U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
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 0-11102
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1564329
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
4041 SW 47 Avenue, Ft. Lauderdale, Florida 33314-4023
(Address of principal executive offices)
954-587-6280
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or such shorter period that the registrant has
been required to submit and post such files). Yes [X] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated file. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No.|X|
The number of shares of the Registrant's common stock outstanding as of May
14, 2009, was 7,699,813.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
Part I - Financial Information:
Item 1. - Financial Statements:
Condensed consolidated balance sheets
as of March 31, 2009 and December
31, 2008 3
Condensed consolidated statements of operations
for the three months ended March 31, 2009 and 2008 4
Condensed consolidated statements of cash flows
for the three months ended March 31, 2009 and 2008 5
Notes to condensed consolidated financial statements 6-14
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of Operations 14-16
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 16
Item 4 - Controls and Procedures 16-17
Part II - Other Information:
Item 1. - Legal Proceedings 17
Item 1A. - Risk Factors 17
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. - Defaults upon Senior Securities 17
Item 4. - Submission of Matters to a Vote by Security Holders 17
Item 5. - Other Matters 17
Item 6. - Exhibits 17
Signatures 17
Certifications 18-20
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2009 DECEMBER 31, 2008
---------------- -----------------
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 406,574 $ 527,056
Trade accounts receivable net of allowance for doubtful
accounts of approximately $183,200 and $117,600 at March 31 ,
2009 and December 31, 2008 respectively 1,882,792 1,966,223
Inventories, net 7,717,902 6,564,909
Prepaid expenses and other current assets 265,451 365,982
------------- ------------
Total current assets 10,272,719 9,424,170
------------- ------------
Property, plant and equipment, net 5,692,010 5,780,395
------------- ------------
Other assets:
Trademarks, trade names and patents, net
of accumulated amortization 330,439 330,439
Due from affiliated companies, net 914,746 910,553
Deposits and other assets 208,628 184,628
------------- ------------
Total Other Assets 1,453,813 1,425,620
------------- ------------
Total Assets $ 17,418,542 $ 16,630,185
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 1,364,218 $ 894,193
Notes payable - bank 3,200,000 2,800,000
Current portion of long term debt 584,652 584,537
Accrued expenses payable 690,972 883,354
------------- ------------
Total Current Liabilities 5,839,842 5,162,084
------------- ------------
Long term debt, less current portion 3,287,763 3,434,491
------------- ------------
Commitments and contingencies
Shareholders' Equity:
Common stock - $.01 par value, 10,000,000 shares authorized;
8,051,316 and 7,886,816 shares issued and outstanding at
March 31, 2009 and December 31, 2008, respectively 80,513 78,868
Additional paid in capital 8,027,924 7,928,269
Less cost of common stock in treasury, 351,503 shares
at March 31, 2009 and December 31, 2008, respectively ( 288,013) ( 288,013)
Foreign currency translation adjustment ( 249,956) ( 280,123)
Retained earnings 720,469 594,609
------------- ------------
Total Shareholders' Equity 8,290,937 8,033,610
------------- ------------
Total Liabilities and Shareholders' Equity $ 17,418,542 $ 16,630,185
============= ============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS
ENDED MARCH 31,
2009 2008
----------- -----------
Gross sales $4,341,354 $3,980,519
Sales allowances 231,371 235,559
----------- -----------
Net sales 4,109,983 3,744,960
Cost of goods sold 2,660,099 2,873,824
----------- -----------
Gross profit 1,449,884 2,873,824
----------- -----------
Expenses:
Advertising and promotion 321,979 202,346
Selling and administrative 851,533 927,247
Interest expense 70,925 64,687
----------- -----------
Total operating expenses 1,244,437 1,194,,280
----------- -----------
Operating income (loss) 205,447 ( 323,144)
Other income 11,571 11,908
----------- -----------
Income (loss) before Income Taxes 217,018 ( 311,237)
Provision (benefit) for Income Taxes 91,158 ( 104,946)
----------- -----------
Net income (loss) 125,860 (206,291)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment 30,167 (1,310)
----------- -----------
Comprehensive income (loss) $ 156,027 ($ 207,601)
=========== ===========
Income (loss) per common share - basic and diluted $ 0.02 ($ 0.03)
=========== ===========
Weighted average shares - basic and diluted 7,590,146 7,822.066
=========== ===========
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(UNAUDITED)
2009 2008
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 125,860 ($206,290)
Adjustment to reconcile net income (loss)
to net cash used in operations:
Depreciation and amortization 179,449 196,988
Stock based compensation 101.300 29,803
Other operating non-cash items 114,577 95,625
Changes in assets and liabilities:
Accounts receivable 22,377 95,836
Inventory (1,176,162) (1,121,885)
Deposits and other assets ( 24,000) ( 101,555)
Prepaid expenses 100,531 126,692
Accounts payable and accrued taxes and other 277,643 146,168
---------- ----------
Net cash (used) in operating activities ( 278,425) ( 535,508)
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment ( 91,064) ( 131,421)
---------- ----------
Net cash used in investing activities ( 91,064) ( 131,421)
---------- ----------
Cash flows from financing activities:
Borrowings line of credit, net 400,000 950,000
Amounts due from affiliates ( 4,193) ( 242,935)
Principal payments - long-term debt ( 146,613) ( 136,370)
---------- ----------
Net cash provided by financing activities 249,194 570,695
---------- ----------
Cash prior to effect of exchange rate on cash ( 120,295) ( 96,234)
Effect of foreign exchange rate on cash ( 187) ( 1,310)
---------- ----------
Net (decrease) increase in cash ( 120,482) ( 97,544)
Cash at beginning of period 527,056 750,901
---------- ----------
Cash at end of period $ 406,574 $ 653,357
========== ==========
Supplemental disclosure of cash transactions:
Cash paid for interest during period $ 70,925 $ 64,687
========== ==========
Cash paid for income taxes during period $ 185,000 $ -
========== ==========
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
OCEAN BIO CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Interim Reporting
The accompanying unaudited consolidated financial statements include the
accounts of Ocean Bio-Chem, Inc. and its subsidiaries ("the Company"). All
significant inter-company transactions and balances have been eliminated. The
unaudited consolidated financial statements have been prepared in conformity
with Article 8 of Regulation S-X of the Securities and Exchange Commission and,
therefore, do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America. However, all adjustments (consisting of normal recurring accruals)
that, in the opinion of management, are necessary for a fair presentation of the
financial statements have been included.
Operating results for the period ended March 31, 2009 are not necessarily
indicative of the results that may be expected for the full year ending December
31, 2009 due to seasonal fluctuations in the Company's business, changes in
economic conditions and other factors.
For further information, please refer to the Consolidated Financial
Statements and Notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 2008.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amount of assets, liabilities, revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain items in the accompanying consolidated financial statements for the
year 2008 that had an immaterial amount may have been reclassified to conform to
the 2009 presentation.
Revenue recognition
Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery to customer has occurred, the sales price is fixed
and determinable, and collectability of the related receivable is probable. For
customers for whom the Company manages the inventory, at their location, revenue
is recognized when the products are sold to a third party. Reported net sales
are net of customer prompt pay discounts, contractual allowances, authorized
customer returns, consumer rebates and other allowable deductions from our
invoices. Cooperative advertising deductions, based on our customers' promotion
of our products is recognized as an advertising cost and charged against
operations as an operating expense. The Company follows the policy of reporting
sales taxes as a net amount - receipt and payments recorded in a liability
account.
Collectability of accounts receivable
Included in the consolidated balance sheets as of March 31, 2009 and
December 31, 2008 are allowances for doubtful accounts aggregating approximately
$183,200 and $117,600, respectively. Such amounts are based on management's
estimates of the creditworthiness of its customers, current economic conditions
and other historical information. Consolidated bad debt expense charged against
operations for the quarter ended March 31, 2009, and 2008 aggregated
approximately a net expense of $61,100 and a net credit of $4,000 respectively.
The recession is expected to increase the Company's risk related to sales
and collection of accounts receivable. At the time of this filing we have
incurred, in 2009, one customer filing for bankruptcy (Boaters' World),
representing a maximum risk of loss on unrecoverable receivables of
approximately $210,000 in total, from which approximately $144,000 was reserved
at the March 31, 2009. We do not know yet and cannot predict if we will be able
to collect accounts receivable with more or less difficulty than in the past in
our business. The Company's Management understands that the economic conditions
in the industry may result in additional difficulties for our customers, but is
unable to qualify this risk at this time.
Cost of goods sold/Selling, general and administrative expenses
Cost of goods sold includes all of the direct and indirect costs of
manufacturing our products. Included therein specifically are warehousing costs
of both raw and finished materials, in-bound freight, out-bound freight (in
those instances that we absorb such costs), purchasing, receiving, and
inspection costs. Other costs of the distribution network are reflected in
Selling, General and Administrative expenses. Also included therein are
managerial and clerical wages and related expenses, office and administrative
occupancy costs, taxes, professional fees, insurance coverages and other related
expenses.
6
Inventories
Inventories are comprised of raw materials, work-in-process and finished
goods and stated at the lower of cost or market. Cost is determined by the
first-in, first-out method. At March 31, 2009 and December 31, 2008,
approximately $240,500 and $231,200 respectively is reflected in the
accompanying consolidated financial statements as a reserve for excess,
obsolete, slow moving and shrinkage inventory adjustments.
Stock Based Compensation
On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123R (revised 2004), "Share Based Payment" ("SFAS No. 123R"),
which requires the measurement and recognition of compensation cost for all
share-based payment awards made to employees and directors based on estimated
fair values. The impact of forfeitures that may occur prior to vesting is also
estimated and considered in the amount recognized. In December 2007, the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB)
No. 110. This guidance allows companies, in certain circumstances, to utilize a
simplified method in determining the expected term of stock option grants when
calculating the compensation expense to be recorded under Statement of Financial
Accounting Standards (SFAS) No. 123(R), Share-Based Payment. The simplified
method can be used after December 31, 2007 only if a company's stock option
exercise experience does not provide a reasonable basis upon which to estimate
the expected option term. Through 2008, we utilized the simplified method to
determine the expected option term, based upon the vesting and original
contractual terms of the option. During 2009, we continued to use the simplified
method in accordance with SAB No. 110.
Compensation of Outside (Independent) Directors
Our outside directors, those other than officers of the Company, receive
compensation only in the form of non-qualified common stock options. Such
options are generally awarded for a ten year period, with an exercise price
equal to the closing market price on the date of award, and are fully vested at
time of grant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRONOUNCEMENTS THAT BECAME EFFECTIVE
IN 2009
In December 2007, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 110. This guidance allows companies, in certain
circumstances, to utilize a simplified method in determining the expected term
of stock option grants when calculating the compensation expense to be recorded
under Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based
Payment. The simplified method can be used after December 31, 2007 only if a
company's stock option exercise experience does not provide a reasonable basis
upon which to estimate the expected option term. Through 2008, we utilized the
simplified method to determine the expected option term, based upon the vesting
and original contractual terms of the option. During 2009, we continued to use
the simplified method in accordance with SAB No. 110.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and
expands the disclosure requirement for FASB Statement No. 133, "Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). It requires enhanced
disclosure about (i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedged items are accounted for under SFAS No.
133 and its related interpretations, and (iii) how derivative instruments and
related hedged items affect an entity's financial position, financial
performance, and cash flows. SFAS No. 161 is effective for the Company as of
January 1, 2009, and its impact was immaterial on Company's consolidated
financial position and results of operations.
In September 2008, the FASB issued FSP FAS No. 133-1, "Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161." This FSP amends FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," to require disclosures by
sellers of credit derivatives, including credit derivatives embedded in a hybrid
instrument. The FSP also amends FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," to require and additional disclosure
about the current status of the payment/performance risk of a guarantee.
Finally, this FSP clarifies the Board's intent about the effective date of FASB
Statement No. 161, "Disclosures about Derivative Instruments and Hedging
Activities." FSP FAS No. 133-1 is effective for fiscal years ending after
November 15, 2008. The impact of FSP FAS No. 133-1 was immaterial on Company's
consolidated financial position and results of operations.
7
In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations,
and SFAS No. 160, Non-controlling Interests in Consolidated Financial
Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree at their fair values on the acquisition date, with goodwill being
the excess value over the net identifiable assets acquired. SFAS No. 160
clarifies that a non-controlling interest in a subsidiary should be reported as
equity in the consolidated financial statement. The calculation of earnings per
share will continue to be based on income amounts attributable to the parent.
SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued
for fiscal years beginning after December 15, 2008. Early adoption was
prohibited. SFAS No. 141 (R) and SFAS No. 160 did not impact Company's
consolidated financial position and results of operations.
In April 2008, the FASB issued FSP 142-3, "Determination of the Useful Life
of Intangible Assets", (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and
Other Intangible Assets". FSP 142-3 is effective for fiscal years beginning
after December 15, 2008. The FSP142-3 had no impact on Company's consolidated
financial position and results of operations.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles." SFAS No. 162 identifies the sources of
accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented
inconformity with GAAP. The hierarchical guidance provided by FAS 162 was
effective for the Company on January 1st, 2009 and did not have a significant
impact on the Company's financial statements.
In May, 2008 the FASB issued FASB Staff Position (FSP) APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)." APB 14-1 requires the issuer to
separately account for the liability and equity components of convertible debt
instruments in a manner that reflects the issuer's nonconvertible debt borrowing
rate. The guidance results in companies recognizing higher interest expense in
the statement of operations due to amortization of the discount that results
from separating the liability and equity components. APB 14-1 was effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Adopting APB 14-1 did not impact
Company's consolidated financial statements.
In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities". This FASB Staff Position (FSP) addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share (EPS) under the two-class method described in
paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. This FSP
provides that unvested share-based payment awards that contain non forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of EPS
pursuant to the two-class method. The provisions of FSP No. 03-6-1 shall be
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period EPS
data presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected financial data) to conform with
the provisions of this FSP. Early application is not permitted. The provisions
of FSP No. 03-6-1 were effective for the Company retroactively in the first
quarter ended March 31, 2009. The impact of adoption of FSP No. EITF 03-6-1 on
the calculation and presentation of earnings per share in its consolidated
financial statements was immaterial.
In October 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-3,
"Determining the Fair Value of a Financial Asset When the Market for That Asset
is Not Active." This FSP clarifies the application of SFAS No. 157, "Fair Value
Measurements," in a market that is not active. The FSP also provides examples
for determining the fair value of a financial asset when the market for that
financial asset is not active. FSP FAS No. 157-3 was effective upon issuance,
including prior periods for which financial statements have not been issued. The
impact of adoption of FSP FAS No. 157-3 was not material to the Company's
consolidated financial condition or results of operations.
In September 2008, the FASB issued EITF Issue No. 08-5 ("EITF No. 08-5"),
"Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party
Credit Enhancement." This FSP determines an issuer's unit of accounting for a
liability issued with an inseparable third-party credit enhancement when it is
measured or disclosed at fair value on a recurring basis. FSP EITF No. 08-5 is
effective on a prospective basis in the first reporting period beginning on or
after December 15, 2008. The impact of FSP EITF No. 08-5 was immaterial on
Company's consolidated financial position and results of operations.
8
3. RECENT ACCOUNTING PRONOUNCEMENTS:
In April 2009, the FASB issued FASB Staff Position FAS-157-4, "Determining
Whether a Market Is Not Active and a Transaction Is Not Distressed" ("FSP FAS
157-4"). FSP FAS 157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS 157. FSP FAS 157-4
provides additional authoritative guidance in determining whether a market is
active or inactive and whether a transaction is distressed. FSP FAS 157-4 is
applicable to all assets and liabilities (i.e. financial and non -financial) and
will require enhanced disclosures. FSP FAS 157-4 is required to be adopted no
later than the periods ending after June 15, 2009. We are currently assessing
the potential impact of the adoption of FSP FAS 157-4 on our consolidated
financial statement disclosures.
In April 2009, the FASB issued FASB Staff Position FAS 115-2 and FAS 124-2,
"Recognition and Presentation of Other-Than-Temporary Impairments" ("FSP FAS
115-2") and ("FSP FAS 124-2"). FSP FAS 115-2 and FSP FAS 124-2 provide
additional guidance to provide greater clarity about the credit and noncredit
component of an other-than-temporary impairment event and to improve
presentation and disclosure of other than temporary impairments in the financial
statements. FSP FAS 115-2 and FSP FAS 124-2 are required to be adopted no later
than the periods ending after June 15, 2009. We are currently assessing the
potential impact of the adoption of FSP FAS 115-2 on our consolidated financial
statement disclosures.
In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1,
"Interim Disclosures about Fair Value of Financial Instruments" ("FSP FAS
107-1") and ("APB 28-1"). FSP FAS 107-1 amends FASB Statement No. 107,
"Disclosures about Fair Value of Financial Instruments", to require disclosures
about fair value of financial instruments in interim as well as in annual
financial statements and amends APB Opinion No. 28 "Interim Financial
Reporting", to require those disclosures in interim financial statements. FSP
FAS 107-1 and APB 28-1 are required to be adopted no later than the periods
ending after June 15, 2009. We are currently assessing the potential impact of
the adoption of FSP FAS 107-1 on our consolidated financial statement
disclosures.
In April 2009, the FASB issued FASB Staff Position (FSP) No. 141(R) 1
"Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination that Arise from Contingencies." This FSP deals with the initial
recognition and measurement of an asset acquired or a liability assumed in a
business combination that arises from a contingency provided the asset or
liability's fair value on the date of acquisition can be determined. This is
effective for assets or liabilities arising from contingencies in business
combinations that occur following the start of the first fiscal year that begins
on or after December 15, 2008. At this time, this FSP is not applicable to the
Company.
The Company has reviewed all recently issued, but not yet effective,
accounting pronouncements and does not believe the future adoption of any such
pronouncements will cause a material impact on its financial condition or the
results of its operations.
4. INVENTORIES
Inventories are comprised of raw materials and finished goods and stated at
the lower of cost or market. Cost is determined by the first-in, first-out
method. The composition of inventories at March 31, 2009 and December 31, 2008
are as follows:
2009 2008
------------ ------------
Raw Materials $ 3,796,892 $ 3,254,212
Finished Goods 4,161,472 3,541,908
------------ ------------
7,958,364 6,796,120
Less: Inventory Reserve ( 240,462) ( 231,211)
------------ ------------
Inventory - Net $ 7,717,902 $ 6,564,909
============ ============
At March 31, 2009 and December 31, 2008, inventory reserves included
approximately $240,500 and $231,200 reserve for excess, obsolete, slow moving
and shrinkage inventory adjustments.
9
5. PROPERTY, PLANT & EQUIPMENT
The Company's property, plant and equipment consisted of the following at
March 31, 2009 and December 31, 2008:
Estimated
Useful Life-
Years 2009 2008
------------- ---------- ------------
Land N/A $ 278,325 $ 278,325
Building 30 4,392,430 4,389,154
Manufacturing and warehouse equipment 6-20 6,598,844 6,592,558
Office equipment and furniture 3-5 527,537 525,734
Leasehold Improvements 10-15 122,644 122,644
Construction in process N/A 151,628 71,929
----------- ------------
12,071,408 11,980,344
Less Accumulated depreciation 6,379,398 6,199,919
----------- ------------
Total property, plant and equipment - net $ 5,692,010 $ 5,780,395
=========== ============
6. NOTES PAYABLE TO BANK
The primary sources of our liquidity are our operations and short-term
borrowings from Regions Bank pursuant to a revolving line of credit aggregating
$6 million. During 2002, the Company secured a revolving line of credit, which
provides a maximum of $6 million financing of working capital from the
commercial bank providing the financing for the expansion of our facility in
Montgomery, AL. The line carried interest based on the 30 day LIBOR rate plus
275 basis points payable monthly, and was collateralized by the Company's
inventory, trade receivables, and intangible assets.
This financing matured on May 31, 2008, and was renewed for three years.
Such line matures May 31, 2011, bears interest at the 30 Day LIBOR plus 250
basis points (approximately 3.1% at March 31, 2009) and is secured by our trade
receivables, inventory, and intangible assets. The terms, including required
financial covenants relating to maintaining minimum working capital levels,
maintaining stipulated debt to tangible net worth and adhering to debt coverage
ratios, and collaterals were substantially unchanged. We are required to
maintain a minimum working capital of $1.5 million and meet certain other
financial covenants during the term of the agreement. At March 31, 2009 the
Company was in compliance with its debt covenants. As of March 31, 2009, we were
obligated under this arrangement in the amount of $3,200,000.
7. LONG-TERM DEBT
The Company is obligated pursuant to capital leases financed through
Industrial Development Bonds. Such obligations were incurred during 1997 and
2002 in connection with building and equipment expansion at the Company's
Alabama manufacturing and distribution facility. Both bear interest at tax-free
rates that adjust weekly. Principal and accrued interest retiring the underlying
bonds are payable quarterly through March 2012 and July 2017 for the 1997 and
2002 series, respectively. At March 31, 2009, $1,020,000 and $2,690,000 were
outstanding attributable to the 1997 and 2002 series, respectively. During the
three months ended March 31, 2009 interest rates ranged between 1.5% and 5.25%.
Repayment of the bonds is guaranteed by a substitute irrevocable letter of
credit for the 1997 bonds and an irrevocable letter of credit for the 2002
bonds, both issued by Regions Bank, the Company's primary commercial bank.
Security for the Letters of Credit is a priority first mortgage on the Kinpak
facility and collateral on Kinpak manufacturing equipment. On February 10, 2009
the Company received notification that its City of Montgomery, AL Series 1997
and Series 2002 Industrial Revenue Bonds with an approximate balance of
$1,105,000 and $2,720,000, respectively, were tendered by various bondholders.
At March 31, 2009, $1,020,000 and $2,690,000 were outstanding, respectively.
There has been no default on these bonds by the Company. It is the understanding
of the Company that due to the tight credit markets, these bonds were tendered.
As a result the Company is temporarily obligated to its primary commercial bank,
for a few weeks during the first quarter 2009, until the credit market improves
sufficiently to remarket these bonds. The interest rate on the loans during this
period was prime rate plus 2%, or approximately 5.25% at March 31, 2009.
10
Interest expenses for the quarter ending March 31, 2009 were approximately
$47,000. Principal and accrued interest retiring the underlying bonds are
payable quarterly through March 2012 and July 2017 for the 1997 and 2002 series,
respectively.
During 2009, the Company, through its subsidiary, Kinpak Inc., was
obligated pursuant to various capital lease agreements covering equipment
utilized in the Company's Alabama plant. Such obligations, aggregating
approximately $33,800 at March 31, 2009, have varying maturities through 2012
and carry interest rates ranging from 7% to 12%.
On April 12, 2005 the Company entered into a financing obligation with
Regions Bank whereby the bank advanced the Company $500,000 to finance equipment
acquisitions at the Kinpak facility. Such obligation is due in monthly
installments of principal aggregating approximately $8,300 plus interest. The
outstanding balance on this obligation at March 31, 2009 was approximately
$108,300. Interest rate is calculated at LIBOR plus 2.5% per annum, respectively
3.1% at March 31, 2009, through the maturity on April 15, 2010. Interest
incurred for the three month period ended on March 31, 2009 was approximately
$1,000.
The composition of these obligations at March 31, 2009 and December 31,
2008 were as follows:
Current Portion Long Term Portion
----------------------- --------------------------
2009 2008 2009 2008
---------- ---------- ----------- ------------
Industrial Development Bonds $ 460,000 $ 460,000 $3,225,001 $3,365,000
Notes Payable 99,996 99,996 33,352 33,352
Capitalized equipment leases 24,656 24,541 29,410 36,139
---------- ---------- ----------- -------------
$ 584,652 $ 584,537 $3,287,763 $3,434,491
========== ========== =========== =============
Required principal payment obligations attributable to the foregoing are
tabulated below:
Twelve month period ending March 31,
2010 $ 584,652
2011 480,253
2012 473,328
2013 444,182
2014 440,000
Thereafter 1,450,000
----------
Total $3,872,415
==========
8. RELATED PARTY TRANSACTIONS
At March 31, 2009 and December 31, 2008, the Company had amounts receivable
from and payable to affiliated companies, which are directly or beneficially
owned by the Company's president, aggregating on a net basis to a receivable of
approximately $914,700 and $910,600 respectively. Such amounts result from sales
to the affiliates, allocations of management fees incurred by the Company on the
affiliates' behalf and funds advanced to or from the Company.
Sales to such affiliates were sold at cost of material and labor plus a
profit covering manufacturing overhead costs. In addition, the affiliates are
charged for their allocable share of administrative expenses of the Company. The
sales and transfers to affiliates aggregated approximately $316,400 and $195,400
during the three months periods ended March 31, 2009 and 2008, respectively;
allocable administrative fees aggregated $75,000 the three months periods ended
March 31, 2009.
Such transactions were made in the ordinary course of business but were not
made on substantially the same terms and conditions as those prevailing at the
same time for comparable transactions with other customers. Management believes
that the sales transactions did not involve more than normal credit risk or
present other unfavorable features.
11
A subsidiary of ours currently uses the services of an entity that is owned
by our president to conduct product research and development. Such entity
received $7,500 during the quarters ended March 31, 2009 and 2008 under such
relationship.
Mr. Kolisch, a Director of the Company, sources most of the Company's
insurance needs at an arm's length competitive basis.
9. COMMITMENTS
On May 1, 2008, the Company renewed for ten years the existing lease for
approximately 12,700 square feet of office and warehouse facilities in Fort
Lauderdale, Florida from an entity owned by certain officers of the Company,
with unchanged conditions. The lease still requires a minimum rental of $94,800
plus applicable taxes for the first year and provides for a maximum 2% increase
on the anniversary of the lease throughout the term. Additionally, the landlord
is entitled to reimbursement of all taxes, assessments, and any other expenses
that arise from ownership. The landlord reserves the right under the agreement
to review the terms of the lease at 3, 6, and 9 year intervals in order to make
modifications for market conditions. Total rent charged to operations during the
three months period ended March 31, 2009, and 2008 amounted to approximately
$23,500 and $23,700. respectively.
The following is a schedule of minimum future rentals on the non-cancelable
operating leases.
Twelve month period ending March 31,
2010 $ 102,330
2011 104,377
2012 106,464
2013 108,594
2014 110,766
Thereafter 475,671
----------
$1,008,202
==========
10. EARNINGS PER SHARE Three months ended March 31,:
2009 2008
---- ----
Weighted-average common
shares outstanding 7,590,146 7,822,066
Dilutive effect of stock plans,
other options & conversion rights - -
--------- ---------
Diluted weighted-average shares
outstanding 7,590,146 7,822,066
========= =========
11. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Stock options are granted annually to selective executives, key employees,
directors and others pursuant to the terms of the Company's various plans. Such
grants are made at the discretion of the Board of Directors. Qualified options
typically have a five-year life with vesting occurring at 20% per year on a
cumulative basis with forfeiture at the end of the option, if not exercised. Non
qualified options granted to outside Directors have a 10 year life and are
immediately exercisable.
Non-Qualified Common Stock Options Awards as Compensation:
On January 11, 2009 the Company's outside directors, received compensation
in the form of non-qualified common stock options. Each outside director
received 10,000 non-qualified common stock options which vest immediately, or a
total of 50,000 non-qualified options.
Non Plan Stock Options
The Board of Directors granted 115,000 stock options of the Corporation's
common stock, pursuant to the Corporation's Non Plan - Incentive Stock Options
to Peter Dornau, the Company's CEO, priced at the closing market bid price plus
10%. At the date of grant, March 25, 2009, the shares had a market value of
$0.50 each. Mr. Dornau's grant was at market price plus 10% or $0.55, and
vesting immediately upon issue of options.
The fair value of each option grant was estimated using the Black-Scholes
option pricing model with the following assumptions: risk free rate ranging from
1.51% to 1.69%, no dividend yield for all years, expected life from three years
to five years and volatility of approximately 99.9%. Compensation cost
recognized during the three months period ended March 31, 2009 attributable to
stock options amounted to approximately $46,600. Additional compensation costs
to be recognized over 2009 is approximately $40,000. As of March 31, 2009, there
was approximately $408,400 of unrecognized compensation cost related to unvested
share based compensation arrangements. That cost will be charged against
operations as the respective options vest through December, 2013.
12
The number of options outstanding and the number of shares available for
grant under each qualified Stock Option and non-qualified plan as of March 31,
2009, is presented below:
Options Available
Plan Options Outstanding for Grant
---------- --------------- --------------
NON-PLAN: 115,000 shares N/A
1994 PLAN 154,500 shares None
2002 PLAN 133,000 shares None
2007 PLAN 321,000 shares 79,000 shares
2008 PLAN 159,500 shares 240,500 shares
2002 PLAN NQ 185,000 shares 15,000 shares
2008 PLAN NQ 50,000 shares 150,000 shares
---------------- --------------
Total 1,118,000 shares 484,500 shares
================ ==============
The following schedule reflects the detailed status of outstanding options
under the Company's four incentive stock option and two non-qualified plans and
a non plan non qualified stock option as of March 31, 2009:
Weighted
Date Options Exercisable Exercise Expiration average
Plan granted outstanding options price date remaining life
-------- ---------- ------- ------------ -------- -------------- --------------
Non Plan 03/25/2009 115,000 115,000 0.55 03/24/2014 5.0
1994 10/26/2004 154,500 131,325 1.05 10/25/2009 .6
2002 11/06/2006 133,000 53,200 0.93 11/05/2011 2.6
2007 05/17/2007 162,500 44,250 1.66 05/16/2012 3.1
2007 10/08/2007 2,000 400 1.87 10/07/2012 3.5
2007 12/17/2007 156,500 30,700 1.32 12/16/2017 8.7
2008 08/25/2008 159,500 - .97 08/21/2013 4.4
2002NQ 10/22/2002 35,000 35,000 1.26 10/21/2012 3.6
2002NQ 06/20/2003 30,000 30,000 1.03 06/20/2013 4.2
2002NQ 05/25/2004 40,000 40,000 1.46 05/25/2014 5.2
2002NQ 04/03/2006 30,000 30,000 1.08 04/03/2016 7.0
2002NQ 12/17/2007 50,000 50,000 1.32 12/16/2017 8.7
2008NQ 01/11/2009 50,000 50,000 .69 01/10/2019 9.8
--------- ------- ---- ----
1,118,000 609,875 1.12 4.6
========= ======= ==== ====
A summary of the Company's stock options as of March 31, 2009, and changes
during the three months period ended March 31, 2009, is presented below:
Plan options outstanding at
January 1, 2009 1,090,000 $1.26
Options granted 50,000 .69
Options exercised - -
Options forfeited or expired (137,000) 1.62
---------- ------
Plan options outstanding at
March 31, 2009 1,003,000 1.18
Non plan options 115,000 .55
---------- -----
Totals 1,118,000 $1.12
========= =====
Incentive Stock Options aggregating 137,000 shares granted on March 2, 2004
with a five year vesting, expired on March 1, 2009.
13
Restricted Stock Awards as Compensation
During February 2009 we issued 164,500 shares of our common stock bearing a
restricted legend to certain officers and other key employees as a component of
their compensation. At the date of grant the shares had a market value of $0.69
each. Shares were granted as follows:
Peter G. Dornau, President and CEO 20,000 shares
Jeffrey S. Barocas, Vice President and CFO 15,000 shares
William Dudman, Vice President 20,000 shares
Gregor M. Dornau, Vice President 20,000 shares
-------
Total to named officers 75,000 shares
Other employees, as a group (20 individuals) 89,500 shares
-------
Total restricted shares awarded 164,500 shares
=======
These restricted stock awards will be voted on for approval by our
shareholders at our Annual Meeting of Shareholders to be held on June 12, 2009.
12. SUBSEQUENT EVENTS
Common stock trading: given exceptional market conditions, NASDAQ has
determined to suspend enforcement of the bid price and market value of publicly
held shares requirements. As extended, the suspension will remain in effect
through July 20, 2009. After this date, the Company has to regain compliance
with the $1.00 minimum bid price for continued listing as required in
Marketplace Rule 4310 (c)(4). Following the reinstatement of these rules, in
accordance with Marketplace Rule 4310(c)(8)(D), the Company will be provided 180
calendar days to regain compliance. If, at any time before January 16, 2010, the
bid price of the Company's common stock closes at $1.00 per share or more for a
minimum of 10 consecutive business days, NASDAQ will provide written
notification that it complies with the Rule.
If compliance with this Rule cannot be demonstrated by January 29, 2010,
Staff will determine whether the Company meets The NASDAQ Capital Market initial
listing criteria as set forth in Marketplace Rule 4310(c), except for the bid
price requirement. If it meets the initial listing criteria, Staff will notify
the Company that it may be granted an additional 180 calendar day compliance
period. If the Company is not eligible for an additional compliance period,
Staff will provide written notification that the Company's securities will be
delisted. At that time, the Company may appeal Staff's determination to delist
its securities to a Listing Qualifications Panel.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Forward-looking Statements:
Certain statements contained herein, including without limitation
expectations as to future sales and operating results, constitute
forward-looking statements pursuant to the safe harbor provisions of the Private
Securities Litigations Reform Act of 1995. For this purpose, any statements
contained in this report that are not statements of historical fact may be
deemed forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "anticipate", "intend",
"could" or the negative other variations thereof or comparable terminology are
intended to identify forward-looking statements. These statements involve known
and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the highly competitive nature of the Company's
industry; reliance on certain key customers; consumer demand for marine
recreational vehicle and automotive products; advertising and promotional
efforts, and other factors. The Company will not undertake and specifically
declines any obligation to update or correct any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
Overview:
We are a leading manufacturer and distributor of chemical formulations
serving the appearance and functional categories of the marine, automotive,
recreational vehicle and home care markets. We were founded in 1973 and have
conducted operations within the aforementioned categories since then. During
1984, we changed our corporate name to Ocean Bio-Chem, Inc. (the parent company)
from our former name, Star Brite Corporation. Our operations were conducted as a
privately owned company through March, 1981 when we completed our initial public
offering of common stock.
14
Critical accounting policies and estimates:
See Note 1 "Summary of Accounting Policies" in the Notes to the Unaudited
Condensed Consolidated Financial Statements for a discussion of recent
accounting pronouncements and their effect, if any, on the Company.
Liquidity and Capital Resources:
The primary sources of our liquidity are our operations and borrowings from
Regions Bank pursuant to a revolving line of credit aggregating $6 million. On
May 31, 2008 this line of credit was renewed for three years. Such line matures
May 31, 2011, bears interest at the 30 Day LIBOR plus 250 basis points
(approximately 3.1% at March 31, 2009) and is secured by our trade receivables,
inventory and intangible assets. We are required to maintain a minimum working
capital of $1.5 million and meet certain other financial covenants during the
term of the agreement. At March 31, 2009 the Company was in compliance with its
debt covenants, and was obligated under this arrangement in the amount of
$3,200,000.
In connection with the purchase and expansion of the Alabama facility, we
closed on Industrial Development Bonds during 1997. The proceeds were utilized
for both the repayment of certain advances used to purchase the Alabama facility
and to expand such facility for our future needs. During July 2002, we completed
a second Industrial Development Bond financing aggregating $3.5 million through
the City of Montgomery, AL. Such transaction funded an approximate 70,000 square
foot addition to the manufacturing facility as well as the remaining machinery
and equipment additions required therein. This project was substantially
completed during 2003.
The bonds maturity dates are respectively March 2012 and July 2017 for the
1997 and 2002 series bonds.
In order to market the Industrial Development Bonds at favorable rates, we
obtained a substitute irrevocable letter of credit for the 1997 issue and a new
irrevocable letter of credit for the 2002 issue. Under such letters of credit
agreements maturing on July 31, 2009, renewable annually, we are required to
maintain a stipulated level of working capital, a designated maximum debt to
tangible ratio, and a required debt service coverage ratio. Such letters of
credit are secured by a first priority mortgage on the underlying Alabama
facility and collateral on Kinpak manufacturing equipment.
The bonds are marketed weekly at the prevailing rates for such tax-exempt
instruments. Principal and accrued interest retiring the underlying bonds are
payable quarterly through March 2012 and July 2017 for the 1997 and 2002 series,
respectively. At March 31, 2009, $1,020,000 and $2,690,000 were outstanding
attributable to the 1997 and 2002 series, respectively. During the three months
ended March 31, 2009 interest rates ranged between 1.5% and 5.25%.
Repayment of the bonds is guaranteed by a Letter of Credit issued by the
Company's primary commercial bank. Security for the Letter of Credit is a
priority first mortgage on the Kinpak facility and collateral on Kinpak
manufacturing equipment. On February 10, 2009 the Company received notification
that its City of Montgomery, AL Series 1997 and Series 2002 Industrial Revenue
Bonds with an approximate balance of $1,105,000 and $2,720,000, respectively,
were tendered by various bondholders. At March 31, 2009, $1,020,000 and
$2,690,000 were outstanding, respectively. There has been no default on these
bonds by the Company. It is the understanding of the Company that due to the
tight credit markets, these bonds were tendered. As a result the Company has
been temporarily obligated to its primary commercial bank, for a few weeks
during the first quarter 2009, until the credit markets improved sufficiently to
remarket these bonds. The interest rate on the loans during this period was
prime rate plus 2%, or approximately 5.25%. We believe current operations are
sufficient to meet these obligations. Interest expenses for the quarter ending
March 31, 2009 were approximately $47,000.
On April 12, 2005 we entered into a financing obligation with Regions Bank
whereby they advanced us $500,000 to finance equipment acquisitions at our
Kinpak facility. Such obligation is due in monthly installments of principal
aggregating approximately $8,300 plus interest at prevailing rates. The
outstanding balance and interest rate on this obligation at March 31, 2009 was
approximately $108,000 and interest rate is LIBOR plus 2.5% per annum (or
approximately 3.1% at March 31, 2009).
We are involved in making sales in the Canadian market and must deal with
the currency fluctuations of the Canadian currency. We do not engage in currency
hedging and deal with such currency risk as a pricing issue.
During the past few years, we have introduced various new products to our
customers. At times this has required us to carry greater amounts of overall
inventory and has resulted in lower inventory turnover rates. The effects of
such inventory turnover have not been material to our overall operations. We
believe that all required capital to maintain such increases can continue to be
provided by operations and current financing arrangements.
Many of the raw materials that we use in the manufacturing process are
petroleum chemical based and commodity chemicals that are subject to fluctuating
prices. The costs of petroleum and related products, major components in many of
our products, have been increasingly unstable since 2008. The practical dynamics
of our business do not afford us the same pricing flexibility with our
15
customers, than available to our suppliers. We cannot pass along price increases
to our national retailers and distributors as promptly as our suppliers do.
As of March 31, 2009 and through the date hereof, we did not and do not
have any material commitments for capital expenditures, nor do we have any other
present commitment that is likely to result in our liquidity increasing or
decreasing in any material way. In addition, except for our need for additional
capital to finance inventory purchases, we know of no trend, additional demand,
event or uncertainty that will result in, or that is reasonably likely to result
in, our liquidity increasing or decreasing in any material way.
Results of Operations:
For the Three Months Ended March 31, 2009 compared to the Three Months
ended March 31, 2008
Net sales were approximately $4,110,000 for the three months ended March
31, 2009 compared to $3,745,000 for the comparative quarter 2008, an increase of
approximately $365,000 or 10%. The Company increased its sales of private label
marine products to two newer customers. The Company also increased sales of its
fuel treatment product StarTron, to the automotive and power sports markets in
the northern parts of the United States. The addition of up to 10% ethanol in
gasoline has generated engine problems, which has created a demand for StarTron,
to help cure water in fuel problems. All types of combustion engines are
susceptible to water in fuel problems including motor cycles, small engines
(lawn mowers, trimmers), snow mobiles, autos and trucks which create
opportunities for us to increase sales. The increase in sales was partially
offset by a decrease in sales to Boaters' World which filed for bankruptcy
protection early in the 1st quarter 2009.
Cost of goods sold as a percentage of sales decreased to 64.7% of sales
compared to 76.7% for the comparative 2008 quarter. This decrease in the cost of
goods sold percentage of 12%, was primarily a result of increased selling prices
to our customers made in 2008, combined with decreased oil prices and the
resulting decrease in the Company's raw material costs. In addition, the
Company's freight out expense also decreased as a result of lower petroleum
cost.
Advertising and promotion expenses were approximately $322,000 compared to
$202,000 for the comparative 2008 first quarter. The increase in advertising
expense of approximately $120,000 was a result of increased customer
cooperative, promotional, and catalog allowances. In addition, we increased our
advertising expenditures in both TV and print advertising. We also initiated an
advertising program on the Internet, on both Face Book and Twitter. Initial
results look promising. Selling and administrative expenses decreased
approximately $75,000 to $852,000 from $927,000, for comparative quarters. Lower
operating expenses were recognized in the quarter for accounting & legal
services, lower travel expenses, and higher charges to affiliated companies for
administrative services. These lower costs were partially offset by higher non
cash compensation expense and charges to income to increase bad debt allowances.
Management continues to monitor all expenses to reduce spending.
Interest expense increased by approximately $6,000 for the quarter ended
March 31, 2009 compared to the corresponding quarter in 2008. The higher
interest expense in 2009 is associated with the financing of higher levels of
inventory, in addition to higher average interest expense as a result of the
industrial revenue bonds being tendered.
Operating income increased to approximately $205,000 from a loss of
$323,000, a change of $529,000 or 164%. This is a result of higher sales volume,
higher gross margin percent, and lower operating expenses.
Net profit for the quarter ended March 31, 2009 was approximately $126,000
compared to a net loss of $206,000 for the comparable period in 2008. The
Company had income tax expense for the quarter of $91,000, as a result of the
Company being in a tax paying position, as compared to the comparative quarter
2008 in which the Company was in a loss position.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures:
The Company has carried out an evaluation under the supervision of
management, including the President and Chief Executive Officer ("CEO") and the
Vice President - Finance and Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of its disclosure controls and
procedures. Based on that evaluation, our CEO and CFO have concluded that, as of
December 31, 2008, our disclosure controls and procedures were effective to
ensure that information required to be disclosed by the Company in the reports
filed or submitted by it under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the time periods
16
specified in the rules and forms of the SEC, and include controls and procedures
designed to ensure that information required to be disclosed by us in such
reports is accumulated and communicated to management, including the CEO and
CFO, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting. No change in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings:
We are not a party to any material litigation presently pending nor, to the
best knowledge of the Company, have any such proceedings been threatened.
Item 1A. - Risk Factors
Not Applicable
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds:
On February 7, 2009, 164,500 shares of the Registrant's common stock were
issued pursuant to the employee bonus program.
Item 3. - Defaults Upon Senior Securities:
Not Applicable
Item 4 - Submission of Matters to Vote of Security Holders:
Not applicable
Item 5 - Other Matters
Not applicable
Item 6. - Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf by the Undersigned
there unto duly authorized.
OCEAN BIO-CHEM, INC.
Date: May 14, 2009 /s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board of Directors
and Chief Executive Officer
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
17
Exhibit 31.1
CERTIFICATION
I, Peter G. Dornau certify that:
1. I have reviewed this Form 10-Q of Ocean Bio-Chem, Inc. as of and for the
period ended March 31, 2009;
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
-affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: May 14, 2009 /s/ Peter G.Dornau
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
18
Exhibit 31.2
CERTIFICATION
I, Jeffrey S. Barocas certify that:
1. I have reviewed this Form 10-Q of Ocean Bio-Chem, Inc. as of and for the
period ended March 31, 2009;
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: May 14, 2009 /s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
19
Exhibit 32.1
CERTIFICATION
Pursuant to 18U.S.C.Section 1350, the undersigned officers of Ocean
Bio-Chem, Inc. (the "Company"), hereby certify that the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2009 (the "Report") fully
complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operation of the Company.
Dated: May 14, 2009
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board of
Directors and Chief
Executive Officer
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
20