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 September 30, 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 Identification Number)
of incorporation or organization)
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
November 11, 2009, was 7,702,313.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
----------- ----
Part I - Financial Information:
Item 1.- Financial Statements:
Condensed consolidated balance sheets as of September 30, 2009
and December 31, 2008 3
Condensed consolidated statements of operations for the
three months and nine months periods ended September 30,
2009 and 2008 4
Condensed consolidated statements of cash flows for the
nine months ended September 30, 2009 and 2008 5
Notes to condensed consolidated financial statements 6-12
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 15
Item 4 - Controls and Procedures 15
Part II - Other Information:
Item 1. - Legal Proceedings 15
Item 1A. - Risk Factors 15
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. - Defaults upon Senior Securities 15
Item 4. - Submission of Matters to a Vote by Security Holders 15
Item 5. - Other Matters 15
Item 6. - List of Exhibits 15
Signatures 16
Certifications 17-19
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 DECEMBER 31, 2008
------------------ -----------------
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 416,957 $ 527,056
Trade accounts receivable net of allowance for doubtful
accounts of approximately $259,000 and $117,600 at September 30,
2009 and December 31, 2008 respectively 4,739,688 1,966,223
Inventories, net 7,185,668 6,564,909
Prepaid expenses and other current assets 440,384 365,982
------------- ------------
Total current assets 12,782,697 9,424,170
------------- ------------
Property, plant and equipment, net 5,511,874 5,780,395
------------- ------------
Other assets:
Trademarks, trade names and patents, net
of accumulated amortization 330,439 330,439
Due from affiliated companies, net 59,981 910,553
Deposits and other assets 160,097 184,628
------------- ------------
Total Other Assets 550,517 1,425,620
------------- ------------
Total Assets $ 18,845,088 $ 16,630,185
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 2,404,352 $ 894,193
Notes payable - bank 2,000,000 2,800,000
Current portion of long term debt 540,718 584,537
Accrued expenses payable 1,735,393 883,354
------------- ------------
Total Current Liabilities 6,680,463 5,162,084
------------- ------------
Long term debt, less current portion 3,056,163 3,434,491
------------- ------------
Commitments and contingencies - -
Shareholders' Equity:
Common stock - $.01 par value, 10,000,000 shares authorized;
8,053,816 and 7,886,816 shares issued and outstanding at
September 30, 2009 and December 31, 2008, respectively 80,538 78,868
Additional paid in capital 8,169,466 7,928,269
Less cost of common stock in treasury, 351,503 shares
at September 30, 2009 and December 31, 2008, respectively ( 288,013) ( 288,013)
Foreign currency translation adjustment ( 278,918) ( 280,123)
Retained earnings 1,425,389 594,609
------------- -------------
Total Shareholders' Equity 9,108,462 8,033,610
------------- -------------
Total Liabilities and Shareholders' Equity $ 18,845,088 $ 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 FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2009 2008 2009 2008
------------ ------------ ------------- -------------
Gross Sales $ 9,629,794 $ 8,911,090 $19,940,251 $ 18,096,830
Discounts, returns and allowances 723,942 690,082 1,209,047 1,139,896
------------ ------------ ------------- -------------
Net sales 8,905,852 8,221,008 18,731,204 16,956,934
Cost of goods sold 6,186,477 5,905,666 12,597,488 12,065,447
------------ ------------ ------------- -------------
Gross profit 2,719,375 2,315,342 6,133,716 4,891,487
------------ ------------ ------------- -------------
Expenses:
Advertising and promotion 380,276 409,365 1,278,689 1,079,435
Selling and administrative 1,406,472 877,022 3,250,775 2,953,747
Interest expense 41,463 71,949 169,694 231,882
------------ ------------ ------------- -------------
Total operating expenses 1,828,211 1,358,336 4,699,158 4,265,064
------------ ------------ ------------- -------------
Operating income 891,164 957,006 1,434,558 626,423
Other income 12,134 10,846 23,705 21,932
------------ ------------ ------------- -------------
Income before Income Taxes 903,298 967,852 1,458,263 648,355
Income Taxes 331,805 366,493 627,483 271,000
------------ ------------ ------------- -------------
Net income 571,493 601,359 830,780 377,355
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment 1,558 ( 2,365) 1,205 ( 66,155)
------------ ------------ ------------- -------------
Comprehensive income $ 573,051 $ 598,994 $ 831,985 $ 311,200
============ ============ ============= =============
Income per common share - basic $ 0.07 $ 0.08 $ 0.11 $ 0.05
============ ============ ============= =============
Income per common share - diluted $ 0.07 $ 0.07 $ 0.11 $ 0.05
============ ============ ============= =============
Weighted average shares - basic 7,704,813 7,886,816 7,665,757 7,876,816
============ ============ ============= =============
Weighted average shares - diluted 7,777,101 8,051,744 7,682,452 8,177,452
============ ============ ============= =============
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 NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
2009 2008
Cash flows from operating activities:
Net income $ 830,780 $ 377,355
Adjustment to reconcile net income
to net cash provided by (used in) operations:
Depreciation and amortization 535,297 590,954
Stock based compensation 244,917 107,138
Other operating non-cash items 297,922 83,779
Changes in assets and liabilities:
Accounts receivable ( 2,926,678) ( 1,724,507)
Inventory ( 765,983) ( 968,484)
Deposits and other assets 24,531 109,956
Prepaid expenses ( 74,402) ( 122,649)
Accounts payable and other accrued liabilities 2,360,148 1,310,780
------------- ------------
Net cash provided by (used in) operating activities 526,532 ( 235,678)
------------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment ( 266,776) ( 230,444)
------------- ------------
Net cash used in investing activities ( 266,776) ( 230,444)
------------- ------------
Cash flows from financing activities:
Borrowings (repayment) line of credit, net ( 800,000) 900,000
Amounts due from (repaid to) affiliates 850,572 ( 220,721)
Principal payments - Long-term debt ( 422,147) ( 429,336)
------------- ------------
Net cash provided by (used in) financing activities ( 371,575) 249,943
------------- ------------
Change in cash prior to effect of exchange rate ( 111,819) ( 216,179)
Effect of exchange rate on cash 1,720 401
------------- ------------
Net decrease in cash ( 110,099) ( 215,778)
Cash at beginning of period 527,056 750,901
------------- ------------
Cash at end of period $ 416,957 $ 535,123
============= ============
Supplemental disclosure of cash transactions:
Cash paid for interest during period $ 169,694 $ 231,882
============= ============
Cash paid for income taxes during period $ 364,000 $ 40,919
============= ============
The company had no cash equivalents at September 30, 2009 and 2008
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 September 30, 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 September 30, 2009 and
December 31, 2008 are allowances for doubtful accounts aggregating approximately
$259,000 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 nine months periods ended September 30, 2009, and 2008
aggregated approximately a net expense of $153,200 and a net credit of $2,000
respectively. At September 30, 2009 the Company had a concentration of accounts
receivable with two customers totaling 52% of total outstanding accounts
receivable.
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 significant customer filing for bankruptcy (Boater's
World), representing a maximum risk of loss on unrecoverable receivables of
approximately $210,000 in total, from which approximately $144,000 was reserved
at September 30, 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.
6
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 coverage's and other
related expenses.
Inventories
Inventories are comprised of raw materials, work-in process and finished
goods and are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method. At September 30, 2009 and December 31, 2008,
approximately $322,400 and $231,200 respectively is reflected in the
accompanying consolidated financial statements as a reserve for excess,
obsolete, slow moving and shrinkage inventory adjustments.
Share Based Compensation
The Company measures and recognizes 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRONOUNCEMENTS THAT BECAME EFFECTIVE
IN 2009
In May 2009, the Financial Accounting Standard Board revised accounting
standards to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. These revised standards require the
disclosure of the date through which subsequent events have been evaluated and
whether that date is the date the financial statements were issued or were
available to be issued. The Company adopted the provisions of these revised
standards during the second quarter of 2009. The adoption did not have an impact
on the Company's statements of operations or statement of financial position.
The Company has evaluated all subsequent events that occurred through November
11, 2009, the date the financial statements were issued.
In June 2009, FASB issued FASB Accounting Standards Codification
("Codification"). The Codification will become the single source for all
authoritative Generally Accepted Accounting Principles ("GAAP") recognized by
FASB to be applied for financial statements issued for periods ending after
September 15, 2009. The Codification does not change GAAP and will not have an
effect on the Company's financial position or results of operations. The Company
adopted this accounting standard during the three month period ending
September 30, 2009.
3. RECENT ACCOUNTING PRONOUNCEMENTS
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 September 30, 2009 and December 31,
2008 are as follows:
2009 2008
---- ----
Raw materials $3,696,378 $3,254,212
Finished goods 3,811,709 3,541,908
------------ -----------
7,508,087 6,796,120
Less Inventory Reserve ( 322,419) ( 231,211)
------------ -----------
Inventory - net $7,185,668 $6,564,909
=========== ===========
7
At September 30, 2009 and December 31, 2008, inventory reserves included
approximately $322,400 and $231,200 reserve for excess, obsolete, slow moving
and shrinkage inventory adjustments.
5. PROPERTY, PLANT & EQUIPMENT
The Company's property, plant, and equipment consisted of the following at
September 30, 2009 and December 31, 2008:
Estimated
Useful Life-
Years 2009 2008
------------- ---------- ------------
Land N/A $ 278,325 $ 278,325
Building 30 4,396,410 4,389,154
Manufacturing and warehouse equipment 6-20 6,790,478 6,592,558
Office equipment and furniture 3-5 537,786 525,734
Leasehold Improvements 10-15 122,644 122,644
Construction in process N/A 83,454 71,929
----------- ------------
12,209,097 11,980,344
Less Accumulated depreciation 6,697,223 6,199,949
----------- ------------
Total property, plant and equipment - net $ 5,511,874 $ 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 this revolving line of credit,
which provides a maximum of $6 million financing of working capital, in
connection with 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 is 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 2.7% at September 30, 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 September 30, 2009 the
Company was in compliance with its debt covenants. As of September 30, 2009, we
were obligated under this arrangement in the amount of $2,000,000.
7. LONG-TERM DEBT
In connection with the purchase and expansion of the Alabama facility, the
Company secured financing with 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. Both bear interest at
tax-free rates that adjust weekly. The bonds were tendered in early 2009 and
currently bear interest at current market rates. 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 September 30, 2009, $850,000
and $2,630,000 were outstanding attributable to the 1997 and 2002 series,
respectively. During the nine months ended September 30, 2009 interest rates
ranged between 3.3% and 5.3%.
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. Under such letters of
credit agreements maturing on July 31, 2010, 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. The Company has been
in compliance with its debt covenants since the origination of such standby
letters of credit. 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 September 30, 2009, $850,000 and $2,630,000
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 until the credit market improves
sufficiently to remarket these bonds. The interest rate on the loans during this
period was prime rate or approximately 3.3% at September 30, 2009.
8
Interest expense on such long term debt for the nine months ending
September 30, 2009 was approximately $116,000. 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's subsidiary Kinpak Inc., was obligated pursuant
to various capital lease agreements covering equipment utilized in the Company's
Alabama plant. Such obligations, aggregating approximately $41,000 at September
30, 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 September 30, 2009 was approximately
$58,400. Interest rate is calculated at LIBOR plus 2.5% per annum, respectively
2.7% at September 30, 2009, through the maturity on April 15, 2010. Interest
incurred for the nine months period ended on September 30, 2009 was
approximately $2,000.
The composition of these obligations at September 30, 2009 and December 31,
2008 were as follows:
Current Portion Long Term Portion
2009 2008 2009 2008
---- ---- ---- ----
Industrial Development Bonds $460,000 $460,000 $3,020,000 $3,365,000
Notes payable 58,351 99,996 - 33,352
Capitalized equipment leases 22,367 24,541 36,163 36,139
-------- -------- ---------- ----------
$540,718 $584,537 $3,056,163 $3,434,491
======== ======== ========== ==========
Required principal payment obligations attributable to the foregoing are
tabulated below:
Twelve month period ending September 30,
2010 $ 540,718
2011 478,234
2012 465,004
2013 442,925
2014 440,000
Thereafter 1,230,000
----------
Total $3,596,881
==========
8. RELATED PARTY TRANSACTIONS
At September 30, 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 a receivable of
approximately $60,000 and $910,600 respectively. Such amounts result from sales
and transfers to the affiliates, as well as 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. The sales and transfers to
affiliates aggregated approximately $754,900 and $680,000 during the nine months
ended September 30, 2009 and 2008, and $153,600 and $202,000 for the three
months ended September 30, 2009 and 2008, respectively. In addition, the
affiliates are charged for their allocable share of administrative expenses of
the Company. Allocable administrative fees aggregated $175,000 for the nine
months period ended September 30, 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. These related party
sales are for distribution in markets that the Company does not normally sell
into, and serves to increase volume and absorption of overhead in our
manufacturing facility. Management believes that the sales transactions did not
involve more than normal credit risk or present other unfavorable features.
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 $22,500 during the nine months periods ended September 30, 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
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
annually on 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
nine months period ended September 30, 2009, and 2008 amounted to approximately
$90,900 and $80,400 respectively.
The following is a schedule of minimum future rentals on the non-cancelable
operating lease:
Twelve month period ending September 30,
2010 $103,352
2011 105,419
2012 107,527
2013 109,678
2014 111,871
Thereafter 419,273
--------
$957,120
========
10. EARNINGS PER SHARE
Three months Nine months
ended September 30, ended September 30,
-------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Weighted-average common
shares outstanding 7,704,813 7,886,816 7,665,757 7,876,816
Dilutive effect of stock plans,
other options & conversion rights 72,288 164,928 16,695 300,636
--------- --------- --------- ---------
Diluted weighted-average shares
outstanding 7,777,101 8,051,744 7,682,452 8,177,452
========= ========= ========= =========
11. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Incentive Stock Options (ISO's):
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 (NQ's) 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, for a
total of 50,000 non-qualified options. Non qualified options granted to outside
Directors have a 10 year life and are immediately exercisable.
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
1.1% to 1.7%, no dividend yield for all years, expected life from three years to
five years and volatility of approximately 97%. Compensation cost recognized
during the nine months period ended September 30, 2009 attributable to stock
options amounted to approximately $157,600. Compensation costs to be recognized
over 2009 is approximately $25,500. As of September 30, 2009, there was
approximately $284,000 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.
10
The number of options outstanding and the number of shares available for
grant under each Stock Options qualified and non-qualified plan options, as of
September 30, 2009, is presented below:
Options Available
Plan Options Outstanding for Grant
---------- --------------- --------------
NON-PLAN: 115,000 shares N/A
1994 PLAN 129,500 shares None
2002 PLAN 118,000 shares None
2007 PLAN 326,500 shares 73,500 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 1,083,500 shares 479,000 shares
========= =======
The following schedule reflects the detailed status of outstanding options
under the Company's four stock option qualified and two non-qualified plans as
of September 30, 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 4.5
1994 10/26/2004 129,500 103,600 1.05 10/25/2009 .1
2002 11/06/2006 118,000 47,200 0.93 11/05/2011 2.1
2007 05/17/2007 167,500 67,000 1.66 05/16/2012 2.6
2007 10/08/2007 2,500 500 1.87 10/07/2012 3.0
2007 12/17/2007 156,500 31,300 1.32 12/16/2012 3.2
2008 08/25/2008 159,500 31,900 .97 08/21/2013 3.9
2002NQ 10/22/2002 35,000 35,000 1.26 10/21/2012 3.1
2002NQ 06/20/2003 30,000 30,000 1.03 06/19/2013 3.7
2002NQ 05/25/2004 30,000 30,000 1.46 05/24/2014 4.6
2002NQ 04/03/2006 40,000 40,000 1.08 04/02/2016 6.5
2002NQ 12/17/2007 50,000 50,000 1.32 12/16/2017 8.2
2008NQ 01/11/2009 50,000 50,000 .69 01/10/2019 9.3
--------- ------- ---- ----
1,083,500 631,500 1.12 3.5
========= ======= ==== ====
A summary of the Company's stock options as of September 30, 2009, and
changes during the nine months period ended September 30, 2009, is presented
below:
Weighted
Average
Exercise
Shares Price
--------- ---------
Plan options outstanding at
January 1, 2009 1,090,000 $1.26
Options granted 50,000 .69
Options exercised - -
Options forfeited or expired (171,500) 1.49
---------- ------
Plan options outstanding at
September 30, 2009 968,500 1.19
Non plan options 115,000 .55
---------- -----
Totals 1,083,500 $1.12
========= =====
Incentive Stock Options issued on March 2, 2004 with a five year vesting,
expired on March 1, 2009.
11
Restricted Stock Awards as Compensation
During February 2009 and in August 2009 we issued 167,000 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:
Officers:
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
-------
75,000 shares
Other employees, as a group (16 individuals) 92,000 shares
-------
Total restricted shares awarded 167,000
=======
These restricted stock awards have been approved by vote by our
shareholders at our Annual Meeting of Shareholders held on June 12, 2009.
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.
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 2.7% at September 30, 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 September 30, 2009 the Company
was in compliance with its debt covenants, and was obligated under this
arrangement in the amount of $2,000,000.
In connection with the purchase and expansion of the Alabama facility, the
Company secured financing with 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.
12
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 interest
rates the Company obtained a substitute irrevocable letter of credit for the
1997 issue and a new irrevocable letter of credit for the 2002 issue from
Regions Bank. Under such letters of credit agreements maturing on July 31, 2010,
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 when reissued 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. During the nine months ended September 30,
2009 interest rates ranged between 3.3% and 5.25%.
Repayment of the bonds is guaranteed by a Letter of Credit issued by the
Company's primary commercial bank - Regions 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 September 30,
2009, $850,000 and $2,630,000 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 until the
credit markets improve sufficiently to remarket these bonds. The interest rate
on the loans during this period was prime rate or approximately 3.3%. We believe
current operations are sufficient to meet these obligations. Interest expense on
such notes were approximately $116,000 for the nine months ending September 30,
2009 and $29,000 for the three months ending September 30, 2009.
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 September 30, 2009
was approximately $58,400 and interest rate is LIBOR plus 2.5% per annum (or
approximately 2.8% at September 30, 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 customers
that is available to our suppliers in that we cannot pass along price increases
to our national retailers and distributors as promptly as our suppliers do.
As of September 30, 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 September 30, 2009 compared to the Three Months
ended September 30, 2008:
Net sales were approximately $8,906,000 for the three months ended
September 30, 2009 compared to $8,221,000 for the comparative quarter 2008, an
increase of approximately $685,000 or 8.3%. The Company increased its sales of
private label marine products to existing as well as two newer customers. The
Company started shipping in the 3rd quarter winterizing products, under the
previously announced new contract. The increase in sales does not fully reflect
the increase in sales volume of winterizing products, due to lower oil prices
compared to last year and the resulting corresponding decrease in average
selling prices of products. The Company has also continued to increase sales of
its fuel treatment product - StarTron, into the marine markets and automotive,
powers sports and small engine markets. The addition of up to 10% ethanol in
fuel has caused engine problems, which has created increased demand for
StarTron. The increase in total sales was partially offset on a comparative
13
basis by a decrease in sales to Boater's World, which filed for bankruptcy early
in 2009.
Cost of goods sold as a percentage of net sales decreased to 69.5% in 2009
from 71.8% for the comparative 2008 quarter. With the increase in sales volume,
the Company is beginning to realize the improved plant utilization at its Kinpak
manufacturing facility, in addition to improved sales of higher margin items
Advertising and promotion expenses were approximately $380,000 compared to
$409,000 for the comparative 2008 third quarter. On a comparative basis the
advertising programs in place in 2008 were repeated in 2009. The decrease in
expense of approximately $29,000 was a result of decreased advertising rates in
trade publications.
Selling and administrative expenses increased approximately $529,500 to
$1,406,500 from $877,000, for the comparative quarters. The largest increase was
unusual legal expense for $200,000, to sue a competitor, Valvtech for false and
misleading advertising. The courts have imposed an injunction against Valvtect
for their false and misleading marketing claims. It is anticipated the Company
will prevail in a trial, scheduled for spring 2010. In addition the Company had
an increase in non-cash expenses for allowances for doubtful accounts and stock
awards granted earlier in the year. The Company also recognized performance
related employee bonuses in the quarter.
Interest expense decreased by approximately $30,500 for the quarter ended
September 30, 2009 to $41,500 compared to the corresponding quarter of $72,000
in 2008. The lower interest expense is a result in lower overall borrowings on
the Company's line of credit, partially offset by higher interest cost in the
Company's IRB's which were tended in the first quarter of this year.
Operating income was approximately $891,000 compared to $957,000, for the
comparative 2008 third quarter, a change of ($66,000) or (7.0%). This is a
result of higher sales volume partially offset with higher selling and
administrative expenses as detailed above.
Income taxes - the Company had income tax provision for the quarter of
$331,800 compared to the corresponding quarter of $366,500 in 2008.
Net profit for the quarter ended September 30, 2009 was approximately
$571,500 compared to $601,000 for the comparable period in 2008.
For the Nine Months Ended September 30, 2009 Compared to the Nine Months
Ended September 30, 2008:
Net sales were approximately $18,731,000 for the nine months ended
September 30, 2009 compared to $16,957,000 for the comparative 2008 period, an
increase of approximately $1,774,000 or 10.5%. The Company increased its sales
of private label marine products to new and existing customers. The Company also
increased sales of winterizing and StarTron products. The year to date sales
increases was partially offset by a decrease in sales to Boater's World which
filed for bankruptcy protection in the 1st quarter of 2009.
Cost of goods sold as a percentage of net sales decreased to 67.3% of sales
compared to 71.1% for the comparative 2008 period. This decrease in the cost of
goods sold percentage of 3.8% was primarily a result of a combination of lower
raw material and freight costs as a result of lower oil prices, improved
efficiency at the Company's manufacturing facility, Kinpak.
Advertising and promotion expenses were approximately $1,279,000 compared
to $1,079,000 for the comparative 2008 period. The increase in advertising
expense of approximately $200,000 was a result of increased customer
cooperative, promotional, and catalog allowances in addition to increased
expenditures for trade shows. The Company has increased its consumer advertising
with increased expenditures in magazines, newspapers and television medias. We
also increased consumer and trade advertising in TV, radio and print. This year
the Company also initiated advertising programs on the internet, on both Face
Book and Twitter.
Selling and administrative expenses increased approximately $297,000 to
$3,251,000 from $2,954,000, for comparative periods. The largest increase was
unusual legal expense for $200,000, to sue a competitor, Valvtech for false and
misleading advertising. The courts have imposed an injunction against Valvtect
for their false and misleading marketing claims. It is anticipated the Company
will prevail in a trial, scheduled for spring 2010. The Company had higher
allocation of administrative services charged to affiliated companies offset by
additional allowance for bad debts and non cash compensation expense for both
stock and stock options awards.
Interest expense decreased by approximately $62,000 for the nine months
ended September 30, 2009 to $170,000 from $232,000 for the corresponding 2008
period. The decrease in interest expense is a result of the lower outstanding
borrowings for the comparative period partially offset by higher interest rates
on the Company's IRB's which were tendered in February 2009 and held as a term
loan by Regions Bank until the bonds are remarketed.
Operating income increased to approximately $1,435,000 from $626,000 a
change of $809,000 or 129%. This is a result of higher net sales volume, higher
gross margin percent, and lower interest expenses partially offset by higher
operating expenses.
14
Income taxes - The Company had income tax expense for the nine months for
approximately $627,000 compared to the comparative period of $271,000.
Net profit for the nine months ended September 30, 2009 was approximately
$831,000 compared to $377,000 for the comparable period in 2008 an increase of
$454,000 or 120%. The percentage return on net sales doubled to 4.4% from 2.2%.
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
September 30, 2009, 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
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
The Company is the Plaintiff in the United States District Court for the
Southern District of Florida., in the matter of Star-brite Distributing, Inc.,
v. Kop-Coat, Inc., Case No. 09-60812-CIV-COHN/SELTZER.
The Company filed suit on May 29, 2009 to enjoin Kop-Coat, Inc. from
engaging in a false and misleading advertising campaign against Star-brite
Distributing, Inc. The Company is also seeking damages and attorney's fees.
A Preliminary Injunction was entered on August 31, 2009, enjoining Kop-Coat
from placing the comparison ad that is the subject of this lawsuit. On November
4, 2009, Kop-Coat, Inc. filed an answer and Counterclaims against the Company.
The Counterclaims make substantially the same types of claims against the
Company as were made by the Company against Kop-Coat, Inc., which were the basis
of the Preliminary Injunction granted by the Court against Kop-Coat, Inc. Trial
is scheduled to commence in March 2010. The Company does not believe it has any
significant financial exposure other than the expenses of litigation.
Item 1A. - Risk Factors
Not Applicable
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. - Defaults Upon Senior Securities
None.
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 Act.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley Act.
15
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: November 11, 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
16
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
periods ended September 30, 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: November 11, 2009 /s/ Peter G.Dornau
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
17
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
periods ended September 30, 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: November 11, 2009 /s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
18
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 September 30, 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: November 11, 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
19