40YEARS
973 - 2 0 1
1
3
As you have probably noted from the cover of our annual report, Ocean Bio-Chem/
Star brite® is celebrating it’s 40th Anniversary this year. Since 1973, our Company
has accomplished many milestones. Some are highlighted below.
4041 SW 47th Avenue • Fort Lauderdale, Florida 33314 • Tel:(954) 587-6280 • (800) 327-8583 • Fax:(954) 587-2813
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM • WWW.STARTRON.COM
2012 ANNUAL REPORT LETTER TO SHAREHOLDERS
Fellow Shareholders:
We ended 2012 on a very high note with record fourth quarter sales, gross margins and operating profits. For the
year 2012, the slight reduction in sales was mainly attributable to our largest customer implementing an inventory
reduction program of 15%, as we have reported. We fully anticipate that in 2013 sales to this customer will increase,
as their lower inventory levels have been achieved. Your company is stronger today as we have broadened our sales
efforts to new markets and increased sales to existing customers in our core marine market in order to help lessen the
impact of the actions of any one customer.
In order to maximize sales to new customers and distribution channels, we have increased our advertising and
marketing expenditures to create additional consumer awareness and brand recognition in these new markets. In
2012, we also introduced an exciting consumer rebate program for our Star Tron® product group. Early indications
indicate that it will be very successful program, educating the end consumer to the attributes and benefits of Star
Tron®. This is a long-term strategic program designed to expand our customer base. These initiatives contributed to
the reduced earnings for the year 2012. Marketing and advertising programs take time to produce results and we
expect excellent returns in the relatively near future as well as in the long term.
The Company had several major accomplishments in 2012. Examples include new distribution in three major
national automobile chains as well as expansion into a major hardware/home goods chain in the northern part of
the United States. We confidently and optimistically look forward to continued expansion of our customer base for
all products in 2013 and beyond.
In order to maintain and improve our capital assets, in 2012 we continued to upgrade property, plant and
equipment in our Kinpak manufacturing facility, investing an additional $770 thousand dollars. The total net book
value of our property, plant and equipment is $5.3 million dollars. We estimate the current replacement cost of our
property, plant and equipment to be well in excess of $20 million dollars.
Ocean Bio-Chem’s 2013 outlook and potential remain positive as we continue to develop new products and explore
new markets. We are optimistic that 2013 will be another successful year for the Company, building on the gains
achieved in 2012 and earlier. We are currently working on a group of new products to be introduced in 2014
that will utilize our patented chlorine dioxide delivery system. The new product is a liquid disinfectant that will be
named Xtrem-A-Cide P®. This patented product is a broad-spectrum disinfectant that has EPA approval for use as
a sanitizer, virucide, tuberculocide, fungicide, algaecide, slimicide and deodorizer. The applications for this product
are immense, ranging from consumer use to industrial.
In closing, I would like to express my appreciation to all of the Ocean Bio-Chem. Inc., employees for their continued
dedication and efforts in achieving the milestones and successes over the past year. We are also very grateful for the
support of all of our customers, suppliers and shareholders.
Peter G. Dornau
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission File Number 000-11102
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or
organization)
59-1564329
(I.R.S. Employer Identification No.)
4041 SW 47 AVENUE
FORT LAUDERDALE, FLORIDA 33314
(Address of principal executive offices)
954-587-6280
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 No
Indicate by check mark whether registrant has submitted electronically and posted on its corporate Website, if any every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 (or for such shorter period that the registrant was required to submit and
post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the Common Stock held by non-affiliates of the registrant at June 29, 2012 was $6,460,514. For purposes of making this
computation only, all executive officers, directors and beneficial owners of more than five percent of the registrant's Common Stock are deemed to be affiliates.
At April 1, 2013, 8,398,385 shares of the registrant’s voting Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, which will be filed not later than April 30, 2013, are incorporated by reference in Part III of this report.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Business
PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibits, Financial Statements Schedules
Signatures
Forward-looking Statements:
Page
1-3
4-5
5
5
5
5
5-6
6
6-10
10
10
10
10
11
11
11
11
11
11
12-13
14
Certain statements contained in this Annual Report on Form 10-K, including without limitation, sufficiency of funds provided through
operations and existing sources of financing to satisfy our cash requirements, constitute forward-looking statements. 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 "believe," "may," "will," "expect," "anticipate," "intend," or "could," including the negative or 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 to be materially different from those expressed or implied by such
forward-looking statements. Factors that may affect these results include, but are not limited to, the highly competitive nature of our industry,
increasing oil and related petrochemical and petroleum prices, reliance on certain key customers, changes in consumer demand for marine,
recreational vehicle and automotive products, advertising and promotional efforts, and exposure to market risks relating to changes in interest
rates and foreign exchange rates.
Item 1. Business
General:
PART I
We are principally engaged in the manufacturing, marketing and distribution of a broad line of appearance, performance, and maintenance
products for the marine, automotive, power sports, recreational vehicle and outdoor power equipment markets, under the Star brite®, Star Tron®,
and other trademarks within the United States of America and Canada. In addition, we produce private label formulations of many of our
products for various customers and provide custom blending and packaging services for these and other products. Unless, the context indicates
otherwise, we sometimes refer to Ocean Bio-Chem, Inc. and its consolidated subsidiaries as “the Company," "we" or "our.”
Ocean Bio-Chem, Inc. was incorporated in 1973 under the laws of the state of Florida. In 1981, we purchased, from Peter G. Dornau and Arthur
Spector, the co-founders of the Company, rights to the Star brite® trademark and related products for the United States and Canada. Mr.
Dornau, our Chairman, President and Chief Executive Officer, has retained rights to these assets with respect to all other geographic
areas. Accordingly, products that we manufacture that are sold outside of the United States and Canada are purchased from us and distributed by
two companies owned by Mr. Dornau. Net sales to the two companies in 2012 totaled approximately $1,487,000, or 4.8% of our net sales. See
Note 8 to the consolidated financial statements included in this report for additional information.
On May 10, 2010, the Company announced the formation of OdorStar Technology LLC (“OdorStar”), a joint venture between the Company
and BBL Distributors, LLC. OdorStar owns patents that relate to a formula and delivery system, for use with products containing chlorine
dioxide, designed to safely prevent and eliminate all types of odors relating to mold, mildew, and other sources of unpleasant odors. The
Company and BBL Distributors LLC share equally in profits or losses from OdorStar. Because the Company manages OdorStar, it has
consolidated OdorStar in its financial statements.
Products:
The products that we manufacture and market include the following:
Marine: Our marine line consists of polishes, cleaners, protectants and waxes under the Star brite® brand name, enzyme fuel treatment under the
Star Tron® brand name, and private label products. The marine line also includes motor oils, boat washes, vinyl cleaners, protectants, teak
cleaners, teak oils, bilge cleaners, hull cleaners, silicone sealants, polyurethane sealants, polysulfide sealants, gasket materials, lubricants,
antifouling additives and anti-freeze coolants. In addition, we manufacture a line of brushes, poles, tie-downs and other related marine
accessories.
Automotive: We manufacture a line of automotive products under the Star brite® and Star Tron® brand names The automotive line includes fuel
treatments for both gas and diesel engines, motor oils, greases and related items. In addition, we produce anti-freeze and windshield washes
under the Star brite® brand and under private labels for customers. We also produce automotive polishes, cleaners and other appearance items.
Recreational Vehicle/Power Sports: We also market Star Tron® fuel treatment to the recreational vehicle market, including snow mobiles, all
terrain vehicles and motorcycles. Power sports enthusiasts have found Star Tron® a viable solution to a number of problems associated with E-
10 fuel, which contains ethanol. Other recreational vehicle/power sports products include cleaners, polishes, detergents, fabric cleaners and
protectors, silicone sealants, waterproofers, gasket materials, degreasers, vinyl cleaners and protectors, toilet treatment fluids and anti-freeze
coolants.
Outdoor Power Equipment/ Lawn & Garden: We market Star Tron® as a viable solution to help rectify a number of operating engine problems in
commercial lawn equipment and other home and garden power equipment associated with using E-10 fuel, which is fuel containing 10%
ethanol.
Contract Filling and Blow Molded Bottles: We blend and package a variety of chemical formulations to our customers’ specifications. In
addition, we manufacture for sale to various customers assorted styles of both PVC and HDPE blow molded bottles.
Mold/Mildew Odor Control: We manufacture and market a variety of products under the Star brite® name that help prevent and eliminate all
types of mold, mildew, and other unpleasant odors, through OdorStar’s patented delivery system. Our odor control products are effective for
homes, automobiles, boats and recreational vehicles.
Although our products are utilized for different types of vehicles and boats, and for home care, we believe our operations constitute one industry
segment.
1
Manufacturing: We produce the majority of our products at the manufacturing facilities of our subsidiary, Kinpak, Inc. ("Kinpak"), in
Montgomery, Alabama. In addition, we contract with various unaffiliated companies located in the northeastern and mid-western areas of the
country to manufacture our other products, which are manufactured to our specifications using our provided formulas. Each third party packager
enters into a confidentiality agreement with us.
We purchase raw materials from a wide variety of suppliers; all raw materials used in manufacturing are readily available from alternative
sources. We design our own packaging and supply our outside manufacturers with the appropriate design or packaging. We believe that our
internal manufacturing capacity and our arrangements with our current outside manufacturers are adequate for our present needs.
In the event that arrangements with any third-party manufacturer are discontinued, we believe that we will be able to locate substitute
manufacturing facilities without a substantial adverse effect on our manufacturing and distribution.
Marketing and Significant Customers: Our products are sold through national retailers such as Wal-Mart, Tractor Supply,West Marine, and
Bass Pro Shops. We also sell to national and regional distributors that sell our products to specialized retail outlets. Currently we have two
customers to whom sales exceeded 10% of consolidated net revenues for the year ended December 31, 2012. Sales to these two customers
represented approximately 37% of consolidated net sales. Sales to our five largest unaffiliated customers for the year ended December 31, 2012,
amounted to approximately 49% of our consolidated net sales, and at December 31, 2012, outstanding accounts receivable balances from our
five largest unaffiliated customers aggregated approximately 23% of our consolidated accounts receivable.
We market our products through internal salesmen and approximately 40 sales representatives who work on an independent contractor
commission basis. Our personnel also participate in sales presentations and trade shows. In addition, we market our brands and products
through advertising campaigns in national magazines, television, newspapers and product catalogs. Our products are distributed primarily from
Kinpak’s manufacturing and distribution facility in Montgomery, Alabama. Since 2008, we have participated in a vendor managed inventory
program with one major customer.
Backlog, Seasonality, and Selling Terms: We had no significant backlog of orders at December 31, 2012. We do not give customers the
absolute right to return product. The majority of our products is non-seasonal and is sold throughout the year. Normal trade terms offered to
credit customers range from 30 to 60 days. However, at times we offer extended payment terms or discount arrangements as purchasing
incentives to customers. These initiatives do not materially affect customary margins.
Competition:
Competition with respect to our principal product lines is described below: The principal elements of competition affecting all of our product
lines are brand recognition, price, service and the ability to deliver products on a timely basis.
Marine: We have several national and regional competitors in the marine marketplace. We do not believe that any competitor or small group of
competitors hold a dominant market share. We believe that we can increase or maintain our market share through expenditures directed to our
present methods of advertising and distribution.
Automotive: There are a large number of companies, both national and regional, that compete with us. Many are more established and have
greater financial resources than we do. While our market share is small, the total market size is substantial. We believe that we have established
a reasonable market share through our present methods of advertising and distribution, considering the large size of this market.
Recreational Vehicle/Power Sports: We compete with national and regional competitors. We do not believe that any competitor or small group
of competitors hold a dominant market share. We believe that we can increase or maintain our market share by utilizing similar methods to
those we use in the marine market.
Outdoor Power Equipment/Lawn & Garden: We compete with several established national and regional competitors. We do not believe that
any competitor or small group of competitors hold a dominant market share. We have attempted to make inroads in this market by emphasizing
Star Tron®’s unique formulation and by increasing our advertising and attendance at trade shows.
Trademarks: We have obtained registered trademarks for Star brite®, Star Tron® and other trade names used on our products. We view our
trademarks as significant assets because they provide product recognition. We believe that our intellectual property is protected, but we cannot
assure that our intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged.
Patents: In 2010, the Company acquired an interest in patents held by OdorStar. The patents relate to a delivery system, for use with products
containing chlorine dioxide, designed to safely prevent and eliminate all types of odors relating to mold, mildew, and other unpleasant
odors. The patents expire in 2022.
2
New Product Development: We continue to develop specialized products for the marine, automotive, recreational vehicle/power sports and
outdoor power equipment/lawn and garden markets. Expenditures for new product development have not been significant and are charged to
operations in the year incurred.
Personnel: At December 31, 2012, we had 117 full-time employees. The following table provides information regarding personnel working for
the Company and its subsidiaries at December 31, 2012:
Location
Fort Lauderdale, Florida
Fort Lauderdale, Florida
Montgomery, Alabama
Description
Administrative
Manufacturing and distribution
Manufacturing and distribution
Full-time Employees
28
7
82
117
3
Item 1A. Risk Factors
If we do not compete effectively, our business will suffer.
We confront aggressive competition in the sale of our products. In each of the markets in which we sell our products, we compete with a
number of national and regional competitors. Competition in the automotive market is particularly intense, with many national and regional
companies marketing competitive products. Many of our competitors in the automotive market are more established and have greater financial
resources than we do. Our inability to successfully compete in our principal markets would have a material adverse effect on our financial
condition, results of operations and cash flows.
Economic conditions can adversely affect our business.
We are subject to risks arising from adverse changes in general domestic and global economic conditions, including recession or economic
slowdown and disruption of credit markets, which may impair the ability of our customers to satisfy obligations due to us. In addition, adverse
economic conditions in recent years have adversely affected discretionary spending, which can have an indirect adverse effect on our product
lines, particularly those directed to the marine and recreational vehicle markets. A continued economic slowdown or a decline in economic
conditions could have a material adverse effect on our financial condition, results of operations and cash flows.
Failure to effectively utilize or successfully assert intellectual property rights could materially adversely affect our competitiveness.
We rely on trademarks and trade names in connection with our products, the most significant of which are Star brite® and Star Tron®. OdorStar
also owns patents we consider important to our business. We rely on trademark, trade secret, patent and copyright laws to protect our
intellectual property rights. We cannot assure that these intellectual property rights will be effectively utilized or, if necessary, successfully
asserted. There is a risk that we will not be able to obtain and perfect our own intellectual property rights, or, where appropriate, license from
others intellectual property rights necessary to support new product introductions. Our intellectual property rights, and any additional rights we
may obtain in the future, may be invalidated, circumvented or challenged in the future. Our failure to perfect or successfully assert intellectual
property rights could make us less competitive and could have a material adverse effect on our financial condition, results of operations and cash
flows.
Environmental matters may cause potential liability risks.
We must comply with various environmental laws and regulations in connection with our operations, including those relating to the handling and
disposal of hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous substances. A release of
such substances due to accident or intentional act could result in substantial liability to governmental authorities or to third parties. In addition,
we are subject to reporting requirements with respect to certain materials we use in our manufacturing operations. In January 2011, Kinpak,
which owns our manufacturing facility in Montgomery, Alabama, became subject to a consent agreement and final order with the United States
Environmental Protection Agency relating to its alleged failure to complete and submit certain required forms with respect to toxic and
hazardous chemicals used at its facilities. Under the consent agreement and final order, Kinpak paid a civil penalty of $110,000. It is possible
that we could become subject to additional environmental liabilities in the future that could have a material adverse effect on our financial
condition, results of operations and cash flows.
Our variable rate indebtedness exposes us to risks related to interest rate fluctuation.
The Company has a revolving line of credit with a variable interest rate. At December 31, 2012, the Company did not have any borrowings
outstanding under the revolving line of credit. However, during 2012 the highest amount outstanding under the revolving line of credit was
$1,700,000. Interest on the revolving line of credit is payable at the 30 day LIBOR rate plus 1.74% per annum (unless the Company’s debt
service coverage ratio, as defined in the credit agreement, falls below 2.0 to 1, in which case the additional percentage will be 2.75% per
annum). In no event will the interest rate be less than 2.0% per annum. If interest rates were to increase significantly, our financial condition,
results of operations and cash flows could be materially adversely affected.
Our Chairman, President and Chief Executive Officer is a majority shareholder who controls us, and his interest may conflict with or
differ from the Company's interests.
Peter G. Dornau, our Chairman, President and Chief Executive Officer, owns approximately 55% of our Common Stock. As a result,
Mr. Dornau has the power to elect all of our directors and effectively has the ability to prevent any transaction that requires the approval of our
Board of Directors and our shareholders. Products that we manufacture and that are sold outside of the United States and Canada are purchased
from us and distributed by two companies owned by Mr. Dornau, which we refer to as the “affiliated companies.” Sales to the affiliated
companies aggregated approximately $1,487,000 and $1,764,000 during the years ended December 31, 2012 and 2011, respectively. An
affiliated company owns the rights to the Star brite® and Star Tron® trademarks and related products outside of the United States and Canada.
4
In addition, we provided administrative services to the affiliated companies for fees aggregating approximately $335,000 and $332,000 during
the years ended December 31, 2012 and 2011, respectively. While the terms of the sales to the affiliated companies differed from the terms of
sale to other customers, the affiliated companies bear their own warehousing, distribution, advertising, selling and marketing costs, as well as
their own freight charges (we pay freight charges in connection with sales to our domestic customers on all but small orders). Moreover, we do
not pay sales commissions with respect to products sold to the affiliated companies. As a result, we believe our profit margins with respect to
sales to the affiliated companies are similar to the profit margins we realize with respect to sales to our larger domestic customers. Management
believes that the sales to the affiliated companies did not involve more than normal credit risk or present other unfavorable features. We have
entered into other transactions with entities owned by Mr. Dornau. See Note 8 to the consolidated financial statements included in this report for
additional information.
Trading in our Common Stock has been limited, and our stock price could potentially be subject to substantial fluctuations.
Our common stock is listed on the NASDAQ Capital Market, but trading in our stock has been limited. Our stock price could be affected
substantially by a relatively modest volume of transactions.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our executive offices and one of our manufacturing facilities is located in Fort Lauderdale, Florida and are leased from an entity controlled by
our Chairman, President and Chief Executive Officer. The lease covers approximately 12,700 square feet of office, manufacturing, and
warehouse space. See Note 9 to the consolidated financial statements included in this report for additional information.
We own Kinpak’s Alabama facility, which currently contains approximately 300,000 square feet of office, plant and warehouse space on 20
acres of land. We also lease a 1.5 acre docking facility on the Alabama River, located approximately eleven miles from these facilities.
Item 3. Legal Proceedings
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the NASDAQ Capital Market under the symbol OBCI. A summary of the high and low sales prices during each
quarter of 2012 and 2011 is presented below.
PART II
2012
2011
High
Low
High
Low
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
$
$
$
$
2.78 $
2.01 $
3.93 $
1.80 $
2.59 $
1.83 $
3.56 $
2.16 $
2.59 $
1.76 $
4.40 $
1.98 $
2.50
1.81
2.68
1.68
We had 144 record holders of our Common Stock at December 31, 2012. We believe that there are approximately 900 additional beneficial
holders of our Common Stock, based on information obtained from our transfer agent and from broker-dealers that hold shares on behalf of their
clients.
The Company has not paid any cash dividends since its incorporation. The Company does not currently intend to pay any cash dividends, but
instead will utilize available cash to fund operations.
5
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements contained herein as Item 8.
Overview:
We are principally engaged in the manufacturing, marketing and distribution of a broad line of appearance, performance, and maintenance
products for the marine, automotive, power sports, recreational vehicle and outdoor power equipment markets, under the Star brite® and other
trademarks within the United States of America and Canada. In addition, we produce private label formulations of many of our products for
various customers and provide custom blending and packaging services for these and other products. We sell our products through national
retailers and to national and regional distributors who, in turn, sell our products to specialized retail outlets.
Critical accounting estimates:
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and assumptions.
We have identified the following as critical accounting estimates, which are defined as those that are reflective of significant judgments and
uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially
result in materially different results under different assumptions and conditions.
Revenue recognition and collectability of accounts receivable
Revenue from product sales is recognized when persuasive evidence of a contract exists, the sales price is fixed and determinable, the title of
goods pass to the customer, and collectability of the related receivable is probable. With respect to a customer for whom the Company manages
the inventory at the customer's location, revenue is recognized when the products are sold to a third party. In the ordinary course of business, we
grant non-interest bearing trade credit to our customers on normal credit terms. In an effort to reduce our credit risk, we perform ongoing credit
evaluations of our customers and adjust credit limits based upon payment history and customers’ creditworthiness, as determined by our review
of their current credit information. We monitor collections and payments from our customers and maintain a provision for estimated credit
losses based upon our historical experience, specific customer collection issues and reviews of agings of trade receivables based on contractual
terms. We generally do not require collateral on trade accounts receivable. We maintain an allowance for doubtful accounts based on our
historical collection experience and expected collectability of the accounts receivable, considering the period an account is outstanding, the
financial position of the customer and information provided by credit rating services. The adequacy of this allowance is reviewed each
reporting period and adjusted as necessary. Our allowance for doubtful accounts was approximately $73,000 and $75,000 at December 31, 2012
and 2011, respectively, which was approximately 2.4% and 2.8%, respectively, of gross accounts receivable. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to make payments, or if unexpected events or significant future changes
in trends were to occur, additional allowances may be required, resulting in increased bad debt expense.
Inventories
Inventories primarily are composed of raw materials and finished goods and are stated at the lower of cost or market, using the first-in, first-out
method. We maintain a reserve for slow moving and obsolete inventory to reduce the carrying value of our inventories to reflect the diminution
of value resulting from product obsolescence, damage or other issues affecting marketability by an amount equal to the difference between the
cost of the inventory and its estimated market value. The adequacy of this reserve is reviewed each reporting period and adjusted as
necessary. We regularly compare inventory quantities on hand against historical usage or forecasts related to specific items in order to evaluate
obsolescence and excessive quantities. In assessing historical usage, we also qualitatively assess business trends to evaluate the reasonableness
of using historical information as an estimate of future usage. A complete physical count of the inventory is conducted annually.
Our slow moving and obsolete inventory reserve was $271,994 and $276,703 at December 31, 2012 and December 31, 2011, respectively.
6
Income taxes
Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized to
reflect the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which the differences are expected to be recovered or settled. The temporary differences are attributable to differing
methods of financial statement and income tax depreciation and reserves for trade accounts receivable and inventories.
The likelihood of a material change in the Company's expected realization of deferred tax assets is dependent on, among other factors, future
taxable income and settlements with tax authorities. While management believes that its judgments and interpretations regarding income taxes
are appropriate, significant differences in actual experience may require future adjustments to our tax assets and liabilities, which could be
material.
We are also required to assess the realizability of our deferred tax assets. We evaluate positive and negative evidence and use judgments
regarding past and future events, including operating results and available tax planning strategies that could be implemented to realize the
deferred tax assets. Based on this assessment, we determine when it is more likely than not that all or some portion of our deferred tax assets
may not be realized, in which case we would be required to apply a valuation allowance to offset our deferred tax assets in an amount equal to
future tax benefits that may not be realized. We currently do not apply a valuation allowance to our deferred tax assets. However, if facts and
circumstances change in the future, valuation allowances may be required.
Significant judgment is required in determining income tax provisions and in evaluating tax positions. We establish additional provisions for
income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum
probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority. In
the normal course of business, we and our subsidiaries are examined by various federal and state tax authorities. We regularly assess the
potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision
for income taxes. We adjust the income tax provision, the current tax liability and deferred taxes in any period in which facts that give rise to an
adjustment become known. The ultimate outcomes of the examinations of our income tax returns could result in increases or decreases to our
recorded tax liabilities, which could affect our financial results.
Trademarks, trade names and patents - We acquired the rights to the Star brite® trademark and related products for the United States and Canada
in conjunction with our initial public offering during March 1981 for $880,000. The cost of these intangible assets was amortized on a straight-
line basis over an estimated useful life of 40 years through December 31, 2001. Effective January 1, 2002 and pursuant to Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (now codified in Financial Accounting Standards Board
Accounting Standards Codification Topic 350, "Intangibles - Goodwill and Other"), we determined that these intangible assets have indefinite
lives and therefore, we no longer recognize amortization expense. In addition, our 50% owned joint venture, OdorStar Technology, LLC, owns
patents we use in our business. The Company amortizes these patents over their remaining life on a straight line basis. We review the carrying
values of the trademarks and patents periodically for possible impairment. Our impairment review is based on a discounted cash flow approach
that requires significant judgment with respect to unit volume, revenue and expense growth rates, and the selection of an appropriate discount
rate. Management uses estimates based on expected trends in making these assumptions. All impairment charges would be recorded for the
difference between the carrying value and the net present value of estimated future cash flows, which represents the estimated fair value of the
asset. Management uses its judgment in assessing whether assets may have become impaired between annual valuations. Indicators such as
unexpected adverse economic factors, unanticipated technological change, distribution losses, competitive activities and acts by governments
and courts may indicate that an asset has become impaired.
7
Results of Operations:
Net sales were approximately $31,039,000 in 2012 compared to $31,681,000 in 2011, a decrease of $642,000 or 2.0%. The sales decrease
reflects a decline in sales to one of our largest customers, which engaged in an inventory reduction program in 2012. The customers’ inventory
reduction program is not expected to continue in 2013. This sales decrease was partially offset by sales to new customers and increased sales to
other established customers. Net sales also reflected continued growth of our enzyme fuel treatment product, Star Tron®, into the retail markets
to which our products are directed.
Cost of goods sold and gross profit – Cost of goods sold during 2012 decreased approximately $585,000 or 2.8%, to approximately
$20,412,000 from approximately $20,997,000 in 2011. The decrease was principally due to the decrease in sales.
Our gross profit percentage (gross profit as a percentage of net sales) increased approximately 0.5%, from 33.7% in 2011 to 34.2% in
2012. This increase primarily was a result of improved product sales mix and a reduction of cost of goods sold. The $57,000 decrease in gross
profit reflects lower net sales, somewhat mitigated by the increase in gross profit percentage.
Advertising and promotion expense was approximately $2,418,000 in 2012, an increase of approximately $438,000 or 22.1% from
approximately $1,980,000 in 2011. As a percentage of net sales, advertising and promotion expense increased from 6.2% in 2011 to 7.8% in
2012. The increase in advertising expenditures was designed to support the expansion of Star Tron® products into new markets, including
automotive, power sports, motorcycle, small engine and outdoor power equipment markets . We sponsored several television programs targeted
to potential customers for our products and purchased print advertisements in several national magazines targeted to automotive, boating and
engine maintenance and repair enthusiasts, as well as in specific industry magazines. In addition, we increased expenditures for customer
cooperative advertising allowances to promote our Star Tron® and Star brite® products in catalogs and sales promotion flyers.
Selling and administrative expenses increased by about $136,000 or 2.7%, from approximately $4,990,000 in 2011 to approximately
$5,126,000 in 2012. The increase is principally due to an increase in sales-related expenses mainly increased staffing and related expenses
including travel and entertainment expenses. As a percentage of net sales, selling and administrative expenses increased from 15.8% in 2011 to
16.5% in 2012.
Interest expense decreased approximately $52,000 to $98,000 in 2012, compared to $150,000 in 2011. The decrease principally reflects the
reduction in our short-term and long-term indebtedness during 2012. In addition, the reduction reflects reduced financing costs resulting from
the July 2011 refinancing of both our short term borrowing and long term debt at lower interest rates.
Operating income – As a result of the foregoing, operating income decreased to approximately $3,082,000 in 2012, compared to approximately
$3,714,000 in 2011, a decrease of $632,000 or 17.0%.
Income taxes – We had a tax expense of approximately $1,055,000 in 2012 or 35.3% of pretax income, compared to $1,280,000 in 2011 or
35.4% of pretax income. For additional information, see Note 7 to the consolidated financial statements.
Net Income and Net income attributable to Ocean Bio-Chem, Inc. As a result of the items described above, net income decreased
approximately 17.2% or approximately $401,000 to $1,934,000 from $2,335,000 in 2011. Net income attributable to Ocean Bio-Chem, Inc.
(excluding the loss attributable to non-controlling interests) was approximately $1,962,000 in 2012, a decrease of approximately $431,000 or
18% from approximately $2,393,000 in 2011.
Liquidity and Capital Resources:
Our cash balance was approximately $1,508,000 at December 31, 2012 compared to approximately $585,000 at December 31, 2011. At
December 31, 2012 there were no borrowings under our revolving line of credit compared to $850,000 outstanding at December 31, 2011.
Cash provided by operating activities for the year ended December 31, 2012 was approximately $2,775,000 compared to about $621,000 for the
year ended December 31, 2011. The increase in cash provided from operations is primarily due to the reduction in inventories of approximately
$376,000 in 2012 as compared to the increase in inventories of approximately $1,849,000 in 2011. In 2011, management increased inventory
levels of petroleum based products in anticipation of rising oil prices in early 2012.
Cash used in investing activities for the year ended December 31, 2012 was approximately $771,000 compared to $435,000 in 2011. In 2012 we
continued to upgrade and replace older less efficient equipment in our Kinpak manufacturing facility and made capital improvements to our
principal executive offices.
8
Cash used in financing activities for the year ended December 31, 2012 was approximately $1,081,000 compared to $215,000 for the year ended
December 31, 2011. The increase in cash used in financing activities in 2012 is due to net repayments on our line of credit of $850,000 in 2012
compared to net borrowings of $850,000 in 2011. In addition, in 2011 we paid the entire balance of approximately $472,000 on a related party
note held by our Chairman, President and Chief Executive Officer, as described in Note 8 to the consolidated financial statements included in
this report. These increases were partially offset by the lower net reduction of approximately $400,000 in long-term debt in 2012 compared to
the net reduction of approximately $658,000 in 2011. We also received approximately $169,000 from the exercise of stock options in 2012
compared to approximately $65,000 in 2011.
Net trade accounts receivable aggregated approximately $2,931,000 at December 31, 2012 and $2,563,000 at December 31, 2011, an increase of
14.4%. This increase in accounts receivable is due to increased sales in December 2012.
Inventories were approximately $9,257,000 and $9,628,000 at December 31, 2012 and 2011, respectively, representing a decrease of
approximately $371,000 or 3.9% in 2012. The higher levels of 2011 inventories compared to 2012 levels reflect management's 2011 decision to
increase inventory levels of petroleum-based products in anticipation of rising oil prices.
On July 6, 2011, we, together with our subsidiary, Kinpak Inc. (“Kinpak”), entered into a Credit Agreement with Regions Bank (and, pursuant to
an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)) under which (a) our revolving
line of credit with Regions Bank was renewed, and (b) REFCO provided a new term loan in the amount of $2,430,000, the proceeds of which
were used to pay the Kinpak’s remaining lease obligations in connection with the previously outstanding 2002 Series of Industrial Development
Revenue Bonds issued by the City of Montgomery, Alabama (the “2002 Bonds”). The 2002 Bonds were used to fund the expansion of Kinpak’s
facilities and acquisition of related equipment.
Under the term loan, we pay principal, together with interest at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of
$37,511 over the six year period beginning on August 6, 2011, with the final payment due on July 6, 2017. In the event our debt service
coverage ratio falls below 2.0 to 1, interest on the term loan will increase by 1.01% per annum. For the year ended December 31, 2012, our debt
service coverage ratio exceeded 6.0 to 1.
The Credit Agreement defines “debt service coverage ratio“ as meaning net profit plus taxes, interest, depreciation, amortization and rent
expense divided by debt service plus interest and lease/rent expense. The Credit Agreement contains various covenants, including financial
covenants requiring a minimum debt coverage ratio of 1.75 to 1.00, tested on a rolling four-quarter basis, and a maximum debt to capitalization
ratio (funded debt divided by the sum of total net worth and funded debt) of 0.75 to 1, tested quarterly. At December 31, 2012, we were in
compliance with these covenants.
Under the renewed revolving line of credit, we may borrow up to the lesser of (i) $6 million and (ii) a borrowing base equal to 80% of eligible
accounts receivable plus 50% of eligible inventory. Interest on the revolving line of credit is payable at the 30 day LIBOR rate plus 1.74% per
annum (unless our debt service coverage ratio falls below 2.0 to 1, in which case the additional percentage will be 2.75% per annum). In no
event will the interest rate be less than 2.0% per annum. Outstanding amounts under the revolving line of credit are payable on demand. If no
demand is made, we may repay and reborrow funds from time to time. Interest payments are made in monthly installments on outstanding
average balances with all outstanding principal and interest payable on July 6, 2014. At December 31, 2012 there were no borrowings under our
revolving line of credit.
Our obligations under the Credit Agreement are secured by our accounts receivable and inventory, as well as real property and equipment at the
Kinpak’s Montgomery, Alabama facility.
In addition to the revolving line of credit and term loan, we have obtained financing through capital leases for both manufacturing and office
equipment, totaling approximately $37,600 and $62,400 at December 31, 2012 and December 31, 2011, respectively.
Our sales in the Canadian market are subject to currency fluctuations relating to the Canadian dollar. We do not engage in currency hedging and
address currency risk as a pricing issue. In the year ended December 31, 2012, we recorded approximately $6,000 in foreign currency
translation adjustments (increasing shareholders equity by $6,000).
During the past few years, we have introduced a number of new products. At times, new product introductions have required us to increase our
overall inventory and have resulted in lower inventory turnover rates. The effects of reduced inventory turnover have not been material to our
overall operations. We believe that all required capital to maintain such increases will continue to be provided by operations and our current
financing arrangements.
Many of the raw materials that we use in the manufacturing process are petroleum or chemical based and commodity chemicals that are subject
to fluctuating prices. The nature of our business does not enable us to pass through the price increases to our national retailers and distributors,
as promptly as we experience increases in raw material costs. This may, at times, adversely affect our margins.
9
At December 31, 2012 and through the date of this report, 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.
We believe that funds provided through operations and our existing sources of financing will be sufficient to satisfy our cash requirements over
at least the next twelve months.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The audited financial statements of the Company required pursuant to this Item 8 are included in a separate section commencing on page F-1 and
are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures:
Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-
15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") at the end of the period covered by this
report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures as of the end of the period covered by this report are effective to provide reasonable assurance that the information required to be
disclosed by the Company in reports filed under the Exchange Act are (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and (ii) accumulated and communicated to the Company’s management,
including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the disclosure.
Change in Internal Controls over Financial Reporting. No change in internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of Ocean Bio-Chem, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is a process designed 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. A company’s internal
control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management evaluated the Company’s internal control over financial reporting as of December 31, 2012. In making this assessment,
management used the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). As a result of this assessment and based on the criteria in the COSO framework, management has
concluded that, as of December 31, 2012, the Company’s internal control over financial reporting was effective.
10
Item 9B. Other Information
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed with the
Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed with the
Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed with the
Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed with the
Commission no later than 120 days after the close of the fiscal year covered by this report.
Item 14. Principal Accounting Fees and Services
Information required by this item is incorporated by reference to the Company's definitive proxy statement, which will be filed with the
Commission no later than 120 days after the close of the fiscal year covered by this report.
11
Item 15. Exhibits, Financial Statements, Schedules and Reports Filed on Form 8K
(a)
Financial Statements – See the Index to Consolidated Financial Statements on page F-1.
PART IV
(b)
Exhibits:
Exhibit
No.
3.1.1
Articles of Incorporation and amendments through May 20, 1994 (incorporated by reference to Exhibit 3.1 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2010).
*3.1.2 Articles of Amendment to the Articles of Incorporation, as filed on June 13, 2012.
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on December 5, 2011).
†10.1 Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration
Statement on Form S-8 (file no. 333-174659), filed with the Securities and Exchange Commission on June 2, 2011).
10.2
Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”) (incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011).
10.3
10.4
10.5
Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment Finance Corporation
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2011).
Promissory Note, dated July 6, 2011, issued by the Company to Regions Bank in connection with the revolving line of credit under the
Credit Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed with the Securities
and Exchange Commission on July 12, 2011).
Promissory Note, dated July 6, 2011, issued by the Company and Kinpak, Inc. to Regions Equipment Finance Corporation in
connection with the term loan under the Credit Agreement (incorporated by reference to Exhibit 99.4 to the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on July 12, 2011).
†10.6 Ocean Bio-Chem, Inc. 2002 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.2 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
†10.7 Ocean Bio-Chem, Inc. 2008 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.4 to the Company’s
Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
†10.8 Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
†10.9 Ocean Bio-Chem, Inc. Form of Stock Option granted to Peter G. Dornau (incorporated by reference to Exhibit 99.6 to the Company’s
Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
†10.10 Ocean bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration
Statement on Form S-8, filed with the Securities and Exchange Commission on June 2, 2011).
10.11 Net Lease dated May 1, 1998 between Star Brite Distributing, Inc. and PEJE, Inc (incorporated by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
10.12 Renewal of Lease dated May 1, 2008 between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to Exhibit 10.24
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
10.13 OdorStar Technology, LLC Operating Agreement dated May 4, 2010 (incorporated by reference to Exhibit 10.17 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2010).
List o List of Subsidiaries
*21.
12
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
Exhibit
No.
*31.1
*31.2
*32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
*32.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
101
The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012, formatted
in XBLR (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2012 and December 31, 2011;
(ii) Consolidated Statements of Operations for the years ended December 31, 2012 and 2011; (iii) Consolidated Statements of
Comprehensive Income for the years ended December 31, 2012 and 2011; (iv) Consolidated Statements of Changes in Shareholders
Equity for the years ended December 31, 2012 and 2011, (v) Consolidated Statements of Cash Flows for the years ended December 31,
2012 and 2011 and (vi) Notes to Consolidated Financial Statements.
* Filed herewith.
† Constitutes management contract or compensatory plan or arrangement required to be filed as in exhibit to this report.
13
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: April 1, 2013
OCEAN BIO-CHEM, INC.
Registrant
By: /s/ Peter G. Dornau
PETER G. DORNAU
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
April 1, 2013
/s/Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
April 1, 2013
/s/ Gregor M. Dornau
Gregor M. Dornau
April 1, 2013
Director
/s/ William W. Dudman
William W. Dudman
/s/ James M. Kolisch
James M. Kolisch
/s/ John B. Turner
John B. Turner
/s/ Sonia B. Beard
Sonia B. Beard
/s/ Diana Mazuelos Conard
Diana Mazuelos Conard
Director
Director
Director
Director
Director
April 1, 2013
April 1, 2013
April 1, 2013
April 1, 2013
April 1, 2013
14
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of independent registered public accounting firm
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of comprehensive income
Consolidated statements of changes in shareholders’ equity
Consolidated statements of cash flows
Notes to consolidated financial statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8 - F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Ocean Bio-Chem, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Ocean Bio-Chem, Inc. and Subsidiaries as of December 31, 2012 and 2011
and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the
years in the two-year period ended December 31, 2012. Ocean Bio-Chem, Inc. and Subsidiaries’ management is responsible for these
consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Ocean Bio-Chem, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the
years in the two-year period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of
America.
/s/ Goldstein Schechter Koch P.A.
Certified Public Accountants
Hollywood, Florida
April 1, 2013
F-2
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
ASSETS
Current Assets:
Cash
Trade accounts receivable less allowances of approximately $73,000 and $75,000, respectively
Receivables due from affiliated companies
Inventories, net
Prepaid expenses and other current assets
Deferred tax asset
Total Current Assets
Property, plant and equipment, net
Other Assets:
Trademarks, trade names and patents, net
Other assets
Total Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable – trade
Revolving line of credit
Current portion of long-term debt
Income taxes payable
Accrued expenses payable
Total Current Liabilities
Deferred tax liability
Long-term debt, less current portion
Total Liabilities
Commitments and contingencies
Shareholders' Equity:
Common stock - $.01 par value, 12,000,000 shares authorized; 8,749,888 and 8,458,389
shares issued, respectively
Additional paid in capital
Less cost of common stock in treasury, 351,503 shares
Foreign currency translation adjustment
Retained earnings
Total Shareholders' Equity of Ocean Bio-Chem, Inc.
Noncontrolling interest
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
December 31,
2012
December 31,
2011
$
1,508,385 $
2,931,479
556,051
9,256,589
530,305
56,221
14,839,030
585,357
2,563,089
495,130
9,627,798
424,168
65,797
13,761,339
5,327,909
5,213,333
819,194
24,350
870,642
33,442
843,544
21,010,483 $
904,084
19,878,756
$
$
1,431,457 $
-
407,095
65,944
913,129
2,817,625
1,162,143
850,000
400,430
353,608
889,444
3,655,625
230,478
1,532,286
4,580,389
250,191
1,939,362
5,845,178
87,499
8,617,081
(288,013 )
(261,807 )
8,021,136
16,175,896
84,584
8,163,864
(288,013 )
(268,084 )
6,058,848
13,751,199
254,198
282,379
16,430,094
$
21,010,483
14,033,578
19,878,756
$
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2012 AND 2011
Gross sales
Less: discounts, returns, and allowances
Net sales
Cost of goods sold
Gross profit
Operating Expenses:
Advertising and promotion
Selling and administrative
Total operating expenses
Operating income
Other income (expense)
Interest (expense)
Other income
Income before income taxes
Provision for income taxes
Net income
Loss attributable to noncontrolling interests
Net income attributable to Ocean Bio-Chem, Inc.
Income per common share – basic
Income per common share – diluted
Weighted average shares – basic
Weighted average shares – diluted
The accompanying notes are an integral part of these consolidated financial statements.
F-4
2012
2011
$ 33,061,823 $ 33,648,366
1,967,303
2,022,929
31,038,894 31,681,063
20,412,022 20,996,824
10,626,872 10,684,239
2,417,745
5,126,467
7,544,212
1,979,800
4,989,846
6,969,646
3,082,660
3,714,593
(97,964 )
4,489
(150,142 )
50,499
2,989,185
3,614,950
1,055,078
1,279,892
1,934,107
2,335,058
28,181
1,962,288 $
57,579
2,392,637
0.24 $
0.30
0.23 $
0.28
8,229,720
8,556,107
7,953,329
8,395,347
$
$
$
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2012 AND 2011
Net Income
Foreign currency translation adjustment
Comprehensive income
Comprehensive loss attributable to noncontrolling interests
2012
2011
$
1,934,107 $
2,335,058
6,277
3,855
1,940,384
2,338,913
28,181
57,579
Comprehensive income attributable to Ocean Bio-Chem, Inc.
$
1,968,565 $
2,396,492
The accompanying notes are an integral part of these consolidated financial statements.
F-5
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2012 AND 2011
Common
Stock
Shares
Amount
Additional
Paid In
Capital
Foreign
Currency
Translation
Adjustment
Retained
Earnings
Treasury
Stock
Non
Controlling
Interest
Total
January 1, 2011
8,205,116
$ 82,051
$ 7,689,183
$ (271,939)
$ 3,666,211
$ (288,013)
$ 303,116
$ 11,180,609
Net Income (loss)
Contribution from non-
controlling partner
Options exercised
114,273
1,143
63,982
Stock based compensation -
Grants
Stock based compensation –
options
Foreign currency
translation adjustment
139,000
1,390
331,793
78,906
3,855
2,392,637
(57,579)
2,335,058
36,842
36,842
65,125
333,183
78,906
3,855
December 31, 2011
8,458,389
$ 84,584
$ 8,163,864
$ (268,084)
$ 6,058,848
$ (288,013)
$ 282,379
14,033,578
Net Income (loss)
1,962,288
(28,181)
1,934,107
Options exercised
174,499
1,745
167,751
Stock based compensation -
Grants
Stock based compensation –
options
Foreign currency
translation adjustment
117,000
1,170
229,905
55,561
6,277
169,496
231,075
55,561
6,277
December 31, 2012
8,749,888
$ 87,499
$ 8,617,081
$ (261,807)
$ 8,021,136
$ (288,013)
$ 254,198
$ 16,430,094
The accompanying notes are an integral part of these consolidated financial statements
F-6
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2012 AND 2011
Cash flows from operating activities:
Net income
Adjustment to reconcile net income to net cash provided by operations:
Depreciation and amortization
Deferred income taxes
Stock based compensation
Other operating noncash items
Changes in assets and liabilities:
Trade accounts receivable
Inventories
Other assets
Prepaid expenses and other current assets
Receivables due from affiliated companies
Accounts payable and other accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Contributions from (to) joint venture from non-controlling partner
Net cash used in investing activities
Cash flows from financing activities:
Net borrowings (repayments) under revolving line of credit
Repayments of notes payable related party
Proceeds from long-term debt
Payments on long-term debt
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of exchange rate on cash
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period
Supplemental disclosure of cash transactions:
Cash paid for interest during period
Cash paid for income taxes during period
The accompanying notes are an integral part of these consolidated financial statements.
2012
2011
$
1,934,107 $
2,335,058
701,569
(10,137 )
276,993
15,457
754,854
231,040
395,100
(17,989 )
(366,645 )
375,918
9,092
(106,137 )
(60,921 )
5,335
2,774,631
(307,365 )
(1,849,295 )
41,594
(134,238 )
(282,394 )
(545,402 )
620,963
(770,737 )
-
(770,737 )
(472,005 )
36,842
(435,163 )
(850,000 )
-
-
(400,411 )
169,496
(1,080,915 )
49
923,028
585,357
1,508,385 $
850,000
(471,950 )
2,430,000
(3,088,320 )
65,125
(215,145 )
(342 )
(29,687 )
615,044
585,357
100,995 $
163,716
1,352,879 $
1,335,141
$
$
$
F-7
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2012 AND 2011
Note 1 – Organization and summary of significant accounting policies:
Organization – The Company was incorporated in November 1973 under the laws of the state of Florida and operates as a
manufacturer and distributor of products principally under the Star brite® brand to the marine, automotive, recreational vehicle, and
outdoor power equipment aftermarkets.
Basis of presentation – The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and
a joint venture in which the Company has a controlling interest. All significant inter-company accounts and transactions have been
eliminated in consolidation. Certain prior-period data have been reclassified to conform to the current period presentation.
Revenue recognition – Revenue from product sales is recognized when persuasive evidence of a contract exists, the sales price is fixed
and determinable, the title of goods passes to the customer, and collectability of the related receivable is probable. Reported net sales
are net of customer prompt pay discounts, contractual allowances, authorized customer returns, consumer rebates and other sales
incentives.
Collectability of accounts receivable – Trade accounts receivable at December 31, 2012 and 2011 are net of allowances for doubtful
accounts aggregating approximately $73,000 and $75,000, respectively. Such amounts are based on management's estimates of the
creditworthiness of its customers, current economic conditions and other historical information. For the years ended December 31,
2012 and 2011 the Company had no net bad debt expense.
Inventories – Inventories are primarily composed of raw materials and finished goods and are stated at the lower of cost, using the
first-in, first-out method, or market.
Shipping and handling costs – All shipping and handling costs incurred by the Company are included in cost of goods sold in the
consolidated statements of operations. Shipping and handling costs totaled approximately $1,165,000 and $1,174,000 for the years
ended December 31, 2012 and 2011, respectively.
Advertising and promotion expense – Advertising and promotion expense consists of advertising costs and catalog costs. Advertising
costs are expensed in the period in which the advertising occurs and totaled approximately $2,418,000 and $1,980,000 in 2012 and
2011, respectively. The Company capitalizes the direct cost of producing and distributing its catalogs. Capitalized catalog costs are
amortized, once a catalog is distributed, over the expected net sales period, which is generally from one to 12 months. At December
31, 2012 and 2011, the carrying value of capitalized catalog costs was not material.
Property, plant and equipment – Property, plant and equipment is stated at cost, net of depreciation. Depreciation is provided over the
estimated useful lives of the related assets using the straight-line method.
Research and development costs – Research and development costs are expensed as incurred and recorded in selling and
administrative expenses in the consolidated statements of operations. The Company incurred approximately $76,000 and $58,000 of
research and development costs for the years ended December 31, 2012 and 2011 respectively.
Stock based compensation – The Company records stock-based compensation in accordance with the provisions of Financial
Accounting Standards Board Accounting Standards Codification (“ASC") Topic 718, "Accounting for Stock Compensation," which
establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. Under ASC
Topic 718, we recognize an expense for the fair value of our outstanding stock options and grants as they vest, whether held by
employees or others.
Use of estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Concentration of credit risk; dependence on major customers – Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable. The Company’s five largest unaffiliated customers represented
approximately 49% and 51% of consolidated net revenues for the years ended December 31, 2012 and 2011, and 23% and 40% of
consolidated accounts receivable at December 31, 2012 and 2011, respectively. The Company has a longstanding relationship with
each of these entities and previously has collected all open receivable balances from these entities. The loss of any of these customers
could have an adverse impact on the Company’s operations (see Note 11).
F-8
Concentration of cash – At various times during the year and at December 31, 2012, the Company had a concentration of cash in one
bank in excess of prevailing insurance offered through the Federal Deposit Insurance Corporation at such institution. Management
does not consider the excess deposits to be a significant risk.
Fair value of financial instruments – ASC Topic 820, “Fair Value Measurements and Disclosures” defines “fair value” as the price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date.
ASC 820 also sets forth a valuation hierarchy of the inputs (assumptions that market participants would use in pricing an asset or
liability) used to measure fair value. This hierarchy prioritizes the inputs into the following three levels:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that
result in management’s best estimate of fair value.
The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, certain
accrued expenses, revolving line of credit, and notes payable to related parties, approximate their fair value due to the relatively short
period to maturity for these instruments. The fair value of long-term debt is based on current rates at which the Company could
borrow funds with similar remaining maturities, and the carrying amount of the long-term debt approximates fair value.
Impairment of long-lived assets – Potential impairments of long-lived assets are reviewed annually or when events and circumstances
warrant an earlier review. In accordance with ASC Subtopic 360-10, "Property, Plant and Equipment – Overall," impairment is
determined when estimated future undiscounted cash flows associated with an asset are less than the asset’s carrying value.
Income taxes – The Company records income taxes under the asset and liability method. The Company recognizes deferred income
tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting and tax bases of
assets and liabilities. These differences are measured using tax rates that are expected to apply to taxable income in the years in which
those temporary differences are recovered or settled. We recognize the effect on deferred income taxes of a change in tax rates in
income in the period that includes the enactment date.
We record a valuation allowance when necessary to reduce our deferred tax assets to the net amount that we believe is more likely than
not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations
and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation
allowance.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax positions will be
sustained on examination by the taxing authorities based on the technical merits of the positions. We establish and adjust reserves with
respect to uncertain tax positions to address developments related to these positions, such as the closing of a tax audit, the expiration of
a statute of limitations or the refinement of an estimate. The provision for income taxes includes the effects of any reserves with
respect to uncertain tax positions that are considered appropriate, as well as the related net interest and penalties.
The Company has been audited by the Internal Revenue Service through the year ended December 31, 2009.
F-9
Trademarks, trade names and patents – The Company purchased the Star brite® trade name and trademark in 1980 for $880,000. The
cost of the trade mark and trade name initially were amortized on a straight-line basis over an estimated useful life of 40
years. Effective January 1, 2002 and in accordance with ASC Topic 350, "Intangibles – Goodwill and Other," the Company
determined that these intangible assets have indefinite lives and therefore, the Company no longer recognizes amortization
expense. The Company evaluates intangible assets for impairment every year and at other times when an event occurs or
circumstances change such that it is reasonably possible that an impairment may exist. In addition, the Company’s 50% owned joint
venture, OdorStar Technology, LLC, owns patents for a delivery system that enables the precise control of release rates of chlorine
dioxide (ClO2) products to safely help prevent and eliminate odors caused by mold, mildew and other sources of unpleasant
odors. The Company amortizes these patents over their remaining life on a straight line basis. The company amortized approximately
$51,000 and $77,000 for the years ended December 31, 2012 and 2011 respectively.
Foreign currency adjustments – Translation adjustments result from translating the Company’s Canadian subsidiary’s financial
statements into U.S. dollars. The Company’s Canadian subsidiary’s functional currency is the Canadian dollar. Assets and liabilities
are translated at exchange rates in effect at the balance sheet date. Income and expenses are translated at average exchange rates
during the year. Resulting translation adjustments are included in Shareholders’ Equity and as a component of comprehensive income.
Earnings per share – The Company computes earnings per share in accordance with the provisions of ASC Topic 260, "Earnings Per
Share," which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with
publicly held common stock. Basic earnings per share are computed by dividing net earnings available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted earnings per share are computed assuming the
exercise of dilutive stock options under the treasury stock method and the related income tax effects. See Note 12 - Earnings per
share.
Note 2 – Inventories:
The composition of inventories at December 31, 2012 and 2011 are as follows:
Raw materials
Finished goods
Inventories, gross
Inventory reserves
Inventories, net
$
2012
4,055,812 $
5,472,771
9,528,583
2011
4,431,651
5,472,850
9,904,501
(271,994 )
(276,703 )
$
9,256,589 $
9,627,798
The inventory reserves shown in the table above reflect slow moving and obsolete inventory.
The Company operates a vendor managed inventory program with one of its customers to improve the promotion of the Company's
products. The Company manages the inventory levels at this customer’s warehouses and recognizes revenue as the products are sold
by the customer. The inventories managed at the customer’s warehouses amounted to approximately $487,000 and $570,000 at
December 31, 2012 and 2011, respectively.
F-10
Note 3 – Property, plant and equipment:
The Company’s property, plant and equipment at December 31, 2012 and 2011 consisted of the following:
Land
Building and Improvements
Manufacturing and warehouse equipment
Office equipment and furniture
Construction in process
Leasehold improvements
Property, plant and equipment, gross
Less accumulated depreciation
Property, plant and equipment, net
Estimated
Useful Life
30 years
6-20 years
3-5 years
10-15 years
2012
2011
278,325 $
$
278,325
4,489,377 4,445,924
7,982,669 7,632,398
668,046
32,788
122,644
13,860,626 13,180,125
738,584
249,027
122,644
8,532,717 7,966,792
$ 5,327,909 $ 5,213,333
Depreciation expense for the years ended December 31, 2012 and 2011 amounted to approximately $650,000 and $678,000,
respectively.
Note 4 – Revolving Line of Credit:
On July 6, 2011, the Company, together with its subsidiary, Kinpak Inc. (“Kinpak”), entered into a Credit Agreement with Regions
Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation
(“REFCO”)). Under the Credit Agreement, the Company’s revolving line of credit with Regions Bank was renewed. The terms of the
revolving line of credit, as renewed, provide that the Company may borrow up to the lesser of (i) $6 million or (ii) a borrowing base
equal to 80% of eligible accounts receivable plus 50% of eligible inventory. Interest on the revolving line of credit is payable at the 30
day LIBOR rate plus 1.74% per annum (unless the Company’s debt service coverage ratio (net profit plus taxes, interest, depreciation,
amortization and rent expense divided by debt service plus interest) falls below 2.0 to 1, in which case the interest is payable at the 30
day LIBOR rate plus 2.75% per annum). In no event will the interest rate be less than 2.0% per annum. Outstanding amounts under the
revolving line of credit are payable on demand. If no demand is made, the Company may repay and reborrow funds from time to
time. The Company’s obligations under the revolving line of credit are secured by the Company’s accounts receivable and inventory,
as well as real property and equipment at Kinpak’s Montgomery, Alabama facility. The Company’s obligations under the revolving
line of credit and the term loan discussed in footnote 6 below are cross-collateralized. Interest on amounts borrowed under the
revolving line of credit is payable in monthly installments on outstanding average balances, with all outstanding principal and interest
payable on July 6, 2014. The Credit Agreement includes financial covenants requiring a minimum debt service coverage ratio of 1.75
to 1.00, tested on a rolling four-quarter basis, and a maximum debt to capitalization ratio (funded debt divided by the sum of total net
worth and funded debt) of 0.75 to 1, tested quarterly. At December 31, 2012, the Company was in compliance with these
covenants. The Company’s principal obligations under the revolving line of credit were $0 and $850,000 at December 31, 2012 and
December 31, 2011, respectively.
Note 5 – Accrued expenses payable
Accrued expenses payable at December 31, 2012 and 2011 consisted of the following:
Accrued customer promotions
Accrued payroll, commissions, and benefits
Other
2012
2011
$
431,015 $
188,645
293,469
485,730
169,103
234,611
Total accrued expenses payable
$
913,129 $
889,444
F-11
Note 6 – Long-term debt:
On July 6, 2011, under the Equipment Finance Addendum to the Credit Agreement, REFCO provided to the Company a $2,430,000
term loan with a fixed interest rate of 3.54%. Principal and interest on the term loan are payable in equal monthly installments through
July 6, 2017, the date the term loan matures. The proceeds of the term loan were used to pay the Kinpak’s remaining lease obligations
in connection with the previously outstanding 2002 Series of Industrial Development Revenue Bonds issued by the City of
Montgomery, Alabama (the “2002 Bonds”). The 2002 Bonds were used to fund the expansion of Kinpak’s facilities and acquisition of
related equipment. At December 31, 2012 approximately $1,902,000 was outstanding under the term loan.
At December 31, 2012 and December 31, 2011, the Company was obligated under various capital lease agreements covering equipment
utilized in the Company’s operations. The capital leases, aggregating $37,552 and $62,400 at December 31, 2012 and December 31,
2011, respectively, have varying maturities through 2015 and carry interest rates ranging from 7% to 14%.
The following table provides information regarding the Company’s long-term debt at December 31, 2012 and 2011:
Current Portion
2012
2011
Long-term Portion
2012
2011
Term loan
Capitalized equipment leases
$
389,075 $
18,020
375,562 $
24,868
1,512,754 $
19,532
1,901,830
37,532
Total long-term debt
$
407,095 $
400,430 $
1,532,286 $
1,939,362
Required principal payments under these obligations are set forth below:
Year ending December 31,
2013
2014
2015
2016
2017
Total
$
$
407,095
414,525
425,657
432,601
259,503
1,939,381
Note 7 – Income taxes:
The components of the Company’s consolidated provision for income taxes are as follows:
Federal – current
Federal – deferred
State – current
State – deferred
Total provision for income taxes
2012
1,011,543 $
9,842
33,398
295
1,055,078 $
2011
1,036,816
204,041
12,036
26,999
1,279,892
$
$
The reconciliation of the provision for income taxes at the statutory rate to the reported provision for income taxes is as follows:
Income Tax computed at statutory rate
State tax, net of federal benefit
Loss attributable to noncontrolling interest
Share based compensation
Temporary adjustments
Other, permanent adjustments
Tax credits and prior year tax adj.
$
2012
1,016,323
21,637
9,581
66,600
15,388
(86,666 )
12,215
%
34%
.7%
.3%
2%
.5%
-2.9%
.4%
$
2011
1,229,083
23,793
19,577
112,862
184,205
(105,805 )
(183,823 )
%
34%
.5%
.5%
3%
5%
-3%
-5%
Provision for income taxes
$
1,055,078
35%
$
1,279,892
35%
F-12
The Company’s deferred tax asset and liability accounts consisted of the following at December 31, 2012 and 2011:
Deferred taxes – current
Reserves for bad debts, inventories, and other accruals
Depreciation of property and equipment
Total deferred tax asset current
Deferred taxes - non-current
Depreciation of property and equipment
Total deferred tax liability non-current
Note 8 – Related party transactions:
2012
2011
$
$
120,740 $
(64,519)
56,221 $
123,000
(57,203 )
65,797
(230,478 )
(230,478 ) $
(250,191 )
(250,191 )
$
During 2012, as in previous years, the Company sold products to companies affiliated with its Chairman, President and Chief Executive
Officer. The affiliated companies distribute the products outside of the United States and Canada. The Company also provides
administrative services to these companies. Sales to the affiliated companies aggregated approximately $1,487,000 and $1,764,000
during the years ended December 31, 2012 and 2011, respectively, and administrative fees aggregated approximately $335,000 and
$332,000 during the years ended December 31, 2012 and 2011, respectively. The Company had accounts receivable from the affiliated
companies in connection with the product sales and administrative services aggregating approximately $556,000 and $495,000 at
December 31, 2012 and 2011, respectively. Transactions with the affiliated companies were made in the ordinary course of business
While the terms of the sales to the affiliated companies differed from the terms of sale to other customers, the affiliated companies bear
their own warehousing, distribution, advertising, selling and marketing costs, as well as their own freight charges (the Company pays
freight charges in connection with sales to its domestic customers on all but small orders). Moreover, the Company does not pay sales
commissions with respect to products sold to the affiliated companies. As a result, the Company believes its profit margins with respect
to sales to the affiliated companies are similar to the profit margins it realizes with respect to sales to its larger domestic customers.
Management believes that the sales transactions did not involve more than normal credit risk or present other unfavorable features.
A subsidiary of the Company currently uses the services of an entity that is owned by the Chairman, President and Chief Executive
Officer of the Company to conduct product research and development. The Company paid the entity $42,000 for each of the years ended
December 31, 2012 and 2011, respectively, under this arrangement.
The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and
Chief Executive Officer. The Company believes that the rental payments are below market rates. See Note 9 for a description of the
lease terms.
On December 6, 2010, the Company redeemed a warrant held by its Chairman, President and Chief Executive Officer to purchase
500,000 shares of its Common Stock at an exercise price of $0.836 per share. The warrants initially were issued to him in connection
with financing he provided to the Company in December 2005. The aggregate redemption price of the warrant was $471,950, which was
based on the difference between the closing price of the Company's Common Stock on December 6, 2010 and the exercise price of the
warrant. The Company issued a note to the Chairman, President and Chief Executive Officer in an amount equal to the redemption
price, which bore interest at the rate of 3% per annum. On January 5, 2011, the Company paid all outstanding principal and interest on
the note. The redemption, which was approved by the independent directors of the Board of Directors, was effected in order to prevent
the dilutive effect of the exercise of the warrant.
A director of the Company is Regional Executive Vice President of an entity from which the Company sources most of its insurance
needs at an arm’s length competitive basis. During each of the years ended December 31, 2012 and 2011, the Company paid in
aggregate of approximately $600,000 in insurance premiums on policies obtained through the entity.
F-13
Note 9 – Commitments
The Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its President
and Chief Executive Officer. On May 1, 2008, the Company renewed the lease for a term of ten years. The lease requires minimu m
base rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the
minimum rent since the Company entered into the lease agreement in 1998. Additionally, the leasing entity is entitled to reimbursement
of all taxes, assessments, and any other expenses that arise from ownership. Each of the parties to the lease has agreed to review the
terms of the lease every three years at the request of the other party. Rent expense under the lease during each of the years ended
December 31, 2012 and 2011 was approximately $96,000.
The Company leases from the Alabama State Port Authority a 1.5 acre docking facility on the Alabama River, located approximately
eleven miles from the Company’s Alabama manufacturing facility. The lease expires on September 30, 2014, and requires the
Company to pay rent and additional expenses totaling approximately $7,800 annually.
The following is a schedule of minimum future rentals on the Company’s non-cancelable operating leases.
12 month period ending December 31,
2013
2014
2015
2016
2017
Thereafter
Total
Note 10 - Stock options and awards:
$
$
103,864
97,985
99,945
101,944
103,983
34,889
542,610
On June 3, 2011, the Company’s shareholders approved the Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (the “Plan”).
The Plan is designed (i) to meet the Nasdaq listing requirements, (ii) to enable compensation attributable to grants under the Plan to
qualify for an exemption from the deduction limit under section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (the “Code”) and (iii) to enable incentive stock options to meet the requirements of the Code.
As a result of the adoption of the Plan, no further stock option grants will be made under the Company’s 2002 Non-Qualified Stock
Option Plan, 2002 Incentive Stock Option Plan, 2007 Incentive Stock Option Plan, 2008 Non-Qualified Stock Option Plan and 2008
Incentive Stock Option Plan.
The Plan authorizes 750,000 shares of the Company’s common stock for issuance, subject to antidilution adjustments upon the
occurrence of certain events affecting the common stock. On May 9, 2012, the Company issued stock awards under the Plan to
officers, key employees and a consultant totaling 117,000 shares of common stock in the aggregate. On June 3, 2011, the Company
issued stock awards under the Plan to officers, key employees and a consultant totaling 139,000 shares of common stock in the
aggregate. At December 31, 2012, 494,000 shares remained available for future issuance under the Plan. Compensation expense related
to the stock awards was approximately $223,000 and $321,000 for the years ended December 31, 2012 and 2011, respectively.
During 2012, stock options to purchase an aggregate of 302,800 shares were exercised and stock options to purchase an aggregate of
11,500 shares expired. Following the cancellation of an aggregate of 128,301 shares in connection with a net exercise feature of the
stock options, the Company issued an aggregate of 174,499 shares.
F-14
The following tables provide information at December 31, 2012 and 2011 regarding outstanding options under the Company’s stock
option plans as well as a grant made outside of the Company’s stock option plans. As used in the table below, “2002 ISO” refers to the
Company’s 2002 Incentive Stock Option Plan, “2007 ISO” refers to the Company’s 2007 Incentive Stock Option Plan, “2008 ISO”
refers to the Company’s 2008 Incentive Stock Option Plan, “2002 NQ” refers to the Company’s 2002 Non-Qualified Stock Option Plan
and “2008 NQ” refers to the Company’s 2008 Non-Qualified Stock Option Plan.
December 31, 2012
Plan
Non Plan
2008 ISO
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2008 NQ
2008 NQ
December 31, 2011
Plan
Non Plan
2007 ISO
2007 ISO
2007 ISO
2008 ISO
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2002 NQ
2008 NQ
2008 NQ
Date
Granted
Options
Outstanding
Exercisable
Options
Exercise
Price
Expiration
Date
Weighted
Average
Remaining
Life
3/25/09
8/25/08
6/20/03
5/25/04
4/3/06
12/17/07
1/11/09
4/26/10
115,000
141,400
30,000
30,000
40,000
50,000
50,000
25,000
115,000 $
107,680
30,000
30,000
40,000
50,000
50,000
25,000
0.55
0.97
1.03
1.46
1.08
1.32
0.69
2.07
3/24/14
8/21/13
6/19/13
5/24/14
4/2/16
12/16/17
1/10/19
4/25/20
481,400
447,680 $
0 .98
1.2
.7
.5
1.4
3.3
5.0
6.1
7.4
2.4
Date
Granted
Options
Outstanding
Exercisable
Options
Exercise
Price
Expiration
Date
Weighted
Remaining
Life
3/25/09
5/17/07
10/8/07
12/17/07
8/25/08
10/22/02
6/20/03
5/25/04
4/3/06
12/17/07
1/11/09
4/26/10
115,000
136,500
2,500
142,600
144,100
30,000
30,000
30,000
40,000
50,000
50,000
25,000
795,700
115,000 $
106,000
2,000
111,300
81,500
30,000
30,000
30,000
40,000
50,000
50,000
25,000
670,800 $
3/24/14
5/16/12
10/07/12
12/16/12
8/21/13
10/21/12
6/19/13
5/24/14
4/2/16
12/16/17
1/10/19
4/25/20
0.55
1.66
1.87
1.32
0.97
1.26
1.03
1.46
1.08
1.32
0.69
2.07
1.17
2.3
.4
.8
1.0
1.7
.8
1.5
2.4
4.3
6.0
7.1
8.4
2.4
F-15
The following table shows the number of options outstanding under each stock option plan at December 31, 2012:
Plan
Non Plan
2008 ISO
2002 NQ
2008 NQ
Totals
Options
Outstanding
115,000
141,400
150,000
75,000
481,400
The following table provides information relating to stock option transactions during the years ended December 31, 2012 and 2011:
Options outstanding beginning of the year
Options exercised
Options forfeited or expired
Options outstanding end of the year
Non plan options
Totals
2012
Weighted
Average
Exercise
2011
Weighted
Average
Exercise
Shares
Price
Shares
Price
680,700 $
(302,800 )
(11,500 )
366,400
115,000
481,400 $
1.27
1.46
1.51
1.11
0.55
0.98
854,200 $
(158,500 )
(15,000 )
680,700
115,000
795,700 $
1.24
1.05
1.66
1.27
0.55
1.17
Stock options may be awarded as part of compensation to executives, employees, directors and others, pursuant to the terms of the
Company’s Omnibus Equity Compensation Plan, but no options were awarded under the plan in 2012 or 2011. Grants of stock options
or other equity awards are made at the discretion of the Equity Grant Committee of the Board of Directors. Options previously were
granted under the Company’s other stock option plans. Qualified options previously granted typically have a five-year term with
vesting in equal 20% increments on each anniversary of the date of grant. Non-qualified options previously granted to outside directors
have a 10-year term and are immediately exercisable. The last tranche of non-qualified options previously granted terminate on April
25, 2020. Compensation cost recognized during the year ended December 31, 2012 and 2011 attributable to stock options amounted to
approximately $54,000 and $74,000, respectively.
At December 31, 2012 and 2011, there was approximately $12,000 and $68,000 of unrecognized compensation cost related to unvested
share based compensation arrangements, which will be charged against operations as the options vest through the year ending
December 31, 2013.
F-16
Note 11 – Major customers:
The Company has two major customers, with sales in excess of 10% of consolidated net revenues for each of the years ended December 31, 2012 and
2011. Sales to these customers represented approximately 37% and 40% of consolidated net revenues for 2012 and 2011, respectively.
The Company’s top five unaffiliated customers represented approximately 49% and 51%, of consolidated net revenues for the years ended December
31, 2012 and 2011, respectively, and 23% and 40% of consolidated trade accounts receivables at December 31, 2012 and 2011, respectively. While
the Company enjoys good relations with these customers, the loss of any of these customers could have an adverse impact on the Company’s
operations.
Note 12 – Earnings per share:
Basic earnings per share is calculated by dividing net income attributable to Ocean-Bio Chem, Inc. by the weighted average number of shares
outstanding during the reported period. Diluted earnings per share reflect additional dilution from potential common stock issuable upon the exercise
of outstanding stock options. The following table sets forth the computation of basic and diluted earnings per common share, as well as a
reconciliation of the weighted average number of common shares outstanding to the weighted average number of shares outstanding on a diluted basis.
Year Ended
December 31 ,
2012
2011
Earnings per common share –Basic
Net income attributable to OBCI
$ 1,962,288 $ 2,392,637
Weighted average number of common shares outstanding
8,229,720 7,953,329
Earnings per common share – Basic
$
0.24 $
0.30
Earnings per common share – Diluted
Net income attributable to OBCI
$ 1,962,288 $ 2,392,637
Weighted average number of common shares outstanding
8,229,720 7,953,329
Effect of employee stock-based awards
326,387 442,018
Weighted average number of common shares outstanding - assuming dilution 8,556,107 8,395,347
Earnings per common share - Diluted
$
0.23 $
0.28
The Company had no stock options outstanding at December 31, 2012 and 2011, respectively, that were anti-dilutive and therefore not included in the
diluted earnings per common share calculation.
Note 13 – Shareholders’ equity:
On June 8, 2012, the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation to increase the Company’s
authorized common stock, $.01 par value, from 10,000,000 shares to 12,000,000 shares and enable the Company to issue shares for such consideration
as is permitted under the Florida Business Corporation Act.
During the years ended December 31, 2012 and 2011, the Company granted stock awards of 117,000 and 139,000 shares of common stock,
respectively, to certain executives, key employees and a consultant. Compensation expense recorded in connection with the stock awards for the years
ended December 31, 2012 and 2011 aggregated approximately $223,000 and $321,000, respectively.
During 2012, certain employees of the Company and a consultant were issued 174,499 shares of the Company’s common stock as a result of
exercising stock options. The total cash received by the Company from the stock option exercises was approximately $169,500 and is reflected as paid
in capital on the consolidated balance sheet.
During 2011, certain employees of the Company and a consultant were issued 114,273 shares of the Company’s common stock as a result of
exercising stock options. The total cash received by the Company from the stock option exercises was approximately $65,100 and is reflected as paid
in capital on the consolidated balance sheet.
Note -14 – Recent Accounting Pronouncements
There have been no accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2012 that are expected
to have a material impact on the Company’s financial position, results of operations or cash flows. Accounting pronouncements that became effective
during the year ended December 31, 2012 did not have a material impact on disclosures or on the Company’s financial position, results of operations
or cash flows.
F-17
Exhibit
No.
EXHIBIT INDEX
3.1.1 Articles of Incorporation and amendments through May 20, 1994 (incorporated by reference to Exhibit 3.1 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2010).
*3.1.2 Articles of Amendment to the Articles of Incorporation, as filed on June 13, 2012.
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with
the Securities and Exchange Commission on December 5, 2011).
10.1 Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration
Statement on Form S-8 (file no. 333-174659), filed with the Securities and Exchange Commission on June 2, 2011).
10.2 Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”) (incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011).
10.3 Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment Finance Corporation
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2011).
10.4 Promissory Note, dated July 6, 2011, issued by the Company to Regions Bank in connection with the revolving line of credit under
the Credit Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on July 12, 2011).
10.5 Promissory Note, dated July 6, 2011, issued by the Company and Kinpak, Inc. to Regions Equipment Finance Corporation in
connection with the term loan under the Credit Agreement (incorporated by reference to Exhibit 99.4 to the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on July 12, 2011).
10.6 Ocean Bio-Chem, Inc. 2002 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.2 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
10.7 Ocean Bio-Chem, Inc. 2008 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 99.4 to the Company’s
Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
10.8 Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5 to the
Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
10.9 Ocean Bio-Chem, Inc. Form of Stock Option granted to Peter G. Dornau (incorporated by reference to Exhibit 99.6 to the Company’s
Registration Statement on Form S-8, filed with the Securities and Exchange Commission on August 12, 2011).
10.10 Ocean bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration
Statement on Form S-8, filed with the Securities and Exchange Commission on June 2, 2011).
10.11 Net Lease dated May 1, 1998 between Star Brite Distributing, Inc. and PEJE, Inc (incorporated by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2004).
10.12 Renewal of Lease dated May 1, 2008 between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to Exhibit 10.24
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
10.13 OdorStar Technology, LLC Operating Agreement dated May 4, 2010 (incorporated by reference to Exhibit 10.17 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2010).
List List of subsidiaries
*21.
Exhibit
No.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
*31.1
*31.2
*32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
*32.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
101 The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012,
formatted in XBLR (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2012 and
December 31, 2011; (ii) Consolidated Statements of Operations for the years ended December 31, 2012 and 2011; (iii) Consolidated
Statements of Comprehensive Income for the years ended December 31, 2012 and 2011; (iv) Consolidated Statements of Changes in
Shareholders Equity for the years ended December 31, 2012 and 2011, (v) Consolidated Statements of Cash Flows for the years
ended December 31, 2012 and 2011 and (vi) Notes to Consolidated Financial Statements.
* Filed herewith.
EXHIBIT 3.1.2
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
OCEAN BIO-CHEM, INC.
Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, the undersigned, Ocean Bio-Chem, Inc., a
Florida corporation, by its President and Chief Executive Officer, does hereby make and execute these Articles of Amendment to its Articles of
Incorporation:
1.
2.
The name of the corporation is Ocean Bio-Chem, Inc.
The Articles of Incorporation are amended by deleting Article III thereof in its entirety and by inserting, in lieu
thereof, the following new Article III:
ARTICLE III
The aggregate number of shares that this corporation shall have authority to issue is 12,000,000
shares of common stock, $.01 par value.
3.
The date of the adoption of the amendment by the shareholders of the corporation was June 8, 2012.
4.
The only voting group entitled to vote on the amendment was the holders of the corporation’s common stock. The
number of votes cast for the amendment by the holders of the common stock was sufficient for approval by that
voting group.
IN WITNESS WHEREOF, these Articles of Amendment to Articles of Incorporation of Ocean Bio-Chem, Inc. have been executed by
Ocean Bio-Chem, Inc., by its President and Chief Executive Officer, this 12th day of June, 2012.
OCEAN BIO-CHEM, INC.
By:
/s/ Peter G. Dornau
Peter G. Dornau
President and Chief Executive Officer
EXHIBIT 21
The following is a list of the Registrant’s subsidiaries:
Name
Star brite Distributing, Inc.
Star brite Distributing Canada, Inc.
D & S Advertising Services, Inc.
Star brite StaPut, Inc.
Star brite Service Centers, Inc.
Star brite Automotive, Inc.
Kinpak Inc.
OdorStar Technology, LLC
Jurisdiction
of Organization
Florida
Florida
Florida
Florida
Florida
Florida
Alabama
Florida
Ownership %
100
100
100
100
100
100
100
50
CERTIFICATION
EXHIBIT 31.1
I, Peter G. Dornau, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
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;
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;
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 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; and
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 the registrant’s board of directors (or persons performing the equivalent
functions):
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: April 1, 2013
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
I, Jeffrey S. Barocas, certify that:
CERTIFICATION
EXHIBIT 31.2
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Ocean Bio-Chem, Inc.;
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;
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;
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 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; and
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 the registrant’s board of directors (or persons performing the equivalent
functions):
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: April 1, 2013
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
EXHIBIT 32.1
I, Peter G. Dornau, Chief Executive Officer of Ocean Bio-Chem, Inc. (the "Company"), hereby certify that, based on my knowledge:
1.
2.
The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the "Report")
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company.
By:
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Dated: April 1, 2013
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
EXHIBIT 32.2
I, Jeffrey S. Barocas, Chief Financial Officer of Ocean Bio-Chem, Inc. (the "Company"), hereby certify that, based on my knowledge:
1.
2.
The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the "Report")
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company.
Dated: April 1, 2013
By:
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
THIS PAGE LEFT INTENTIONALLY BLANK
INVESTOR INFORMATION
NASDAQ STOCK SYMBOL OBCI
Stock Transfer Agent
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
General Counsel
Berger Singerman, LLP
350 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Auditors
Goldstein Schechter Koch, P.A.
4000 Hollywood Blvd., Suite 215 South
Hollywood, FL 33021
Reports and Publications
A free copy of the Company’s 2012
Form 10-K filed with the Securites
and Exchange Commission can be
obtained upon written request to:
Corporate Relations Department
4041 SW 47th Avenue
Fort Lauderdale, Florida 33314
COMMON STOCK
MARKET INFORMATION
The following table sets forth high and low
sales prices of the Common Stock of Company
as reported on the NASDAQ Capital Market
for each calendar quarter in 2012 and 2011:
2012
High
Low
2011
High Low
$2.78 $2.01 $3.93 $1.80
First Quarter
Second Quarter 2.59 1.83
2.59 1.76
Third Quarter
2.50 1.81
Fourth Quarter
3.56 2.16
4.40 1.98
2.68 1.68
OCEAN BIO-CHEM, INC.
BOARD OF DIRECTORS
Peter G. Dornau
Chairman, President and
Chief Executive Officer
Jeffrey S. Barocas
Sonia B. Beard*
Gregor M. Dornau
William W. Dudman
James M. Kolisch
Diana Mazuelos Conard*
John B. Turner*
* A member of audit and equity grant committees
OFFICERS OF
OCEAN BIO-CHEM, INC.
Peter G. Dornau
President and Chief Executive Officer
Jeffrey S. Barocas
Vice President, Chief Financial Officer
Gregor M. Dornau
Executive Vice President of Sales and Marketing
William W. Dudman
Vice President of Operations, Corporate Secretary
OFFICERS OF STAR BRITE, INC.
Peter G. Dornau
President and Chief Executive Officer
Jeffrey S. Barocas
Chief Financial Officer
Gregor M. Dornau
Executive Vice President of Sales and Marketing
William W. Dudman
Vice President of Operations
Marc A. Emmi
Senior Vice President of Sales
Natalie S. Fino
Vice President of Customer Service
George W. Lindsey, Jr.
Vice President of Marketing
Dennis M. Torok
Vice President of Sales
4041 SW 47th Avenue • Fort Lauderdale, Florida 33314
Tel:(954) 587-6280 • (800) 327-8583 • Fax:(954) 587-2813
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM
WWW.STARTRON.COM • WWW.NOS-GUARD.COM
OCEAN BIO-CHEM, INC.
BOARD OF DIRECTORS
Peter G. Dornau
Chairman, President and
Chief Executive Officer
Jeffrey S. Barocas
Sonia B. Beard*
Gregor M. Dornau
William W. Dudman
James M. Kolisch
Diana Mazuelos Conard*
John B. Turner*
* A member of audit and equity grant committees
OFFICERS OF
OCEAN BIO-CHEM, INC.
Peter G. Dornau
President and Chief Executive Officer
Jeffrey S. Barocas
Vice President, Chief Financial Officer
Gregor M. Dornau
William W. Dudman
Vice President of Operations, Corporate Secretary
OFFICERS OF STAR BRITE, INC.
Peter G. Dornau
President and Chief Executive Officer
Jeffrey S. Barocas
Chief Financial Officer
Gregor M. Dornau
William W. Dudman
Vice President of Operations
Marc A. Emmi
Senior Vice President of Sales
Natalie S. Fino
Vice President of Customer Service
George W. Lindsey, Jr.
Vice President of Marketing
Dennis M. Torok
Vice President of Sales
CORPORATE OFFICES • FORT LAUDERDALE, FLORIDA
MANUFACTURING & DISTRIBUTION FACILITIES • MONTGOMERY, ALABAMA
OCEAN BIO-CHEM, INC. MANUFACTURING CAPABILITIES
TANK FARM
Executive Vice President of Sales and Marketing
QUALITY CONTROL
Executive Vice President of Sales and Marketing
FILLING
DISTRIBUTION
4041 SW 47th Avenue • Fort Lauderdale, Florida 33314
Tel:(954) 587-6280 • (800) 327-8583 • Fax:(954) 587-2813
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM
WWW.STARTRON.COM • WWW.NOS-GUARD.COM
2
1
0
2
-
R
A
Ocean Bio-Chem, Inc.’s main manufacturing and distribution
facility is its wholly owned subsidiary, Kinpak, Inc., located
on a 20 acre site in Montgomery, Alabama. In addition to
manufactoring Star brite® products, Kinpak also manufactures
numerous items under private label programs. The facility’s
300,000 s.f. manufacturing, blending, packing, and distribution
center features a 500,000 gallon tank farm plus an additional
1.2 million gallon tank farm on the Alabama River, as well as a
fully-equipped R&D laboratory and a quality control center that
performs quality audits for each phase of the production process.
The plant has 300,000 gallons of blending capacity plus
multiple blow-molding machines that produce custom PVC and
HDPE bottles in various colors and shapes. There are ten fully-
automated high-speed liquid filling lines, pail lines, drum filling
line, bulk load filling lines, plus grease filling lines capable of
filling containers from 1 ounce to 55 gallons in size at speeds up
to 120 gallons per minute.
Finished goods are secured by automatic case packers, case sealers
and palletizers. In addition to a line of truck loading docks, the
facility has a rail spur capable of handling 20 railcars. Kinpak’s
off-site facility is a five acre marine terminal on the Alabama River
for accepting shipments of raw materials by barge.
Star brite® and Star Tron® products are available at marine,
automotive, power sports, outdoor power equipment and
hardware stores, as well as at sporting goods stores, agriculture
and RV stores worldwide.
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM
WWW.STARTRON.COM • WWW.NOS-GUARD.COM
40YEARS
973 - 2 0 1
1
3
Ocean Bio-Chem, Inc. 4041 S.W. 47th Ave., Ft. Lauderdale, FL 33314
T: (954) 587-6280 • Toll Free (800) 327-8583 • F: (954) 587-2813
WWW.OCEANBIOCHEM.COM • WWW.STARBRITE.COM • WWW.STARTRON.COM