**FORM 10-Q**

 

**SECURITIESAND EXCHANGE COMMISSION**

 

**Washington, DC 20549**

 
| **x** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For thequarterly period ended February 28, 2003**

 

**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 FileNumber:       0-12395**

 

 

**ALCIDECORPORATION**

 
| **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**                   |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 
| YES |   | x |   | NO |   | o |
|-----|--------|---|--------|----|--------|---|

 

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

 
| YES |   | o |   | NO |   | x |
|-----|--------|---|--------|----|--------|---|

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as ofFebruary 28, 2003:  2,664,638, net ofTreasury Stock.

 

 

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**ALCIDE CORPORATION**

 

**INDEX**

 
| PART I.                                                                                              | FINANCIAL INFORMATION                                                                                                           |
|------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                 |                                                                                                                            |
| Item 1. Financial  Statements (unaudited)                                                            |
|                                                                                                 |                                                                                                                            |
|                                                                                                 | Condensed  Consolidated Balance Sheets – February 28, 2003 and May 31, 2002                                                |
|                                                                                                 |                                                                                                                            |
|                                                                                                 | Condensed  Consolidated Statements of Operations - For the three and nine months ended  February 28, 2003 and February 28, 2002 |
|                                                                                                 |                                                                                                                            |
|                                                                                                 | Condensed  Consolidated Statements of Shareholders’ Equity                                                                 |
|                                                                                                 |                                                                                                                            |
|                                                                                                 | Condensed  Consolidated Statements of Cash Flows - For the nine months ended February  28, 2003 and February 28, 2002           |
|                                                                                                 |                                                                                                                            |
|                                                                                                 | Notes  to Unaudited Condensed Consolidated Financial Statements                                                                 |
|                                                                                                 |                                                                                                                            |
| Item  2. Management’s Discussion and Analysis of Financial Condition and Results of  Operations |
|                                                                                                 |                                                                                                                            |
| Item  3. Quantitative and Qualitative Disclosures About Market Risk                                  |
|                                                                                                 |                                                                                                                            |
| Item  4. Evaluation of Disclosure Controls and Procedures                                            |
|                                                                                                 |                                                                                                                            |
| PART II.                                                                                             | OTHER  INFORMATION                                                                                                              |
|                                                                                                 |                                                                                                                            |
| Item 1. Legal Proceedings                                                                            |
|                                                                                                 |                                                                                                                            |
| Item 6.  Exhibits and Reports on Form 8-K                                                            |
|                                                                                                 |                                                                                                                            |
| SIGNATURE                                                                                            |

 

2

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**ALCIDE CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS**

 
|                                                                                                                                                                                |   | **February 28, 2003** |           | **May 31, 2002** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|----------------|------------------|--------|
| **Assets:**                                                                                                                                                                         |   |                  |           |             |   |
| Current  assets:                                                                                                                                                                    |   |                  |           |             |   |
| Cash and cash equivalents                                                                                                                                                           |   | $                     | 3,723,597      |             | $      | 2,847,581 |   |
| Accounts receivable – trade, net                                                                                                                                               |   | 3,855,553             |           | 2,849,103        |   |
| Inventory                                                                                                                                                                           |   | 2,015,538             |           | 1,823,691        |   |
| Deferred and prepaid income taxes                                                                                                                                                   |   | 311,204               |           | 434,200          |   |
| Spare parts                                                                                                                                                                         |   | 838,808               |           | 652,620          |   |
| Prepaid expenses and other current assets                                                                                                                                           |   | 323,266               |           | 412,118          |   |
| Total  current assets                                                                                                                                                               |   | 11,067,966            |           | 9,019,313        |   |
| Equipment and leasehold improvements:                                                                                                                                               |   |                  |           |             |   |
| SANOVA plant assets                                                                                                                                                                 |   | 16,638,289            |           | 14,376,961       |   |
| Construction in progress                                                                                                                                                            |   | 2,508,743             |           | 3,009,716        |   |
| Office equipment                                                                                                                                                                    |   | 564,323               |           | 553,539          |   |
| Laboratory, manufacturing equipment and  vehicles                                                                                                                                   |   | 523,718               |           | 451,824          |   |
| Leasehold improvements                                                                                                                                                              |   | 73,483                |           | 73,483           |   |
| Less:   Accumulated depreciation and amortization                                                                                                                              |   | (8,836,531            | )              | (6,118,278       | )      |
| Total equipment and leasehold  improvements, net                                                                                                                                    |   | 11,472,025            |           | 12,347,245       |   |
| Goodwill                                                                                                                                                                            |   | 478,807               |           | 478,807          |   |
| Other assets                                                                                                                                                                        |   | 16,430                |           | 19,968           |   |
| **Total Assets**                                                                                                                                                                    |   | **$**                 | **23,035,228** | ** **       | **$**  | **21,865,333** | ** ** |
| **Liabilities and Shareholders’ Equity:**                                                                                                                                      |   |                  |           |             |   |
| Current liabilities:                                                                                                                                                                |   |                  |           |             |   |
| Accounts payable                                                                                                                                                                    |   | $                     | 810,074        |             | $      | 743,514 |   |
| Accrued expenses                                                                                                                                                                    |   | 385,555               |           | 626,953          |   |
| Line of credit payable                                                                                                                                                              |   | 2,000,000             |           | 2,000,000        |   |
| Total current liabilities                                                                                                                                                           |   | 3,195,629             |           | 3,370,467        |   |
| Deferred tax  liability                                                                                                                                                             |   | 585,500               |           | 94,837           |   |
| Other long-term liabilities                                                                                                                                                         |   | —                |           | 26,346           |   |
| **Total Liabilities**                                                                                                                                                               |   | 3,781,129             |           | 3,491,650        |   |
| Commitments and Contingencies                                                                                                                                                       |   |                  |           |             |   |
| Redeemable Class “B” Preferred Stock -  $.01 par value;authorized  10,000,000 shares; issued and outstanding: February 28, 2003 – 63,675; May 31, 2002 – 68,425 |   | 167,145               |           | 179,614          |   |
| Shareholders’ equity:                                                                                                                                                          |   |                  |           |             |   |
| Class “A” Preferred Stock - no par value,  authorized 1,000 shares; issued and outstanding:  February 28, 2003 – 138; May 31, 2002 - 138                        |   | 18,636                |           | 18,636           |   |
| Common Stock - $.01 par value; authorized  100,000,000 shares; issued: February 28, 2003 – 3,040,597; May 31, 2002 –  3,031,292                                           |   | 30,406                |           | 30,313           |   |
|                                                                                                                                                                                |   |                  |           |             |   |
| Common treasury stock at costFebruary 28, 2003 – 375,959; May 31, 2002  - 375,959                                                                                              |   | (7,144,721            | )              | (7,144,721       | )      |
| Additional paid-in capital                                                                                                                                                          |   | 21,502,827            |           | 21,386,417       |   |
| Retained earnings                                                                                                                                                                   |   | 4,679,806             |           | 3,903,424        |   |
| **Total Shareholders’ Equity**                                                                                                                                                 |   | 19,086,954            |           | 18,194,069       |   |
| **Total Liabilities and Shareholders’ Equity**                                                                                                                                 |   | **$**                 | **23,035,228** | ** **       | **$**  | **21,865,333** | ** ** |

 

See notes to Unaudited Condensed ConsolidatedFinancial Statements.

 

3

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**ALCIDECORPORATION UNAUDITED CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

 
|                                                                            |   | **For the Three Months Ended  February 28,** |      | **For the Nine Months Ended  February 28,** |       |
|---------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|---------------------------------------------|------------|
|                                                                            |   | **2003**                                     |      | **2002**                                    | ** ** | **2003** | ** ** | **2002** | ** ** |
| Revenue:                                                                        |   |                                         |      |                                        |       |   |   |   |   |
| Net sales                                                                       |   | $                                            | 5,172,872 |                                        | $          | 5,500,252 |   | $ | 15,736,462 |   | $ | 16,632,062 |   |
| License revenue                                                                 |   | 330,722                                      |      | —                                      |       | 590,876 |   | — |   |
| Total revenue                                                                   |   | 5,503,594                                    |      | 5,500,252                                   |       | 16,327,338 |   | 16,632,062 |   |
| Expenditures:                                                                   |   |                                         |      |                                        |       |   |   |   |   |
| Cost of goods  sold                                                             |   | 3,095,239                                    |      | 2,913,369                                   |       | 8,986,635 |   | 8,643,194 |   |
| Research and  development expense                                               |   | 520,678                                      |      | 573,978                                     |       | 1,674,636 |   | 2,058,993 |   |
| Consulting  expense to related parties                                          |   | 15,000                                       |      | 15,000                                      |       | 45,000 |   | 59,000 |   |
| Selling, general  and administrative expense                                    |   | 1,441,805                                    |      | 1,167,953                                   |       | 4,421,222 |   | 3,906,317 |   |
| Total expenditures                                                              |   | 5,072,722                                    |      | 4,670,300                                   |       | 15,127,493 |   | 14,667,504 |   |
| Operating income                                                                |   | 430,872                                      |      | 829,952                                     |       | 1,199,845 |   | 1,964,558 |   |
| Interest income                                                                 |   | 5,945                                        |      | 11,693                                      |       | 20,013 |   | 63,826 |   |
| Interest expense                                                                |   | (15,219                                      | )         | (20,591                                     | )          | (53,072 | ) | (67,549 | ) |
| Other income                                                                    |   | 8,862                                        |      | 10,203                                      |       | 27,646 |   | 39,142 |   |
| Income before provision for income taxes                                        |   | 430,460                                      |      | 831,257                                     |       | 1,194,432 |   | 1,999,977 |   |
| Provision for income taxes                                                      |   | 150,661                                      |      | 290,941                                     |       | 418,051 |   | 699,992 |   |
| Net income                                                                      |   | $                                            | 279,799   |                                        | $          | 540,316 |   | $ | 776,381 |   | $ | 1,299,985 |   |
| Basic earnings per common share                                                 |   | $                                            | .11       |                                        | $          | .20 |   | $ | .29 |   | $ | .49 |   |
| Diluted earnings per common share and  equivalents                              |   | $                                            | .10       |                                        | $          | .20 |   | $ | .29 |   | $ | .48 |   |
| Weighted average common stock and dilutive  potential common stock outstanding: |   |                                         |      |                                        |       |   |   |   |   |
| Basic                                                                           |   | 2,659,910                                    |      | 2,648,614                                   |       | 2,657,352 |   | 2,640,358 |   |
| Diluted                                                                         |   | 2,682,765                                    |      | 2,715,849                                   |       | 2,681,962 |   | 2,722,643 |   |

 

Seenotes to Unaudited Condensed Consolidated Financial Statements.

 

4

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**ALCIDE CORPORATION**

**UNAUDITEDCONDENSED CONSOLIDATED STATEMENTSOF SHAREHOLDERS’ EQUITY**

 
|                                           |   | **Class “A” Preferred  Stock** |       | **Common Stock** |       | **Additional  Paid-in  Capital** | ** ** | **Common Treasury Stock** | ** ** | **Retained  Earnings** | ** ** | **Total  Shareholders’  Equity** | ** ** |
|------------------------------------------------|--------|------------------------------------------|------------|------------------|------------|----------------------------------|------------|---------------------------|------------|------------------------|------------|---------------------------------------|------------|
| **Shares**                                     |   | **Amount**                               | **Shares** | ** **       | **Amount** | **Shares**                       | ** ** | **Amount**                |
| Balance May 31,  2002                          |   | 138                                      |       | $                | 18,636     |                             | 3,031,292  |                      | $          | 30,313                 |       | $                                     | 21,386,417 |   | (375,959 | ) | $ | (7,144,721 | ) | $ | 3,903,424 |   | $ | 18,194,069 |   |
| Exercise of stock options                      |   |                                     |       |             |       | 834                              |       | 8                         |       | 5,747                  |       |                                  |       |   |   |   |   | 5,755 |   |
| Net income                                     |   |                                     |       |             |       |                             |       |                      |       |                   |       |                                  |       |   |   | 61,669 |   | 61,669 |   |
| Balance August  31, 2002                       |   | 138                                      |       | $                | 18,636     |                             | 3,032,126  |                      | $          | 30,321                 |       | $                                     | 21,392,164 |   | (375,959 | ) | $ | (7,144,721 | ) | $ | 3,965,093 |   | $ | 18,261,493 |   |
| Net income                                     |   |                                     |       |             |       |                             |       |                      |       |                   |       |                                  |       |   |   | 434,914 |   | 434,914 |   |
| Balance November  30, 2002                     |   | 138                                      |       | $                | 18,636     |                             | 3,032,126  |                      | $          | 30,321                 |       | $                                     | 21,392,164 |   | (375,959 | ) | $ | (7,144,721 | ) | $ | 4,400,007 |   | $ | 18,696,407 |   |
| Exercise of stock  options                     |   |                                     |       |             |       | 5,200                            |       | 52                        |       | 47,398                 |       |                                  |       |   |   |   |   | 47,450 |   |
| Stock issued to  employee stock ownership plan |   |                                     |       |             |       | 3,271                            |       | 33                        |       | 53,873                 |       |                                  |       |   |   |   |   | 53,906 |   |
| Tax benefit from  exercise of stock options    |   |                                     |       |             |       |                             |       |                      |       | 9,392                  |       |                                  |       |   |   |   |   | 9,392 |   |
| Net income                                     |   |                                     |       |             |       |                             |       |                      |       |                   |       |                                  |       |   |   | 279,799 |   | 279,799 |   |
| Balance February  28, 2003                     |   | 138                                      |       | $                | 18,636     |                             | 3,040,597  |                      | $          | 30,406                 |       | $                                     | 21,502,827 |   | (375,959 | ) | $ | (7,144,721 | ) | $ | 4,679,806 |   | $ | 19,086,954 |   |

 

Seenotes to Unaudited Condensed Consolidated Financial Statements.

 

5

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##### **ALCIDECORPORATION UNAUDITED CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

 
|                                                                               |   | **For the Nine Months Ended February 28,** |      |
|------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                               |   | **2003**                                   |      | **2002** |   |
| **Cash Flows from Operating  Activities:**                                         |   |                                       |      |   |   |
| Net income                                                                         |   | $                                          | 776,381   |   | $ | 1,299,985 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |   |                                       |      |   |   |
| Depreciation                                                                       |   | 2,718,253                                  |      | 1,992,899 |   |
| Amortization of  investment premiums                                               |   | —                                     |      | 483 |   |
| Tax benefit from  exercise of stock options                                        |   | 9,392                                      |      | 97,820 |   |
| Deferred income  taxes                                                             |   | 418,659                                    |      | 625,392 |   |
| Common stock  issued to employee stock ownership plan                              |   | 53,906                                     |      | 138,444 |   |
| Decrease  (increase) in assets:                                                    |   |                                       |      |   |   |
| Accounts  receivable - trade, net                                                  |   | (1,006,450                                 | )         | (1,189,038 | ) |
| Inventory                                                                          |   | (191,847                                   | )         | (104,982 | ) |
| Prepaid income  taxes                                                              |   | 195,000                                    |      | (47,620 | ) |
| Spare parts                                                                        |   | (186,188                                   | )         | (146,626 | ) |
| Prepaid expenses  and other current assets                                         |   | 88,852                                     |      | 113,344 |   |
| Other assets                                                                       |   | 3,539                                      |      | 21,205 |   |
| Increase  (decrease) in liabilities:                                               |   |                                       |      |   |   |
| Accounts payable                                                                   |   | 66,560                                     |      | (46,864 | ) |
| Accrued expenses                                                                   |   | (241,398                                   | )         | (184,016 | ) |
| Other long-term  liabilities                                                       |   | (26,346                                    | )         | 43,500 |   |
| Net cash provided  by operating activities                                         |   | 2,678,313                                  |      | 2,613,926 |   |
| **Cash Flows from Investing  Activities:**                                         |   |                                       |      |   |   |
| Sale of  investments                                                               |   | —                                     |      | 1,493,196 |   |
| Acquisition of  equipment, net                                                     |   | (1,843,033                                 | )         | (4,543,431 | ) |
| Net cash used in  investing activities                                             |   | (1,843,033                                 | )         | (3,050,235 | ) |
| **Cash Flows from Financing  Activities:**                                         |   |                                       |      |   |   |
| Redemption of  Class “B” Preferred Stock                                 |   | (12,469                                    | )         | (10,763 | ) |
| Borrowing on line  of credit                                                       |   | —                                     |      | 1,000,000 |   |
| Exercise of stock  options                                                         |   | 53,205                                     |      | 124,935 |   |
| Net cash provided  by financing activities                                         |   | 40,736                                     |      | 1,114,172 |   |
| Net increase in  cash and cash equivalents                                         |   | 876,016                                    |      | 677,863 |   |
| Cash and cash  equivalents at beginning of period                                  |   | 2,847,581                                  |      | 839,103 |   |
| Cash and cash  equivalents at end of period                                        |   | $                                          | 3,723,597 |   | $ | 1,516,966 |   |
| **Supplemental Disclosures of Cash  Flow Information:**                            |   |                                       |      |   |   |
| Cash paid during  the period for income taxes                                      |   | $                                          | 10,000    |   | $ | 130,000 |   |
| Cash paid during  the period for interest                                          |   | $                                          | 53,072    |   | $ | 67,549 |   |

 

See notes to UnauditedCondensed Consolidated Financial Statements.

 

6

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**ALCIDE CORPORATIONNOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

1.                                       Basisof Presentation

 

In the opinion ofmanagement, the accompanying unaudited condensed consolidated financialstatements of Alcide Corporation (the “Company”) for the three and nine-monthperiods ended February 28, 2003 and 2002 have been prepared in accordance withthe instructions to Form 10-Q.  Certaininformation and disclosures normally included in notes to financial statementshave been condensed or omitted according to the rules and regulations of theSecurities and Exchange Commission, although the Company believes that thedisclosures are adequate to make the information presented not misleading.  The accompanying unaudited condensedconsolidated financial statements should be read in conjunction with thefinancial statements contained in the Company’s Annual Report on Form 10-K forthe fiscal year ended May 31, 2002.  Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements contain all adjustments (consisting of only normalrecurring accruals) considered necessary for a fair presentation.  Certain reclassifications have been made toprior year financial statements to conform to current year presentation.  The results of operations for the interimperiods are not necessarily indicative of the results to be expected for thefull year.

 

2.                                       Accounts Receivable - Trade consisted ofthe following:

 
|                              |   | **February 28, 2003** |            | **May 31, 2002** |   |
|-----------------------------------|--------|-----------------------|-----------------|------------------|--------|
| Domestic Distributors             |   | $                     |  384,467   |             | $      |  349,942 |   |
| International Distributors        |   | 1,274,001             |            | 813,155          |   |
| SANOVA Customers                  |   | 2,043,261             |            | 1,580,444        |   |
| Other Receivables                 |   | 153,824               |            | 105,562          |   |
| Total Accounts Receivable - Trade |   | $                     |  3,855,553 |             | $      |  2,849,103 |   |

 

The Company evaluatesimpairment of its trade receivables on a regular basis.  During the quarter, the Company recorded anallowance for doubtful accounts of $27,000 to reflect the Company’s probableloss relating to receivables from one of its customers that filed for Chapter11 bankruptcy protection.  The allowancefor doubtful accounts was $28,000 and $1,000 as of February 28, 2003 and May31, 2002, respectively, which was estimated based on collection history andknown events.

 

3.                                       Inventoryconsisted of the following:

 
|                               |   | **February 28, 2003** |      | **May 31, 2002** |   |
|------------------------------------|--------|-----------------------|-----------|------------------|--------|
| Raw Materials                      |   | $                     | 657,494   |             | $      | 307,922 |   |
| Finished Products                  |   | 479,104               |      | 630,517          |   |
| SANOVA Inventory at Customer Sites |   | 878,940               |      | 885,252          |   |
| Total Inventory                    |   | $                     | 2,015,538 |             | $      | 1,823,691 |   |

 

4.                                       Lineof Credit Payable

 

In September 2002, theCompany 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. The interest rates areapproximately 3.1% for the first advance and 3.0% for the second.  Interest is paid monthly.  Management believes the Company was in fullcompliance with all bank covenants as of February 28, 2003.  The Company repaid both of these advances inMarch 2003.

 

7

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5.                                       Commitmentsand Contingencies

 

As of February 28, 2003,the Company had contracts for future startups of six red meat processingoperations.  It is estimated that 65% to75% of the assets required for such installations have already been purchasedand are classified on the balance sheet as construction in progress.

 

6.                                       Taxes

 

The income taxprovisions were as follows:

 
|                        |   | **Three  Months Ended  February 28,** |    | **Nine  Months Ended  February 28,** |   |
|-----------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                        |   | **2003**                              |    | **2002**                             |   | **2003** |   | **2002** |   |
| Federal Income Taxes        |   | $                                     | 144,139 |                                 | $      | 278,346 |   | $ | 399,954 |   | $ | 669,690 |   |
| State Income Taxes          |   | 6,522                                 |    | 12,595                               |   | 18,097 |   | 30,302 |   |
| Total Income Tax Provisions |   | $                                     | 150,661 |                                 | $      | 290,941 |   | $ | 418,051 |   | $ | 699,992 |   |

 

7.                                       EarningsPer Share

 

Basic earnings pershare is computed by dividing net income by the weighted average number ofcommon shares outstanding during the period. Diluted earnings per share is computed by dividing net income by theweighted average number of common shares and potential common shares outstandingduring the period. Potential common shares of the Company include the dilutiveeffect of outstanding stock options and warrants. For the three and nine-monthperiods ended February 28, 2003, potential common shares excluded because oftheir antidilutive effect were 260,392 and 242,892 shares, respectively.  For the three and nine-month periods endedFebruary 28, 2002, 95,790 and 93,790 shares were excluded, respectively.

 

Basic and dilutedearnings per share were calculated as follows:

 
|                                                                                                                                          |   | **Three  Months Ended  February 28,** |    | **Nine  Months Ended   February 28,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|---------------------------------------|--------|
|                                                                                                                                          |   | **2003**                              |    | **2002**                              |   | **2003** |   | **2002** |   |
|                                                                                                                                          |   |                                  |    |                                  |   |   |   |   |   |
| Net income                                                                                                                                    |   | $                                     | 279,799 |                                  | $      | 540,316 |   | $ | 776,381 |   | $ | 1,299,985 |   |
| Weighted average number of common shares outstanding                                                                                          |   | 2,659,910                             |    | 2,648,614                             |   | 2,657,352 |   | 2,640,358 |   |
| Basic earnings per share                                                                                                                      |   | $                                     | .11     |                                  | $      | .20 |   | $ | .29 |   | $ | .49 |   |
| Assuming exercise of options reduced by the number of shares which  could have been purchased with the proceeds from exercise of such options |   | 22,855                                |    | 67,235                                |   | 24,610 |   | 82,285 |   |
| Weighted average common shares outstanding and dilutive potential  common shares                                                              |   | 2,682,765                             |    | 2,715,849                             |   | 2,681,962 |   | 2,722,643 |   |
| Diluted earnings per share                                                                                                                    |   | $                                     | .10     |                                  | $      | .20 |   | $ | .29 |   | $ | .48 |   |

 

8.                                       Ordersfor Future Delivery

 

At February 28,2003 and 2002, the Company had orders for future delivery of $430,918 and$714,113, respectively.  The $430,918orders for future delivery are scheduled for shipment during the periodMarch 2003 through May 2003. Last year’s future orders included $240,462of orders from one of the Company’s domestic distributors, IBA.  This year’s sales to IBA are based on alicensing arrangement that doesn’t involve the placement of orders for futuredelivery. Data for both years excludes expected sales of SANOVA becausecontracts with SANOVA customers do not require placement of purchase orders forfuture delivery.

 

8

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9.                                       Segment Information

 

The Company follows theprovisions of Statement of Financial Accounting Standards (“SFAS”) No. 131,“Disclosures about Segments of an Enterprise and Related Information” andreports segment information in the same format as reviewed by the Company’smanagement (the “Management Approach”), which is organized around differencesin products and services.  Managementhas determined the Company has two reportable segments, Animal Health andSurface Disinfectants and SANOVA Food Antimicrobial Products.

 

The Company’s reportablesegments are strategic business units that offer similar products, but toentirely different customers at substantially different selling prices and costof goods sold structures.  The Companydoes not have any inter-segment revenues.

 

The accounting policiesof the segments are the same as those described in Note 2 – Summary ofSignificant Accounting Policies in the Company’s May 31, 2002 Form 10-K.  The Company evaluates performance based ongross margin from the sale of each segment’s products and does not allocateexpenses beyond gross margin to the two segments.

 

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

 
|                                        |   | **Three Months Ended  February 28,** |    | **Nine Months Ended  February 28,** |   |
|---------------------------------------------|--------|--------------------------------------|---------|-------------------------------------|--------|
|                                        |   | **2003**                             |    | **2002**                            |   | **2003** |   | **2002** |   |
| **Animal Health and Surface Disinfectants** |   |                                 |    |                                |   |   |   |   |   |
| License Revenue – U.S.                 |   | $                                    | 330,722 |                                | $      | — |   | $ | 590,876 |   | $ | — |   |
| Net Sales - U.S.                            |   | 878,954                              |    | 1,249,335                           |   | 2,384,374 |   | 4,232,286 |   |
| Net Sales - International                   |   | 1,070,183                            |    | 999,099                             |   | 3,230,895 |   | 3,553,759 |   |
| Total Revenue                               |   | 2,279,859                            |    | 2,248,434                           |   | 6,206,145 |   | 7,786,045 |   |
| Gross Margin                                |   | 1,395,902                            |    | 1,290,888                           |   | 3,654,518 |   | 4,428,502 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| Assets (at end of period)                   |   | 3,359,538                            |    | 3,533,698                           |   | 3,359,538 |   | 3,533,698 |   |
| Fixed Asset Additions                       |   | —                               |    | —                              |   | — |   | — |   |
| Depreciation Expense                        |   | 1,344                                |    | 1,344                               |   | 4,032 |   | 4,032 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| **SANOVA**                                  |   |                                 |    |                                |   |   |   |   |   |
| Net Sales - U.S.                            |   | 3,223,735                            |    | 3,251,818                           |   | 10,121,193 |   | 8,846,017 |   |
| Gross Margin                                |   | 1,012,453                            |    | 1,295,995                           |   | 3,686,185 |   | 3,560,366 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| Assets (at end of period)                   |   | 14,996,925                           |    | 15,526,988                          |   | 14,996,925 |   | 15,526,988 |   |
| Fixed Asset Additions                       |   | 430,240                              |    | 1,007,544                           |   | 1,760,355 |   | 4,433,075 |   |
| Depreciation Expense                        |   | 903,852                              |    | 688,382                             |   | 2,627,790 |   | 1,924,236 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| **Not  Segment Related**                    |   |                                 |    |                                |   |   |   |   |   |
| Assets (at end of period)                   |   | 4,678,765                            |    | 2,627,587                           |   | 4,678,765 |   | 2,627,587 |   |
| Fixed Asset Additions                       |   | 4,468                                |    | 14,625                              |   | 82,678 |   | 110,356 |   |
| Depreciation Expense                        |   | 29,908                               |    | 23,244                              |   | 86,431 |   | 64,631 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| **Total**                                   |   |                                 |    |                                |   |   |   |   |   |
| License Revenue                             |   | 330,722                              |    | —                              |   | 590,876 |   | — |   |
| Net Sales                                   |   | 5,172,872                            |    | 5,500,252                           |   | 15,736,462 |   | 16,632,062 |   |
| Total Revenue                               |   | 5,503,594                            |    | 5,500,252                           |   | 16,327,338 |   | 16,632,062 |   |
| Gross Margin                                |   | 2,408,355                            |    | 2,586,883                           |   | 7,340,703 |   | 7,988,868 |   |
|                                        |   |                                 |    |                                |   |   |   |   |   |
| Assets (at end of period)                   |   | 23,035,228                           |    | 21,688,273                          |   | 23,035,228 |   | 21,688,273 |   |
| Fixed Asset Additions                       |   | 434,708                              |    | 1,022,169                           |   | 1,843,033 |   | 4,543,431 |   |
| Depreciation Expense                        |   | 935,104                              |    | 712,970                             |   | 2,718,253 |   | 1,992,899 |   |
|                                             |        |                                      |         |                                     |        |  |  |  |  |  |  |  |  |

 

Assets assigned to thebusiness segments include accounts receivable, inventories, fixed assets, spareparts and goodwill.  No single customeraccounted for 10% or more of revenues.

 

9

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**PART  I.**

 

ITEM 2.                             Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

 

## Introduction

AlcideCorporation (the “Company” or “Alcide”) is a Delaware Corporation organized in1983 which has its executive offices and research laboratories at 8561 154thAvenue N.E., Redmond, Washington 98052.

 

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

 

Risks and Uncertainty

This reportincludes forward looking statements which involve risk and uncertaintyincluding, without limitation, risk of dependence on patents, trademarks, thirdparty suppliers, market acceptance of and demand for the Company’s products,distribution capabilities and the development of technology and governmentregulatory approval thereof.

 

Sentences orphrases that use words such as “believes”, “anticipates”, “hopes”, “plans”, “may”, “can”, “will”, “expects” and others are often used to flag such forwardlooking statements, but their absence does not necessarily mean a statement isnot forward looking.  Such statementsreflect management’s current opinion and are designed to help readersunderstand management’s thinking.  Bytheir very nature, however, such statements are subject to certain risks anduncertainties that could cause actual results to differ materially from thoseexpected or projected.  Readers arecautioned not to place undo reliance on these forward looking statements whichspeak only as of the date hereof.  TheCompany undertakes no obligation to release publicly any revisions to theseforward looking statements that may be made to reflect events or circumstancesafter the date hereof or to reflect the occurrence of unanticipated events.

 

Substantially allof the Company’s products are subject to regulatory approval of or control byvarious governmental agencies, such as the Food and Drug Administration,Department of Agriculture and Environmental Protection Agency in the UnitedStates and their equivalents in international markets.  The exercise of control and regulatoryauthority by these agencies can have a material effect on the Company’sbusiness directly as it relates to the Company’s products and indirectly as itmay relate to competitors’ products.

 

Within the AnimalHealth and Surface Disinfectant business segment, all of the Company’s AnimalHealth products are sold through distributors having exclusive orsemi-exclusive rights to specified geographical territories.  The loss of a distributor can have a materialeffect on the Company’s sales, particularly, in the short-term until areplacement is found, contracted and trained in the sale of the Company’sproducts.  Further, the Company faceswell established competition in each of the markets where its Animal Healthproducts are sold.  Such competition,particularly, competition claiming equivalence to the Company’s products, canlimit the sales potential for Alcide’s products.

 

Alcide’s FoodSafety products participate in a rapidly evolving marketplace which, by itsnature, attracts innovation and competing technologies.  The Company’s SANOVA sales are based onperformance, price and convenience. Introduction of competitive products better meeting these customer needscan have a material impact on the Company’s ability to sell and expand the useof its SANOVA products.

 

The Company’sbusiness model for its Food Safety business involves a capital investmentranging from $20,000 to $500,000 for each user plant site, depending on thesize of the operation.  If a substantialnumber of customers elect not to renew their contracts, non-productive assetswould exist until new customers are found. The Company’s experience after four years in the Food Safety business isthat all but two of its customers have renewed their contracts.

 

The economic vitality of the industries servedby the Company’s products can have an impact on Alcide’s ability to sell itsproducts, expand sales and maintain product price levels.  Within the Animal Health business segment, 

 

10

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the Company’s products are premium pricedconsistent with their superior performance, however, as dairy industry productmargins are compressed, some farmers may discontinue the use of Alcide productsin favor of lower priced, competitors’ products.

 

Likewise, the Company’s ability to sell andexpand sales of its Food Safety products may be impacted by economic conditionswithin the poultry and red meat industries. During the nine months ended February 28, 2003, three Alcide poultrycustomers elected not to use SANOVA as a direct result of economicconditions.  One of the three customershas allowed its SANOVA agreement to expire.

 

Critical Accounting Policies

•                  RevenueRecognition

Revenuefrom sales of SANOVA food antimicrobials is recognized based on the terms ofthe Company’s contracts with individual customers.  For customers using more than 15,000 gallons of SANOVA per month,Alcide provides bulk shipments of inventory to the customer and the customer isinvoiced at month-end with revenue recognized based on the amount of productprocessed or gallons of SANOVA used. All other customers are invoiced and revenue is recognized at the timeSANOVA is shipped to their facilities.  Paymentin either case is due fifteen to thirty days after billing.

 

AnimalHealth and Surface Disinfectant sales are recognized at the time of shipment todistributors or to end users.  TheCompany provides a limited warranty to its distributors which limits theCompany’s obligation to replacement of defective product.  Such replacements have, for the past severalyears, been less than .1% of net sales. The distributors have no contractual right to return unsoldproduct.  Payment is due thirty daysafter shipment for sales to U.S. distributors and sixty days following shipmentto international distributors.

 

Licenserevenue is recognized in the month the licensee takes delivery of licensedproducts. Payment of license revenue is due by the tenth day of the monthfollowing delivery.

 

•                  Depreciation andBook Value of SANOVA Plant Assets

Capitalinvestments for SANOVA plant assets are depreciated over a five-year life,while customer contracts range from one year to four years.  As the SANOVA food antimicrobial businesshas been in existence for less than five years, the Company has a limited,practical basis on which to assign depreciable life.  Management believes, however, based on four years experience,that well-maintained assets will be operational beyond five years and, further,that if customers decide not to renew their contracts, the assets can berelocated to new customer sites.  In theevent that a customer elects not to renew its SANOVA agreement, the Companywill continue to depreciate the SANOVA assets consistent with SFAS No. 144, “Accountingfor Impairment or Disposal of Long-Lived Assets.”

 

Commitments and Contingencies

 

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

 

Line of Credit Payable:  InSeptember 2002, the Company extended its $10,000,000 unrestricted line ofcredit with US Bank.  The new expirationdate is September 30, 2004.

 

Two advances of $1,000,000 each have been taken on the line ofcredit.   The interest rates areapproximately 3.1% for the first advance and 3.0% for the second.  Interest is paid monthly.  Management believes the Company was in fullcompliance with all bank covenants as of February 28, 2003.  The Company repaid both advances in March2003.

 

New SANOVAInstallations:  As of February 28, 2003,the Company had contracts for future startups of six red meat processingoperations.  It is estimated that 65% to75% of the assets required for such installations have 

 

11

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already beenpurchased and are classified on the balance sheet as construction inprogress.  An additional investment of$150,000 to $250,000 may be required for successful startup of the six systems.

 

Employment Agreements:  Oneofficer has a one year, automatically renewable, employment agreement whichobligates the Company to a salary of $273,266 per year.  Bonus compensation of 100% of base pay forthe 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 itsoutstanding Series 2 Class “B” Preferred Stock.  The amount redeemed is equal to .7% of the Company’s prior yearnet income.  A total of $167,145 ofClass “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 $5,503,594 for the quarter endedFebruary 28, 2003 were $3,342 higher than for the equivalent quarter lastyear.  Fiscal 2003 nine-month net salesand license revenue of $16,327,338 were $304,724, or 2%, lower than nine-monthsales in fiscal 2002.

 

Sales of SANOVA food antimicrobial to the poultry and red meatindustries totaled $3,223,735 for the quarter ended February 28, 2003, $28,083lower than the third fiscal quarter last year. At the end of the third fiscal 2003 quarter, SANOVA systems werecontracted for and installed at 38 poultry plants and 10 red meat plants.  Three of the poultry plants were usingSANOVA applications both pre-chill and post-chill, thus bringing the total to51 operations at quarter’s end.  Two ofthe poultry operations and three of the red meat operations did not contributesignificant revenue during the quarter. SANOVA sales for the nine-month period ended February 28, 2003 were$10,121,193, an increase of $1,275,176, or 14%, compared to the equivalentnine-month period last year.

 

SANOVA sales to the poultry industry during the fiscal 2003 three-monthand nine-month periods, were adversely affected by economic conditions withinthe poultry industry, which in turn, have caused SANOVA customers to reducetheir use of SANOVA, discontinue using antimicrobial interventions altogether,or in the case of one plant, switch to lower priced competition.  The following table shows the difference insales this year versus last year for these customers.

 

Negative Impact on SANOVA Net Sales Caused by Poultry Industry Profitability

 
|                                           |   | **Estimated Impact on  Fiscal 2003 Sales** |    |
|------------------------------------------------|--------|--------------------------------------------|---------|
|                                           |   | **Quarter Ended****February 28, 2003**     |    | **Nine Months Ended****February 28, 2003** |   |
|                                           |   |                                       |    |   |   |
| 3 plants discontinued  SANOVA use              |   | $                                          | 272,000 |   | $ | 826,000 |   |
| 1 plant switched to  competitor’s product |   | $                                          | 55,000  |   | $ | 119,000 |   |
| Reduced production at  several plants          |   | $                                          | 141,000 |   | $ | 146,000 |   |
|                                           |   |                                       |    |   |   |
|                                           |   | $                                          | 468,000 |   | $ | 1,091,000 |   |

 

The Company’s Animal Health and Surface Disinfectant revenues for thequarter ended February 28, 2003 were $2,279,859, including $330,722 in licenserevenue, which did not exist prior to the first fiscal quarter of 2003.  Net revenue including license revenue forthe third fiscal 2003 quarter was $31,425 higher than for the third fiscalquarter last year. Nine-month fiscal 2003 Animal Health and Surface Disinfectantsales and license revenue of $6,206,145 were $1,579,900 lower than for thenine-month period last year reflecting primarily changes in distributorinventory levels which occurred during the first four months of the Company’sfiscal year 

 

12

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2003.  In the United Kingdom, theCompany established a new distributor relationship with Agri-Lloyd beginningSeptember 15, 2002, while the Company’s previous distributor liquidated itsinventory of Alcide products resulting in a $280,000 sales reduction from theprior year.  In the United States,Alcide introduced UDDERgold 5-Star, an advanced new product, in early October2002, intended to maintain the Company’s performance edge in the mastitisprevention market.  In anticipation ofthe new product launch, U.S. distributors delayed their purchases, accountingfor a reduction of an estimated $350,000 in sales activity during the firstfour months of fiscal 2003.  Lastly,IBA, the Company’s largest distributor, transitioned from a distributorarrangement with Alcide to a licensing arrangement and this transition had theeffect of reducing sales to IBA by an estimated $800,000 during the firstnine-month period of fiscal year 2003. The gross margin impact of the salesreduction is estimated at $200,000, attributable entirely to inventoryreduction.  This reduction occurred inthe first quarter of fiscal year 2003 as IBA sold through its existinginventory of Alcide produced products and began making IBA produced products.

 

Cost of Goods Sold

 

Cost of goods sold was 56% of total revenue for the quarter and 55% oftotal revenue for the nine-month period ended February 28, 2003, as compared to53% and 52%, respectively, of total revenue for the equivalent periods a yearago.

 

Cost of goods sold as a percentage of net sales for the SANOVA (FoodSafety) business segment was at 69% for the quarter and 64% for the nine-monthperiod ended February 28, 2003, as compared to 60% of net sales for the quarterand nine-month period last year.  Theincrease as a percentage of net sales was caused primarily by theunderutilization of equipment during production stoppages and reductions atSANOVA customers during fiscal 2003.

 

Cost of goods sold for the Animal Health and Surface Disinfectantbusiness segment was 45% of net sales (excludes license revenue) for thequarter and nine-month periods ended February 28, 2003 versus 43% of net salesfor both the third quarter and nine-month periods last year.  The increased cost of goods sold as apercentage of net sales for the segment was caused primarily by a shift inproduct mix as a result of the aforementioned distributor inventory reductionswhich affected sales of products UDDERgold Plus and UDDERgold to a greaterdegree than lower margin ancillary products.

 

Research and Development Expense

 

Reflecting the conclusion of development activities related to theCompany’s new Animal Health products and the reduction in the cost of SANOVAprocess validation trials, research and development expenses for the quarterand for the nine months ended February 28, 2003 were $53,300 and $384,357lower, respectively, than for the equivalent periods a year ago.

 

Selling, General and Administrative Expense

 

Selling, general and administrative expense of $1,441,805 for thequarter ended February 28, 2003 was $273,852 higher than for the equivalentquarter last year. Nine-month fiscal year 2003 expense of $4,421,222 was$514,905 higher than for the nine-month period last year.  Major components of the increase were a$102,000 increase in Animal Health marketing expenses incurred to launchUDDERgold 5 Star and to solidify the Animal Health and Surface Disinfectantbusiness segment, a $118,000 increase in Food Safety administrative expensesprimarily related to additional staff to enter the red meat and fish markets, a$100,000 increase in insurance costs due to growth of the Company, a $27,000allowance for doubtful accounts related to a receivable from a Puerto Ricopoultry customer, and an estimated $40,000 in legal and other costs to complywith evolving SEC and NASDAQ regulations.

 

13

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Interest Income

 

Interest income was $5,945 for the quarter and $20,013 for thenine-month period ended February 28, 2003 versus $11,693 for the quarter and$63,826 for the nine-month period last year. The decrease was due to lower prevailing short-term interest rates.

 

Interest Expense

 

Interest expense of $15,219 for the quarter and $53,072 for thenine-month period ended February 28, 2003 compare favorably to the $20,591 and$67,549 for the quarter and nine-month period last year, respectively.  The reduction is due entirely to lowerprevailing interest rates.

 

Liquidity and Capital Resources

 

The Company’s cash and cash equivalentstotaled $3,723,597 on February 28, 2003, as compared to $2,847,581 on May 31,2002.  During the first nine months offiscal 2003, the Company generated cash from operating activities of $2,678,313and invested a net of $1,843,033 in acquisition of new assets to support theexpanding SANOVA business.  At thistime, the Company expects to fund its existing operations and growth with itscurrent cash balance plus cash generated by operations.  If growth exceeds current expectations, itmay be necessary to draw on the Company’s line of credit.  In March 2003, the Company repaid $2,000,000that had previously been advanced on the line of credit, restoring theavailable line to its original $10,000,000.

 

Outlook

•                                          SANOVA FoodQuality System

Management expects the size of the Company’sfood antimicrobial business will continue to expand.  Eleven new operations were added during the first nine months of2003 and six additional operations are under construction.  The poultry industry is under severeeconomic pressure and, as a consequence, two SANOVA customers have temporarilystopped purchasing the Company’s product and one customer has allowed itsSANOVA agreement to terminate.  Inaddition, one SANOVA customer has switched to a lower priced competitor’s product.  Until the poultry industry recovers from itseconomic slump, it will be difficult for Alcide to expand its business in thatsector and existing Alcide customers may be vulnerable to lower pricedcompetitive products or, alternatively, SANOVA may experience pricingpressure.  New plants started during theyear and those scheduled for startup during the next several months have beenpredominately red meat plants.  Alcidemanagement believes that the near term growth prospects in the red meat andaquaculture business segments offer the greatest expansion potential.

 

•                                          Animal Healthand Surface Disinfectant Products

The worldwide dairy herd is decreasingslightly as cows become more productive, partly through increased use ofmastitis prevention products such as those marketed by Alcide.  In addition, the Company now faces directcompetition from products similar to its products, UDDERgold, UDDERgold Plusand 4XLA®.  To counter thiscompetitive threat, the Company has introduced advancements to its technologyin the form of UDDERgold Platinum® in Europe and UDDERgold 5-Star,an improved barrier product, in the United States.  The Company’s strategy is to maintain a performance edge overcompeting products.  However, becausethe Company sells through distributors, both changes in the distributionnetwork and the introduction of new products can cause the Company’s sales toshift from quarter to quarter as distributors increase or decrease theirinventories of Alcide products.  On anongoing basis, management believes that its distribution network, combined withevolving new product introductions, will enable Alcide to maintain its share ofthe market.

 

ITEM 3.                             Quantitative and QualitativeDisclosures About Market Risk

 

No materialchanges have occurred in the disclosure of qualitative and quantitative marketrisk set forth in our Annual Report on Form 10-K for the fiscal year ended May31, 2002.

 

14

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ITEM 4.                             Evaluationof 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 andprocedures*”*(as defined in theSecurities 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 dateof this quarterly report, have concluded that, as of the Evaluation Date, theCompany’s disclosure controls and procedures were adequate and designed toensure that material information relating to the Company and its consolidatedsubsidiary would be made known to them by others within those entities.

 

b)                  There were no significant changes in the Company’sinternal controls or in other factors that could significantly affect theCompany’s disclosure controls and procedures subsequent to the EvaluationDate.  There were no significantdeficiencies or material weaknesses, and therefore, there were no correctiveactions taken.

 

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**PARTII.**

 

#### **OTHER INFORMATION**

 

ITEM 1.                           LegalProceedings

 

On October 31,2002, the Company filed a patent lawsuit against Biocide InternationalIncorporated in the United States District Court, Western District ofWashington.

 

The lawsuit claimsthat “a reasonable opportunity for discovery will show that Biocide hasinfringed the 064 Patent (Alcide’s Patent 36064) because it has made, offeredfor sale, distributed, used and/or sold antimicrobial or biocidal products suchas Oxine, Pro-Oxine and Purogene for use in food treatment and red meat industrythat fall within one or more claims of the 064 Patent, or when used inaccordance with Biocide’s instructions and teachings, fall within one or moreclaims of the 064 Patent”.

 

The lawsuit alsoclaims that “Biocide has also made, offered for sale, distributed, used and/orsold Purogene antimicrobial or biocidal products through its distributorAerosafe Products Incorporated that fall within one or more claims of the 064Patent, or when used in accordance with Biocide’s instructions and teachings,fall within one or more claims of the 064 Patent”.

 

The Discoveryphase of the lawsuit began in March 2003 and is likely to continue forapproximately a year in the event the matter ultimately goes to trial.

 

ITEM 6.                             Exhibits and Reports on Form 8-K

 

a)                   Exhibits:

 

99.1                           Certificationof Periodic Report by Chairman and Chief Executive Officer of Corporation.

 

99.2                           Certificationof Periodic report by President and Chief Financial Officer of AlcideCorporation.

 

b)                  Reports on Form 8-K:

 

None.

 

16

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#### **SIGNATURE**

 

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

 
|   |                 |             | ALCIDE CORPORATION      |
|--------|----------------------|------------------|-------------------------|
|   |                 |             | The Registrant          |
|   |                 |             |
|   |                 |             |
| Date:  |  April 13, 2003 |             | By                      | /s/  John P. Richards |   |
|   |                 | John P. Richards |
|   |                 |             | President               |
|   |                 |             | Chief Financial Officer |
|        |                      |                  |                         |  |  |  |

 

**CERTIFICATIONS**

 

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

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of Alcide Corporation;

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                       Theregistrant’s other certifying officer and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                                      all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                                       Theregistrant’s other certifying officer and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date: April 13, 2003 |   |                    |
|----------------------|--------|-------------------------|
|                 |   |                    |
|                 |   |                    |
|                 |   | By                 | /s/  Joseph A. Sasenick |   |
|                 |   | Joseph A. Sasenick      |
|                 |   | Chairman                |
|                 |   | Chief Executive Officer |

 

17

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

 

1.                                       Ihave reviewed this quarterly report on Form 10-Q of Alcide Corporation;

 

2.                                       Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                       Theregistrant’s other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)                                      designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                      presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.                                       The registrant’s other certifying officerand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.                                       Theregistrant’s other certifying officer and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date: April 13, 2003 |   |                    |
|----------------------|--------|-------------------------|
|                 |   |                    |
|                 |   |                    |
|                 |   | By                 | /s/  John P. Richards |   |
|                 |   | John P. Richards        |
|                 |   | President               |
|                 |   | Chief Financial Officer |

 

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