<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
---------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from
___________________ to ______________________.
Commission File Number: 0-12395
ALCIDE CORPORATION
-----------------------
Delaware 22-2445061
- ------------------------------- -----------------------
State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization
8561 154th Avenue North East, Redmond WA 98052
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code .......... (206) 882-2555
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 31, 1996: 2,601,301, net of Treasury Stock.
<PAGE>
ALCIDE CORPORATION
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..............................................PAGE
----
Condensed Balance Sheets - August 31, 1996
(Unaudited) and May 31, 1996.........................................3
Unaudited Condensed Statements of Operations - For the three
months ended August 31, 1996 and August 31, 1995.....................4
Unaudited Condensed Statements of Cash Flows - For the three months
ended August 31, 1996 and August 31, 1995............................5
Notes to the Unaudited Condensed Financial Statements................6
Statements of Changes in Shareholders' Equity........................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................9
Item 6. Exhibits and Reports on Form 8 - K...................................9
SIGNATURE.....................................................................10
2
<PAGE>
ALCIDE CORPORATION CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, 1996 MAY 31, 1996
---------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $5,635,339 $ 5,365,895
Short term investments 1,041,114 1,032,634
Accounts receivable - trade 2,332,487 2,585,427
Inventory 853,682 928,500
Prepaid expenses and other current assets 97,947 125,547
----------- -----------
Total current assets 9,960,569 10,038,003
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Office equipment 92,656 92,656
Laboratory and manufacturing equipment 132,404 132,404
Leasehold improvements 56,152 56,152
Less: Accumulated depreciation and amortization (100,643) (86,582)
----------- -----------
Total equipment and leasehold improvements, net 180,569 194,630
----------- -----------
Deferred income tax asset 2,242,465 2,421,191
----------- -----------
Other assets 1,113,608 1,114,790
----------- -----------
TOTAL ASSETS $13,497,211 $13,768,614
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts Payable $228,347 $374,440
Accrued Expenses and Taxes Payable 597,416 1,083,840
----------- -----------
TOTAL LIABILITIES 825,763 1,458,280
----------- -----------
COMMITMENTS AND CONTINGENCIES:
Redeemable Class B Preferred Stock - noncumulative
convertible $.01 par value: authorized
1,664,581 shares; issued and outstanding:
May 31, 1996 - 95,002
August 31, 1996 - 95,002 249,380 249,380
----------- -----------
Shareholders' equity:
Class "A" Preferred Stock - no par value authorized
1,000 shares; issued and outstanding 1,000 shares 135,307 135,307
Common Stock $.01 par value; authorized
100,000,000 shares; issued and outstanding:
May 31, 1996 - 2,791,538
August 31, 1996 - 2,796,638 27,966 27,915
Treasury stock at cost (2,280,027) (2,213,845)
Additional paid-in capital 18,260,361 18,209,412
Accumulated Deficit (3,721,539) (4,097,835)
----------- -----------
Total Shareholders' Equity 12,422,068 12,060,954
----------- -----------
TOTAL LIABILITIES, AND SHAREHOLDERS' EQUITY $13,497,211 $13,768,614
----------- -----------
----------- -----------
See notes to Unaudited Condensed Financial Statements.
</TABLE>
3
<PAGE>
ALCIDE CORPORATION UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED AUGUST 31,
1996 1995
----------- -----------
<S> <C> <C>
NET SALES $2,042,222 $2,608,746
Expenditures
Cost of goods sold 622,425 901,301
Research and development expense 436,181 268,448
Depreciation and amortization 14,061 11,841
Consulting expense to the related parties 33,014 15,000
Royalty expense 73,146 204,735
Other selling, general/administrative 393,466 512,797
----------- -----------
Total Expenditures 1,572,293 1,914,122
----------- -----------
Operating income 469,929 694,624
Royalty and other income 6,759 5,322
Interest income 94,323 70,863
Interest expense --- ---
----------- -----------
Total Non-Operating Income 101,082 76,185
Income before provision for income tax 571,011 770,809
Provision for income taxes 194,715 266,670
----------- -----------
Net income $376,296 $504,139
----------- -----------
----------- -----------
Net income per share $.13 $.18
----------- -----------
----------- -----------
Weighted average Common Shares outstanding and
Common Share equivalents 2,803,276 2,855,740
----------- -----------
----------- -----------
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
ALCIDE CORPORATION UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED AUGUST 31,
1996 1995
----------- -----------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $376,296 $504,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,061 11,841
Deferred income tax benefit 178,726 257,420
----------- -----------
569,083 773,400
----------- -----------
Decrease (increase) in assets:
Inventory 74,818 (292,524)
Accounts receivable - trade 252,940 (653,827)
Prepaid expenses and other current assets 27,600 58,713
Increase (decrease) in liabilities:
Accounts payable (146,093) 12,165
Accrued expenses and taxes payable (486,424) 47,584
----------- -----------
Total adjustments (277,159) (827,889)
----------- -----------
Net cash generated by (used in) operating activities 291,924 (54,489)
----------- -----------
INVESTING ACTIVITIES:
Acquisition of fixed and other assets (7,298) (12,352)
----------- -----------
Net cash used in investing activities (7,298) (12,352)
----------- -----------
FINANCING ACTIVITIES:
Exercise of Stock Options 51,000 ---
Purchase of Alcide Common Stock (66,182) (70,400)
----------- -----------
Net cash used in financing activities (15,182) (70,400)
----------- -----------
Net increase (decrease) in cash and cash equivalents 269,444 (137,241)
Cash and cash equivalents at beginning of period 5,365,895 2,770,157
Cash and cash equivalents at end of period $5,635,339 $2,632,916
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest --- ---
Cash paid for income taxes --- $2,500
</TABLE>
See notes to Unaudited Condensed Financial Statements.
5
<PAGE>
ALCIDE CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements of
Alcide Corporation (the "Company") for the three-month periods ended August 31,
1996 and 1995 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 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, 1996. In the opinion of
management, the accompanying unaudited condensed financial statements contain
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation. The results of operations for the three-
month periods are not necessarily indicative of the results to be expected for
the full year.
2. Inventory consisted of the following:
AUGUST 31, 1996 MAY 31, 1996
Finished products $167,834 $120,155
Raw materials $685,848 $808,345
---------- ----------
Total $853,682 $928,500
---------- ----------
---------- ----------
3. Accounts Receivable - Trade consisted of the following:
AUGUST 31, 1996 MAY 31, 1996
ABS Global, Inc. $1,693,612 $1,879,670
International Distributors $551,912 $611,286
Other Receivables $86,963 $94,471
---------- ----------
Total Accounts Receivable $2,332,487 2,585,427
---------- ----------
4. Taxes
The income tax provision for the three-month period ended August 31, 1996
consists of:
<TABLE>
<CAPTION>
TAXES PAYABLE DURING REDUCTION OF DEFERRED TOTAL TAX PROVISION
FISCAL YEAR TAX ASSET
<S> <C> <C> <C>
Federal Income Taxes 15,989 178,726 194,715
</TABLE>
5. Orders for Future Delivery
At August 31, 1996 and 1995 the Company had orders for future delivery of
$1,431,297 and $2,759,726, respectively, of which $881,038 is from one
distributor at August 31, 1996. The $1,431,297 orders for future delivery are
scheduled for shipment during the period September through December, 1996.
6
<PAGE>
ALCIDE CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class "A" Preferred Stock Common Stock Additional Paid
in Capital
- ----------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance May 31, 1996 1,000 $135,307 2,791,538 $27,915 $18,209,412
Stock Option Exercise 5,100 51 50,949
Purchase Treasury Stock
Net Income
- ----------------------------------------------------------------------------------------------------------
Balance August 31, 1996 1000 $135,307 2,796,638 $27,966 $18,260,361
-------- ----------- ------------ ------------ ------------
-------- ----------- ------------ ------------ ------------
Common Treasury Stock Accumulated Total
Deficit Shareholders'
Equity
- ------------------------------------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------
Balance May 31, 1996 (192,337) ($2,213,845) ($4,097,835) $12,060,954
Stock Option Exercise 51,000
Purchase Treasury Stock (3,000) (66,182) (66,182)
Net Income 376,296 376,296
- ------------------------------------------------------------------------------------------
Balance August 31, 1996 (195,337) ($2,280,027) ($3,721,539) $12,422,068
-------- ----------- ------------ ------------
-------- ----------- ------------ ------------
</TABLE>
7
<PAGE>
PART I.
--------
ALCIDE CORPORATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Results of Operations
First quarter fiscal year 1997 sales of $2,042,222 were 22% lower than first
quarter sales one year ago. The sales reduction is primarily the result of a
30%, $521,776 sales reduction of uddercare products to ABS Global, Inc.,
Alcide's exclusive distributor in North and South America. During the quarter
ABS Global reduced its inventories of Alcide product by approximately $700,000.
First quarter sales performance was also adversely affected by a new competitive
teat dip by Babson Brothers Company. Alcide believes the Babson Brothers'
INTERSEPT product infringes Alcide's patent and, consequently, Alcide filed a
patent infringement lawsuit against Babson Brothers and moved for a preliminary
injunction against the further sales of INTERSEPT. The injunction was issued
against Babson Brothers on September 19, 1996.
Neither the Babson Brothers infringement nor ABS inventory reduction are
expected to continue in Alcide's fiscal second quarter.
Cost of goods as a percentage of net sales decreased to 30.5% from 34.5% for the
first quarter last year. The cost improvement as a percentage of net sales
results primarily from a reduction in the cost of glycerine and other large use
raw materials, and from increased finance charges to ABS for extended sales
payment terms.
Research and development expenses of $436,181 for the first quarter of fiscal
1997 increased 63% as compared to the first quarter last year. The increase
reflects expenditures associated with pre-clinical and clinical testing as part
of the Company's response to FDA requirements for additional data to support
Alcide's preoperative skin antiseptic New Drug Application. Other significant
expenditures incurred during the quarter related to USDA mandated commercial
plant evaluations of the Company's poultry antimicrobial and to clinical testing
of Alcide's anti-infective oral medication in the United Kingdom.
Royalty expense of $73,146 for the first quarter of fiscal 1997 reflects actual
royalties earned for the quarter, while the $204,735 royalty expense for the
first quarter last year included $134,000 for the purpose of establishing a
reserve for litigation.
Other selling general and administrative expenses of $393,466 for the FY '97
first quarter were $119,331, 23%, lower than the first quarter last year. The
expense reduction reflects a $79,000 reduction in the provision for executive
bonuses consistent with lower first quarter sales performance and a $38,000
reduction in shared promotional support for ABS, consistent with the ABS sales
shortfall.
Liquidity
The Company's cash, cash equivalents, short term investments and U.S. Treasury
instruments totalled $7,790,061 on August 31, 1996, an amount $276,742 higher
than at the end of the fiscal year ended May 31, 1996. The Company's net income
for the quarter on a cash flow basis was $569,083. This was offset by an
$277,159 increase in net working capital. The working capital change is the net
of a $355,358 reduction in inventory, accounts receivable and pre-paid expenses,
offset by a decrease of $632,517 in accounts payable and accrued expenses.
Litigation Cost
During the quarter ended August 31, 1996, the Company incurred legal fees and
other costs totalling $312,400 in connection with a suit brought by some of the
individuals who have rights to receive royalties with respect to certain patents
assigned to the Company. The entire $312,400 was charged to a reserve
previously established for the litigation. On August 31, 1996 the reserve
balance was $346,600. The Company has denied any wrongdoing in connection with
the matters that have been alleged and intends to continue to defend the lawsuit
vigorously.
8
<PAGE>
PART II.
--------
OTHER INFORMATION
Item 1. Legal Proceedings
On August 19, 1996, Alcide Corporation filed a patent infringement lawsuit in
the United States District Court for the Western District of Wisconsin against
Babson Brothers Company of Naperville, Illinois. The suit concerns Babson
Brothers' introduction of its INTERSEPT teat dip product, which closely
resembles Alcide's UDDERgold-Registered Trademark-.
Subsequently on September 10, 1996, Alcide moved for a Preliminary Injunction
against further sales of the INTERSEPT product. On September 19, 1996, Judge
Barbara B. Crabb, of the Western District of Wisconsin, issued a Preliminary
Injunction order enjoining the manufacture, sale or use of the INTERSEPT product
pending final resolution of the lawsuit.
Item 6. Exhibits and Reports on Form 8-K
EXHIBIT 11
(a) Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Three Months Ended August 31,
1996 1995
--------- ---------
<S> <C> <C>
Weighted average number of Common Shares outstanding 2,600,251 2,632,458
Assuming exercise of options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options 203,025 223,282
--------- ---------
Weighted average Common Shares outstanding and Common
Share equivalents 2,803,276 2,855,740
--------- ---------
--------- ---------
Net Income per share $.13 $.18
</TABLE>
Reports on Form 8 - K
None.
9
<PAGE>
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: October 4, 1996 By /s/
-------------------------------
John P. Richards
Executive Vice President
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 5,635,339
<SECURITIES> 0
<RECEIVABLES> 2,332,487
<ALLOWANCES> 0
<INVENTORY> 853,682
<CURRENT-ASSETS> 9,960,569
<PP&E> 281,212
<DEPRECIATION> (100,643)
<TOTAL-ASSETS> 13,497,211
<CURRENT-LIABILITIES> 825,763
<BONDS> 0
0
249,380
<COMMON> 27,966
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,497,211
<SALES> 2,042,222
<TOTAL-REVENUES> 2,143,304
<CGS> 622,425
<TOTAL-COSTS> 1,572,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 571,011
<INCOME-TAX> 194,715
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 376,296
<EPS-PRIMARY> 0
<EPS-DILUTED> .13
</TABLE>
