CLEAN + PROTECT SINCE 1973 OBCI, INC. ANNUAL REPORT 2019 Fellow Shareholders:
As we prepare this year’s annual letter to
shareholders, our nation and our world is
confronting one of the greatest threats of a
generation, affecting not only our health, but
global economies as well. We honor those lost
during this time and respect the brave people
continuing to work through the COVID-19 crisis,
including first responders, healthcare workers,
and of course our own Star brite / Kinpak family
of employees. As an “essential business,” our
Company is finding new purpose through these
uncertain times, with the spirit of Innovation,
Experience, and Leadership blazing the trail.
For generations, Star brite products have
elped the world to clean and protect their
boats, RVs, homes, and more. And in the past
two years, we’ve brought the theme and tagline
of Clean + Protect to the foreground, featuring
it in our marketing and trade show displays.
Now, more than ever, we realize how important
those words really are. In a time when cleaning
and protection has now become a standard
of survival, we at Star brite are honored to fulfill
our mission, helping to keep America healthy
through what we do best.
STAR BRITE. CLEAN + PROTECT.
2019 IN REVIEW
Though current headlines dominate our
thoughts, we would like to look back briefly on
our last year of decisions and celebrate the
milestones that have afforded us the opportunity
to keep our employees successful and moving
forward during these challenging times. It was
these series of decisions and investments that
are now proving “essential.”
The year 2019 presented its own challenges: a
late spring delayed the beginning of boating
season, and a very active hurricane season
dampened many holidays and high-spending
events, including Labor Day. Despite these
weather-related setbacks, the Company reports
record net sales for the seventh continuous year.
In 2019, we saw the first full year of service of the
expansion at our manufacturing facility—Kinpak.
Increased capacity in the warehouse as well as
additional filling capabilities grew overall output
and strengthened operational efficiencies. With
the entire facility maximized to over 300,000
square feet, the additional warehouse space
and loading docks allow greater storage as well
as improved traffic in and out of the facility.
A new filling line completed last year not only
increases production capabilities, but under
current circumstances, it also affords our
employees additional space as social distancing
protocols are in place, while still maintaining
adequate production.
ACQUISITIONS
On December 27, 2019, the Company acquired
certain tangible and intangible assets of Check
Corporation, a manufacturer and distributer of
mildew and humidity control products under
the name of Damp Check™. This new addition to
the Company’s established portfolio of brands
is an ideal fit and supports our current efforts in
expanding the air care and desiccants market.
The previous acquisition of Snappy Marine,
Inc. in 2018 proved profitable in 2019 as the
teak and fine wood restoration market finds a
larger following in the American marketplace.
Snappy Teak products are a popular choice for
professional yards and the yachting market, due
to their quick-acting chemistry. An additional
teak oil product was also introduced to complete
the Snappy Teak line, further enhancing the line’s
market appeal.
PRODUCTS AND MARKETING
In addition to the marine teak market, the
Company launched a new line of teak products
geared toward home use under the brand Star
brite Home. Consisting of two products, this initial
offering launched in a major, big-box retailer
nationwide, and has seen positive sales. Store
counts and availability are trending higher for
2020.
Star brite Auto Odor Eliminator, which found
placement in a national automotive retailer in
2018, added another major automotive retailer—
thus doubling its availability. Advertising and
marketing featuring professional bass angler
Scott Martin (from The Scott Martin Challenge)
continues to air omajor networks, including
CLEAN + PROTECT SINCE 1973 Discovery, as well as local markets and online.
Building on the success of Auto Odor Eliminator,
a similar product for the RV category launched
in 2019: RV Odor Eliminator (RVOE). Recreational
vehicles and campers pose unique challenges
for air care products for many reasons:
differences in size (as compared to cars and
trucks) as well as features common to RVs—such
as kitchens, bathrooms, and living spaces—all
which can produce odors. RV Odor Eliminator is
a larger, stronger product (as compared to Auto
Odor Eliminator) suited for the larger sizes and
stronger odors of the RV market.
Along with RVOE, the RV market continues to
grow year over year, and we are now in year
three of seeing this increase. Star brite product
offerings are growing each year as well, now
including products for holding tank treatments,
freshwater treatments, natural air care, exterior
and interior cleaning, and specialty products.
Star Tron—our premier ethanol fuel treatment—
also saw growth yet again. A major national
product data firm collected POS data and
recognized Star Tron as the number one
ethanol fuel treatment in the nation. Not only is
it number one, but by a large margin. We are
attributing the growth to enhanced placement in
distribution and national retailers.
REVENUES
The year 2019 marked the seventh consecutive
year in which the Company achieved record
annual net sales. Once again, our Star brite®
branded and private label marine products led
the way. We experienced increased sales of our
marine products throughout our distribution
channels, including marine specialty retailers,
mass merchandisers and online retailers.
The Company’s 2019 record net income was
approximately $3.5 million, compared to 2018
net income of $2.8 million, an increase of
approximately $700,000 or 25%. Earnings per
share for 2019 were $0.37 compared to $0.30 for
2018, an increase of 23%.
2020 OUTLOOK
The last few years have laid the groundwork for
Ocean Bio-Chem, Inc. to successfully navigate
our company through these uncertain times.
Our decisions and planning—expanding our
manufacturing plant, increasing our advertising
in our home care and disinfecting products,
hiring more employees and extending our sales
network—have prepared us for the journey
ahead in this year and beyond. Currently, we
are seeing record sales of Performacide, and
the Company is cautiously optimistic that these
patterns in sales will secure our disinfectant as a
mainstay in the category, as well as opening the
door to new markets.
We’re not sure when business will be back to
normal. And normal will never be “normal” again.
However, as state’s open up and Americans
(and the world) resume social activities, we think
there may be a renewed passion for outdoor
activities in particular. Low fuel costs, favorable
weather, and a high demand to be outside are
all factors that benefit our markets, including
boating, powersports, and RVing. When it comes
to the outlook for 2020, no one can know how
far-reaching or long-lasting the ramifications of
COVID-19 will be, however, as a company, we are
investing in inventory and producing product.
Therefore, when outdoor activities are resumed,
our products will be available and waiting.
We are optimistic that these investments will
return yet another successful year. So far, OBCI
has not had to take steps to furlough or lay off
employees, and we are extraordinarily grateful
to the many men and women in our Ocean
Bio-Chem family for ensuring our continued
operations despite the many challenges the
world has faced in such a short time.
I thank all of our employees for your dedication,
ambition, and vision.
Stay healthy and safe.
The Company also reported record net sales in
2019 of approximately $42.3 million, compared to
approximately $41.8 million for 2018, an increase
of approximately $500,000.
Peter G. Dornau
President and Chief Executive Officer
April 2020
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
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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
For the fiscal year ended December 31, 2019
or
☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 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
Trading Symbol
OBCI
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☒ No ☐☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐☐
☒☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐☐
☒☒
☐☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐
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 registrant’s common stock held by non-affiliates of the registrant as of June 28, 2019 was $10,088,084, based upon the closing price
of the registrant’s common stock on such date as reported by the NASDAQ Capital Market. 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 March 26, 2020, 9,448,105 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, which will be filed not later than April 29, 2020, are incorporated by reference in Part III of this report.
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
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OCEAN BIO-CHEM, INC.
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OCEAN BIO-CHEM, INC.
TABLE OF CONTENTS
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Page
1
4
5
5
5
5
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
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
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
OCEAN BIO-CHEM, INC.
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6
6
6
10
10
10
10
11
TABLE OF CONTENTS
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
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Business
Certain Relationships and Related Transactions, and Director Independence
Risk Factors
Principal Accounting Fees and Services
Unresolved Staff Comments
Properties
Legal Proceedings
Exhibits, Financial Statement Schedules
Mine Safety Disclosures
Form 10-K Summary
Part III
Item 10.
Item 11.
Part I
Item 12.
Item 1.
Item 13.
Item 1A.
Item 14.
Item 1B.
Item 2.
Part IV
Item 3.
Item 15.
Item 4
Item 16.
Signatures
Part II
Index To Consolidated Financial Statements
Item 5.
Item 6.
Forward-looking Statements:
Item 7.
Item 7A.
Certain statements contained in this Annual Report on Form 10-K, including without limitation, estimated costs of expansion of facilities operated by our wholly-
Item 8.
owned subsidiary, KINPAK Inc. (“Kinpak”), our ability to locate substitute third party manufacturing facilities without a substantial adverse effect on our
Item 9.
manufacturing and distribution, the effect of price increases in raw materials that are petroleum or chemical based or commodity chemicals on our margins, the
Item 9A.
sufficiency of funds provided through operations and existing sources of financing to satisfy our cash requirements and our expectation that we will be able to maintain
Item 9B.
borrowings, if any, under our current revolving line of credit facility until the end of its stated term constitute forward-looking statements. For this purpose, any
statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the
Part III
foregoing, words such as “believe,” “may,” “will,” “expect,” “anticipate,” “intend,” or “could,” including the negative or other variations thereof or comparable
Item 10.
terminology, are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause
Item 11.
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
Item 12.
limited to, the highly competitive nature of our industry; reliance on certain key customers; changes in consumer demand for marine, recreational vehicle and
Item 13.
automotive products; expenditures on, and the effectiveness of, our advertising and promotional efforts; unanticipated litigation developments; exposure to market risks
Item 14.
relating to changes in interest rates, foreign currency exchange rates and prices for raw materials that are petroleum or chemical based; and other factors discussed
below under Item 1A, “Risk Factors.”
Part IV
Item 15.
Item 16.
Signatures
Index To Consolidated Financial Statements
Directors, Executive Officers and Corporate Governance
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
12
Page
12
12
1
12
4
12
5
5
5
13
5
13
14
F-1
6
6
6
10
10
10
10
11
Exhibits, Financial Statement Schedules
Form 10-K Summary
13
13
14
F-1
12
12
12
12
12
i
Forward-looking Statements:
Certain statements contained in this Annual Report on Form 10-K, including without limitation, estimated costs of expansion of facilities operated by our wholly-
owned subsidiary, KINPAK Inc. (“Kinpak”), our ability to locate substitute third party manufacturing facilities without a substantial adverse effect on our
manufacturing and distribution, the effect of price increases in raw materials that are petroleum or chemical based or commodity chemicals on our margins, the
sufficiency of funds provided through operations and existing sources of financing to satisfy our cash requirements and our expectation that we will be able to maintain
borrowings, if any, under our current revolving line of credit facility until the end of its stated term constitute forward-looking statements. For this purpose, any
statements contained in this report that are not statements of historical fact may be deemed to be 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 that 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; reliance on certain key customers; changes in consumer demand for marine, recreational vehicle and
automotive products; expenditures on, and the effectiveness of, our advertising and promotional efforts; unanticipated litigation developments; exposure to market risks
relating to changes in interest rates, foreign currency exchange rates and prices for raw materials that are petroleum or chemical based; and other factors discussed
below under Item 1A, “Risk Factors.”
i
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 3
03/27/2020 05:38 PM
Item 1. Business
General:
PART I
f10k2019_oceanbiochem.htm
Edgar Agents LLC
We are principally engaged in the manufacture, marketing, and distribution of a broad line of appearance, performance and maintenance products for the marine,
automotive, power sports, recreational vehicle, home care and outdoor power equipment markets, under the Star brite® and Star Tron® brand names. We sell these
products 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 also manufacture, market and distribute chlorine dioxide-based deodorizing
disinfectant, and sanitizing products under the Star brite® and Performacide® brand names, utilizing a patented delivery system for use with products containing
chlorine dioxide. Unless the context indicates otherwise, we sometimes refer to Ocean Bio-Chem, Inc. and its consolidated subsidiaries as “the Company," "we" or
"our.”
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03/27/2020 05:38 PM
Form Type: 10-K
Page 3
PART I
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-
Item 1. Business
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 we manufacture that are sold outside of the
General:
United States and Canada are purchased from us and distributed by two companies owned by Mr. Dornau. Net sales to the two companies in 2019 and 2018 totaled
approximately $1,788,000 and $2,190,000, representing 4.2% and 5.2% of our net sales, respectively. See Note 10 to the consolidated financial statements included in
We are principally engaged in the manufacture, marketing, and distribution of a broad line of appearance, performance and maintenance products for the marine,
this report for additional information.
automotive, power sports, recreational vehicle, home care and outdoor power equipment markets, under the Star brite® and Star Tron® brand names. We sell these
products within the United States of America and Canada. In addition, we produce private label formulations of many of our products for various customers and
Because our operations involve, in all material respects, substantially similar manufacturing and distribution processes, our operations constitute one reportable
provide custom blending and packaging services for these and other products. We also manufacture, market and distribute chlorine dioxide-based deodorizing
segment for financial reporting purposes.
disinfectant, and sanitizing products under the Star brite® and Performacide® brand names, utilizing a patented delivery system for use with products containing
chlorine dioxide. Unless the context indicates otherwise, we sometimes refer to Ocean Bio-Chem, Inc. and its consolidated subsidiaries as “the Company," "we" or
Recent Developments:
"our.”
The Company’s wholly-owned subsidiary, KINPAK Inc. (“Kinpak”) has been engaged since 2017 in a project involving the expansion of its manufacturing,
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-
warehouse and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion
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
Project”). Kinpak has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank
Executive Officer, has retained rights to these assets with respect to all other geographic areas. Accordingly, products we manufacture that are sold outside of the
farm to accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of
United States and Canada are purchased from us and distributed by two companies owned by Mr. Dornau. Net sales to the two companies in 2019 and 2018 totaled
additional equipment. At December 31, 2019, Kinpak had spent an aggregate of approximately $6.1 million on the Expansion Project. Of that amount, approximately
approximately $1,788,000 and $2,190,000, representing 4.2% and 5.2% of our net sales, respectively. See Note 10 to the consolidated financial statements included in
$2,654,000 was provided through a $4,500,000 industrial development bond financing, which is described in Note 8.
this report for additional information.
On December 9, 2019, there was a chemical incident at Kinpak. As a precautionary measure several employees were sent to the hospital. We believe that no one
Because our operations involve, in all material respects, substantially similar manufacturing and distribution processes, our operations constitute one reportable
suffered any serious injuries, and that we do not have any liability relating to personal injuries.
segment for financial reporting purposes.
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
Recent Developments:
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019
from insurance policies. No net gain or net loss from the chemical incident was recognized in 2019. Any gain or loss from the chemical incident will be recognized in a
The Company’s wholly-owned subsidiary, KINPAK Inc. (“Kinpak”) has been engaged since 2017 in a project involving the expansion of its manufacturing,
future period.
warehouse and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion
Project”). Kinpak has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank
The Company is still assessing the total property damage from the chemical incident and does not expect the loss to be in excess of the insurance proceeds.
farm to accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of
additional equipment. At December 31, 2019, Kinpak had spent an aggregate of approximately $6.1 million on the Expansion Project. Of that amount, approximately
Products:
$2,654,000 was provided through a $4,500,000 industrial development bond financing, which is described in Note 8.
The products that we manufacture and market include the following:
On December 9, 2019, there was a chemical incident at Kinpak. As a precautionary measure several employees were sent to the hospital. We believe that no one
suffered any serious injuries, and that we do not have any liability relating to personal injuries.
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 sold by some of our customers. The marine line also includes motor oils, boat washes, vinyl cleaners, protectants, teak cleaners, teak
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
oils, bilge cleaners, hull cleaners, silicone sealants, polyurethane sealants, polysulfide sealants, gasket materials, lubricants, antifouling additives and anti-freeze
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019
coolants. In addition, we manufacture a line of brushes, brush handles, tie-downs and other related marine accessories.
from insurance policies. No net gain or net loss from the chemical incident was recognized in 2019. Any gain or loss from the chemical incident will be recognized in a
future period.
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. Our Star Tron® enzyme fuel treatment is designed to eliminate and prevent engine problems associated
The Company is still assessing the total property damage from the chemical incident and does not expect the loss to be in excess of the insurance proceeds.
with fuel containing 10% ethanol (E-10 fuel) including, among other things, fuel degradation, debris in fuel (gum and varnish formation) and ethanol’s propensity to
attract water (which can adversely affect octane). Star Tron® fuel treatment also increases fuel economy by cleaning the fuel delivery system and facilitating more
Products:
complete and uniform combustion. In addition, we produce anti-freeze and windshield washes under the Star brite® brand and under private labels for customers. We
The products that we manufacture and market include the following:
also produce automotive polishes, cleaners and other appearance items.
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 sold by some of our customers. The marine line also includes motor oils, boat washes, vinyl cleaners, protectants, teak cleaners, teak
1
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, brush handles, 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. Our Star Tron® enzyme fuel treatment is designed to eliminate and prevent engine problems associated
with fuel containing 10% ethanol (E-10 fuel) including, among other things, fuel degradation, debris in fuel (gum and varnish formation) and ethanol’s propensity to
attract water (which can adversely affect octane). Star Tron® fuel treatment also increases fuel economy by cleaning the fuel delivery system and facilitating more
complete and uniform combustion. 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.
1
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
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Form Type: 10-K
OCEAN BIO-CHEM, INC.
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Recreational Vehicle/Power Sports: We market Star Tron® fuel treatment and other specialty products to the recreational vehicle market, including snow mobiles, all-
terrain vehicles and motorcycles. For power sports enthusiasts, Star Tron® provides a viable solution to a number of problems associated with E-10 fuel. Other
specialty recreational vehicle/power sports products include cleaners, polishes, detergents, fabric cleaners and protectants, silicone sealants, waterproofers, gasket
materials, degreasers, vinyl cleaners and protectants, toilet treatment fluids and anti-freeze/coolant.
Outdoor Power Equipment/ Lawn & Garden: We market Star Tron® as a solution to help rectify a number of operating engine problems associated with E-10 fuel in
commercial lawn equipment and other home and garden power equipment.
f10k2019_oceanbiochem.htm
Disinfectant Group: Our disinfectant group includes chlorine dioxide based deodorizers, disinfectants and sanitizers, which we sell under the Star brite® and
Performacide® brand names, and which our customers sell using private label brands. Star Brite® products include NosGUARD mildew odor control bags and boat
odor sanitizers. Performacide® products include disinfectants for hard, non-porous surfaces, air care products for deodorizing and products to eliminate mold and
mildew. These products are sold in both a gas and liquid form. The U.S. Environmental Protection Agency has accepted labeling for Performacide® used in hard
surface applications that claims, among other things, effectiveness as a virucide against a variety of viruses, including HIV-1, Influenza-A, Herpes Simplex-2,
Poliovirus-1, norovirus and rotavirus; as a disinfectant against a number of different types of bacteria; and as a sanitizer against certain types of bacteria that cause food
borne illnesses. We are directing distribution efforts with respect to our disinfectant group principally towards the marine, automotive, home restoration, pet care and
agriculture markets, and to institutions such as schools.
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Edgar Agents LLC
Form Type: 10-K
Page 4
Contract Filling and Blow Molded Bottles: We blend and package a variety of chemical formulations to our customers’ specifications. In addition, we manufacture for
Recreational Vehicle/Power Sports: We market Star Tron® fuel treatment and other specialty products to the recreational vehicle market, including snow mobiles, all-
sale to various customers assorted styles of both PVC and HDPE blow molded bottles.
terrain vehicles and motorcycles. For power sports enthusiasts, Star Tron® provides a viable solution to a number of problems associated with E-10 fuel. Other
specialty recreational vehicle/power sports products include cleaners, polishes, detergents, fabric cleaners and protectants, silicone sealants, waterproofers, gasket
Manufacturing: We produce most of our products at Kinpak’s manufacturing facilities in Montgomery, Alabama. In addition, we contract with various third- party
materials, degreasers, vinyl cleaners and protectants, toilet treatment fluids and anti-freeze/coolant.
manufacturers to manufacture some of our products, which are manufactured to our specifications using our provided formulas. Each third- party manufacturer enters
into a confidentiality agreement with us.
Outdoor Power Equipment/ Lawn & Garden: We market Star Tron® as a solution to help rectify a number of operating engine problems associated with E-10 fuel in
commercial lawn equipment and other home and garden power equipment.
We purchase raw materials from a 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
Disinfectant Group: Our disinfectant group includes chlorine dioxide based deodorizers, disinfectants and sanitizers, which we sell under the Star brite® and
with our current outside manufacturers are adequate for our present needs.
Performacide® brand names, and which our customers sell using private label brands. Star Brite® products include NosGUARD mildew odor control bags and boat
odor sanitizers. Performacide® products include disinfectants for hard, non-porous surfaces, air care products for deodorizing and products to eliminate mold and
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
mildew. These products are sold in both a gas and liquid form. The U.S. Environmental Protection Agency has accepted labeling for Performacide® used in hard
substantial adverse effect on our manufacturing and distribution.
surface applications that claims, among other things, effectiveness as a virucide against a variety of viruses, including HIV-1, Influenza-A, Herpes Simplex-2,
Marketing and Significant Customers: Our branded and private label products are sold through national retailers such as Wal-Mart, Tractor Supply, West Marine
Poliovirus-1, norovirus and rotavirus; as a disinfectant against a number of different types of bacteria; and as a sanitizer against certain types of bacteria that cause food
and Bass Pro Shops. Additionally, we market our products via online retailers. We also sell to national and regional distributors that resell our products to specialized
borne illnesses. We are directing distribution efforts with respect to our disinfectant group principally towards the marine, automotive, home restoration, pet care and
retail outlets. In the case of Performacide® disinfectant/sanitizing products, we sell to both retailers as well as distributors that resell our products, in some cases under
agriculture markets, and to institutions such as schools.
private labels, to end users principally in the marine, automotive, home restoration, law enforcement and agriculture markets.
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.
Net sales to each of three customers exceeded 10% of our consolidated net sales, and in the aggregate constituted approximately 43.2% of our consolidated net sales,
for the year ended December 31, 2019. Net sales to each of two customers exceeded 10% of our consolidated net sales, and in the aggregate constituted approximately
Manufacturing: We produce most of our products at Kinpak’s manufacturing facilities in Montgomery, Alabama. In addition, we contract with various third- party
33.1% of our consolidated net sales, for the year ended December 31, 2018. Net sales to our four largest unaffiliated customers for the years ended December 31, 2019
manufacturers to manufacture some of our products, which are manufactured to our specifications using our provided formulas. Each third- party manufacturer enters
and 2018 amounted to approximately 52.0% and 48.8% of our consolidated net sales, respectively, and at December 31, 2019 and 2018, outstanding accounts
into a confidentiality agreement with us.
receivable balances from our four largest unaffiliated customers aggregated approximately 64.9% and 57.2% of our consolidated accounts receivable, respectively.
We purchase raw materials from a variety of suppliers; all raw materials used in manufacturing are readily available from alternative sources. We design our own
We market our products through both internal salesmen and external sales representatives who work on an independent contractor commission basis. Our personnel
packaging and supply our outside manufacturers with the appropriate design or packaging. We believe that our internal manufacturing capacity and our arrangements
also participate in sales presentations and trade shows. In addition, we market our brands and products through advertising campaigns in national magazines, on
with our current outside manufacturers are adequate for our present needs.
television, on the internet, in newspapers and through 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. See Note 2 to the consolidated financial
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
statements included in this report for additional information.
substantial adverse effect on our manufacturing and distribution.
Backlog, seasonality, and selling terms: We had no significant backlog of orders at December 31, 2019. We generally do not give customers the right to return
Marketing and Significant Customers: Our branded and private label products are sold through national retailers such as Wal-Mart, Tractor Supply, West Marine
products. The majority of our products are non-seasonal and are sold throughout the year. Normal trade terms offered to customers range from 30 to 180
and Bass Pro Shops. Additionally, we market our products via online retailers. We also sell to national and regional distributors that resell our products to specialized
days. However, at times we offer extended payment terms or discount arrangements as purchasing incentives to customers. Historically, these initiatives have not
retail outlets. In the case of Performacide® disinfectant/sanitizing products, we sell to both retailers as well as distributors that resell our products, in some cases under
materially affected our overall profit margins.
private labels, to end users principally in the marine, automotive, home restoration, law enforcement and agriculture markets.
2
Net sales to each of three customers exceeded 10% of our consolidated net sales, and in the aggregate constituted approximately 43.2% of our consolidated net sales,
for the year ended December 31, 2019. Net sales to each of two customers exceeded 10% of our consolidated net sales, and in the aggregate constituted approximately
33.1% of our consolidated net sales, for the year ended December 31, 2018. Net sales to our four largest unaffiliated customers for the years ended December 31, 2019
and 2018 amounted to approximately 52.0% and 48.8% of our consolidated net sales, respectively, and at December 31, 2019 and 2018, outstanding accounts
receivable balances from our four largest unaffiliated customers aggregated approximately 64.9% and 57.2% of our consolidated accounts receivable, respectively.
We market our products through both internal salesmen and external 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, on
television, on the internet, in newspapers and through 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. See Note 2 to the consolidated financial
statements included in this report for additional information.
Backlog, seasonality, and selling terms: We had no significant backlog of orders at December 31, 2019. We generally do not give customers the right to return
products. The majority of our products are non-seasonal and are sold throughout the year. Normal trade terms offered to customers range from 30 to 180
days. However, at times we offer extended payment terms or discount arrangements as purchasing incentives to customers. Historically, these initiatives have not
materially affected our overall profit margins.
2
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 5
03/27/2020 05:38 PM
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 advertising and distribution
channels.
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 seek to maintain and possibly increase our market share through our present
advertising and distribution channels.
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 advertising and distribution channels similar to those we use in the
marine market.
f10k2019_oceanbiochem.htm
Form Type: 10-K
Page 5
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
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.
Competition:
Disinfectant Group: There are a large number of companies that compete with us, many of which are much larger, and have much greater financial resources than we
do. We emphasize the effectiveness of chlorine dioxide, coupled with the convenience in application of our products.
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.
Trademarks: We have obtained registered trademarks for Star brite®, Star Tron®, Performacide® and other trade names used on our products. We view our trademarks
as significant assets because they provide product recognition. We believe that our trademarks provide protection in the geographic markets we serve, but we cannot
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
assure that our intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged.
dominant market share. We believe that we can increase or maintain our market share through expenditures directed to our present advertising and distribution
channels.
Patents: We own several patents, the most significant of which relate to a delivery system for use with products containing chlorine dioxide (the “ClO2 Patents”). The
ClO2 patents expire in 2022. We have encountered difficulty in protecting the ClO2 patents through litigation. See “Risk Factors - If we do not utilize or successfully
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
assert intellectual property rights, our competitiveness could be materially adversely affected,” in Item 1A of this report for additional information. A 2014 adverse
than we do. While our market share is small, the total market size is substantial. We seek to maintain and possibly increase our market share through our present
judgment in patent litigation that was upheld on appeal in 2015 has limited the scope of protection provided by the patent. To date, we do not believe the judgment has
advertising and distribution channels.
materially impaired our ability to effectively market and distribute our Performacide® products. However, we are unable to predict the long-term competitive effect of
the judgment on these products.
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 advertising and distribution channels similar to those we use in the
New Product Development: We continue to develop specialized products for the marine, automotive, recreational vehicle/power sports and outdoor power
marine market.
equipment/lawn and garden markets. Expenditures for new product development have not been significant and are charged to operations in the year incurred.
Outdoor Power Equipment/Lawn & Garden: We compete with several established national and regional competitors. We do not believe that any competitor or small
Personnel: At December 31, 2019, we had 149 full-time employees and five part-time employees. The following table provides information regarding personnel
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
working for the Company and its subsidiaries at December 31, 2019:
increasing our advertising and attendance at trade shows.
Location
Disinfectant Group: There are a large number of companies that compete with us, many of which are much larger, and have much greater financial resources than we
451
Fort Lauderdale, Florida
do. We emphasize the effectiveness of chlorine dioxide, coupled with the convenience in application of our products.
6
Fort Lauderdale, Florida
1032
Trademarks: We have obtained registered trademarks for Star brite®, Star Tron®, Performacide® and other trade names used on our products. We view our trademarks
Montgomery, Alabama
as significant assets because they provide product recognition. We believe that our trademarks provide protection in the geographic markets we serve, but we cannot
154
assure that our intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged.
Administrative, sales, and marketing
Manufacturing and distribution
Manufacturing and distribution
Number of Employees
Description
1 Includes one part-time employee.
Patents: We own several patents, the most significant of which relate to a delivery system for use with products containing chlorine dioxide (the “ClO2 Patents”). The
2 Includes four part-time employees.
ClO2 patents expire in 2022. We have encountered difficulty in protecting the ClO2 patents through litigation. See “Risk Factors - If we do not utilize or successfully
assert intellectual property rights, our competitiveness could be materially adversely affected,” in Item 1A of this report for additional information. A 2014 adverse
judgment in patent litigation that was upheld on appeal in 2015 has limited the scope of protection provided by the patent. To date, we do not believe the judgment has
3
materially impaired our ability to effectively market and distribute our Performacide® products. However, we are unable to predict the long-term competitive effect of
the judgment on these products.
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, 2019, we had 149 full-time employees and five part-time employees. The following table provides information regarding personnel
working for the Company and its subsidiaries at December 31, 2019:
Location
Fort Lauderdale, Florida
Fort Lauderdale, Florida
Montgomery, Alabama
1 Includes one part-time employee.
2 Includes four part-time employees.
Description
Number of Employees
Administrative, sales, and marketing
Manufacturing and distribution
Manufacturing and distribution
3
451
6
1032
154
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 6
03/27/2020 05:38 PM
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. Moreover, we confront intense competition with
respect to our Performacide® disinfectant, sanitizing and deodorizing products from a large number of competitors, many of which are well established and have
substantially 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.
Our business is, to a significant extent, dependent on a small number of major customers, and the loss of any of these customers could adversely affect our
financial condition, results of operations and cash flows.
Net sales to our four largest unaffiliated customers accounted for 52.0% of our consolidated net sales in 2019; our largest unaffiliated customer accounted for 21.7% of
our consolidated net sales in 2019. The loss of any of these customers would have a material adverse effect on our financial condition, results of operations and cash
flows.
Our Chairman, President and Chief Executive Officer is a majority shareholder who controls us, and his interests may conflict with or differ from the
Company’s interests.
Peter G. Dornau, our Chairman, President and Chief Executive Officer, together with a family entity he controls, owns approximately 50.7% 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.” The affiliated companies also collectively own the rights to the Star brite® and
Star Tron® trademarks and related products outside of the United States and Canada. Sales to the affiliated companies aggregated approximately $1,788,000 and
$2,190,000 during the years ended December 31, 2019 and 2018, respectively. In addition, we provided administrative services and advances for business related
expenditures to the affiliated companies. During the years ended December 31, 2019 and 2018, fees for administrative services aggregated approximately $779,000 and
$760,000, respectively, and amounts billed to the affiliated companies to reimburse the Company for business related expenditures made on behalf of the affiliated
companies aggregated approximately $113,000 and $151,000, respectively. Receivables due from the affiliated companies in connection with product sales,
administrative services, and advances for business related expenditures totaled approximately $962,000 and $1,046,000 at December 31, 2019 and 2018, respectively.
The accounts receivable turnover ratio for the year ended December 31, 2019 with respect to sales to the affiliated companies was approximately 3.4 and with respect
to administrative services and advances for business related expenditures was approximately 1.9. Management believes that the sales and provision of administrative
services to the affiliated companies do not involve more than normal credit risk.
We have entered into other transactions with entities owned by Mr. Dornau. See Notes 4 and 10 to the consolidated financial statements included in this report for
additional information.
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, we believe that adverse economic conditions in recent years
adversely constrained discretionary spending, which we believe has, at times, adversely affected our sales, particularly with respect to products directed to the marine
and recreational vehicle markets. While published reports indicate that economic conditions, particularly in the United States, generally have improved over the past
several years, a future decline in economic conditions could have a material adverse effect on our financial condition, results of operations and cash flows.
If we do not effectively utilize or successfully assert intellectual property rights, our competitiveness could be materially adversely affected.
We rely on trademarks and trade names in connection with our products, the most significant of which are Star brite® and Star Tron®. In addition, we own patents we
have viewed as providing some degree of competitive support for our Performacide® products. 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, and the legal costs necessary to protect our intellectual property rights could be significant. Our failure to perfect or successfully assert intellectual
property rights could harm our competitive position and could have a material adverse effect on our financial condition, results of operations and cash flows.
Our business involves the use of chemicals.
At our Kinpak facility we blend various chemicals that can cause explosions or harmful gas to be released. Mishandling of chemicals can potentially result in people
being hurt or killed, property damaged, and business interruption. On December 9, 2019, there was a chemical reaction incident at the Kinpak facility that resulted in
three employees suffering injuries, which we do not believe to be serious. The chemical incident damaged various manufacturing equipment with a net book value of
$50,520. The Company recorded a loss for the $50,520 and an offsetting insurance claim receivable of $50,520 in 2019.
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. It is possible that we could become subject to environmental liabilities in the future that could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
4
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 7
03/27/2020 05:38 PM
Our financial condition, results of operations and cash flows may be adversely affected by public health epidemics, including the coronavirus reported to
have originated in Wuhan, China.
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the
World Health Organization declared COVID-19 a pandemic—the first pandemic caused by a coronavirus. The outbreak has reached more than 160 countries, resulting
in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans, intended to control the spread of the virus.
f10k2019_oceanbiochem.htm
The COVID-19 outbreak has already caused severe global disruptions. In response to the virus, various countries have implemented lockdown measures, and other
countries and local governments may also do so. The United States and various states and municipalities have limited activities. Companies are also taking precautions,
such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 7
A public health pandemic, such as that relating to COVID-19, poses the risk that we or our suppliers, customers and other business partners may be prevented from
conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. In addition,
our financial condition, results of operations and cash flows could be adversely affected to the extent an epidemic harms the global economy in general.
Our financial condition, results of operations and cash flows may be adversely affected by public health epidemics, including the coronavirus reported to
have originated in Wuhan, China.
The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the
outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the
impact of COVID-19 on our business. However, if the pandemic continues to evolve into a severe worldwide health crisis, the disease could have a material adverse
World Health Organization declared COVID-19 a pandemic—the first pandemic caused by a coronavirus. The outbreak has reached more than 160 countries, resulting
effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.
in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans, intended to control the spread of the virus.
Our variable rate indebtedness exposes us to risks related to interest rate fluctuation and matures in August 2021.
The COVID-19 outbreak has already caused severe global disruptions. In response to the virus, various countries have implemented lockdown measures, and other
We have a revolving line of credit with a variable interest rate. Interest on the revolving line of credit is payable at the one month LIBOR rate plus 1.35% per annum,
countries and local governments may also do so. The United States and various states and municipalities have limited activities. Companies are also taking precautions,
computed on a 365/360 basis. At December 31, 2019, we did not have any borrowings outstanding under the revolving line of credit. However, if we borrow amounts
such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.
under the revolving line of credit in the future, and if interest rates were to increase significantly, our financial condition, results of operations and cash flows could be
materially adversely affected. Moreover, we believe, but cannot assure, that we could obtain a renewal of the revolving line of credit or a suitable replacement facility
A public health pandemic, such as that relating to COVID-19, poses the risk that we or our suppliers, customers and other business partners may be prevented from
when the current facility terminates in August 2021. Our failure to renew or obtain a replacement for our current facility may impair our financial flexibility and have a
conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. In addition,
material adverse effect on our business.
our financial condition, results of operations and cash flows could be adversely affected to the extent an epidemic harms the global economy in general.
Weather conditions can adversely affect our sales.
The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the
outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall
Our sales can be adversely affected by prolonged cold winters which curtail boating activity and by natural disasters such as hurricanes, floods and tornados. During
impact of COVID-19 on our business. However, if the pandemic continues to evolve into a severe worldwide health crisis, the disease could have a material adverse
2019 both the second and third quarters were adversely affected by weather conditions.
effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.
Trading in our common stock has been limited, and our stock price could potentially be subject to substantial fluctuations.
Our variable rate indebtedness exposes us to risks related to interest rate fluctuation and matures in August 2021.
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
We have a revolving line of credit with a variable interest rate. Interest on the revolving line of credit is payable at the one month LIBOR rate plus 1.35% per annum,
modest volume of transactions.
computed on a 365/360 basis. At December 31, 2019, we did not have any borrowings outstanding under the revolving line of credit. However, if we borrow amounts
under the revolving line of credit in the future, and if interest rates were to increase significantly, our financial condition, results of operations and cash flows could be
Item 1B. Unresolved Staff Comments
materially adversely affected. Moreover, we believe, but cannot assure, that we could obtain a renewal of the revolving line of credit or a suitable replacement facility
Not applicable.
when the current facility terminates in August 2021. Our failure to renew or obtain a replacement for our current facility may impair our financial flexibility and have a
material adverse effect on our business.
Item 2. Properties
Weather conditions can adversely affect our sales.
Our executive offices and one of our manufacturing facilities are 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. The lease expires in
Our sales can be adversely affected by prolonged cold winters which curtail boating activity and by natural disasters such as hurricanes, floods and tornados. During
December 2023. See Note 4 to the consolidated financial statements included in this report for additional information.
2019 both the second and third quarters were adversely affected by weather conditions.
Kinpak leases its Alabama manufacturing facilities from The Industrial Development Board of the City of Montgomery, Alabama (the “IDB”). Kinpak entered into the
Trading in our common stock has been limited, and our stock price could potentially be subject to substantial fluctuations.
lease in its current form in connection with an industrial development bond financing related to the Expansion Project; Kinpak’s lease payments are used to fund
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
repayment of the IDB’s obligations under the bond it issued in connection with the industrial development bond financing. See Note 8 to the consolidated financial
modest volume of transactions.
statements included in this report for additional information. Kinpak inherited the lease structure when it first acquired its facilities from its predecessor-in-interest in
1996. The lease provides that prior to the maturity date of the bond, Kinpak may repurchase the facilities for $1,000 if the bond has been redeemed or fully paid. As a
Item 1B. Unresolved Staff Comments
result of the Expansion Project, the facilities contain approximately 272,000 square feet of office, plant and warehouse space on 20 acres of land.
Not applicable.
Item 3. Legal Proceedings
Item 2. Properties
Not applicable
Our executive offices and one of our manufacturing facilities are located in Fort Lauderdale, Florida and are leased from an entity controlled by our Chairman,
Item 4. Mine Safety Disclosures
President and Chief Executive Officer. The lease covers approximately 12,700 square feet of office, manufacturing, and warehouse space. The lease expires in
December 2023. See Note 4 to the consolidated financial statements included in this report for additional information.
Not applicable.
Kinpak leases its Alabama manufacturing facilities from The Industrial Development Board of the City of Montgomery, Alabama (the “IDB”). Kinpak entered into the
lease in its current form in connection with an industrial development bond financing related to the Expansion Project; Kinpak’s lease payments are used to fund
5
repayment of the IDB’s obligations under the bond it issued in connection with the industrial development bond financing. See Note 8 to the consolidated financial
statements included in this report for additional information. Kinpak inherited the lease structure when it first acquired its facilities from its predecessor-in-interest in
1996. The lease provides that prior to the maturity date of the bond, Kinpak may repurchase the facilities for $1,000 if the bond has been redeemed or fully paid. As a
result of the Expansion Project, the facilities contain approximately 272,000 square feet of office, plant and warehouse space on 20 acres of land.
Item 3. Legal Proceedings
Not applicable
Item 4. Mine Safety Disclosures
Not applicable.
5
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 8
03/27/2020 05:38 PM
Item 5. Market for 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.
PART II
On December 31, 2019, there were 100 holders of record. We believe that a substantially greater number of holders of our common stock are beneficial owners whose
shares are held by brokers and other institutions for the account of the beneficial owners.
While we have provided a special cash dividend to our shareholders in every year since 2016, payment of dividends in the future will be subject to the discretion of the
Board of Directors in light of numerous factors, including our business performance and operating plans, capital commitments, liquidity and other factors.
Item 6. Selected Financial Data
Not applicable.
f10k2019_oceanbiochem.htm
Form Type: 10-K
Edgar Agents LLC
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OCEAN BIO-CHEM, INC.
Page 8
03/27/2020 05:38 PM
The following discussion should be read in conjunction with our consolidated financial statements which are contained in a separate section of this report, beginning on
page F-1.
Overview:
PART II
We are engaged in the manufacture, marketing and distribution of a broad line of appearance, performance, and maintenance products for the marine, automotive,
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
power sports, recreational vehicle and outdoor power equipment markets, under the Star brite® and other trademarks within the United States and Canada. In addition,
Our common stock is traded on the NASDAQ Capital Market under the symbol OBCI.
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 also manufacture, market and distribute a line of products including disinfectants, sanitizers and deodorizers. We sell our products through national
On December 31, 2019, there were 100 holders of record. We believe that a substantially greater number of holders of our common stock are beneficial owners whose
retailers and to national and regional distributors. In addition, we sell products to two companies affiliated with Peter G. Dornau, our Chairman, President and Chief
shares are held by brokers and other institutions for the account of the beneficial owners.
Executive Officer; these companies distribute the products outside of the United States and Canada. Transactions with the affiliated companies were made in the
ordinary course of business, and management believes that sales to the affiliated companies do not involve more than normal credit risk.
While we have provided a special cash dividend to our shareholders in every year since 2016, payment of dividends in the future will be subject to the discretion of the
Board of Directors in light of numerous factors, including our business performance and operating plans, capital commitments, liquidity and other factors.
The Company’s wholly owned subsidiary, KINPAK Inc. (“Kinpak”) has been engaged since 2017 in a project involving the expansion of its manufacturing, warehouse
and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion Project”). Kinpak
has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank farm to
Item 6. Selected Financial Data
accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of additional
Not applicable.
equipment. At December 31, 2019, Kinpak had spent an aggregate of approximately $6,117,000 on the Expansion Project. Of that amount, approximately $2,654,000
was provided through a $4,500,000 industrial development bond financing, which is described in Note 8, of the consolidated financial statements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
On December 9, 2019, there was a chemical incident at our Kinpak facility. As a precautionary measure several employees were sent to the hospital. We believe that
The following discussion should be read in conjunction with our consolidated financial statements which are contained in a separate section of this report, beginning on
no one suffered any serious injuries, and that we do not have any liability relating to personal injuries.
page F-1.
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019. The Company is still
Overview:
assessing the total property damage from the chemical incident.
We are engaged in the manufacture, 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 and Canada. In addition,
On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842). The Company adopted the new guidance using the
modified retrospective method, under which the Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting
we produce private label formulations of many of our products for various customers and provide custom blending and packaging services for these and other
prior periods. As a result, the Company’s balance sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption
products. We also manufacture, market and distribute a line of products including disinfectants, sanitizers and deodorizers. We sell our products through national
of ASU 2016-02 resulted in the recognition of approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the
retailers and to national and regional distributors. In addition, we sell products to two companies affiliated with Peter G. Dornau, our Chairman, President and Chief
reclassification of office equipment with a net book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
Executive Officer; these companies distribute the products outside of the United States and Canada. Transactions with the affiliated companies were made in the
ordinary course of business, and management believes that sales to the affiliated companies do not involve more than normal credit risk.
6
The Company’s wholly owned subsidiary, KINPAK Inc. (“Kinpak”) has been engaged since 2017 in a project involving the expansion of its manufacturing, warehouse
and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion Project”). Kinpak
has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank farm to
accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of additional
equipment. At December 31, 2019, Kinpak had spent an aggregate of approximately $6,117,000 on the Expansion Project. Of that amount, approximately $2,654,000
was provided through a $4,500,000 industrial development bond financing, which is described in Note 8, of the consolidated financial statements.
On December 9, 2019, there was a chemical incident at our Kinpak facility. As a precautionary measure several employees were sent to the hospital. We believe that
no one suffered any serious injuries, and that we do not have any liability relating to personal injuries.
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019. The Company is still
assessing the total property damage from the chemical incident.
On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842). The Company adopted the new guidance using the
modified retrospective method, under which the Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting
prior periods. As a result, the Company’s balance sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption
of ASU 2016-02 resulted in the recognition of approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the
reclassification of office equipment with a net book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
6
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 9
03/27/2020 05:38 PM
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, if subject to different assumptions and conditions, could lead to
f10k2019_oceanbiochem.htm
materially different results.
Edgar Agents LLC
Collectability of trade accounts receivable
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Form Type: 10-K
Page 9
In the ordinary course of business, we grant non-interest-bearing trade credit to our unaffiliated customers on terms that range from 30 to 180 days. 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 aging of receivables, as well as
our assessment of our customers’ creditworthiness, as determined by our review of credit information relating to the customers. We generally do not require collateral
Critical accounting estimates:
on trade accounts receivable. We maintain an allowance for doubtful accounts based on expected collectability of the trade accounts receivable, after considering our
historical collection experience, the length of time an account is outstanding, the financial position of the customer if known and information provided by credit rating
The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management
services. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary. Our allowance for doubtful accounts was approximately
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
$162,000 and $171,000 at December 31, 2019 and 2018, respectively, which was approximately 2.2% and 2.9% of gross accounts receivable at December 31, 2019
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
and 2018, respectively. If the financial condition of our customers were to deteriorate, resulting in increased uncertainty as to their ability to make payments, or if
unexpected events or significant future changes in trends were to occur, we may be required to increase the allowance or incur a bad debt expense. In this regard, we
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
incurred bad debt expense of approximately $6,000 and $35,000 in 2019 and 2018, respectively.
pervasive and important to the presentation of our financial condition and results of operations and, if subject to different assumptions and conditions, could lead to
materially different results.
Inventories
Collectability of trade accounts receivable
Our inventories primarily are composed of raw materials and finished goods and are stated at the lower of cost or net realizable value, using the first-in, first-out
method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and
In the ordinary course of business, we grant non-interest-bearing trade credit to our unaffiliated customers on terms that range from 30 to 180 days. In an effort to
transportation. We maintain a reserve for slow moving and obsolete inventory to reflect the diminution in value resulting from product obsolescence, damage or other
reduce our credit risk, we perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and aging of receivables, as well as
issues affecting marketability in an amount equal to the difference between the cost of the inventory and its estimated net realizable value. The adequacy of this reserve
our assessment of our customers’ creditworthiness, as determined by our review of credit information relating to the customers. We generally do not require collateral
is reviewed each reporting period and adjusted as necessary. We regularly compare inventory quantities on hand against historical usage or forecasts related to specific
on trade accounts receivable. We maintain an allowance for doubtful accounts based on expected collectability of the trade accounts receivable, after considering our
items in order to evaluate obsolescence and excessive quantities. In assessing historical usage, we also qualitatively assess business trends to evaluate the
historical collection experience, the length of time an account is outstanding, the financial position of the customer if known and information provided by credit rating
reasonableness of using historical information as an estimate of future usage.
services. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary. Our allowance for doubtful accounts was approximately
$162,000 and $171,000 at December 31, 2019 and 2018, respectively, which was approximately 2.2% and 2.9% of gross accounts receivable at December 31, 2019
Our slow moving and obsolete inventory reserve was $244,206 and $284,109 at December 31, 2019 and 2018, respectively.
and 2018, respectively. If the financial condition of our customers were to deteriorate, resulting in increased uncertainty as to their ability to make payments, or if
unexpected events or significant future changes in trends were to occur, we may be required to increase the allowance or incur a bad debt expense. In this regard, we
Income taxes
incurred bad debt expense of approximately $6,000 and $35,000 in 2019 and 2018, respectively.
We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized to reflect the future tax
Inventories
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 and recorded using currently enacted tax rates, which we expect will apply to taxable income in the years in which the
Our inventories primarily are composed of raw materials and finished goods and are stated at the lower of cost or net realizable value, using the first-in, first-out
differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases are recovered or settled. The differences are
method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and
attributable to differing methods of financial statement and income tax treatment with respect to depreciation and reserves for trade accounts receivable and
transportation. We maintain a reserve for slow moving and obsolete inventory to reflect the diminution in value resulting from product obsolescence, damage or other
inventories. The likelihood of a material change in our expected realization of deferred tax assets is dependent on, among other factors, changes in tax law, future
issues affecting marketability in an amount equal to the difference between the cost of the inventory and its estimated net realizable value. The adequacy of this reserve
taxable income and settlements with tax authorities.
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
In assessing the realizability of our deferred tax assets, we evaluate positive and negative evidence and use judgments regarding past and future events, including
reasonableness of using historical information as an estimate of future usage.
operating results and available tax planning strategies that could be implemented to realize the deferred tax assets. 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 available evidence, both positive and negative, and
Our slow moving and obsolete inventory reserve was $244,206 and $284,109 at December 31, 2019 and 2018, respectively.
use judgments regarding past and future events, including operating results and available tax planning strategies, in assessing the need for a valuation allowance.
Income taxes
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
We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized to reflect the future tax
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
consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
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
tax assets and liabilities are measured and recorded using currently enacted tax rates, which we expect will apply to taxable income in the years in which the
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 we
differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases are recovered or settled. The differences are
become aware of facts that necessitate such an adjustment. The ultimate outcomes of the examinations of our income tax returns could result in increases or decreases
attributable to differing methods of financial statement and income tax treatment with respect to depreciation and reserves for trade accounts receivable and
to our recorded tax liabilities, which would affect our financial results.
inventories. The likelihood of a material change in our expected realization of deferred tax assets is dependent on, among other factors, changes in tax law, future
taxable income and settlements with tax authorities.
7
In assessing 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. 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 available evidence, both positive and negative, and
use judgments regarding past and future events, including operating results and available tax planning strategies, in assessing the need for a valuation allowance.
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 we
become aware of facts that necessitate such an adjustment. The ultimate outcomes of the examinations of our income tax returns could result in increases or decreases
to our recorded tax liabilities, which would affect our financial results.
7
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 10
03/27/2020 05:38 PM
Intangible Assets
Intangible assets are acquired assets that lack physical substance and that meet specified criteria for recognition apart from goodwill. We own several trademarks and
trade names, including Star brite® and Performacide®. We have determined that these intangible assets have indefinite lives and, therefore, are not amortized. In
addition, we own other intangible assets including patents, royalty rights, other trademarks and trade names, customer lists, and product formulas that have finite lives.
As these intangible assets have finite lives, their carrying value is amortized over their remaining useful lives. See Note 5 to the consolidated financial statements
included in this report for additional information regarding our intangible assets.
f10k2019_oceanbiochem.htm
Form Type: 10-K
Page 10
Edgar Agents LLC
We evaluate our indefinite-lived intangible assets for impairment annually and at other times if events or changes in circumstances indicate that an impairment may
have occurred. In evaluating our indefinite-lived intangible assets for impairment, we assess qualitative factors to determine whether it is more likely than not that the
fair value of an indefinite-lived intangible asset is less than its carrying value. If, after completing the qualitative assessment, we determine it is more likely than not
that the fair value of the indefinite-lived intangible asset is greater than its carrying amount, the asset is not impaired. If we conclude it is more likely than not that the
fair value of the indefinite-lived intangible assets is less than the carrying value, we would then proceed to a quantitative impairment test, which consists of a
comparison of the fair value of the intangible assets to their carrying amounts. In 2019, we performed a qualitative assessment on all of our indefinite lived assets and
Intangible Assets
determined, based on the assessment, that their fair values were more likely than not higher than their carrying values.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Intangible assets are acquired assets that lack physical substance and that meet specified criteria for recognition apart from goodwill. We own several trademarks and
We assess the remaining useful life and recoverability of intangible assets having finite lives whenever events or changes in circumstances indicate the carrying value
trade names, including Star brite® and Performacide®. We have determined that these intangible assets have indefinite lives and, therefore, are not amortized. In
of an asset may not be recoverable. Such events or circumstances may include, for example, the occurrence of an adverse change with respect to a product line that
addition, we own other intangible assets including patents, royalty rights, other trademarks and trade names, customer lists, and product formulas that have finite lives.
utilizes the intangible assets. Significant judgments in this area involve determining whether such an event or circumstance has occurred. Any impairment loss, if
As these intangible assets have finite lives, their carrying value is amortized over their remaining useful lives. See Note 5 to the consolidated financial statements
indicated, equals the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
included in this report for additional information regarding our intangible assets.
Results of Operations:
We evaluate our indefinite-lived intangible assets for impairment annually and at other times if events or changes in circumstances indicate that an impairment may
have occurred. In evaluating our indefinite-lived intangible assets for impairment, we assess qualitative factors to determine whether it is more likely than not that the
The following table provides a summary of our financial results for the years ended December 31, 2019 and 2018:
fair value of an indefinite-lived intangible asset is less than its carrying value. If, after completing the qualitative assessment, we determine it is more likely than not
that the fair value of the indefinite-lived intangible asset is greater than its carrying amount, the asset is not impaired. If we conclude it is more likely than not that the
fair value of the indefinite-lived intangible assets is less than the carrying value, we would then proceed to a quantitative impairment test, which consists of a
comparison of the fair value of the intangible assets to their carrying amounts. In 2019, we performed a qualitative assessment on all of our indefinite lived assets and
determined, based on the assessment, that their fair values were more likely than not higher than their carrying values.
Net sales
100.0%
We assess the remaining useful life and recoverability of intangible assets having finite lives whenever events or changes in circumstances indicate the carrying value
Cost of goods sold
65.6%
of an asset may not be recoverable. Such events or circumstances may include, for example, the occurrence of an adverse change with respect to a product line that
Gross profit
34.4%
utilizes the intangible assets. Significant judgments in this area involve determining whether such an event or circumstance has occurred. Any impairment loss, if
Advertising and promotion
7.3%
indicated, equals the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
18.3%
Selling and administrative
8.9%
Operating income
Results of Operations:
Interest expense, net
0.3%
Provision for income taxes
1.9%
The following table provides a summary of our financial results for the years ended December 31, 2019 and 2018:
6.7%
Net income
2019
42,259,487
26,659,427
15,600,060
3,147,289
7,839,411
4,613,360
(118,642)
(996,004)
3,498,714
2018
41,799,545
27,402,356
14,397,189
3,050,858
7,638,158
3,708,173
(121,894)
(791,030)
2,795,249
For The Years Ended December 31,
Percent
Change
100.0%
63.1%
36.9%
7.4%
18.6%
10.9%
0.3%
2.4%
8.3%
1.1%
(2.7)%
8.4%
3.2%
2.6%
24.4%
(2.7)%
25.9%
25.2%
Percentage of Net Sales
2018
2019
$
$
$
$
For The Years Ended December 31,
Percent
Change
Percentage of Net Sales
2018
2019
Net sales increased by approximately $460,000, or 1.1%, during 2019 as compared to 2018.
$
Cost of goods sold decreased by approximately $743,000 or 2.7% in 2019, as compared to 2018. The decrease in cost of goods sold was primarily a result of a more
100.0%
Net sales
favorable sales mix, in which sales of higher margin branded marine products increased as a percentage of overall sales, and lower margin private label marine
65.6%
Cost of goods sold
products and winterizing products decreased as a percentage of overall sales.
34.4%
Gross profit
7.3%
Advertising and promotion
Gross profit increased by approximately $1,203,000, or 8.4%, in 2019 as compared to 2018. As a percentage of net sales, gross profit increased primarily because of a
18.3%
Selling and administrative
more favorable sales mix to 36.9% in 2019 from 34.4% in 2018. The higher gross profit percentage along with increased net sales led to the increase in gross profit in
8.9%
Operating income
2019, as compared to 2018.
0.3%
Interest expense, net
1.9%
Provision for income taxes
Advertising and promotion expense increased by approximately $96,000, or 3.2%, during 2019 as compared to 2018. As a percentage of net sales, advertising and
6.7%
Net income
promotion expense increased to 7.4% in 2019 from 7.3% in 2018. The increase in advertising and promotion expense was principally a result of increases in
sponsorship of a NASCAR driver, product samples used to promote sales and advertising in customer catalogs.
100.0%
63.1%
36.9%
7.4%
18.6%
10.9%
0.3%
2.4%
8.3%
1.1%
(2.7)%
8.4%
3.2%
2.6%
24.4%
(2.7)%
25.9%
25.2%
2019
42,259,487
26,659,427
15,600,060
3,147,289
7,839,411
4,613,360
(118,642)
(996,004)
3,498,714
2018
41,799,545
27,402,356
14,397,189
3,050,858
7,638,158
3,708,173
(121,894)
(791,030)
2,795,249
$
$
$
Net sales increased by approximately $460,000, or 1.1%, during 2019 as compared to 2018.
Selling and administrative expenses increased by approximately $201,000, or 2.6%, during 2019 as compared to 2018. The increase in selling and administrative
expenses was principally a result of higher employee payroll and benefits, an increase in amortization expense related to intangible assets we acquired from Snappy
Cost of goods sold decreased by approximately $743,000 or 2.7% in 2019, as compared to 2018. The decrease in cost of goods sold was primarily a result of a more
Marine in July 2018, and administrative expenses at our manufacturing plant, partially offset by a decrease in our provision for bad debts, and depreciation. As a
favorable sales mix, in which sales of higher margin branded marine products increased as a percentage of overall sales, and lower margin private label marine
percentage of net sales, selling and administrative expenses increased to 18.6% in 2019 from 18.3% in 2018.
products and winterizing products decreased as a percentage of overall sales.
Gross profit increased by approximately $1,203,000, or 8.4%, in 2019 as compared to 2018. As a percentage of net sales, gross profit increased primarily because of a
8
more favorable sales mix to 36.9% in 2019 from 34.4% in 2018. The higher gross profit percentage along with increased net sales led to the increase in gross profit in
2019, as compared to 2018.
Advertising and promotion expense increased by approximately $96,000, or 3.2%, during 2019 as compared to 2018. As a percentage of net sales, advertising and
promotion expense increased to 7.4% in 2019 from 7.3% in 2018. The increase in advertising and promotion expense was principally a result of increases in
sponsorship of a NASCAR driver, product samples used to promote sales and advertising in customer catalogs.
Selling and administrative expenses increased by approximately $201,000, or 2.6%, during 2019 as compared to 2018. The increase in selling and administrative
expenses was principally a result of higher employee payroll and benefits, an increase in amortization expense related to intangible assets we acquired from Snappy
Marine in July 2018, and administrative expenses at our manufacturing plant, partially offset by a decrease in our provision for bad debts, and depreciation. As a
percentage of net sales, selling and administrative expenses increased to 18.6% in 2019 from 18.3% in 2018.
8
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 11
03/27/2020 05:38 PM
Interest expense, net during 2019 decreased by approximately $3,000, or 2.7%, as compared to 2018.
Provision for income taxes increased by approximately $205,000 or 25.9% in 2019, as compared to 2018. The increase was principally a result of higher net income.
As a percentage of income before taxes our provision for income taxes increased to 22.2% in 2019 from 22.1% in 2018.
Liquidity and Capital Resources:
f10k2019_oceanbiochem.htm
Our cash balance was approximately $6,125,000 at December 31, 2019 compared to approximately $1,401,000 at December 31, 2018. In addition, we had restricted
cash of approximately $1,885,000 and $2,333,000 at December 31, 2019 and 2018, respectively. The restricted cash constitutes amounts held in a custodial account
that are to be used from time to time to fund additional capital expenditures in connection with the Expansion Project. See Note 8 to the consolidated financial
statements included in this report for additional information.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 11
The following table summarizes our cash flows for the years ended December 31, 2019 and 2018:
Interest expense, net during 2019 decreased by approximately $3,000, or 2.7%, as compared to 2018.
Years Ended December 31,
2018
Provision for income taxes increased by approximately $205,000 or 25.9% in 2019, as compared to 2018. The increase was principally a result of higher net income.
Net cash provided by operating activities
1,218,079
As a percentage of income before taxes our provision for income taxes increased to 22.2% in 2019 from 22.1% in 2018.
(1,735,498)
Net cash used in investing activities
Net cash used in financing activities
(913,254)
Liquidity and Capital Resources:
(1,247)
Effect of exchange rate fluctuations on cash
Net increase (decrease) in cash
(1,431,920)
Our cash balance was approximately $6,125,000 at December 31, 2019 compared to approximately $1,401,000 at December 31, 2018. In addition, we had restricted
cash of approximately $1,885,000 and $2,333,000 at December 31, 2019 and 2018, respectively. The restricted cash constitutes amounts held in a custodial account
Net cash provided by operating activities during 2019 increased by approximately $4,774,000 or 391.9%, as compared to 2018. The increase was principally a result of
that are to be used from time to time to fund additional capital expenditures in connection with the Expansion Project. See Note 8 to the consolidated financial
the Company decreasing its gross inventories during 2019 by approximately $2,571,000 as compared to the Company increasing its gross inventories by approximately
statements included in this report for additional information.
$3,021,000 in 2018. Other changes in working capital used approximately $1,412,000 more in cash during 2019 than 2018. Net income combined with noncash
expenses increased by approximately $594,000 during 2019 as compared to 2018.
The following table summarizes our cash flows for the years ended December 31, 2019 and 2018:
2019
5,991,728
(793,474)
(923,898)
2,140
4,276,496
$
$
$
$
Inventories, net were approximately $9,555,000 and $12,085,000 at December 31, 2019 and 2018, respectively, representing a decrease of approximately $2,530,000
or 20.9% in 2019. We believe the lower levels of inventories are sufficient to meet the Company’s short-term needs.
Years Ended December 31,
Net cash provided by operating activities
Net trade accounts receivable at December 31, 2019 aggregated approximately $7,132,000, an increase of approximately $1,473,000, or 26.0%, compared to
Net cash used in investing activities
approximately $5,659,000 in net trade accounts receivable outstanding at December 31, 2018. The increase principally was due to an increase in net sales during the
Net cash used in financing activities
month ended December 31, 2019, as compared to the month ended December 31, 2018. Receivables due from affiliated companies aggregated approximately $962,000
Effect of exchange rate fluctuations on cash
at December 31, 2019, a decrease of approximately $84,000, or 8.0%, from receivables due from affiliated companies of approximately $1,046,000 at December 31,
Net increase (decrease) in cash
2018.
$
$
$
$
2019
5,991,728
(793,474)
(923,898)
2,140
4,276,496
2018
1,218,079
(1,735,498)
(913,254)
(1,247)
(1,431,920)
Net cash used in investing activities during 2019 decreased by approximately $942,000, or 54.3%, as compared to 2018. The decrease was a result of the Company
Net cash provided by operating activities during 2019 increased by approximately $4,774,000 or 391.9%, as compared to 2018. The increase was principally a result of
decreasing its cash used for purchases of property, plant and equipment and intangible assets. Cash used for purchases of plant, property and equipment decreased by
the Company decreasing its gross inventories during 2019 by approximately $2,571,000 as compared to the Company increasing its gross inventories by approximately
approximately $640,000, primarily because the Expansion Project is mostly completed. See “Overview” above for additional information. Cash used for purchases of
$3,021,000 in 2018. Other changes in working capital used approximately $1,412,000 more in cash during 2019 than 2018. Net income combined with noncash
intangible assets decreased by approximately $302,000. In 2019, the Company used $75,000 to acquire intangible assets from Check Corporation, and in 2018, the
expenses increased by approximately $594,000 during 2019 as compared to 2018.
Company used $376,722 to acquire intangible assets from Snappy Marine. See Note 5 to the consolidated financial statements included in this report for additional
information.
Inventories, net were approximately $9,555,000 and $12,085,000 at December 31, 2019 and 2018, respectively, representing a decrease of approximately $2,530,000
or 20.9% in 2019. We believe the lower levels of inventories are sufficient to meet the Company’s short-term needs.
Net cash used in financing activities during 2019 increased by approximately $11,000 or 1.2%, as compared to 2018. In both years, the Company’s primary use of cash
in financing activities was to pay dividends to common shareholders and to make payments on long-term debt.
Net trade accounts receivable at December 31, 2019 aggregated approximately $7,132,000, an increase of approximately $1,473,000, or 26.0%, compared to
approximately $5,659,000 in net trade accounts receivable outstanding at December 31, 2018. The increase principally was due to an increase in net sales during the
See Notes 6 and 8 to the consolidated financial statements included in this report for information concerning our principal credit facilities, consisting of Kinpak’s
month ended December 31, 2019, as compared to the month ended December 31, 2018. Receivables due from affiliated companies aggregated approximately $962,000
obligations relating to an industrial development bond financing with respect to the Expansion Project, the payment of which we have guaranteed and a revolving line
at December 31, 2019, a decrease of approximately $84,000, or 8.0%, from receivables due from affiliated companies of approximately $1,046,000 at December 31,
of credit. At December 31, 2019 and 2018, we had outstanding balances of approximately $3,974,000 and $4,222,000, under Kinpak’s obligations relating to the
2018.
industrial development bond financing respectively, and no borrowings under our revolving credit facility.
Net cash used in investing activities during 2019 decreased by approximately $942,000, or 54.3%, as compared to 2018. The decrease was a result of the Company
The loan agreement pertaining to our revolving credit facility, as amended, has a stated term that expires on August 31, 2021, although as was the case with earlier
decreasing its cash used for purchases of property, plant and equipment and intangible assets. Cash used for purchases of plant, property and equipment decreased by
revolving lines of credit provided to us in recent years, amounts outstanding are payable on demand. Nevertheless, the loan agreement pertaining to our revolving line
approximately $640,000, primarily because the Expansion Project is mostly completed. See “Overview” above for additional information. Cash used for purchases of
of credit, as amended, contains various covenants, including financial covenants that are described in Note 6 to the consolidated financial statements included in this
intangible assets decreased by approximately $302,000. In 2019, the Company used $75,000 to acquire intangible assets from Check Corporation, and in 2018, the
report. At December 31, 2019, we were in compliance with these financial covenants. The revolving credit facility is subject to several events of default, including a
Company used $376,722 to acquire intangible assets from Snappy Marine. See Note 5 to the consolidated financial statements included in this report for additional
decline of the majority shareholder’s ownership below 50% of our outstanding shares.
information.
Net cash used in financing activities during 2019 increased by approximately $11,000 or 1.2%, as compared to 2018. In both years, the Company’s primary use of cash
9
in financing activities was to pay dividends to common shareholders and to make payments on long-term debt.
See Notes 6 and 8 to the consolidated financial statements included in this report for information concerning our principal credit facilities, consisting of Kinpak’s
obligations relating to an industrial development bond financing with respect to the Expansion Project, the payment of which we have guaranteed and a revolving line
of credit. At December 31, 2019 and 2018, we had outstanding balances of approximately $3,974,000 and $4,222,000, under Kinpak’s obligations relating to the
industrial development bond financing respectively, and no borrowings under our revolving credit facility.
The loan agreement pertaining to our revolving credit facility, as amended, has a stated term that expires on August 31, 2021, although as was the case with earlier
revolving lines of credit provided to us in recent years, amounts outstanding are payable on demand. Nevertheless, the loan agreement pertaining to our revolving line
of credit, as amended, contains various covenants, including financial covenants that are described in Note 6 to the consolidated financial statements included in this
report. At December 31, 2019, we were in compliance with these financial covenants. The revolving credit facility is subject to several events of default, including a
decline of the majority shareholder’s ownership below 50% of our outstanding shares.
9
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 12
03/27/2020 05:38 PM
Our guarantee of Kinpak’s obligations related to the industrial development bond financing are subject to various covenants, including financial covenants that are
described in Note 8 to the consolidated financial statements included in this report. As of December 31, 2019, we were in compliance with these financial covenants.
In connection with our 2018 acquisition of assets of Snappy Marine, we issued a promissory note in the amount of $1,000,000, including interest (of the $1,000,000
amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an imputed interest rate of 2.87% per annum, is being
recorded as interest expense over the term of the note). At December 31, 2019, we had an outstanding balance of $716,666 under the promissory note (including
$680,274 recorded as principal and $36,392 to be recorded as interest expense over the remaining term of the note). We also obtained financing through leases for
office equipment, totaling approximately $26,000 and $31,000 at December 31, 2019 and December 31, 2018, respectively.
Some of our assets and liabilities are denominated in Canadian dollars and are subject to currency exchange rate fluctuations. We do not engage in currency hedging
and address currency risk as a pricing issue. In 2019, we recorded $1,243 in foreign currency translation adjustments, which resulted in a corresponding increase in
shareholders’ equity. In 2018, we recorded $7,683 in foreign currency translation adjustments, which resulted in a corresponding decrease in shareholders’ equity.
f10k2019_oceanbiochem.htm
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 retailer customers and to our distributors as promptly as we experience
increases in raw material costs. This may, at times, adversely affect our margins.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 12
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 funds provided through operations, our revolving line of credit, and other sources of financing will be sufficient to satisfy our cash requirements over
Our guarantee of Kinpak’s obligations related to the industrial development bond financing are subject to various covenants, including financial covenants that are
at least the next twelve months. Although amounts outstanding under our revolving line of credit facility are payable on demand, based on our experience with respect
described in Note 8 to the consolidated financial statements included in this report. As of December 31, 2019, we were in compliance with these financial covenants.
to previous revolving line of credit facilities with the same bank that is providing our current revolving line of credit facility, we anticipate that we will be able to
maintain borrowings, if any, under the current revolving line of credit facility until the end of its stated term.
In connection with our 2018 acquisition of assets of Snappy Marine, we issued a promissory note in the amount of $1,000,000, including interest (of the $1,000,000
amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an imputed interest rate of 2.87% per annum, is being
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
recorded as interest expense over the term of the note). At December 31, 2019, we had an outstanding balance of $716,666 under the promissory note (including
$680,274 recorded as principal and $36,392 to be recorded as interest expense over the remaining term of the note). We also obtained financing through leases for
Not applicable.
office equipment, totaling approximately $26,000 and $31,000 at December 31, 2019 and December 31, 2018, respectively.
Item 8. Financial Statements and Supplementary Data
Some of our assets and liabilities are denominated in Canadian dollars and are subject to currency exchange rate fluctuations. We do not engage in currency hedging
and address currency risk as a pricing issue. In 2019, we recorded $1,243 in foreign currency translation adjustments, which resulted in a corresponding increase in
The audited consolidated financial statements of the Company required pursuant to this Item 8 are included in a separate section commencing on page F-1 and are
shareholders’ equity. In 2018, we recorded $7,683 in foreign currency translation adjustments, which resulted in a corresponding decrease in shareholders’ equity.
incorporated herein by reference.
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.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
The nature of our business does not enable us to pass through the price increases to our national retailer customers and to our distributors as promptly as we experience
increases in raw material costs. This may, at times, adversely affect our margins.
Not applicable.
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
Item 9A. Controls and Procedures:
have resulted in lower inventory turnover rates. The effects of reduced inventory turnover have not been material to our overall operations.
Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief
We believe that funds provided through operations, our revolving line of credit, and other sources of financing will be sufficient to satisfy our cash requirements over
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
at least the next twelve months. Although amounts outstanding under our revolving line of credit facility are payable on demand, based on our experience with respect
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
to previous revolving line of credit facilities with the same bank that is providing our current revolving line of credit facility, we anticipate that we will be able to
Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to
maintain borrowings, if any, under the current revolving line of credit facility until the end of its stated term.
provide reasonable assurance that information we are required to disclose in reports that we file or submit 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
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Not applicable.
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
Item 8. Financial Statements and Supplementary Data
financial reporting.
The audited consolidated 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.
10
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 have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to
provide reasonable assurance that information we are required to disclose in reports that we file or submit 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 required 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.
10
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 13
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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, 2019. In making this assessment, management used the framework
established in Internal Control-Integrated Framework (2013) 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, 2019, the Company’s internal control over
financial reporting was effective.
Item 9B. Other Information
Not applicable.
11
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 13
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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, 2019. In making this assessment, management used the framework
established in Internal Control-Integrated Framework (2013) 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, 2019, the Company’s internal control over
financial reporting was effective.
Item 9B. Other Information
Not applicable.
11
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 14
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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 Stockholder 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.
12
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 14
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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 Stockholder 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.
12
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 15
03/27/2020 05:38 PM
Item 15. Exhibits, Financial Statement Schedules
f10k2019_oceanbiochem.htm
Form Type: 10-K
PART IV
Edgar Agents LLC
Financial Statements – See the Index to Consolidated Financial Statements on page F-1.
OCEAN BIO-CHEM, INC.
(a)
(b)
Exhibits:
Unless otherwise noted, the file number of each referenced filing is 0-11102.
Page 15
03/27/2020 05:38 PM
PART IV
Exhibit No.
3.1.1
Item 15. Exhibits, Financial Statement Schedules
Unless otherwise noted, the file number of each referenced filing is 0-11102.
Financial Statements – See the Index to Consolidated Financial Statements on page F-1.
3.1.2
(a)
3.2
(b)
Exhibits:
*4
10.1.1
Exhibit No.
10.1.2
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).
Articles of Amendment to the Articles of Incorporation, as filed on June 13, 2012 (incorporated by reference to Exhibit 3.1.2 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2012).
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).
Description of Common Stock
Business Loan Agreement, dated August 31, 2018, between the Company and Regions Bank (the “Business Loan Agreement”) (incorporated by
reference to Exhibit 10.1.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
Promissory Note, dated August 31, 2018, issued by the Company to Regions Bank in connection with the revolving line of credit under the Business
Articles of Incorporation and amendments through May 20, 1994 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on
Loan Agreement (the “Promissory Note”) (incorporated by reference to Exhibit 10.1.2 to the Company’s Quarterly Report on Form 10-Q for the quarter
Form 10-K for the year ended December 31, 2010).
ended September 30, 2018).
Articles of Amendment to the Articles of Incorporation, as filed on June 13, 2012 (incorporated by reference to Exhibit 3.1.2 to the Company’s Annual
Letter, dated August 31, 2018, from Regions Bank to the Company, regarding certain terms under the Business Loan Agreement and the Promissory
Report on Form 10-K for the year ended December 31, 2012).
Note (incorporated by reference to Exhibit 10.1.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
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
Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Exchange Commission on December 5, 2011).
Form 10-Q, filed with the Securities and Exchange Commission on August 12, 2016).
Description of Common Stock
Form of Industrial Development Revenue Bond (Kinpak Inc. Project) Series 2017 (incorporated by reference to Exhibit 99.1 to the Company’s Current
Business Loan Agreement, dated August 31, 2018, between the Company and Regions Bank (the “Business Loan Agreement”) (incorporated by
Report on Form 8-K, filed with the Securities and Exchange Commission on October 2, 2017).
reference to Exhibit 10.1.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
Second Restated Lease Agreement, dated as of September 1, 2017, between The Industrial Development Board of the City of Montgomery and
Promissory Note, dated August 31, 2018, issued by the Company to Regions Bank in connection with the revolving line of credit under the Business
KINPAK, Inc. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Loan Agreement (the “Promissory Note”) (incorporated by reference to Exhibit 10.1.2 to the Company’s Quarterly Report on Form 10-Q for the quarter
Commission on October 2, 2017).
ended September 30, 2018).
Mortgage, Security Agreement and Assignment of Rents and Leases, dated as of September 1, 2017, provided by The Industrial Development Board of
Letter, dated August 31, 2018, from Regions Bank to the Company, regarding certain terms under the Business Loan Agreement and the Promissory
the City of Montgomery and KINPAK, Inc. (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed with the
Note (incorporated by reference to Exhibit 10.1.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018).
Securities and Exchange Commission on October 2, 2017).
Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Guaranty Agreement, dated as of September 1, 2017, provided by Ocean Bio-Chem, Inc. and its consolidated subsidiaries party thereto (incorporated by
Form 10-Q, filed with the Securities and Exchange Commission on August 12, 2016).
reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 2, 2017).
Form of Industrial Development Revenue Bond (Kinpak Inc. Project) Series 2017 (incorporated by reference to Exhibit 99.1 to the Company’s Current
Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5 to the Company’s Registration
Report on Form 8-K, filed with the Securities and Exchange Commission on October 2, 2017).
Statement on Form S-8 (File No. 333-176268), filed with the Securities and Exchange Commission on August 12, 2011).
Second Restated Lease Agreement, dated as of September 1, 2017, between The Industrial Development Board of the City of Montgomery and
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
KINPAK, Inc. (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Report on Form 10-K for the year ended December 31, 2004).
Commission on October 2, 2017).
Renewal of Lease, dated May 1, 2008, between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to Exhibit 10.24 to the
Mortgage, Security Agreement and Assignment of Rents and Leases, dated as of September 1, 2017, provided by The Industrial Development Board of
Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
the City of Montgomery and KINPAK, Inc. (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed with the
Amendment Number Two to Net Lease, dated May 16, 2013, between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to
Securities and Exchange Commission on October 2, 2017).
Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013).
Guaranty Agreement, dated as of September 1, 2017, provided by Ocean Bio-Chem, Inc. and its consolidated subsidiaries party thereto (incorporated by
List of Subsidiaries
reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 2, 2017).
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
Ocean Bio-Chem, Inc. 2008 Non-Qualified Stock Option Plan, as amended (incorporated by reference to Exhibit 99.5 to the Company’s Registration
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
Statement on Form S-8 (File No. 333-176268), filed with the Securities and Exchange Commission on August 12, 2011).
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act and 18 U.S.C. Section 1350.
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
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act and 18 U.S.C. Section 1350.
Report on Form 10-K for the year ended December 31, 2004).
The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBLR
Renewal of Lease, dated May 1, 2008, between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to Exhibit 10.24 to the
(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2019 and December 31, 2018; (ii) Consolidated
Company’s Annual Report on Form 10-K for the year ended December 31, 2008).
Statements of Operations for the years ended December 31, 2019 and 2018; (iii) Consolidated Statements of Comprehensive Income for the years ended
Amendment Number Two to Net Lease, dated May 16, 2013, between Star Brite Distributing, Inc. and PEJE, Inc. (incorporated by reference to
December 31, 2019 and 2018; (iv) Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2019 and 2018, (v)
Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013).
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 and (vi) Notes to Consolidated Financial Statements.
List of Subsidiaries
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.
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act and 18 U.S.C. Section 1350.
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act and 18 U.S.C. Section 1350.
The following materials from Ocean Bio-Chem Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in XBLR
(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2019 and December 31, 2018; (ii) Consolidated
Statements of Operations for the years ended December 31, 2019 and 2018; (iii) Consolidated Statements of Comprehensive Income for the years ended
December 31, 2019 and 2018; (iv) Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2019 and 2018, (v)
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018 and (vi) Notes to Consolidated Financial Statements.
Filed herewith.
*21
*31.1
*
*31.2
† Constitutes management contract or compensatory plan or arrangement required to be filed as in exhibit to this report.
*32.1
*32.2
Item 16. Form 10-K Summary
101
3.1.2
10.1.3
3.2
†10.2
*4
10.3.1
10.1.1
10.3.2
10.1.2
10.3.3
10.1.3
†10.2
10.3.4
10.3.1
†10.4
10.3.2
10.5.1
10.5.2
10.3.3
10.5.3
10.3.4
*21
*31.1
†10.4
*31.2
*32.1
10.5.1
*32.2
101
10.5.2
10.5.3
Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has elected not to include a summary.
13
Filed herewith.
*
† Constitutes management contract or compensatory plan or arrangement required to be filed as in exhibit to this report.
Item 16. Form 10-K Summary
Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has elected not to include a summary.
13
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 16
03/27/2020 05:38 PM
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: March 27, 2020
OCEAN BIO-CHEM, INC.
By:
/s/ Peter G. Dornau
PETER G. DORNAU
Chairman of the Board, President and
Chief 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
/s/ Peter G. Dornau
Peter G. Dornau
/s/Jeffrey S. Barocas
Jeffrey S. Barocas
f10k2019_oceanbiochem.htm
Edgar Agents LLC
/s/ Diana M. Conard
Diana M. Conard
/s/ Gregor M. Dornau
Gregor M. Dornau
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Director
Director
SIGNATURES
Date
March 27, 2020
March 27, 2020
Page 16
03/27/2020 05:38 PM
March 27, 2020
March 27, 2020
/s/ William W. Dudman
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
William W. Dudman
undersigned, thereunto duly authorized.
March 27, 2020
Director
/s/ James M. Kolisch
James M. Kolisch
Date: March 27, 2020
/s/ Kimberly A. Krause
Kimberly A. Krause
Director
Director
OCEAN BIO-CHEM, INC.
March 27, 2020
By:
/s/ Peter G. Dornau
PETER G. DORNAU
Chairman of the Board, President and
Chief Executive Officer
March 27, 2020
/s/ John B. Turner
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
John B. Turner
capacities and on the dates indicated.
March 27, 2020
Director
/s/ Peter G. Dornau
Peter G. Dornau
/s/Jeffrey S. Barocas
Jeffrey S. Barocas
/s/ Diana M. Conard
Diana M. Conard
/s/ Gregor M. Dornau
Gregor M. Dornau
/s/ William W. Dudman
William W. Dudman
/s/ James M. Kolisch
James M. Kolisch
/s/ Kimberly A. Krause
Kimberly A. Krause
/s/ John B. Turner
John B. Turner
Signature
14
Capacity
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
14
Date
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
March 27, 2020
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 17
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of independent registered public accounting firm
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of comprehensive income
Consolidated statements of shareholders’ equity
Consolidated statements of cash flows
Notes to consolidated financial statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8 - F-18
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 17
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of independent registered public accounting firm
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of comprehensive income
Consolidated statements of shareholders’ equity
Consolidated statements of cash flows
Notes to consolidated financial statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8 - F-18
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 18
03/27/2020 05:38 PM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Ocean Bio-Chem, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ocean Bio-Chem, Inc. (the Company) as of December 31, 2019 and 2018, and the related
consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes and schedules
(collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flow for each of the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Basis for Opinion
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Form Type: 10-K
Page 18
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial
reporting, 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
such opinion.
To the Board of Directors and Shareholders of Ocean Bio-Chem, Inc.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
Opinion on the Financial Statements
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have audited the accompanying consolidated balance sheets of Ocean Bio-Chem, Inc. (the Company) as of December 31, 2019 and 2018, and the related
consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes and schedules
/s/ Accell Audit & Compliance, P.A.
(collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flow for each of the years then ended, in conformity with accounting
We have served as the Company’s auditor since 2018.
principles generally accepted in the United States of America.
Tampa, Florida
Basis for Opinion
March 27, 2020
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
4806 West Gandy Boulevard ● Tampa, Florida 33611 ● 813.440.6380
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial
F-2
reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Accell Audit & Compliance, P.A.
We have served as the Company’s auditor since 2018.
Tampa, Florida
March 27, 2020
4806 West Gandy Boulevard ● Tampa, Florida 33611 ● 813.440.6380
F-2
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 19
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2019 AND 2018
2019
2018
ASSETS
Current Assets:
Cash
Trade accounts receivable less allowances of approximately $162,000 and $171,000, respectively
Receivables due from affiliated companies
Insurance claim receivable
Restricted cash
Inventories, net
Prepaid expenses and other current assets
f10k2019_oceanbiochem.htm
Total Current Assets
Form Type: 10-K
Edgar Agents LLC
OCEAN BIO-CHEM, INC.
Property, plant and equipment, net
Operating lease – right to use
Intangible assets, net
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2019 AND 2018
Current portion of long-term debt, net
Current portion of operating lease liability
Accounts payable - trade
Accrued expenses payable
ASSETS
Current Assets:
Total Current Liabilities
Cash
Trade accounts receivable less allowances of approximately $162,000 and $171,000, respectively
Deferred tax liability
Receivables due from affiliated companies
Operating lease liability, less current portion
Insurance claim receivable
Long-term debt, less current portion and debt issuance costs
Restricted cash
Total Liabilities
Inventories, net
Prepaid expenses and other current assets
COMMITMENTS AND CONTINGENCIES
Shareholders’ Equity:
Property, plant and equipment, net
outstanding, respectively
Operating lease – right to use
Additional paid in capital
Intangible assets, net
Accumulated other comprehensive loss
Total Assets
Retained earnings
Total Current Assets
Common stock - $.01 par value, 12,000,000 shares authorized; 9,442,809 shares and 9,338,191 shares issued and
Total Shareholders’ Equity
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Total Liabilities and Shareholders’ Equity
Current portion of long-term debt, net
Current portion of operating lease liability
Accounts payable - trade
Accrued expenses payable
The accompanying notes are an integral part of these consolidated financial statements.
Total Current Liabilities
Deferred tax liability
Operating lease liability, less current portion
Long-term debt, less current portion and debt issuance costs
Total Liabilities
COMMITMENTS AND CONTINGENCIES
Shareholders’ Equity:
F-3
Common stock - $.01 par value, 12,000,000 shares authorized; 9,442,809 shares and 9,338,191 shares issued and
outstanding, respectively
Additional paid in capital
Accumulated other comprehensive loss
Retained earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
$
$
$
$
$
$
$
$
6,125,322
7,132,256
962,154
50,520
1,885,098
9,555,071
935,022
26,645,443
1,401,047
5,658,686
1,045,990
-
2,332,877
12,085,813
1,010,641
Page 19
23,535,054
03/27/2020 05:38 PM
$
$
$
$
$
$
9,338,227
352,190
1,949,947
38,285,807
2019
483,477
83,270
1,047,385
1,214,938
2,829,070
6,125,322
7,132,256
311,374
962,154
268,920
50,520
4,142,179
1,885,098
7,551,543
9,555,071
935,022
26,645,443
9,338,227
94,428
352,190
10,503,171
1,949,947
(294,491)
38,285,807
20,431,156
30,734,264
38,285,807
483,477
83,270
1,047,385
1,214,938
2,829,070
311,374
268,920
4,142,179
7,551,543
9,649,237
-
2,050,212
35,234,503
2018
425,663
-
1,472,230
1,108,905
3,006,798
1,401,047
5,658,686
280,349
1,045,990
-
-
4,514,105
2,332,877
7,801,252
12,085,813
1,010,641
23,535,054
9,649,237
93,382
-
10,235,827
2,050,212
(295,734)
35,234,503
17,399,776
27,433,251
35,234,503
425,663
-
1,472,230
1,108,905
3,006,798
280,349
-
4,514,105
7,801,252
94,428
10,503,171
(294,491)
20,431,156
30,734,264
93,382
10,235,827
(295,734)
17,399,776
27,433,251
$
38,285,807
$
35,234,503
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 20
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2019 AND 2018
2019
2018
$
42,259,487
$
41,799,545
26,659,427
27,402,356
15,600,060
14,397,189
Net sales
Cost of goods sold
Gross profit
Operating Expenses:
Advertising and promotion
Selling and administrative
Total operating expenses
Operating income
Other expense
Interest expense, net
Income before income taxes
Provision for income taxes
Net income
Earnings per common share – basic and diluted
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Dividends declared per common share
Form Type: 10-K
OCEAN BIO-CHEM, INC.
The accompanying notes are an integral part of these consolidated financial statements.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
F-4
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2019 AND 2018
Net sales
Cost of goods sold
Gross profit
Operating Expenses:
Advertising and promotion
Selling and administrative
Total operating expenses
Operating income
Other expense
Interest expense, net
Income before income taxes
Provision for income taxes
Net income
Earnings per common share – basic and diluted
Dividends declared per common share
The accompanying notes are an integral part of these consolidated financial statements.
F-4
3,147,289
7,839,411
10,986,700
3,050,858
7,638,158
10,689,016
4,613,360
3,708,173
(118,642)
(121,894)
4,494,718
3,586,279
(996,004)
(791,030)
3,498,714
0.37
$
$
2,795,249
0.30
Page 20
03/27/2020 05:38 PM
0.06
$
0.05
$
$
$
2019
2018
$
42,259,487
$
41,799,545
26,659,427
27,402,356
15,600,060
14,397,189
3,147,289
7,839,411
10,986,700
3,050,858
7,638,158
10,689,016
4,613,360
3,708,173
(118,642)
(121,894)
4,494,718
3,586,279
(996,004)
(791,030)
$
$
$
3,498,714
0.37
0.05
$
$
$
2,795,249
0.30
0.06
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 21
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2019 AND 2018
Net income
Foreign currency translation adjustment
Comprehensive income
The accompanying notes are an integral part of these consolidated financial statements.
F-5
2019
2018
$
$
3,498,714
$
2,795,249
1,243
(7,683)
3,499,957
$
2,787,566
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 21
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2019 AND 2018
Net income
Foreign currency translation adjustment
Comprehensive income
The accompanying notes are an integral part of these consolidated financial statements.
F-5
2019
2018
$
$
3,498,714
$
2,795,249
1,243
(7,683)
3,499,957
$
2,787,566
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 22
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2019 AND 2018
Common Stock
Shares
Amount
Additional
Paid In
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
9,254,580
$
92,546
$
9,931,634
$
(288,051) $
15,159,802
$
24,895,931
-
-
-
-
8,510
Form Type: 10-K
85
-
-
(85)
81,400
OCEAN BIO-CHEM, INC.
814
330,009
(6,299)
(63)
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2019 AND 2018
-
(25,731)
-
-
(7,683)
9,338,191
93,382
Common Stock
-
-
Shares
Amount
$
-
9,254,580
27,928
-
83,000
-
$
-
92,546
279
-
830
-
8,510
(6,310)
81,400
-
-
(6,299)
85
(63)
814
-
-
(63)
10,235,827
Additional
Paid In
Capital
-
-
9,931,634
13,520
-
274,710
-
(85)
(20,886)
330,009
-
(295,734)
Accumulated
Other
Comprehensive
-
Loss
-
$
(288,051) $
-
-
-
-
-
-
-
-
(25,731)
1,243
-
-
-
-
-
-
2,795,249
2,795,249
(555,275)
(555,275)
-
-
Page 22
03/27/2020 05:38 PM
-
330,823
-
-
(25,794)
(7,683)
17,399,776
27,433,251
3,498,714
Retained
Earnings
(468,306)
15,159,802
-
2,795,249
$
(555,275)
-
-
-
972
-
-
3,498,714
Total
(468,306)
24,895,931
13,799
2,795,249
275,540
(555,275)
-
(20,949)
330,823
972
1,243
(25,794)
January 1, 2018
Net income
Dividends, common stock
Options exercised
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Stock based compensation
Shares withheld in consideration of employee
tax obligations related to stock-based
compensation
Foreign currency
translation adjustment
December 31, 2018
Net income
Dividends, common stock
January 1, 2018
Options exercised
Net income
Stock based compensation
Dividends, common stock
Shares withheld in consideration of employee
tax obligations related to stock-based
Options exercised
compensation
Stock based compensation
Cumulative effect adjustment on adoption of
ASU 2016-02 Leases (Topic 842)
Shares withheld in consideration of employee
tax obligations related to stock-based
Foreign currency translation adjustment
compensation
Foreign currency
December 31, 2019
translation adjustment
The accompanying notes are an integral part of these consolidated financial statements.
December 31, 2018
9,442,809
-
94,428
-
9,338,191
93,382
$
$
10,503,171
-
$
(294,491) $
(7,683)
20,431,156
-
$
30,734,264
(7,683)
10,235,827
(295,734)
17,399,776
27,433,251
Net income
Dividends, common stock
Options exercised
Stock based compensation
Shares withheld in consideration of employee
tax obligations related to stock-based
compensation
Cumulative effect adjustment on adoption of
ASU 2016-02 Leases (Topic 842)
Foreign currency translation adjustment
-
-
27,928
83,000
-
F-6
-
279
830
-
-
13,520
274,710
(6,310)
(63)
(20,886)
-
-
-
-
-
-
-
-
-
-
-
1,243
3,498,714
3,498,714
(468,306)
(468,306)
-
-
972
-
13,799
275,540
(20,949)
972
1,243
December 31, 2019
9,442,809
$
94,428
$
10,503,171
$
(294,491) $
20,431,156
$
30,734,264
The accompanying notes are an integral part of these consolidated financial statements.
F-6
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 23
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2019 AND 2018
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2019
2018
$
3,498,714
$
2,795,249
Depreciation and amortization
Deferred income taxes
Stock based compensation
Provision for bad debts
Provision for slow moving and obsolete inventory
Other operating non-cash items
Changes in assets and liabilities:
Trade accounts receivable
Receivables due from affiliated companies
Inventories
Prepaid expenses and other current assets
Accounts payable – trade
Accrued expenses payable
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Purchase of intangible assets
Net cash used in investing activities
Cash flows from financing activities:
Payments on long-term debt
Borrowings on revolving line of credit
Repayments on revolving line of credit
Payments for taxes related to net share settlements of stock awards
Dividends paid to common shareholders
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of exchange rate on cash
Net increase (decrease) in cash and restricted cash
Cash and restricted cash at beginning of period
Cash and restricted cash at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest during period
Cash paid for income taxes during period
Operating lease right to use asset exchanged for operating lease liability
Finance lease right to use assets exchanged for finance lease liabilities
Cash paid under operating lease
Cash
Restricted cash
Total cash and restricted cash
Noncash investing and financing activities:
Issuance of note payable for asset acquisition
Imputed interest
Principal portion of note payable issued for asset acquisition
The accompanying notes are an integral part of these consolidated financial statements.
F-7
1,289,531
31,025
275,540
6,134
(39,903)
(897)
(1,479,704)
83,836
2,570,645
75,619
(424,845)
106,033
5,991,728
1,175,267
126,454
330,823
35,145
9,814
(6,436)
(729,936)
538,375
(3,021,201)
2,572
(334,890)
296,843
1,218,079
(718,474)
(75,000)
(793,474)
(1,358,776)
(376,722)
(1,735,498)
(448,442)
1,000,000
(1,000,000)
(20,949)
(468,306)
13,799
(923,898)
(332,185)
2,750,000
(2,750,000)
(25,794)
(555,275)
-
(913,254)
2,140
(1,247)
4,276,496
(1,431,920)
3,733,924
8,010,420
156,623
778,009
432,466
44,979
94,800
6,125,322
1,885,098
8,010,420
100,000
(2,988)
97,012
$
$
$
$
$
$
$
$
$
$
5,165,844
3,733,924
136,031
660,000
-
-
94,800
1,401,047
2,332,877
3,733,924
1,000,000
(69,472)
930,528
$
$
$
$
$
$
$
$
$
$
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 24
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2019 AND 2018
Note 1 – Organization and Summary of Significant Accounting Policies:
f10k2019_oceanbiochem.htm
Form Type: 10-K
Page 24
Organization – The Company was incorporated in November 1973 under the laws of the state of Florida and manufacturers, markets and distributes products,
Edgar Agents LLC
principally under the Star brite® and Star Tron® brand names, for the marine, automotive, power sports, recreational vehicle and outdoor power equipment markets in
the United States and Canada. In addition, the Company produces private label formulations of many of its products for various customers and provides custom
blending and packaging services for these and other products. The Company also manufactures disinfectants, sanitizers and deodorizers under the Performacide® and
Star brite® brand names.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
Basis of presentation and consolidation – The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United States of America (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
YEARS ENDED DECEMBER 31, 2019 AND 2018
inter-company accounts and transactions have been eliminated in consolidation. Certain prior period data have been reclassified to conform to the current period
presentation.
Note 1 – Organization and Summary of Significant Accounting Policies:
Revenue recognition – On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic
Organization – The Company was incorporated in November 1973 under the laws of the state of Florida and manufacturers, markets and distributes products,
606). Under ASU 2014-09, revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines that the
principally under the Star brite® and Star Tron® brand names, for the marine, automotive, power sports, recreational vehicle and outdoor power equipment markets in
customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled
the United States and Canada. In addition, the Company produces private label formulations of many of its products for various customers and provides custom
to in exchange for the promised goods or services .Under ASU 2014-09, the Company’s performance obligation to its customers under agreements currently in force is
blending and packaging services for these and other products. The Company also manufactures disinfectants, sanitizers and deodorizers under the Performacide® and
satisfied when the goods are shipped or picked up by the customer and title of the goods is transferred (generally upon such shipment or pick up); with regard to a
Star brite® brand names.
customer for which the Company’s inventory is held at the customer’s warehouses, the Company’s performance obligation is deemed satisfied when the Company is
notified of sales by the customer. Sales allowances provided by the Company to customers are recorded as a reduction of net sales.
Basis of presentation and consolidation – The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
Leases - On January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842). Under this new guidance, lessees (including lessees under leases classified
inter-company accounts and transactions have been eliminated in consolidation. Certain prior period data have been reclassified to conform to the current period
as finance leases, which are to be classified based on criteria similar to that applicable to capital leases under the previous guidance, and leases classified as operating
presentation.
leases) recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under previous
guidance, operating leases were not recognized on the balance sheet. The Company adopted ASU 2016-02 utilizing a modified retrospective method, under which the
Revenue recognition – On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic
Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting prior periods. As a result, the Company’s balance
606). Under ASU 2014-09, revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines that the
sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption of ASU 2016-02 resulted in the recognition of
customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled
approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the reclassification of office equipment with a net
to in exchange for the promised goods or services .Under ASU 2014-09, the Company’s performance obligation to its customers under agreements currently in force is
book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
satisfied when the goods are shipped or picked up by the customer and title of the goods is transferred (generally upon such shipment or pick up); with regard to a
customer for which the Company’s inventory is held at the customer’s warehouses, the Company’s performance obligation is deemed satisfied when the Company is
As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term
notified of sales by the customer. Sales allowances provided by the Company to customers are recorded as a reduction of net sales.
leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise);
instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. The Company did not have any short- term
Leases - On January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842). Under this new guidance, lessees (including lessees under leases classified
leases at December 31, 2019.
as finance leases, which are to be classified based on criteria similar to that applicable to capital leases under the previous guidance, and leases classified as operating
leases) recognize a right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under previous
Collectability of accounts receivable – Trade accounts receivable at December 31, 2019 and 2018 are net of allowances for doubtful accounts aggregating
guidance, operating leases were not recognized on the balance sheet. The Company adopted ASU 2016-02 utilizing a modified retrospective method, under which the
approximately $162,000 and $171,000, respectively. Such amounts are based on expected collectability of the trade accounts receivable, after considering the
Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting prior periods. As a result, the Company’s balance
Company’s historical collection experience, the length of time an account is outstanding, the financial position of the customer, if known, and information provided by
sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption of ASU 2016-02 resulted in the recognition of
credit rating services. During the years ended December 31, 2019 and 2018, the Company recorded bad debt expense of approximately $6,000 and $35,000,
approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the reclassification of office equipment with a net
respectively.
book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
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 net
As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term
realizable value.
leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise);
instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. The Company did not have any short- term
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.
leases at December 31, 2019.
Shipping and handling costs totaled approximately $1,148,000 and $1,273,000 for the years ended December 31, 2019 and 2018, respectively.
Collectability of accounts receivable – Trade accounts receivable at December 31, 2019 and 2018 are net of allowances for doubtful accounts aggregating
Advertising and promotion expense – Advertising and promotion expense consists of advertising costs and marketing expenses, including catalog costs and expenses
approximately $162,000 and $171,000, respectively. Such amounts are based on expected collectability of the trade accounts receivable, after considering the
relating to participation at trade shows. Advertising costs are expensed in the period in which the advertising occurs and totaled approximately $3,147,000 and
Company’s historical collection experience, the length of time an account is outstanding, the financial position of the customer, if known, and information provided by
$3,051,000 in 2019 and 2018, respectively.
credit rating services. During the years ended December 31, 2019 and 2018, the Company recorded bad debt expense of approximately $6,000 and $35,000,
respectively.
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. Depreciation expense totaled $1,015,998 (of which $909,411 is included in cost of goods sold and $106,587 is included in
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 net
selling and administrative expenses) and $1,001,206 (of which $837,478 is included in cost of goods sold and $163,728 is included in selling and administrative
realizable value.
expenses) for the years ended December 31, 2019 and 2018, respectively.
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 $1,148,000 and $1,273,000 for the years ended December 31, 2019 and 2018, respectively.
F-8
Advertising and promotion expense – Advertising and promotion expense consists of advertising costs and marketing expenses, including catalog costs and expenses
relating to participation at trade shows. Advertising costs are expensed in the period in which the advertising occurs and totaled approximately $3,147,000 and
$3,051,000 in 2019 and 2018, respectively.
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. Depreciation expense totaled $1,015,998 (of which $909,411 is included in cost of goods sold and $106,587 is included in
selling and administrative expenses) and $1,001,206 (of which $837,478 is included in cost of goods sold and $163,728 is included in selling and administrative
expenses) for the years ended December 31, 2019 and 2018, respectively.
F-8
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 25
03/27/2020 05:38 PM
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 $59,000 and $49,000 of research and development costs for the years ended December 31, 2019 and
2018, respectively.
Stock based compensation – The Company records stock-based compensation in accordance with the provisions of Financial Accounting Standards Board (“FASB”)
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. In accordance with guidance provided under ASC Topic 718, the Company recognizes an expense for the
fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of December
31, 2019, all outstanding stock options were vested.
f10k2019_oceanbiochem.htm
Form Type: 10-K
Page 25
Edgar Agents LLC
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Use of estimates – The preparation of financial statements in conformity with GAAP 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 cash – During the years ended and at December 31, 2019 and 2018, the Company had a concentration of cash in one bank in excess of prevailing
Research and development costs – Research and development costs are expensed as incurred and recorded in selling and administrative expenses in the consolidated
insurance offered through the Federal Deposit Insurance Corporation at such institution. Management does not consider the excess deposits to be a significant risk.
statements of operations. The Company incurred approximately $59,000 and $49,000 of research and development costs for the years ended December 31, 2019 and
2018, respectively.
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
Stock based compensation – The Company records stock-based compensation in accordance with the provisions of Financial Accounting Standards Board (“FASB”)
on the measurement date.
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. In accordance with guidance provided under ASC Topic 718, the Company recognizes an expense for the
ASC Topic 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
fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of December
value. The hierarchy prioritizes the three levels of inputs as follows:
31, 2019, all outstanding stock options were vested.
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Use of estimates – The preparation of financial statements in conformity with GAAP 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
Level 2: Inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets
expenses during the reporting period. Actual results could differ from those estimates.
that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by
observable market data through correlation or other means.
Concentration of cash – During the years ended and at December 31, 2019 and 2018, 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.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed data in connection with fair value measurements.
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
The carrying amounts of the Company’s short-term financial instruments, including cash, accounts receivable, accounts payable, certain accrued expenses and
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
revolving line of credit, 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
on the measurement date.
current rates at which the Company could borrow funds with similar remaining maturities; the carrying amount of the long-term debt approximates fair value.
ASC Topic 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
Impairment of long-lived assets – Potential impairments of long-lived assets are reviewed when events or changes in circumstances indicate a potential impairment
value. The hierarchy prioritizes the three levels of inputs as follows:
may exist. 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.
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Income taxes – The Company records income taxes under the asset and liability method. Under this method, the Company recognizes deferred income tax assets and
Level 2: Inputs that include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets
liabilities for the expected future consequences attributable to temporary differences between the financial reporting and tax bases of assets and liabilities. These
that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by
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. The
observable market data through correlation or other means.
Company recognizes in the consolidated statements of operations the effect on deferred income taxes of a change in tax rates in the period in which the change is
enacted.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed data in connection with fair value measurements.
The Company records a valuation allowance when necessary to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be
The carrying amounts of the Company’s short-term financial instruments, including cash, accounts receivable, accounts payable, certain accrued expenses and
realized. The Company considers available evidence, both positive and negative, and use judgments regarding past and future events, including operating results and
revolving line of credit, 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
available tax planning strategies, in assessing the need for a valuation allowance.
current rates at which the Company could borrow funds with similar remaining maturities; the carrying amount of the long-term debt approximates fair value.
The Company recognizes tax benefits from uncertain tax positions only if the Company believes that it is more likely than not that the tax positions will be sustained
Impairment of long-lived assets – Potential impairments of long-lived assets are reviewed when events or changes in circumstances indicate a potential impairment
on examination by the taxing authorities based on the technical merits of the positions; otherwise, the Company establishes reserves for uncertain tax positions. The
may exist. In accordance with ASC Subtopic 360-10, “Property, Plant and Equipment – Overall,” impairment is determined when estimated future undiscounted cash
Company adjusts 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
flows associated with an asset are less than the asset’s carrying value.
a statute of limitations or the refinement of an estimate. The provision for income taxes includes any reserves with respect to uncertain tax positions that are considered
appropriate, as well as the related net interest and penalties. The Company has no uncertain tax positions as of December 31, 2019.
Income taxes – The Company records income taxes under the asset and liability method. Under this method, the Company recognizes deferred income tax assets and
liabilities for the expected future consequences attributable to temporary differences between the financial reporting and tax bases of assets and liabilities. These
The Company is no longer subject to income tax examinations for years before 2016.
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. The
Company recognizes in the consolidated statements of operations the effect on deferred income taxes of a change in tax rates in the period in which the change is
enacted.
F-9
The Company records a valuation allowance when necessary to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be
realized. The Company considers available evidence, both positive and negative, and use judgments regarding past and future events, including operating results and
available tax planning strategies, in assessing the need for a valuation allowance.
The Company recognizes tax benefits from uncertain tax positions only if the Company believes 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; otherwise, the Company establishes reserves for uncertain tax positions. The
Company adjusts 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 any reserves with respect to uncertain tax positions that are considered
appropriate, as well as the related net interest and penalties. The Company has no uncertain tax positions as of December 31, 2019.
The Company is no longer subject to income tax examinations for years before 2016.
F-9
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 26
03/27/2020 05:38 PM
f10k2019_oceanbiochem.htm
Intangible assets – The Company’s intangible assets consist of trademarks, trade names, customer lists, product formulas, patents and royalty rights. At December 31,
2019, The Company had intangible assets with a cost of approximately $3,375,000, of which approximately $2,793,000 have finite lives and approximately $582,000
Page 26
have indefinite lives. The Company amortizes intangible assets with finite lives over the shorter of their estimated useful or legal life. The useful life is reevaluated for
OCEAN BIO-CHEM, INC.
each reporting period. The Company evaluates intangible assets with finite and indefinite lives for impairment at least annually or when events or changes in
circumstances indicate that an impairment may exist. The Company determined that none of its intangible assets were impaired in 2019 or 2018.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Foreign currency translation – Assets and liabilities of the Company’s Canadian subsidiary are translated from Canadian dollars to United States dollars at exchange
rates in effect at the balance sheet date. Income and expenses are translated at average exchange rates during the year. The translation adjustments for the reporting
period are included in the Company’s consolidated statements of comprehensive income, and the cumulative effect of these adjustments are reported in the Company’s
Intangible assets – The Company’s intangible assets consist of trademarks, trade names, customer lists, product formulas, patents and royalty rights. At December 31,
consolidated balance sheets as accumulated other comprehensive loss within Shareholders’ Equity.
2019, The Company had intangible assets with a cost of approximately $3,375,000, of which approximately $2,793,000 have finite lives and approximately $582,000
have indefinite lives. The Company amortizes intangible assets with finite lives over the shorter of their estimated useful or legal life. The useful life is reevaluated for
Earnings per share – Basic earnings per share are computed by dividing net earnings available to common shareholders by the weighted average number of common
each reporting period. The Company evaluates intangible assets with finite and indefinite lives for impairment at least annually or when events or changes in
shares outstanding during the period. Diluted earnings per share are computed assuming the exercise of dilutive stock options under the treasury stock method. See
circumstances indicate that an impairment may exist. The Company determined that none of its intangible assets were impaired in 2019 or 2018.
Note 13.
Foreign currency translation – Assets and liabilities of the Company’s Canadian subsidiary are translated from Canadian dollars to United States dollars at exchange
Note 2 – Inventories:
rates in effect at the balance sheet date. Income and expenses are translated at average exchange rates during the year. The translation adjustments for the reporting
period are included in the Company’s consolidated statements of comprehensive income, and the cumulative effect of these adjustments are reported in the Company’s
The composition of the Company’s inventories at December 31, 2019 and 2018 are as follows:
consolidated balance sheets as accumulated other comprehensive loss within Shareholders’ Equity.
Earnings per share – 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. See
Raw materials
Note 13.
Finished goods
Inventories, gross
Note 2 – Inventories:
Inventory reserves
The composition of the Company’s inventories at December 31, 2019 and 2018 are as follows:
2019
3,872,752 $
5,926,525
9,799,277
2018
4,320,131
8,049,791
12,369,922
(244,206)
(284,109)
$
Inventories, net
$
Raw materials
The inventory reserves shown in the table above reflect slow moving and obsolete inventory.
Finished goods
Inventories, gross
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
Inventory reserves
warehouses, which are included in inventories, net, amounted to approximately $562,000 and $495,000 at December 31, 2019 and 2018, respectively.
(244,206)
(284,109)
$
9,555,071 $
2019
3,872,752 $
5,926,525
9,799,277
12,085,813
2018
4,320,131
8,049,791
12,369,922
Inventories, net
Note 3 – Property, Plant and Equipment:
$
9,555,071 $
12,085,813
The Company’s property, plant and equipment at December 31, 2019 and 2018 consisted of the following:
The inventory reserves shown in the table above reflect slow moving and obsolete inventory.
$
2018
2019
Estimated
Useful Life
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, which are included in inventories, net, amounted to approximately $562,000 and $495,000 at December 31, 2019 and 2018, respectively.
Land
$
Note 3 – Property, Plant and Equipment:
Building and Improvements
Manufacturing and warehouse equipment
The Company’s property, plant and equipment at December 31, 2019 and 2018 consisted of the following:
Office equipment and furniture
Leasehold improvements
Finance leases – right to use
Vehicles
Construction in process
Land
Property, plant and equipment, gross
Building and Improvements
Manufacturing and warehouse equipment
Less accumulated depreciation
Office equipment and furniture
Leasehold improvements
Property, plant and equipment, net
Finance leases – right to use
Vehicles
The Company’s wholly-owned subsidiary, KINPAK Inc. (“Kinpak”), has been engaged since 2017 in a project involving the expansion of its manufacturing,
Construction in process
warehouse and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion
Property, plant and equipment, gross
Project”). Kinpak has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank
farm to accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of
Less accumulated depreciation
additional equipment. At December 31, 2019, Kinpak has spent an aggregate of approximately $6,117,000 on the Expansion Project. Of that amount, approximately
$2,654,000 was provided through a $4,500,000 industrial development bond financing, which is described in Note 8.
Property, plant and equipment, net
278,325
9,563,406
10,699,461
1,778,781
577,068
45,951
10,020
142,612
278,325
23,095,624
9,563,406
10,699,461
(13,757,397)
1,778,781
577,068
9,338,227
45,951
10,020
142,612
23,095,624
278,325
9,548,922
10,736,161
1,838,360
577,068
-
10,020
80,682
278,325
23,069,538
9,548,922
10,736,161
(13,420,301)
1,838,360
577,068
9,649,237
-
10,020
80,682
23,069,538
30 years
6-20 years
3-5 years
10-15 years
Estimated
5 years
Useful Life
3 years
30 years
6-20 years
3-5 years
10-15 years
5 years
3 years
(13,757,397)
(13,420,301)
2019
2018
$
$
$
$
$
9,338,227
$
9,649,237
F-10
The Company’s wholly-owned subsidiary, KINPAK Inc. (“Kinpak”), has been engaged since 2017 in a project involving the expansion of its manufacturing,
warehouse and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion
Project”). Kinpak has completed the construction of, and placed into service, an approximately 85,000 square foot addition to the facilities and an expansion of a tank
farm to accommodate an additional 500,000 gallons of tank capacity. The final phase of the Expansion Project entails the evaluation, purchase and installation of
additional equipment. At December 31, 2019, Kinpak has spent an aggregate of approximately $6,117,000 on the Expansion Project. Of that amount, approximately
$2,654,000 was provided through a $4,500,000 industrial development bond financing, which is described in Note 8.
F-10
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 27
03/27/2020 05:38 PM
On December 9, 2019, there was a chemical incident at our Kinpak facility.
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019. The Company is still
assessing the total property damage from the chemical incident. At the time of this report the Company is unable to make an estimate of the total loss; however the
Company expects to recover any losses through property insurance, which covers replacement cost.
Note 4 – Leases:
The Company has one operating lease and two finance leases.
f10k2019_oceanbiochem.htm
Under the operating lease, the Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by Peter G. Dornau,
the Company’s Chairman, President and Chief Executive Officer. The lease, as extended, expires on December 31, 2023. The lease requires an annual minimum base
rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the minimum base rent since the Company
entered into a previous 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. Operating lease expense
in 2019 was approximately $100,000, compared to rent expense of approximately $97,000 in 2018. At December 31, 2019, the Company has a right to use asset and a
corresponding liability of $352,190 related to the operating lease. Set forth below is a schedule of future minimum rent payments under the operating lease.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 27
Years ending December 31,
On December 9, 2019, there was a chemical incident at our Kinpak facility.
94,800
94,800
The chemical incident damaged some of Kinpak’s manufacturing equipment. At December 31, 2019, it was determined that manufacturing equipment with a book
94,800
value of $50,520 was no longer useable. The Company recorded a loss for the $50,520 and an offsetting gain and receivable of $50,520 in 2019. The Company is still
94,800
assessing the total property damage from the chemical incident. At the time of this report the Company is unable to make an estimate of the total loss; however the
379,200
Company expects to recover any losses through property insurance, which covers replacement cost.
(27,010)
352,190
2020
2021
2022
2023
Total future minimum lease payments
Less imputed interest
Total operating lease liability
$
$
Note 4 – Leases:
The Company has one operating lease and two finance leases.
The Company’s two finance leases relate to office equipment. See Note 3 for information regarding the Company’s finance lease right to use assets and Note 8 for
information regarding the finance lease payment schedule.
Under the operating lease, the Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by Peter G. Dornau,
the Company’s Chairman, President and Chief Executive Officer. The lease, as extended, expires on December 31, 2023. The lease requires an annual minimum base
Costs incurred with respect to the Company’s leases during 2019 are set forth below.
rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the minimum base rent since the Company
entered into a previous 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. Operating lease expense
in 2019 was approximately $100,000, compared to rent expense of approximately $97,000 in 2018. At December 31, 2019, the Company has a right to use asset and a
corresponding liability of $352,190 related to the operating lease. Set forth below is a schedule of future minimum rent payments under the operating lease.
Operating lease expense
Finance lease amortization
Years ending December 31,
Finance lease interest
Total lease expense
Year Ended
December 31,
2019
$
$
$
The remaining lease term with respect to the operating lease, weighted average remaining lease term with respect to the finance leases and discount rate with respect to
the operating lease and finance leases at December 31, 2019 are set forth below:
2020
2021
2022
2023
Total future minimum lease payments
Less imputed interest
Total operating lease liability
Remaining lease term – operating lease
The Company’s two finance leases relate to office equipment. See Note 3 for information regarding the Company’s finance lease right to use assets and Note 8 for
Weighted average remaining lease term – finance leases
information regarding the finance lease payment schedule.
3.7%
Discount rate – operating lease
Weighted average discount rate – finance leases
3.0%
Costs incurred with respect to the Company’s leases during 2019 are set forth below.
Operating lease expense
Finance lease amortization
Finance lease interest
Total lease expense
F-11
Year Ended
December 31,
2019
$
$
100,000
22,756
945
123,701
The remaining lease term with respect to the operating lease, weighted average remaining lease term with respect to the finance leases and discount rate with respect to
the operating lease and finance leases at December 31, 2019 are set forth below:
Remaining lease term – operating lease
Weighted average remaining lease term – finance leases
Discount rate – operating lease
Weighted average discount rate – finance leases
F-11
December 31,
2019
4.0 years
2.6 years
3.7%
3.0%
100,000
22,756
945
94,800
123,701
94,800
94,800
94,800
379,200
(27,010)
December 31,
352,190
2019
4.0 years
2.6 years
$
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 28
03/27/2020 05:38 PM
Note 5 – Intangible Assets:
The Company’s intangible assets at December 31, 2019 and 2018 consisted of the following:
December 31, 2019
Intangible Assets
Patents
Trade names and trademarks
Customer list
Product formulas
Royalty rights
Total intangible assets
f10k2019_oceanbiochem.htm
Edgar Agents LLC
December 31, 2018
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Intangible Assets
Patents
Note 5 – Intangible Assets:
Trade names and trademarks
Customer list
The Company’s intangible assets at December 31, 2019 and 2018 consisted of the following:
Product formulas
Royalty rights
December 31, 2019
Total intangible assets
Cost
622,733
1,715,325
584,468
292,234
160,000
3,374,760
$
$
Cost
622,733
1,649,880
525,663
262,832
160,000
3,221,108
$
$
Accumulated
Amortization
$
Net
492,308 $
587,387
153,319
76,659
115,140
1,424,813 $
130,425
1,127,938
431,149
215,575
44,860
Page 28
1,949,947
03/27/2020 05:38 PM
$
Accumulated
Amortization
$
439,972
561,449
48,186
24,093
97,196
1,170,896
Accumulated
Amortization
$
$
Net
182,761
1,088,431
477,477
238,739
62,804
2,050,212
$
$
Intangible Assets
On December 27, 2019, the Company acquired intangible assets of Check Corporation, a manufacturer and distributer of mildew and humidity control products.
Patents
Trade names and trademarks
The allocated cost of the intangible assets acquired from Check Corporation and their respective useful lives are set forth in the table below:
Customer list
Product formulas
Intangible Assets
Royalty rights
Trademarks and trade names
Total intangible assets
Customer list
Product formulas
December 31, 2018
Total intangible assets acquired from Check Corporation
492,308 $
587,387
153,319
76,659
115,140
65,445
1,424,813 $
58,805
29,402
153,652
622,733
1,715,325
584,468
292,234
160,000
3,374,760
130,425
1,127,938
431,149
215,575
Life
44,860
5 years
1,949,947
5 years
5 years
Amount
Cost
Net
$
$
$
$
$
On July 13, 2018, the Company acquired assets of Snappy Marine, a corporation that marketed and distributed Snappy Teak – NU®, a cleaning product for teak
Intangible Assets
surfaces on boats principally consisting of intangible assets.
Patents
Trade names and trademarks
The allocated cost of the intangible assets acquired from Snappy Marine and their respective useful lives are set forth in the table below:
Customer list
Product formulas
Intangible Assets
Royalty rights
Trademarks and trade names
Total intangible assets
Customer list
Product formulas
On December 27, 2019, the Company acquired intangible assets of Check Corporation, a manufacturer and distributer of mildew and humidity control products.
Total intangible assets acquired from Snappy Marine
439,972
561,449
48,186
24,093
Amount
97,196
518,755
1,170,896
525,663
262,832
1,307,250
182,761
1,088,431
477,477
238,739
Life
62,804
20 years
2,050,212
5 years
5 years
622,733
1,649,880
525,663
262,832
160,000
3,221,108
Cost
Net
$
$
$
$
$
$
$
Accumulated
Amortization
$
The allocated cost of the intangible assets acquired from Check Corporation and their respective useful lives are set forth in the table below:
Amortization expense related to intangible assets aggregated $253,917 and $154,446 for the years ended December 31, 2019 and 2018, respectively.
Intangible Assets
Trademarks and trade names
Customer list
Product formulas
Total intangible assets acquired from Check Corporation
F-12
Amount
65,445
58,805
29,402
153,652
$
$
Life
5 years
5 years
5 years
On July 13, 2018, the Company acquired assets of Snappy Marine, a corporation that marketed and distributed Snappy Teak – NU®, a cleaning product for teak
surfaces on boats principally consisting of intangible assets.
The allocated cost of the intangible assets acquired from Snappy Marine and their respective useful lives are set forth in the table below:
Intangible Assets
Trademarks and trade names
Customer list
Product formulas
Total intangible assets acquired from Snappy Marine
Amount
518,755
525,663
262,832
1,307,250
$
$
Life
20 years
5 years
5 years
Amortization expense related to intangible assets aggregated $253,917 and $154,446 for the years ended December 31, 2019 and 2018, respectively.
F-12
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 29
03/27/2020 05:38 PM
Note 6 – Revolving Line of Credit:
f10k2019_oceanbiochem.htm
On August 31, 2018, the Company and Regions Bank entered into a Business Loan Agreement (the “Business Loan Agreement”), under which the Company was
provided a revolving line of credit. Under the revolving line of credit, the Company may borrow up to the lesser of (i) $6,000,000 or (ii) a borrowing base equal to 85%
of Eligible Accounts (as defined in the Business Loan Agreement) plus 50% of Eligible Inventory (as defined in the Business Loan Agreement). Interest on amounts
borrowed under the revolving line of credit is payable monthly at the one-month LIBOR rate plus 1.35% per annum, computed on a 365/360 basis. Eligible Accounts
do not include, among other things, accounts receivable from affiliated entities.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 29
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
until expiration of the revolving line of credit on August 31, 2021, at which time all outstanding principal and interest will be due and payable. The Company’s
obligations under the revolving line of credit are principally secured by the Company’s accounts receivable and inventory. The Business Loan Agreement includes
Note 6 – Revolving Line of Credit:
financial covenants requiring that the Company maintain a minimum fixed charge coverage ratio (generally, the ratio of (A) EBITDA for the most recently completed
four fiscal quarters minus the sum of the Company’s distributions to its shareholders, taxes paid and unfunded capital expenditures during such period to (B) prior year
On August 31, 2018, the Company and Regions Bank entered into a Business Loan Agreement (the “Business Loan Agreement”), under which the Company was
current maturities of Company long term debt plus interest expense incurred over the most recently completed four fiscal quarters) of 1.20 to 1, tested quarterly, and a
provided a revolving line of credit. Under the revolving line of credit, the Company may borrow up to the lesser of (i) $6,000,000 or (ii) a borrowing base equal to 85%
maximum “debt to cap” ratio (generally, funded debt divided by the sum of net worth and funded debt) of 0.75 to 1, as of the end of each fiscal quarter. For purposes of
of Eligible Accounts (as defined in the Business Loan Agreement) plus 50% of Eligible Inventory (as defined in the Business Loan Agreement). Interest on amounts
computing the fixed charge coverage ratio, “EBITDA” generally is defined as net income before taxes and depreciation expense plus amortization expense, plus
borrowed under the revolving line of credit is payable monthly at the one-month LIBOR rate plus 1.35% per annum, computed on a 365/360 basis. Eligible Accounts
interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income; “unfunded capital expenditures”
do not include, among other things, accounts receivable from affiliated entities.
generally is defined as capital expenditures made from Company funds other than funds borrowed through term debt incurred to finance such capital expenditures;
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
“long term debt” generally is defined as “debt instruments with a maturity principal due date of one year or more in length,” including, among other listed contractual
until expiration of the revolving line of credit on August 31, 2021, at which time all outstanding principal and interest will be due and payable. The Company’s
debt instruments, “revolving lines of credit” and “capital leases obligations” and “prior year current maturities of long term debt” generally is defined as the principal
obligations under the revolving line of credit are principally secured by the Company’s accounts receivable and inventory. The Business Loan Agreement includes
portions of long-term debt maturing within one year as listed at the last quarter end of the prior completed four fiscal quarters. At December 31, 2019, the Company
financial covenants requiring that the Company maintain a minimum fixed charge coverage ratio (generally, the ratio of (A) EBITDA for the most recently completed
was in compliance with these financial covenants. The revolving line of credit is subject to several events of default, including a decline in the majority shareholder’s
four fiscal quarters minus the sum of the Company’s distributions to its shareholders, taxes paid and unfunded capital expenditures during such period to (B) prior year
ownership below 50% of all outstanding shares.
current maturities of Company long term debt plus interest expense incurred over the most recently completed four fiscal quarters) of 1.20 to 1, tested quarterly, and a
At December 31, 2019 and 2018, the Company had no borrowings under the revolving line of credit provided by the Business Loan Agreement.
maximum “debt to cap” ratio (generally, funded debt divided by the sum of net worth and funded debt) of 0.75 to 1, as of the end of each fiscal quarter. For purposes of
computing the fixed charge coverage ratio, “EBITDA” generally is defined as net income before taxes and depreciation expense plus amortization expense, plus
Note 7 – Accrued Expenses Payable:
interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income; “unfunded capital expenditures”
generally is defined as capital expenditures made from Company funds other than funds borrowed through term debt incurred to finance such capital expenditures;
Accrued expenses payable at December 31, 2019 and 2018 consisted of the following:
“long term debt” generally is defined as “debt instruments with a maturity principal due date of one year or more in length,” including, among other listed contractual
debt instruments, “revolving lines of credit” and “capital leases obligations” and “prior year current maturities of long term debt” generally is defined as the principal
portions of long-term debt maturing within one year as listed at the last quarter end of the prior completed four fiscal quarters. At December 31, 2019, the Company
was in compliance with these financial covenants. The revolving line of credit is subject to several events of default, including a decline in the majority shareholder’s
Accrued customer promotions
ownership below 50% of all outstanding shares.
Accrued payroll, commissions, and benefits
Other
At December 31, 2019 and 2018, the Company had no borrowings under the revolving line of credit provided by the Business Loan Agreement.
530,957 $
417,629
266,352
485,472
373,895
249,538
2019
2018
$
Note 7 – Accrued Expenses Payable:
Total accrued expenses payable
Accrued expenses payable at December 31, 2019 and 2018 consisted of the following:
Note 8 – Long Term Debt:
Industrial Development Bond Financing
$
1,214,938 $
1,108,905
2019
2018
Accrued customer promotions
On September 26, 2017, Kinpak indirectly obtained a $4,500,000 loan from Regions Capital Advantage, Inc. (the “Lender”). The proceeds of the loan are being used
Accrued payroll, commissions, and benefits
principally to pay or reimburse costs relating to the Expansion Project.
Other
The loan was funded by the Lender’s purchase of a $4,500,000 industrial development bond (the “Bond”) issued by The Industrial Development Board of the City of
Montgomery, Alabama (the “IDB”). The Bond is a limited obligation of the IDB and is payable solely out of revenues and receipts derived from the leasing or sale of
Total accrued expenses payable
Kinpak’s facilities. In this regard, Kinpak is obligated to fund the IDB’s payment obligations by providing rental payments under a lease between the IDB and Kinpak
(the “Lease”), under which Kinpak leases its facilities from the IDB. Kinpak inherited the lease structure when it first acquired its facilities from its predecessor-in-
Note 8 – Long Term Debt:
interest in 1996. The Lease provides that prior to the maturity date of the Bond, Kinpak may repurchase the facilities for $1,000 if the Bond has been redeemed or fully
paid.
Industrial Development Bond Financing
530,957 $
417,629
266,352
485,472
373,895
249,538
1,214,938 $
1,108,905
$
$
The Bond bears interest at the rate of 3.07% per annum, calculated on the basis of a 360-day year and the actual number of days elapsed (subject to increase to 6.07%
On September 26, 2017, Kinpak indirectly obtained a $4,500,000 loan from Regions Capital Advantage, Inc. (the “Lender”). The proceeds of the loan are being used
per annum upon the occurrence of an event of default), and is payable in 118 monthly installments of $31,324 beginning on November 1, 2017 and ending on August
principally to pay or reimburse costs relating to the Expansion Project.
1, 2027, with a final principal and interest payment to be made on September 1, 2027 in the amount of $1,799,201. The Bond provides that the interest rate will be
subject to adjustment if it is determined by the United States Treasury Department, the Internal Revenue Service, or a similar government entity that the interest on the
The loan was funded by the Lender’s purchase of a $4,500,000 industrial development bond (the “Bond”) issued by The Industrial Development Board of the City of
Bond is includable in the gross income of the Lender for federal income tax purposes.
Montgomery, Alabama (the “IDB”). The Bond is a limited obligation of the IDB and is payable solely out of revenues and receipts derived from the leasing or sale of
Kinpak’s facilities. In this regard, Kinpak is obligated to fund the IDB’s payment obligations by providing rental payments under a lease between the IDB and Kinpak
Under the Lease, Kinpak is required to make rental payments for the account of the IDB to the Lender in such amounts and at such times as are necessary to enable the
(the “Lease”), under which Kinpak leases its facilities from the IDB. Kinpak inherited the lease structure when it first acquired its facilities from its predecessor-in-
payment of all principal and interest due on the Bond and other charges, if any, payable in respect of the Bond. The Lease also provides that Kinpak may redeem the
interest in 1996. The Lease provides that prior to the maturity date of the Bond, Kinpak may repurchase the facilities for $1,000 if the Bond has been redeemed or fully
Bond, in whole or in part, by prepaying its rental payment obligations in an amount sufficient to effect the redemption. In addition, the Lease contains provisions
paid.
relating to the Expansion Project, including limitations on utilization of Bond proceeds, deposit of unused proceeds into a custodial account (as described below) and
investment of monies held in the custodial account.
The Bond bears interest at the rate of 3.07% per annum, calculated on the basis of a 360-day year and the actual number of days elapsed (subject to increase to 6.07%
per annum upon the occurrence of an event of default), and is payable in 118 monthly installments of $31,324 beginning on November 1, 2017 and ending on August
1, 2027, with a final principal and interest payment to be made on September 1, 2027 in the amount of $1,799,201. The Bond provides that the interest rate will be
F-13
subject to adjustment if it is determined by the United States Treasury Department, the Internal Revenue Service, or a similar government entity that the interest on the
Bond is includable in the gross income of the Lender for federal income tax purposes.
Under the Lease, Kinpak is required to make rental payments for the account of the IDB to the Lender in such amounts and at such times as are necessary to enable the
payment of all principal and interest due on the Bond and other charges, if any, payable in respect of the Bond. The Lease also provides that Kinpak may redeem the
Bond, in whole or in part, by prepaying its rental payment obligations in an amount sufficient to effect the redemption. In addition, the Lease contains provisions
relating to the Expansion Project, including limitations on utilization of Bond proceeds, deposit of unused proceeds into a custodial account (as described below) and
investment of monies held in the custodial account.
F-13
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 30
03/27/2020 05:38 PM
f10k2019_oceanbiochem.htm
Payment of amounts due and payable under the Bond and other related agreements are guaranteed by the Company and its other consolidated subsidiaries. In
connection with a guarantee agreement under which the Company provided its guarantee, the Company is subject to certain covenants, including financial covenants
requiring that the Company maintain (i) a minimum fixed charge ratio (generally, the ratio of (A) EBITDA minus the sum of Company’s distributions to its
shareholders, taxes paid and unfunded capital expenditures to (B) current maturities of Company long-term debt plus interest expense) of 1.2 to 1, tested quarterly, and
(ii) a ratio of funded debt (as defined in the guaranty agreement) divided by the sum of net worth and funded debt of 0.75 to 1, tested quarterly. For purposes of
computing the fixed charge coverage ratio, “EBITDA” generally is defined as net income before taxes and depreciation expense plus amortization expense, plus
interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income; “unfunded capital expenditures”
generally is defined as capital expenditures made from Company funds other than funds borrowed through term debt incurred to finance such capital expenditures. At
December 31, 2019, the Company was in compliance with these financial covenants.
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Edgar Agents LLC
Form Type: 10-K
Page 30
Through December 31, 2019, of the $4,500,000 proceeds of the Bond sale, approximately $2,654,000 has been applied to reimburse Kinpak for Expansion Project
Payment of amounts due and payable under the Bond and other related agreements are guaranteed by the Company and its other consolidated subsidiaries. In
expenditures and approximately $54,000 was paid directly to other parties for certain transaction costs. The remaining amount is held in a custodial account and may
connection with a guarantee agreement under which the Company provided its guarantee, the Company is subject to certain covenants, including financial covenants
be drawn by Kinpak from time to time to fund additional expenditures related to the Expansion Project. Because the Lease contains limitations on the manner in which
requiring that the Company maintain (i) a minimum fixed charge ratio (generally, the ratio of (A) EBITDA minus the sum of Company’s distributions to its
Kinpak may utilize funds held in the custodial account, such funds are classified as restricted cash on the Company’s balance sheets.
shareholders, taxes paid and unfunded capital expenditures to (B) current maturities of Company long-term debt plus interest expense) of 1.2 to 1, tested quarterly, and
(ii) a ratio of funded debt (as defined in the guaranty agreement) divided by the sum of net worth and funded debt of 0.75 to 1, tested quarterly. For purposes of
The Company incurred debt financing costs of $196,095 in connection with the financing. These costs are shown as a reduction of the debt balance and are being
computing the fixed charge coverage ratio, “EBITDA” generally is defined as net income before taxes and depreciation expense plus amortization expense, plus
amortized under the effective interest method.
interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income; “unfunded capital expenditures”
generally is defined as capital expenditures made from Company funds other than funds borrowed through term debt incurred to finance such capital expenditures. At
Other Long- Term Obligations
December 31, 2019, the Company was in compliance with these financial covenants.
In connection with the Company’s agreement to purchase assets of Snappy Marine, the Company provided to Snappy Marine a promissory note in the amount of
Through December 31, 2019, of the $4,500,000 proceeds of the Bond sale, approximately $2,654,000 has been applied to reimburse Kinpak for Expansion Project
$1,000,000, including interest (of the $1,000,000 amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an
expenditures and approximately $54,000 was paid directly to other parties for certain transaction costs. The remaining amount is held in a custodial account and may
imputed interest rate of 2.87% per annum, is being recorded as interest expense over the term of the note). The note is payable in equal installments of $16,667 over a
be drawn by Kinpak from time to time to fund additional expenditures related to the Expansion Project. Because the Lease contains limitations on the manner in which
60-month period that commenced on August 1, 2018, with a final payment due and payable on July 1, 2023. If the note is prepaid in full, the entire outstanding balance
Kinpak may utilize funds held in the custodial account, such funds are classified as restricted cash on the Company’s balance sheets.
of the note (including all unpaid amounts allocated to interest over the remaining term of the note) must be paid.
The Company incurred debt financing costs of $196,095 in connection with the financing. These costs are shown as a reduction of the debt balance and are being
In connection with the Company’s agreement to purchase assets of Check Corporation, the Company agreed to pay Check Corporation $100,000 in equal installments
amortized under the effective interest method.
of approximately $4,348 over a 23-month period that commenced on January 15, 2020 with a final payment due and payable on November 15, 2021. The Company
recorded $97,012 as principal, and the remaining $2,988, representing an imputed interest rate of 3.15% per annum, will be recorded as interest expense over the 23
Other Long- Term Obligations
months).
In connection with the Company’s agreement to purchase assets of Snappy Marine, the Company provided to Snappy Marine a promissory note in the amount of
At December 31, 2019 and December 31, 2018, the Company was obligated under lease agreements covering equipment utilized in the Company’s operations. The
$1,000,000, including interest (of the $1,000,000 amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an
equipment leases, aggregating approximately $26,000 and $31,000 at December 31, 2019 and December 31, 2018, respectively, have maturities through 2024 and
imputed interest rate of 2.87% per annum, is being recorded as interest expense over the term of the note). The note is payable in equal installments of $16,667 over a
carry interest rates ranging from 2% to 4% per annum. The equipment leases are classified as finance leases. During 2019 and 2018, the Company paid approximately
60-month period that commenced on August 1, 2018, with a final payment due and payable on July 1, 2023. If the note is prepaid in full, the entire outstanding balance
$23,701 ($22,756 principal and $945 interest) and $20,000 ($19,237 principal and $763 interest), respectively, under the lease agreements.
of the note (including all unpaid amounts allocated to interest over the remaining term of the note) must be paid.
The following table provides information regarding the Company’s long-term debt at December 31, 2019 and 2018:
In connection with the Company’s agreement to purchase assets of Check Corporation, the Company agreed to pay Check Corporation $100,000 in equal installments
of approximately $4,348 over a 23-month period that commenced on January 15, 2020 with a final payment due and payable on November 15, 2021. The Company
recorded $97,012 as principal, and the remaining $2,988, representing an imputed interest rate of 3.15% per annum, will be recorded as interest expense over the 23
months).
Long Term Portion
Current Portion
Obligations related to industrial development bond financing
At December 31, 2019 and December 31, 2018, the Company was obligated under lease agreements covering equipment utilized in the Company’s operations. The
Note payable related to Snappy Marine asset acquisition
equipment leases, aggregating approximately $26,000 and $31,000 at December 31, 2019 and December 31, 2018, respectively, have maturities through 2024 and
Obligation related to Check Corporation asset acquisition
carry interest rates ranging from 2% to 4% per annum. The equipment leases are classified as finance leases. During 2019 and 2018, the Company paid approximately
Equipment leases
$23,701 ($22,756 principal and $945 interest) and $20,000 ($19,237 principal and $763 interest), respectively, under the lease agreements.
Total principal of long- term debt
The following table provides information regarding the Company’s long-term debt at December 31, 2019 and 2018:
Debt issuance costs
Total long- term debt
247,985 $
177,701
-
19,593
445,279
(19,616)
425,663 $
11,596
4,666,126
(152,021)
4,514,105
255,471 $
182,869
49,930
14,823
503,093
(19,616)
483,477 $
Current Portion
$
$
December 31,
2018
3,974,256
680,274
$
December 31,
2019
3,718,785
497,405
47,082
11,312
4,274,584
(132,405)
4,142,179
Long Term Portion
$
December 31,
2019
December 31,
2018
Required principal payments under the Company’s industrial development bond financing and other long- term obligations are set forth below:
December 31,
2019
December 31,
2018
Obligations related to industrial development bond financing
Year ending December 31,
Note payable related to Snappy Marine asset acquisition
Obligation related to Check Corporation asset acquisition
Equipment leases
Total principal of long- term debt
Debt issuance costs
Total long- term debt
2020
2021
2022
2023
2024
Thereafter
Total
$
$
255,471 $
182,869
49,930
14,823
503,093
(19,616)
483,477 $
December 31,
2019
3,718,785
497,405
47,082
11,312
4,274,584
(132,405)
4,142,179
247,985 $
177,701
-
19,593
445,279
(19,616)
425,663 $
$
December 31,
2018
3,974,256
680,274
503,093
502,493
11,596
469,337
4,666,126
399,954
(152,021)
290,342
2,612,458
4,514,105
4,777,677
$
$
$
Required principal payments under the Company’s industrial development bond financing and other long- term obligations are set forth below:
Year ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total
F-14
F-14
$
$
503,093
502,493
469,337
399,954
290,342
2,612,458
4,777,677
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 31
03/27/2020 05:38 PM
Note 9 – Income Taxes:
The components of the Company’s provision for income taxes for the years ended December 31, 2019 and 2018 are as follows:
Federal – current
Federal – deferred
State – current
State – deferred
Total provision for income taxes
f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
The reconciliation of the provision for income taxes at the statutory rate to the reported provision for income taxes is as follows:
Note 9 – Income Taxes:
Income Tax computed at statutory rate
21.0% $
State tax, net of federal benefit
0.8%
The components of the Company’s provision for income taxes for the years ended December 31, 2019 and 2018 are as follows:
(0.0)%
Share based compensation
0.3%
Permanent adjustments
Tax credits and other
0.1%
Federal – current
Provision for income taxes
22.2% $
Federal – deferred
State – current
The Company’s deferred tax liability consisted of the following at December 31, 2019 and 2018:
State – deferred
Total provision for income taxes
943,891
33,954
(1,149)
11,911
7,397
996,004
$
$
2019
%
2019
2018
636,046
921,954 $
120,760
29,628
28,530
43,025
Page 31
1,397
5,694
03/27/2020 05:38 PM
791,030
996,004 $
$
$
2018
%
753,119
22,468
(1,233)
14,040
2019
2,636
921,954 $
791,030
29,628
43,025
1,397
996,004 $
$
$
2019
2018
21.0%
0.6%
(0.0)%
0.4%
0.1%
636,046
22.1%
120,760
28,530
5,694
791,030
2018
$
$
$
$
$
%
%
2018
2019
943,891
33,954
(1,149)
11,911
7,397
996,004
21.0% $
0.8%
$
(0.0)%
0.3%
0.1%
22.2% $
53,701
35,541
(400,616)
753,119
(311,374)
22,468
(1,233)
14,040
2,636
791,030
62,475
37,645
(380,469)
21.0%
(280,349)
0.6%
(0.0)%
0.4%
0.1%
22.1%
The reconciliation of the provision for income taxes at the statutory rate to the reported provision for income taxes is as follows:
Deferred tax liability
Inventory reserves
Trade accounts receivable allowances
Depreciation and amortization
Income Tax computed at statutory rate
Total net deferred tax liability
State tax, net of federal benefit
Share based compensation
Permanent adjustments
Note 10 – Related Party Transactions:
Tax credits and other
Provision for income taxes
The Company sells products to companies affiliated with Peter G. Dornau, who is the Company’s Chairman, President and Chief Executive Officer. The affiliated
companies resell, outside of the United States and Canada, products they purchase from the Company. The Company also provides administrative services to these
companies and pays certain business related expenditures for the affiliated companies, for which the Company is reimbursed. Sales to the affiliated companies
The Company’s deferred tax liability consisted of the following at December 31, 2019 and 2018:
aggregated approximately $1,788,000 and $2,190,000 for the years ended December 31, 2019 and 2018, respectively; fees for administrative services aggregated
approximately $779,000 and $760,000, respectively; and amounts billed to the affiliated companies to reimburse the Company for business related expenditures made
on behalf of the affiliated companies aggregated approximately $113,000 and $151,000 during the years ended December 31, 2019 and 2018, respectively. The
Deferred tax liability
Company had accounts receivable from the affiliated companies in connection with the product sales, administrative services and business-related expenditures
Inventory reserves
aggregating approximately $962,000 and $1,046,000 at December 31, 2019 and 2018, respectively.
Trade accounts receivable allowances
Depreciation and amortization
An entity that is owned by the Company’s Chairman, President and Chief Executive Officer provides several services to the Company. Under this arrangement, the
Total net deferred tax liability
Company paid the entity an aggregate of $94,000 ($42,000 for research and development, $31,000 for charter boat services that the Company used to provide sales
incentives for customers and $21,000 for the production of television commercials) and $77,000 ($42,000 for research and development, $14,000 for charter boat
services that the Company used to provide sales incentives for customers, and $21,000 for the production of television commercials) for the years ended December 31,
Note 10 – Related Party Transactions:
2019 and 2018, respectively. Expenditures for the research and development services are included in the consolidated statements of operations within selling and
administrative expenses. Expenditures for the charter boat services and television production services are included in the consolidated statements of operations within
The Company sells products to companies affiliated with Peter G. Dornau, who is the Company’s Chairman, President and Chief Executive Officer. The affiliated
advertising and promotion expenses.
companies resell, outside of the United States and Canada, products they purchase from the Company. The Company also provides administrative services to these
companies and pays certain business related expenditures for the affiliated companies, for which the Company is reimbursed. Sales to the affiliated companies
The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. See
aggregated approximately $1,788,000 and $2,190,000 for the years ended December 31, 2019 and 2018, respectively; fees for administrative services aggregated
Note 4 for a description of the lease terms.
approximately $779,000 and $760,000, respectively; and amounts billed to the affiliated companies to reimburse the Company for business related expenditures made
on behalf of the affiliated companies aggregated approximately $113,000 and $151,000 during the years ended December 31, 2019 and 2018, respectively. The
A director of the Company is Regional Executive Vice President of an insurance broker through which the Company sources most of its insurance needs. During the
Company had accounts receivable from the affiliated companies in connection with the product sales, administrative services and business-related expenditures
years ended December 31, 2019 and 2018, the Company paid an aggregate of approximately $1,424,000 and $1,261,000, respectively, in insurance premiums on
aggregating approximately $962,000 and $1,046,000 at December 31, 2019 and 2018, respectively.
policies obtained through the insurance broker.
An entity that is owned by the Company’s Chairman, President and Chief Executive Officer provides several services to the Company. Under this arrangement, the
Company paid the entity an aggregate of $94,000 ($42,000 for research and development, $31,000 for charter boat services that the Company used to provide sales
F-15
incentives for customers and $21,000 for the production of television commercials) and $77,000 ($42,000 for research and development, $14,000 for charter boat
services that the Company used to provide sales incentives for customers, and $21,000 for the production of television commercials) for the years ended December 31,
2019 and 2018, respectively. Expenditures for the research and development services are included in the consolidated statements of operations within selling and
administrative expenses. Expenditures for the charter boat services and television production services are included in the consolidated statements of operations within
advertising and promotion expenses.
53,701
35,541
(400,616)
(311,374)
62,475
37,645
(380,469)
(280,349)
2019
2018
$
$
$
$
The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. See
Note 4 for a description of the lease terms.
A director of the Company is Regional Executive Vice President of an insurance broker through which the Company sources most of its insurance needs. During the
years ended December 31, 2019 and 2018, the Company paid an aggregate of approximately $1,424,000 and $1,261,000, respectively, in insurance premiums on
policies obtained through the insurance broker.
F-15
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 32
03/27/2020 05:38 PM
Note 11 – Stock Options and Awards:
On May 29, 2015, the Company’s shareholders approved the Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan (the “Plan”). The Plan provides for grants of
several types of awards at the discretion of the Equity Grant Committee of the Company’s Board of Directors, including stock options, stock units, stock awards, stock
appreciation rights and other stock-based awards. The Plan authorizes the issuance of 630,000 shares of Company common stock, subject to anti-dilution adjustments
upon the occurrence of certain events affecting the common stock. During 2019 and 2018, the Company granted stock awards under the Plan aggregating 83,000 and
81,400 shares of common stock, respectively, to officers, key employees, and directors. Following the withholding of an aggregate of 6,310 and 6,299 shares of
common stock, respectively, in connection with a tax withholding feature of the Plan, 76,690 and 75,101 shares were issued to the award recipients, during 2019 and
2018, respectively. The shares vested immediately upon issuance and were fully expensed in the period in which they were awarded. Compensation expense related to
the stock awards was $275,540 and $330,823 in 2019 and 2018, respectively. The value of the shares the Company withheld for taxes related to the stock awards was
$20,949 and $25,794 in 2019 and 2018, respectively. At December 31, 2019, 179,000 shares remained available for future issuance under the Plan. As a result of the
adoption of the Plan, no further stock awards will be made under the Company’s equity compensation plans previously approved by its shareholders (the “Prior
f10k2019_oceanbiochem.htm
Plans”).
Edgar Agents LLC
Prior to the May 29, 2015 effective date of the Plan, stock options were granted under the Prior Plans. Only non-qualified options granted under the Prior Plans were
outstanding on December 31, 2019. Outstanding non-qualified options were granted to outside directors, have a 10-year term from the date of grant and are
immediately exercisable. The last tranche of non-qualified options previously granted terminate on April 25, 2020. There was no compensation expense attributable to
stock options recognized during 2019 and 2018, and at December 31, 2019 and 2018, there was no unrecognized compensation cost related to share based
compensation arrangements
Note 11 – Stock Options and Awards:
OCEAN BIO-CHEM, INC.
03/27/2020 05:38 PM
Form Type: 10-K
Page 32
During 2019, stock options to purchase an aggregate of 30,000 shares of common stock were exercised. The Company received a total of $13,799, withheld 2,072
On May 29, 2015, the Company’s shareholders approved the Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan (the “Plan”). The Plan provides for grants of
shares in connection with the net exercise feature of the stock options and issued an aggregate of 27,928 shares to the option holders who exercised their options.
several types of awards at the discretion of the Equity Grant Committee of the Company’s Board of Directors, including stock options, stock units, stock awards, stock
appreciation rights and other stock-based awards. The Plan authorizes the issuance of 630,000 shares of Company common stock, subject to anti-dilution adjustments
During 2018, a former director exercised a stock option to purchase 10,000 shares of common stock. The Company withheld 1,490 shares in connection with the net
upon the occurrence of certain events affecting the common stock. During 2019 and 2018, the Company granted stock awards under the Plan aggregating 83,000 and
exercise of the stock option by the former director and issued 8,510 shares to the former director.
81,400 shares of common stock, respectively, to officers, key employees, and directors. Following the withholding of an aggregate of 6,310 and 6,299 shares of
common stock, respectively, in connection with a tax withholding feature of the Plan, 76,690 and 75,101 shares were issued to the award recipients, during 2019 and
In 2010, the Company granted, under its 2008 Non-Qualified Stock Option Plan, stock options to purchase 20,000 shares of its common stock at an exercise price per
2018, respectively. The shares vested immediately upon issuance and were fully expensed in the period in which they were awarded. Compensation expense related to
share of $2.07 that remained outstanding at December 31, 2019. The stock options expire on April 25, 2020.
the stock awards was $275,540 and $330,823 in 2019 and 2018, respectively. The value of the shares the Company withheld for taxes related to the stock awards was
$20,949 and $25,794 in 2019 and 2018, respectively. At December 31, 2019, 179,000 shares remained available for future issuance under the Plan. As a result of the
The following table provides information relating to stock option transactions during the years ended December 31, 2019 and 2018:
adoption of the Plan, no further stock awards will be made under the Company’s equity compensation plans previously approved by its shareholders (the “Prior
Plans”).
2019
2018
Prior to the May 29, 2015 effective date of the Plan, stock options were granted under the Prior Plans. Only non-qualified options granted under the Prior Plans were
outstanding on December 31, 2019. Outstanding non-qualified options were granted to outside directors, have a 10-year term from the date of grant and are
immediately exercisable. The last tranche of non-qualified options previously granted terminate on April 25, 2020. There was no compensation expense attributable to
stock options recognized during 2019 and 2018, and at December 31, 2019 and 2018, there was no unrecognized compensation cost related to share based
compensation arrangements
Options outstanding beginning of the year
1.15
Options exercised
0.69
During 2019, stock options to purchase an aggregate of 30,000 shares of common stock were exercised. The Company received a total of $13,799, withheld 2,072
Total
1.24
shares in connection with the net exercise feature of the stock options and issued an aggregate of 27,928 shares to the option holders who exercised their options.
50,000 $
(30,000)
20,000 $
60,000 $
(10,000)
50,000 $
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
1.24
0.69
2.07
Shares
Shares
Note 12 – Major Customers:
During 2018, a former director exercised a stock option to purchase 10,000 shares of common stock. The Company withheld 1,490 shares in connection with the net
exercise of the stock option by the former director and issued 8,510 shares to the former director.
The Company had net sales to each of three major customers that constituted in excess of 10% of the Company’s consolidated net sales for the year ended December
31, 2019. Net sales to these three customers respectively represented approximately 43.2% (21.7%, 11.2%, and 10.3% of consolidated net sales for the year ended
In 2010, the Company granted, under its 2008 Non-Qualified Stock Option Plan, stock options to purchase 20,000 shares of its common stock at an exercise price per
December 31, 2019. The Company had net sales to each of two major customers that constituted in excess of 10% of the Company’s consolidated net sales for the year
share of $2.07 that remained outstanding at December 31, 2019. The stock options expire on April 25, 2020.
ended December 31, 2018. Net sales to these two customers respectively represented approximately 33.1% (21.7% and 11.4%) of consolidated net sales for the year
ended December 31, 2018.
The following table provides information relating to stock option transactions during the years ended December 31, 2019 and 2018:
At December 31, 2019, three customers constituted at least 10% of the Company’s gross trade accounts receivable, and at December 31, 2018 two customers
constituted in excess of 10% of the Company’s gross trade accounts receivable. The gross trade accounts receivable balances for these customers represented
approximately 56.8% (28.0%, 15.3%, and 13.5%, respectively) of the Company’s gross trade accounts receivable at December 31, 2019, and 41.0% (25.2% and
15.8%, respectively) of the Company’s gross trade accounts receivable at December 31, 2018.
2019
2018
Weighted
Average
Exercise
Price
1.24
0.69
2.07
Shares
60,000 $
(10,000)
50,000 $
Weighted
Average
Exercise
Price
1.15
0.69
1.24
Options outstanding beginning of the year
Options exercised
Total
Note 12 – Major Customers:
F-16
Shares
50,000 $
(30,000)
20,000 $
The Company had net sales to each of three major customers that constituted in excess of 10% of the Company’s consolidated net sales for the year ended December
31, 2019. Net sales to these three customers respectively represented approximately 43.2% (21.7%, 11.2%, and 10.3% of consolidated net sales for the year ended
December 31, 2019. The Company had net sales to each of two major customers that constituted in excess of 10% of the Company’s consolidated net sales for the year
ended December 31, 2018. Net sales to these two customers respectively represented approximately 33.1% (21.7% and 11.4%) of consolidated net sales for the year
ended December 31, 2018.
At December 31, 2019, three customers constituted at least 10% of the Company’s gross trade accounts receivable, and at December 31, 2018 two customers
constituted in excess of 10% of the Company’s gross trade accounts receivable. The gross trade accounts receivable balances for these customers represented
approximately 56.8% (28.0%, 15.3%, and 13.5%, respectively) of the Company’s gross trade accounts receivable at December 31, 2019, and 41.0% (25.2% and
15.8%, respectively) of the Company’s gross trade accounts receivable at December 31, 2018.
F-16
OBCI, INC. ANNUAL REPORT 2019 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 33
03/27/2020 05:38 PM
Note 13 – Earnings Per Share:
Basic earnings per share are calculated by dividing net income by the weighted average number of shares outstanding during the reporting 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.
Earnings per common share –Basic
Net income
Weighted average number of common shares outstanding
Earnings per common share – Basic
Earnings per common share – Diluted
Net income
Weighted average number of common shares outstanding
Dilutive effect of employee stock-based awards
f10k2019_oceanbiochem.htm
Weighted average number of common shares outstanding – Diluted
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Earnings per common share – Diluted
Years Ended December 31,
2019
2018
3,498,714 $
2,795,249
9,391,264
9,279,872
0.37 $
0.30
3,498,714 $
2,795,249
9,391,264
9,279,872
8,170
9,399,434
39,231
Page 33
9,319,103
03/27/2020 05:38 PM
0.37 $
0.30
$
$
$
$
The Company had no stock options outstanding at December 31, 2019 and 2018, respectively that were anti-dilutive and therefore not included in the diluted earnings
per common share calculation.
Note 13 – Earnings Per Share:
Note 14 – Cash Dividends:
Basic earnings per share are calculated by dividing net income by the weighted average number of shares outstanding during the reporting 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
On March 22, 2019, the Company’s Board of Directors declared a special cash dividend of $0.05 per common share payable on April 19, 2019 to all shareholders 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
record on April 5, 2019. There were 9,366,119 shares of common stock outstanding on April 5, 2019; therefore, dividends aggregating $468,306 were paid on April 19,
number of shares outstanding on a diluted basis.
2019.
On March 19, 2018, the Company’s Board of Directors declared a special cash dividend of $0.06 per common share payable on April 16, 2018 to all shareholders of
record on April 2, 2018. There were 9,254,580 shares of common stock outstanding on April 2, 2018; therefore, dividends aggregating $555,275 were paid on April 16,
Earnings per common share –Basic
2018.
2018
2019
Years Ended December 31,
Net income
Weighted average number of common shares outstanding
F-17
Earnings per common share – Basic
Earnings per common share – Diluted
Net income
Weighted average number of common shares outstanding
Dilutive effect of employee stock-based awards
Weighted average number of common shares outstanding – Diluted
Earnings per common share – Diluted
$
$
$
$
3,498,714 $
2,795,249
9,391,264
9,279,872
0.37 $
0.30
3,498,714 $
2,795,249
9,391,264
9,279,872
8,170
9,399,434
39,231
9,319,103
0.37 $
0.30
The Company had no stock options outstanding at December 31, 2019 and 2018, respectively that were anti-dilutive and therefore not included in the diluted earnings
per common share calculation.
Note 14 – Cash Dividends:
On March 22, 2019, the Company’s Board of Directors declared a special cash dividend of $0.05 per common share payable on April 19, 2019 to all shareholders of
record on April 5, 2019. There were 9,366,119 shares of common stock outstanding on April 5, 2019; therefore, dividends aggregating $468,306 were paid on April 19,
2019.
On March 19, 2018, the Company’s Board of Directors declared a special cash dividend of $0.06 per common share payable on April 16, 2018 to all shareholders of
record on April 2, 2018. There were 9,254,580 shares of common stock outstanding on April 2, 2018; therefore, dividends aggregating $555,275 were paid on April 16,
2018.
F-17
CLEAN + PROTECT SINCE 1973 f10k2019_oceanbiochem.htm
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 34
03/27/2020 05:38 PM
Note -15 – Recent Accounting Pronouncements:
Accounting Guidance Adopted by the Company
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). Under this new guidance, lessees (including lessees under leases classified as finance leases,
which are to be classified based on criteria similar to that applicable to capital leases under the previous guidance, and leases classified as operating leases) recognize a
right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under previous guidance,
operating leases were not recognized on the balance sheet. The Company adopted ASU 2016-02 on January 1, 2019 utilizing a modified retrospective method, under
which the Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting prior periods. As a result, the Company’s
balance sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption of ASU 2016-02 resulted in the
recognition of approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the reclassification of office equipment
with a net book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term
leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise);
instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. The Company did not have any short- term
leases at December 31, 2019.
Accounting Guidance Not Yet Adopted by the Company
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses,” which replaces the “incurred loss” model under current GAAP with a forward-
looking “expected loss” model, principally in connection with financial assets subject to credit losses. Under current GAAP, an entity reflects credit losses on financial
assets measured on an amortized cost basis only when it is probable that losses have been incurred, generally considering only past events and current conditions in
making these determinations. The guidance under ASU 2016-13 prospectively replaces this approach with a forward-looking methodology that reflects the expected
credit losses over the lives of financial assets, beginning when such assets are first acquired. Under the expected loss model, credit losses will be measured based not
only on past events and current conditions, but also on reasonable and supportable forecasts that affect the collectability of financial assets. The guidance also expands
disclosure requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted as of January 1, 2019. The Company is currently evaluating the impact the adoption of this new standard will have on the Company’s consolidated financial
statements.
f10k2019_oceanbiochem.htm
Note -16 – Subsequent Event:
Edgar Agents LLC
Form Type: 10-K
OCEAN BIO-CHEM, INC.
Page 34
03/27/2020 05:38 PM
On March 16, 2020, the Company received an initial payment of $411,657 from our insurance company to cover our initial losses from a chemical incident at our
Kinpak facility. The $411,657 was for the manufacturing equipment determined to be damaged in 2020. We are still evaluating the overall damage to equipment;
however, we do not expect the loss to be in excess of our insurance recovery. Any gain or loss from the chemical incident will be recognized in a future period.
Note -15 – Recent Accounting Pronouncements:
Accounting Guidance Adopted by the Company
F-18
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). Under this new guidance, lessees (including lessees under leases classified as finance leases,
which are to be classified based on criteria similar to that applicable to capital leases under the previous guidance, and leases classified as operating leases) recognize a
right-to-use asset and a lease liability on the balance sheet, initially measured as the present value of lease payments under the lease. Under previous guidance,
operating leases were not recognized on the balance sheet. The Company adopted ASU 2016-02 on January 1, 2019 utilizing a modified retrospective method, under
which the Company recorded an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting prior periods. As a result, the Company’s
balance sheet presentation at December 31, 2019 is not comparable to the presentation at December 31, 2018. The adoption of ASU 2016-02 resulted in the
recognition of approximately $432,000 as an operating lease right to use asset and a corresponding operating lease liability, and the reclassification of office equipment
with a net book value of approximately $27,000 to a finance lease – right to use asset within property, plant and equipment.
As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term
leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise);
instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. The Company did not have any short- term
leases at December 31, 2019.
Accounting Guidance Not Yet Adopted by the Company
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses,” which replaces the “incurred loss” model under current GAAP with a forward-
looking “expected loss” model, principally in connection with financial assets subject to credit losses. Under current GAAP, an entity reflects credit losses on financial
assets measured on an amortized cost basis only when it is probable that losses have been incurred, generally considering only past events and current conditions in
making these determinations. The guidance under ASU 2016-13 prospectively replaces this approach with a forward-looking methodology that reflects the expected
credit losses over the lives of financial assets, beginning when such assets are first acquired. Under the expected loss model, credit losses will be measured based not
only on past events and current conditions, but also on reasonable and supportable forecasts that affect the collectability of financial assets. The guidance also expands
disclosure requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is
permitted as of January 1, 2019. The Company is currently evaluating the impact the adoption of this new standard will have on the Company’s consolidated financial
statements.
Note -16 – Subsequent Event:
On March 16, 2020, the Company received an initial payment of $411,657 from our insurance company to cover our initial losses from a chemical incident at our
Kinpak facility. The $411,657 was for the manufacturing equipment determined to be damaged in 2020. We are still evaluating the overall damage to equipment;
however, we do not expect the loss to be in excess of our insurance recovery. Any gain or loss from the chemical incident will be recognized in a future period.
F-18
OBCI, INC. ANNUAL REPORT 2019 f10k2019ex4_oceanbio.htm
Edgar Agents LLC
Form Type: EX-4
OCEAN BIO-CHEM, INC.
Page 1
03/27/2020 05:38 PM
Exhibit 4
General
DESCRIPTION OF COMMON STOCK
Ocean Bio-Chem, Inc. (“we,” “us,” “our,” or the “Company”) is authorized to issue 12,000,000 shares of common stock, par value $0.01 per share (the “Common
Stock”).
The transfer agent and registrar for the Common Stock is Computershare Trust Company, N.A., Meidinger Tower, 462 S. 4th Street, Louisville, KY 40202, telephone:
(800) 522-6645.
The Common Stock is listed on the NASDAQ Capital Market under the symbol “OBCI.”
The following description of the Common Stock is based on our Certificate of Incorporation, as amended to date (the “Certificate of Incorporation”) and our Amended
and Restated Bylaws, as amended to date (the “Bylaws”) and applicable Florida law.
Common Stock
Each holder of Common Stock is entitled to one vote for every share, and if the Company has issued fractional shares, to a fraction of a vote equal to every fractional
share, of Common Stock standing in such holders’ name on the books of the Company on all matters presented to the shareholders. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are entitled to share equally and ratably in the assets of the Company, if any, remaining after
the payment of all of our debts and liabilities. The Common Stock has no preemptive rights, no cumulative voting rights and no redemption, sinking fund or conversion
provisions.
Holders of Common Stock are entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available therefor. No dividends or
other distributions (including redemptions or repurchases of shares of capital stock) may be made if, after giving effect to any such dividends or distributions, we
would not be able to pay our debts as they become due in the usual course of our activities and affair or our total assets would be less than the sum of our total
liabilities.
Anti-takeover Effects of Certain Provisions of the Certificate of Incorporation, the Bylaws and Florida Law
Certificate of Incorporation and Bylaws. Some of the provisions of our Certificate of Incorporation and Bylaws may be deemed to have anti-takeover effects and may
discourage, delay, defer or prevent a takeover attempt that a shareholder might consider in its best interest. These provisions do the following:
● establish advance notice procedures for the nomination of candidates for election as directors and for shareholder proposals to be considered at annual
shareholders’ meetings; and
● provide that special meetings of the shareholders may be called by our Board of Directors on its own initiative or upon request by the Chairman of the Board
of Directors or the President of the Company or upon the delivery to our Secretary at the request of demand for a meeting by the holders of not less than ten
percent of all the outstanding shares of the corporation entitled to be cast at the meeting.
Florida Law. Furthermore, some of the provisions of the Florida Business Corporations Act (the “FBCA”) could have the effect of delaying, deferring or preventing a
change in control.
Affiliated Transactions
We are subject to provisions of the FBCA that provide that a corporation is prohibited (subject to certain exceptions) from engaging in specified transactions with
persons (defined as “interested shareholders”) who own 15% or more of the outstanding voting stock of such corporation, as well as affiliates and associates of any
such person. This prohibition is in place for three years after such person becomes an interested shareholder. The FBCA defines the prohibited specified transactions to
include a wide variety of transactions with or caused by an interested shareholder, including mergers, asset sales and other transactions in which the interested
shareholder receives or could receive a benefit on other than a proportional basis with other shareholders. This provision would then have an anti-takeover effect for
transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for the
shares of our Common Stock.
Control Shares Act
The FBCA provides that, in certain circumstances, a shareholder who acquires a controlling interest in a corporation, defined in the statute as an interest in excess of a
1/5, 1/3 or majority interest, has no voting rights in the shares acquired that caused the shareholder to exceed any such threshold, unless the corporation’s other
shareholders, by majority vote (not include the interested shareholder), grant voting rights to such shares.
CLEAN + PROTECT SINCE 1973 f10k2019ex21_oceanbio.htm
Edgar Agents LLC
Form Type: EX-21
OCEAN BIO-CHEM, INC.
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
Page 1
03/27/2020 05:38 PM
EXHIBIT 21
Jurisdiction of
Organization
Florida
Florida
Florida
Florida
Florida
Florida
Alabama
Florida
Ownership %
100
100
100
100
100
100
100
100
OBCI, INC. ANNUAL REPORT 2019 f10k2019ex31-1_oceanbio.htm
Edgar Agents LLC
Form Type: EX-31.1
OCEAN BIO-CHEM, INC.
I, Peter G. Dornau, certify that:
CERTIFICATION
Page 1
03/27/2020 05:38 PM
EXHIBIT 31.1
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: March 27, 2020
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
CLEAN + PROTECT SINCE 1973 f10k2019ex31-2_oceanbio.htm
Edgar Agents LLC
Form Type: EX-31.2
OCEAN BIO-CHEM, INC.
I, Jeffrey S. Barocas, certify that:
CERTIFICATION
Page 1
03/27/2020 05:38 PM
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: March 27, 2020
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
OBCI, INC. ANNUAL REPORT 2019 f10k2019ex32-1_oceanbio.htm
Edgar Agents LLC
Form Type: EX-32.1
OCEAN BIO-CHEM, INC.
Page 1
03/27/2020 05:38 PM
EXHIBIT 32.1
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
I, Peter G. Dornau, Chief Executive Officer of Ocean Bio-Chem, Inc. (the “Company”), hereby certify that, based on my knowledge:
1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Report”) fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: March 27, 2020
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board, President and
Chief Executive Officer
CLEAN + PROTECT SINCE 1973 f10k2019ex32-2_oceanbio.htm
Edgar Agents LLC
Form Type: EX-32.2
OCEAN BIO-CHEM, INC.
Page 1
03/27/2020 05:38 PM
EXHIBIT 32.2
CERTIFICATION PURSUANT TO RULE 13a-14(b)
UNDER THE SECURITIES EXCHANGE ACT AND 18 U.S.C. 1350
I, Jeffrey S. Barocas, Chief Financial Officer of Ocean Bio-Chem, Inc. (the “Company”), hereby certify that, based on my knowledge:
1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Report”) fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: March 27, 2020
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Vice President, Chief Financial Officer
OBCI, INC. ANNUAL REPORT 2019 THIS PAGE LEFT INTENTIONALLY BLANK
CLEAN + PROTECT SINCE 1973 THIS PAGE LEFT INTENTIONALLY BLANK
OBCI, INC. ANNUAL REPORT 2019 INVESTOR INFORMATION
NASDAQ STOCK SYMBOL OBCI
Stock Transfer Agent
Computershare
P.O. Box 30170
College Station, Texas 77842-3179
General Counsel
Berger Singerman, LLP
350 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Auditors
Accell Audit & Compliance, PA
4806 W Gandy Blvd.
Tampa, Florida 33611
Reports and Publications
A free copy of the Company’s 2019
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 2019 and 2018:
2019
2018
High
$3.99
$3.78
$3.72
$3.68
Low
$3.17
$2.90
$3.21
$3.28
High
$4.39
$4.07
$4.78
$4.26
Low
$3.68
$3.26
$3.39
$3.05
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
C L E A N + P R O T E C T S I N C E 1 9 7 3
OCEAN BIO-CHEM, INC.
BOARD OF DIRECTORS
Peter G. Dornau
Jeffrey S. Barocas
Diana M. Conard*
Gregor M. Dornau
William W. Dudman
James M. Kolisch
Kimberly A. Krause*
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, Chief Operating Officer,
Corporate Secretary
OFFICERS OF STAR BRITE, INC.
Peter G. Dornau
President and Chief Executive Officer
Jeffrey S. Barocas
Vice President, Chief Financial Officer
Natalie S. Cuomo
Vice President of Customer Service
Gregor M. Dornau
Executive Vice President of Sales and Marketing
William W. Dudman
Vice President, Chief Operating Officer
Marc A. Emmi
Senior Vice President of Sales
Justin L. Gould
Vice President of Technology
Victor G. Phillpotts
Vice President of Business Development
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
WWW.ODORSTAR.COM • WWW.PERFORMACIDE.COM
OBCI, INC. ANNUAL REPORT 2019