERTIFICATIONS

I,
Joseph A. Sasenick, Chairman and Chief Executive Officer, certify that:





Date:
January 13, 2003

| |  | By | /s/JOSEPH A. SASENICKJoseph A. Sasenick Chairman
Chief Executive Officer
| |  | -- | ------------------------------------------------------------------------

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I, John P. Richards, President and Chief Financial Officer, certify that:





Date:
January 13, 2003

| |  | By | /s/JOHN P. RICHARDSJohn P. Richards President
Chief Financial Officer
| |  | -- | ---------------------------------------------------------------------

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