U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-11102
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1564329
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
4041 SW 47 Avenue, Ft. Lauderdale, Florida 33314-4023
(Address of principal executive offices)
954-587-6280
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated file. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No.|X|
As of November 6, 2008, there were 7,886,816 shares of Common Stock, $.01
par value of the registrant outstanding
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX
Description Page
Part I - Financial Information:
Item 1. - Financial Statements:
Condensed consolidated balance sheets
as of September 30, 2008 and December
31, 2007 3
Condensed consolidated statements of
operations for the three and nine month
periods ended September 30, 2008 and 2007 4
Condensed consolidated statements of cash flows
for the nine months ended September 30, 2008 and 2007 5
Notes to condensed consolidated financial statements 6-12
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of Operations 12-15
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 15
Item 4 - Controls and Procedures 15
Part II - Other Information:
Item 1. - Legal Proceedings 115
Item 1A. - Risk Factors 16
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. - Defaults upon Senior Securities 16
Item 4. - Submission of Matters to a Vote by Security Holders 16
Item 5. - Other Matters 16
Item 6. - Exhibits 16
Signatures 16
Certifications 17-19
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2008 2007
------------------ --------------
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 535,123 $ 750,901
Trade accounts receivable net of allowance for doubtful
accounts of approximately $42,042 and $46,996 at September 30 ,
2008 and December 31, 2007 respectively 3,683,825 1,974,654
Inventories, net 6,827,140 5,993,657
Prepaid expenses and other current assets 407,775 285,126
------------- -------------
Total Current Assets 11,453,863 9,004,338
------------- -------------
Property, plant and equipment, net 5,875,302 6,235,812
------------- -------------
Other Assets:
Trademarks, trade names and patents, net 330,439 330,439
Due from affiliated companies, net 330,031 109,310
Deposits and other assets 143,763 253,718
------------- -------------
Total Other Assets 804,233 693,467
------------- -------------
Total Assets $ 18,133,398 $ 15,933,617
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 1,661,941 $ 1,010,263
Notes payable - bank 2,650,000 1,750,000
Current portion of long term debt 588,934 589,906
Accrued expenses payable 1,170,859 511,758
------------- -------------
Total Current Liabilities 6,071,734 3,861,927
------------- -------------
Long term debt, less current portion 3,560,614 3,988,978
------------- -------------
Shareholders' Equity:
Common stock - $.01 par value, 10,000,000 shares authorized;
7,886,816 and 7,871,816 shares issued and outstanding at
September 30, 2008 and December 31, 2007, respectively 78,868 78,718
Additional paid in capital 7,887,535 7,780,547
Less cost of common stock in treasury, 7,519 shares ( 8,195) ( 8,195)
Foreign currency translation adjustment ( 275,204) ( 209,049)
Retained earnings 818,046 440,691
------------- -------------
Total Shareholders' Equity 8,501,050 8,082,712
------------- -------------
Total Liabilities and Shareholders' Equity $ 18,133,398 $ 15,933,617
============= =============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2008 2007 2008 2007
------------ ------------ ------------- -------------
Gross Sales $ 8,911,090 $ 7,517,154 $ 18,096,830 $ 17,905,549
Allowances 690,082 566,210 1,139,896 1,498,194
------------ ------------ ------------- -------------
Net sales 8,221,008 6,950,944 16,956,934 16,407,355
Cost of goods sold 5,905,666 4,722,777 12,065,447 10,845,546
------------ ------------ ------------- -------------
Gross profit 2,315,342 2,228,167 4,891,487 5,561,809
Expenses:
Advertising and promotion 409,366 571,524 1,079,435 1,245,556
Selling and administrative 877,023 965,655 2,953,747 3,190,707
Interest expense 72,386 44,891 231,882 247,989
------------ ------------ ------------- -------------
Total expenses 1,358,775 1,582,070 4,265,064 4,684,252
------------ ------------ ------------- -------------
Operating income 956,567 646,097 626,423 877,557
Other income 11,285 18,597 21,932 18,597
------------ ------------ ------------- -------------
Income before income taxes 967,852 664,694 648,355 896,154
Income taxes 366,493 - 271,000 -
------------ ------------ ------------- -------------
Net Income 601,359 664,694 377,355 896,154
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment ( 2,365) ( 66,611) ( 66,155) ( 100,456)
------------ ------------ ------------- -------------
Comprehensive income $ 598,994 $ 598,083 $ 311,200 $ 795,698
============ ============ ============= =============
Income per common share - basic $ 0.08 $ 0.09 $ 0.05 $ 0.12
============ ============ ============= =============
Income per common share - diluted $ 0.07 $ 0.08 $ 0.05 $ 0.10
============ ============ ============= =============
Weighted average shares - basic 7,886,816 7,723,316 7,876,816 7,677,983
============ ============ ============= =============
Weighted average shares - diluted 8,051,744 8,759,009 8,177,452 8,886,256
============ ============ ============= =============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)
2008 2007
Cash flows from operating activities:
Net income $ 377,355 $ 896,154
Adjustment to reconcile net income (loss)
to net cash provided by (used in) operations:
Depreciation and amortization 590,954 588,965
Compensation cost associated with stock options and stock awards 107,138 171,025
Change in allowance for doubtful accounts 3,926 180,499
Changes in assets and liabilities:
Accounts receivable ( 1,779,654) (2,435,763)
Inventory ( 833,483) ( 606,944)
Prepaid expenses ( 12,694) ( 130,232)
Accounts payable and other accrued liabilities 1,310,780 947,415
------------- ------------
Net cash provided by (used in) operating activities ( 235,678) ( 388,881)
------------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment ( 230,444) ( 181,870)
------------- ------------
Net cash used in investing activities ( 230,444) ( 181,870)
------------- ------------
Cash flows from financing activities:
Borrowings line of credit, net 900,000 1,600,000
Amounts due from affiliates ( 220,721) 189,814
Short term borrowings, net ( 972) -
Principal payments - Long-term debt ( 428,364) ( 435,436)
------------- ------------
Net cash provided by financing activities 249,943 1,354,378
Cash prior to effect of exchange rate on cash ( 216,179) 783,627
Effect of exchange rate on cash 401 ( 100,456)
------------- ------------
Net (decrease) increase in cash ( 215,778) 683,171
Cash at beginning of period 750,901 71,080
------------- ------------
Cash at end of period $ 535,123 $ 754,251
============= ============
Supplemental disclosure of cash transactions:
Cash paid for interest during period $ 231,882 $ 270,154
------------- ------------
Cash paid/(received) for income taxes during period ($ 40,919) $ -
------------- ------------
The company had no cash equivalents at September 30, 2008 and 2007
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Interim Reporting
The accompanying unaudited consolidated financial statements include the
accounts of Ocean Bio-Chem, Inc. and its subsidiaries ("the Company"). All
significant inter-company transactions and balances have been eliminated. The
unaudited consolidated financial statements have been prepared in conformity
with Article 8 of Regulation S-X of the Securities and Exchange Commission and,
therefore, do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America. However, all adjustments (consisting of normal recurring accruals)
that, in the opinion of management, are necessary for a fair presentation of the
financial statements have been included. Operating results for the period ended
September 30, 2008 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2008 due to seasonal fluctuations
in the Company's business, changes in economic conditions and other factors. For
further information, please refer to the Consolidated Financial Statements and
Notes thereto contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 2007.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amount of assets, liabilities, revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue recognition
Revenue from product sales is recognized when persuasive evidence of an
arrangement exists, delivery to customer has occurred, the sales price is fixed
and determinable, and collectibility of the related receivable is probable. For
customers for whom the Company manages the inventory, at their location, revenue
is recognized when the products are sold to a third party. Reported net sales
are net of customer prompt pay discounts, contractual allowances, authorized
customer returns, consumer rebates and other allowable deductions from our
invoices. Cooperative advertising deductions, based on our customers' promotion
of our products is recognized as an advertising cost and charged against
operations as an operating expense. The Company follows the policy of reporting
sales taxes as a net amount - receipt and payments recorded in a liability
account.
Cost of goods sold/Selling, general and administrative expenses
Cost of goods sold includes all of the direct and indirect costs of
manufacturing our products. Included therein specifically are warehousing costs
of both raw and finished materials, in-bound freight, out-bound freight (in
those instances that we absorb such costs), purchasing, receiving, and
inspection costs. Other costs of the distribution network are reflected in
Selling, General and Administrative expenses. Also included therein are
managerial and clerical wages and related expenses, office and administrative
occupancy costs, taxes, professional fees, insurance coverage's and other
related expenses.
Inventories
Inventories are comprised of raw materials, work-in process and finished
goods and stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Stock Based Compensation
At September 30, 2008, the Company had options outstanding under four
stock-based compensation plans, which are described below. On January 1, 2006,
the Company adopted Statement of Financial Accounting Standards No. 123R
(revised 2004), "Share Based Payment" ("SFAS No. 123R"), which requires the
measurement and recognition of compensation cost for all share-based payment
awards made to employees and directors based on estimated fair values. The
Company has elected to use the modified prospective transition method for
adopting SFAS No. 123R, which requires the recognition of stock-based
compensation cost on a prospective basis; therefore, prior period financial
statements have not been restated. Under this method, the provisions of SFAS No.
123R are applied to all awards granted after the adoption date and to awards not
yet vested with unrecognized expense at the adoption date based on the estimated
fair value at grant date as determined under the original provisions of SFAS No.
123. The impact of forfeitures that may occur prior to vesting is also estimated
and considered in the amount recognized.
6
Under various plans, the Company may grant incentive or non-qualified stock
options to employees and directors. The terms of stock options granted under the
plans are determined by the Directors at the time of grant, including the
exercise price, term and any restrictions on the exercisability of such option.
The exercise price of all options granted under the plans equals the market
price at the date of grant, except for options granted to Mr. Dornau, our
President and CEO, which are generally granted at a premium of 10% above the
market price of the underlying common stock, and no option is exercisable after
the expiration of five or ten years from the date of grant, depending on the
Plan under which it was awarded. The stock options outstanding under our
qualified or incentive plans were generally granted for terms of five years and
vest on a straight line basis over such period. The stock options outstanding
under our 2002 non qualified plan were generally granted for terms of ten years
and vested immediately. No employee compensation expense was recognized in the
financial statements upon either the grant or exercise of these stock options.
Prior to January 1, 2006 we followed the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, to record compensation costs.
As of September 30, 2008, the number of options outstanding and the number
of shares available for grant under each Stock Option Plan and non-plan options
is presented below:
Plan Options Outstanding Options Available for Grant
------------- ---------------------- ----------------------------
NON-PLAN: 231,000 shares N/A
1994 PLAN 154,500 shares None
2002 PLAN 270,000 shares None
2007 PLAN 321,000 shares 79,000 shares
2008 PLAN 159,500 shares 240,500 shares
2002 PLAN NQ 185,000 shares None
2008 PLAN NQ 0 shares 200,000 shares
--------- -------
Total 1,321,000 shares 519,500 shares
========= =======
Information with respect to our Stock Option Plan activity is as follows:
Weighted Average
Shares Exercise Price
---------------- --------------
Options outstanding
January 1, 2008 930,500 $ 1.31
Options granted 159,500 0.97
Options exercised - -
Options forfeited - -
--------- ------
Options outstanding at
September 30, 2008 1,090,000 1.26
Non Plan Options 231,000 0.76
--------- ------
Totals 1,321,000 $ 1.17
========= ======
For the nine-month period ended September 30, 2008, the Company recognized
$94,386 in stock-based compensation costs, which is reflected in operating
expenses. No tax benefits were attributed to the stock-based compensation
expense because a valuation allowance was maintained for substantially all net
deferred tax assets. The Company elected to adopt the alternative method of
calculating the historical pool of windfall tax benefits as permitted by FASB
Staff Position (FSP) No. SFAS 123R-c, "Transition Election Related to Accounting
for the Tax Effects of Share-Based Payment Awards." This is a simplified method
to determine the pool of windfall tax benefits that is used in determining the
tax effects of stock compensation in the results of operations and cash flow
reporting for awards that were outstanding as of the adoption of SFAS No. 123R.
As of September 30, 2008, the Company had $403,606 of unrecognized compensation
costs related to non-vested stock option awards that is expected to be
recognized over a weighted average period of 4.75 years.
7
The following information applies to options outstanding and exercisable as
of September 30, 2008:
OPTIONS EXERCISABLE EXC. WEIGHTED
OPTIONS OUTSTANDING 9/30/08 PRICE YEARS
NON-PLAN 231,000 231,000 0.76 -
1994 PLAN 154,500 92,700 1.05 1.1
2002 PLAN 137,000 109,600 1.62 0.4
2002 PLAN 133,000 26,600 0.93 3.1
2007 PLAN 162,500 29,500 1.66 4.1
2007 PLAN 2,000 400 1.87 4.0
2007 PLAN 156,500 - 1.33 4.2
2008 PLAN 159,500 - 0.97 4.9
2002 PLAN NQ 35,000 35,000 1.26 4.1
2002 PLAN NQ 30,000 30,000 1.03 4.7
2002 PLAN NQ 40,000 40,000 1.46 5.7
2002 PLAN NQ 30,000 30,000 1.08 7.5
2002 PLAN NQ 50,000 50,000 1.32 9.2
--------- ------- ==== ---
1,321,000 674,800 2.9
========= ======= ===
The Company utilizes a Black-Scholes option-pricing model to determine the
fair value of stock options on the date of grant. This model derives the fair
value of stock options based on certain assumptions related to expected stock
price volatility, expected option life, risk-free interest rate and dividend
yield. The Company's expected volatility is based on the historical volatility
of the Company's stock price over the most recent period commensurate with the
expected term of the stock option award. The estimated expected option life is
based primarily on historical employee exercise patterns and considers whether
and the extent to which the options are in-the-money. The risk-free interest
rate assumption is based upon the U.S. Treasury yield curve appropriate for the
term of the Company's stock options awards and the selected dividend yield
assumption was determined in view of the Company's historical and estimated
dividend payout. The Company has no reason to believe that the expected
volatility of its stock price or its option exercise patterns will differ
significantly from historical volatility or option exercises.
2. SUMMARY OF SIGNIFICANT ACCOUNTING CHANGES:
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements".
This statement clarifies the definition of fair value of assets and liabilities,
establishes a framework for measuring fair value of assets and liabilities and
expands the disclosures on fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. However, the FASB deferred
the effective date of SFAS No. 157 until the fiscal years beginning after
November 15, 2008 as it relates to the fair value measurement requirements for
Nonfinancial assets and liabilities that are initially measured at fair value,
but not measured at fair value in subsequent periods. These nonfinancial assets
include trademarks and other intangible assets which are included within other
assets. In accordance with SFAS No. 157, the Company has adopted the provisions
of SFAS No. 157 with respect to financial assets and liabilities effective as of
January 1, 2008 and its adoption did not have a material impact on its results
of operations or financial condition. The adoption of this standard has not had
a material effect on the consolidated results of operations and financial
position of the Company for the reporting period.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - including an amendment of FASB
Statement No. 115." SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for us on January 1, 2008. The adoption of this standard has not had a
material effect on the consolidated results of operations and financial position
of the Company for the reporting period.
In December 2007, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 110. This guidance allows companies, in certain
circumstances, to utilize a simplified method in determining the expected term
of stock option grants when calculating the compensation expense to be recorded
under Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based
Payment. The simplified method can be used after December 31, 2007 only if a
company's stock option exercise experience does not provide a reasonable basis
upon which to estimate the expected option term. Through 2007, we utilized the
simplified method to determine the expected option term, based upon the vesting
and original contractual terms of the option. During 2008, we continue to use
the simplified method in accordance with SAB No. 110.
8
3. RECENT ACCOUNTING PRONOUNCEMENTS:
In December 2007, the FASB issued SFAS No. 141 (revised 2007) "Business
Combinations" ("FASB No. 141(R)") FASB No. 141(R) retains the fundamental
requirements of the original pronouncement requiring that the purchase method be
used for all business combinations. FASB No. 141(R) defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination, establishes the acquisition date as the date that the acquirer
achieves control and requires the acquirer to recognize the assets acquired,
liabilities assumed and any non-controlling interest at their fair values as of
the acquisition date. FASB No. 141(R) also requires that acquisition-related
costs be recognized separately from the acquisition. FASB No. 141(R) is
effective for the Company for fiscal 2010. The Company is currently assessing
the impact of FASB No. 141(R) on its consolidated financial position and results
of operations.
In December 2007, the FASB issued Statement No. 160, "Noncontrolling
Interests in Consolidated Financial Statements an amendment of ARB No. 51 ("FASB
No. 160")." The objective of FASB No. 160 is to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by establishing
accounting and reporting standards for the Noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. This Statement applies
to all entities that prepare consolidated financial statements, except
not-for-profit organizations. FASB No. 160 amends ARB 51 to establish accounting
and reporting standards for the Noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It also amends certain of ARB
51'sconsolidation procedures for consistency with the requirements of FASB No.
141 (R). This Statement is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008 (that is,
January 1, 2009, for entities with calendar year-ends). Earlier adoption is
prohibited. The effective date of this Statement is the same as that of the
related Statement141(R). FASB No. 160 will be effective for the Company's fiscal
2010. This Statement shall be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements shall be applied retrospectively for all periods presented.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and
expands the disclosure requirement for FASB Statement No. 133, "Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). It requires enhanced
disclosure about (i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedged items are accounted for under SFAS No.
133 and its related interpretations, and (iii) how derivative instruments and
related hedged items affect an entity's financial position, financial
performance, and cash flows. SFAS No. 161 is effective for the Company as of
January 1, 2009.
In April 2008, the FASB issued FSP 142-3, "Determination of the Useful Life
of Intangible Assets", (FSP 142-3). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and
Other Intangible Assets". FSP 142-3 is effective for fiscal years beginning
after December 15, 2008. The Company is currently assessing the impact of
FSP142-3 on its consolidated financial position and results of operations.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles." SFAS No. 162 identifies the sources of
accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented
inconformity with GAAP. The current GAAP hierarchy has been criticized because
it is directed to the auditor rather than the entity, it is complex, and it
ranks FASB Statements of Financial Accounting Concepts, which are subject to the
same level of due process as FASB Statements of Financial Accounting Standards,
below industry practices that are widely recognized as generally accepted but
that are not subject to due process. The Board believes the GAAP hierarchy
should be directed to entities because it is the entity (not its auditors) that
is responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP. The adoption of FASB 162 is not expected
to have a material impact on the Company's consolidated financial position and
results of operations.
9
In May, 2008 the FASB issued FASB Staff Position (FSP) APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)." APB 14-1 requires the issuer to
separately account for the liability and equity components of convertible debt
instruments in a manner that reflects the issuer's nonconvertible debt borrowing
rate. The guidance will result in companies recognizing higher interest expense
in the statement of operations due to amortization of the discount that results
from separating the liability and equity components. APB 14-1 will be effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. The Company is currently
evaluating the impact of adopting APB 14-1 on its consolidated financial
statements.
In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities". This FASB Staff Position (FSP) addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share (EPS) under the two-class method described in
paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. This FSP
provides that unvested share-based payment awards that contain non forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of EPS
pursuant to the two-class method. The provisions of FSP No. 03-6-1 shall be
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period EPS
data presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected financial data) to conform with
the provisions of this FSP. Early application is not permitted. The provisions
of FSP No. 03-6-1 are effective for the Company retroactively in the first
quarter ended March 31, 2009. The Company is currently assessing the impact of
FSP No. EITF 03-6-1 on the calculation and presentation of earnings per share in
its consolidated financial statements.
4. INVENTORIES
Inventories are comprised of raw materials and finished goods and stated at
the lower of cost or market. Cost is determined by the first-in, first-out
method. The composition of inventories at September 30, 2008 and December 31,
2007 are as follows:
2008 2007
---- ----
Raw materials $3,650,688 $3,247,359
Finished goods 3,317,520 2,821,861
Less Inventory Reserve ( 141,068) ( 75,563)
------------ -----------
Inventory - net $6,827,140 $5,993,657
=========== ===========
At September 30, 2008 and December 31, 2007, approximately $141,000 and
$76,000 respectively is reflected in the accompanying consolidated financial
statements as a reserve for excess, obsolete, slow moving and shrinkage
inventory adjustments.
5. PROPERTY, PLANT & EQUIPMENT
The Company's property, plant and equipment consisted of the following at
September 30, 2008 and December 31, 2007:
Estimated
Useful
Life - Years 2008 2007
Land N/A $ 278,325 $ 278,325
Building 30 4,389,154 4,389,154
Manufacturing and warehouse equipment 6-20 6,512,495 6,367,884
Office equipment and furniture 3-5 557,042 509,496
Leasehold improvement 10-15 122,644 122,644
Construction in process N/A 59,366 21,079
----------- -----------
11,919,026 11,688,582
Less accumulated depreciation (6,043,724) (5,452,770)
----------- ------------
Total property, plant and equipment, net $5,875,302 $6,235,812
=========== ===========
10
6. NOTES PAYABLE TO BANK
The primary sources of our liquidity are our operations and short-term
borrowings from Regions Bank pursuant to a revolving line of credit aggregating
$6 million. Such line matures May 31, 2011, bears interest at the 30 Day LIBOR
plus 250 basis points (approximately 6.2% at September 30, 2008) and is secured
by our trade receivables, inventory and intangible assets. As of each year-end,
December 31, we are required to maintain a minimum working capital of $1.5
million and meet certain other financial covenants during the term of the
agreement. As of September 30, 2008, we were obligated under this arrangement in
the amount of $2,650,000.
7. LONG-TERM DEBT
Long-term debt at September 30, 2008 consisted of the following:
The Company is obligated pursuant to capital leases financed through
Industrial Development Bonds. Such obligations were incurred during 1997 and
2002 in connection with building and equipment expansion at the Company's
Alabama manufacturing and distribution facility. Both bear interest at tax-free
rates that adjust weekly. Repayment of the bonds was guaranteed by a Letter of
Credit issued by the Company's primary commercial bank, Regions Bank. Security
for the Letter of Credit is a priority first mortgage on the Kinpak facility and
manufacturing equipment. On September 26th and October 6th, 2008 the Company was
notified by Regions Bank, that both the 1997 and 2002 series bonds were being
tendered. There has been no default on these bonds by the Company. It is the
understanding of the Company that due to the tight credit markets, these bonds
were tendered. As a result the Company is now obligated to Regions Bank until
which time the credit markets improve to remarket these bonds. The interest rate
on the loans is prime rate plus 2% or 7%, at September 30, 2008. At September
30, 2008, $1,190,000 and $2,750,000 were outstanding attributable to the 1997
and 2002 series, respectively. During the nine months ended September 30, 2008
interest rates ranged between 1.5% and 8.6%.
The Company, through its subsidiary, Kinpak Inc., is obligated pursuant to
various capital lease agreements covering equipment utilized in the Company's
Alabama plant. Such obligations, aggregating approximately $51,000 at September
30, 2008, have varying maturities through 2012 and carry interest rates ranging
from 7% to 12%.
During April 2005 we entered into a financing obligation with Regions Bank
whereby they advanced the Company $500,000 to finance equipment acquisitions at
our Kinpak facility. Such obligation is due in monthly installments of principal
aggregating approximately $8,300 plus interest at prevailing rates (the
outstanding balance and interest rate on this obligation at September 30, 2008
were approximately $158,300 and 5% per annum, respectively) through maturity on
April 15, 2010.
The composition of these obligations at September 30, 2008 and December 31,
2007 were as follows:
Current Portion Long Term Portion
--------------- -----------------
2008 2007 2008 2007
---- ---- ---- ----
Industrial Development Bonds/Term Loans $460,000 $460,000 $3,480,000 $3,825,000
Notes payable 99,996 99,996 58,351 133,348
Capitalized equipment leases 28,938 29,910 22,263 30,630
-------- -------- ---------- ----------
$588,934 $589,906 $3,560,614 $3,988,978
======== ======== ========== ==========
Required principal payment obligations attributable to the foregoing are
tabulated below::
12 month period ending September 30:
2009 $ 588,934
2010 528,399
2011 466,433
2012 455,782
2013 440,000
Thereafter 1,670,000
----------
Total $4,149,548
==========
11
8. RELATED PARTY TRANSACTIONS
At September 30, 2008 and December 31, 2007, the Company had amounts
receivable from and payable to affiliated companies, which are directly or
beneficially owned by the Company's president, aggregating a net receivable of
approximately $350,000 and receivable of $119,000 respectively. Such amounts
result from sales to the affiliates, allocations of expenses incurred by the
Company on the affiliates' behalf and funds advanced to or from the Company.
Sales to such affiliates aggregated approximately $680,000 and $622,000
during the nine months ended September 30, 2008 and 2007, and $202,000 and
$185,000 for the three months ended September 30, 2008 and 2007, respectively.
Commitments:
On May 1, 2008, the Company renewed for ten years the existing lease for
approximately 12,700 square feet of office and warehouse facilities in Fort
Lauderdale, Florida from an entity owned by a certain officer of the Company.
The lease required a minimum rental of $94,800 plus applicable taxes for the
first year and provides for a maximum 2% increase on the anniversary of the
lease throughout the term, which has been waived through December 31, 2008.
Additionally, the landlord is entitled to its pro-rata share of all taxes,
assessments, and any other expenses that arise from ownership. Rent charged to
operations aggregated approximately $80,400 and $81,400. during the nine months
ended September 30, 2008 and 2007, and $25,100 for the three months ended
September 30, 2008 and 2007.
The Company had entered into a corporate guaranty of a mortgage note
obligation of such affiliate. The obligation aggregating approximately $274,000
at December 31, 2007. The property was refinanced in the 2nd quarter 2008,
without a corporate guaranty.
The following is a schedule of minimum future rentals on the non-cancelable
operating leases.
12 month period ending September 30,
2009 $ 101,325
2010 103,352
2011 105,419
2012 107,527
2013 109,678
Thereafter 531,144
----------
$1,058,445
==========
9. EARNINGS PER SHARE
Three months Nine months
ended September 30, ended September 30,
2008 2007 2008 2007
---- ---- ---- ----
Weighted-average common
shares outstanding 7,886,816 7,723,316 7,876,816 7,677,983
Dilutive effect of stock plans,
other options & conversion rights 164,928 1,035,693 300,636 1,208,273
--------- --------- --------- ---------
Diluted weighted-average shares
outstanding 8,051,744 8,759,009 8,177,452 8,886,256
========= ========= ========= =========
10. SUBSEQUENT EVENTS
The Company implemented a program with one of its customers to alter the
manner in which it transacts business. The Company will manage the inventory
levels at this customer's warehouses and will be paid as the products are sold
by such customer. This program was initiated in the 3rd quarter 2008 and was
fully implemented in November 2008. The total sales credit to the customer was
approximately $300,000.
On September 26th and October 6th, 2008 the Company was notified by Regions
Bank that both the 1997 and 2002 series bonds were being tendered. There has
been no default on these bonds by the Company. It is the understanding of the
Company that due to the tight credit markets, these bonds were tendered. As a
result the Company will be obligated to Regions Bank (as these bonds were backed
by a letter of credit by Regions Bank) until which time the credit markets
improve, to remarket these bonds. The interest rate on the loans is prime rate
plus 2% or 7%, at September 30, 2008. At September 30, 2008, $1,190,000 and
$2,750,000 were outstanding attributable to the 1997 and 2002 series,
respectively.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
12
Forward-looking Statements:
Certain statements contained herein, including without limitation
expectations as to future sales and operating results, constitute
forward-looking statements pursuant to the safe harbor provisions of the Private
Securities Litigations Reform Act of 1995. For this purpose, any statements
contained in this report that are not statements of historical fact may be
deemed forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "anticipate", "intend",
"could" or the negative other variations thereof or comparable terminology are
intended to identify forward-looking statements. These statements involve known
and unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the highly competitive nature of the Company's
industry; reliance on certain key customers; consumer demand for marine
recreational vehicle and automotive products; advertising and promotional
efforts, and other factors. The Company will not undertake and specifically
declines any obligation to update or correct any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
Overview:
We are a leading manufacturer and distributor of chemical formulations
serving the appearance and functional categories of the marine, automotive,
recreational vehicle and home care markets. We were founded in 1973 and have
conducted operations within the aforementioned categories since then. During
1984, we changed our corporate name to Ocean Bio-Chem, Inc. (the parent company)
from our former name, Star Brite Corporation. Our operations were conducted as a
privately owned company through March, 1981 when we completed our initial public
offering of common stock.
Critical accounting policies and estimates:
See Note 1 "Summary of Accounting Policies" in the Notes to the Unaudited
Condensed Consolidated Financial Statements for a discussion of recent
accounting pronouncements and their effect, if any, on the Company.
Liquidity and Capital Resources:
The primary sources of our liquidity are our operations and short-term
borrowings from Regions Bank pursuant to a revolving line of credit aggregating
$6 million. Such line matures May 31, 2011, bears interest at the 30 Day LIBOR
plus 250 basis points (approximately 6.2% at September 30, 2008) and is secured
by our trade receivables, inventory and intangible assets. As of each year-end,
December 31, we are required to maintain a minimum working capital of $1.5
million and meet certain other financial covenants during the term of the
agreement. As of September 30, 2008, we were obligated under this arrangement in
the amount of $2,650,000.
In connection with the purchase and expansion of the Alabama facility, we
closed on Industrial Development Bonds during 1997 aggregating approximately $5
million. The proceeds were utilized for both the repayment of certain advances
used to purchase the Alabama facility and to expand such facility. During July
2002, we completed a second Industrial Development Bond financing aggregating
$3.5 million through the City of Montgomery, Alabama. Such transaction funded an
approximate 70,000 square foot addition to the manufacturing facility as well as
the remaining machinery and equipment additions required therein. This project
was substantially completed during 2003.
In order to market the Industrial Development Bonds at favorable rates, we
obtained a substitute irrevocable letter of credit for the 1997 issue and an
irrevocable letter of credit for the 2002 issue. Under such letters of credit
agreements, maturing on July 31, 2009, we are required to maintain a stipulated
level of working capital, a designated maximum debt to tangible ratio, and a
required debt service coverage ratio. Such letters of credit are secured by a
first priority mortgage on the underlying Alabama facility and equipment.
The bonds are marketed weekly at the prevailing rates for such tax-exempt
instruments. During the nine months ended September 30, 2008 such bonds carried
interest ranging between 1.5% and 8.6%. Interest and principal are payable
quarterly. We believe current operations are sufficient to meet these
obligations.
On September 26th and October 6th, 2008 the Company was notified by Regions
Bank that both the 1997 and 2002 series bonds respectively were being tendered.
There has been no default on these bonds by the Company. It is the understanding
of the Company that due to the tight credit markets, these bonds were tendered.
As a result the Company will be obligated to Regions Bank (as these bonds were
backed by a letter of credit by Regions Bank) until which time the credit
markets improve to remarket these bonds. The interest rate on the term loans is
prime rate plus 2% or 7% at September 30, 2008.
13
On April 12, 2005 we entered into a financing obligation with Regions Bank
whereby they advanced us $500,000 to finance equipment acquisitions at our
Kinpak facility. Such obligation is due in monthly installments of principal
aggregating approximately $8,300 plus interest at prevailing rates; the
outstanding balance and interest on this obligation at September 30, 2008 were
approximately $158,300. The maturity on this obligation is April 15, 2010.
We are involved in making sales in the Canadian market and must deal with
the currency fluctuations of the Canadian currency.
We do not engage in currency hedging and deal with such currency risk as a
pricing issue.
During the past few years, we have introduced various new products to our
customers. At times this has required us to carry greater amounts of overall
inventory and has resulted in lower inventory turnover rates. The effects of
such inventory turnover have not been material to our overall operations. We
believe that all required capital to maintain such increases can continue to be
provided by operations and current financing arrangements.
Many of the raw materials that we use in the manufacturing process are
commodities that are subject to fluctuating prices. We react to long-term
increases by passing along all or a portion of such increases to our customers.
As of September 30, 2008 and through the date hereof, we did not and do not
have any material commitments for capital expenditures, nor do we have any other
present commitment that is likely to result in our liquidity increasing or
decreasing in any material way. In addition, except for our need for additional
capital to finance inventory purchases, we know of no trend, additional demand,
event or uncertainty that will result in, or that is reasonably likely to result
in, our liquidity increasing or decreasing in any material way.
Results of Operations:
For the Three Months Ended September 30, 2008 compared to the Three Months
ended September 30, 2007
Net sales were approximately $8,221,000 for the three months ended
September 30, 2008 compared to $6,951,000 for the comparative quarter 2007, an
increase of $1,270,000 or 18%. The Company had higher shipments of its
winterizing products including antifreeze comparing the quarters. The Company
had increased sales of other marine products including the Company's fuel
treatment products - StarTron, in addition to other boat maintenance products.
Cost of goods sold as a percentage of sales increased to 71.8% of sales
compared to 67.9% for the comparative 2007 quarter. This increase in the cost of
goods sold percentage of 3.9 % was a result of the unprecedented increase in oil
prices and the resulting increase in the company's raw material costs that could
not be fully passed on to our customers. In addition the Company had a higher
sales mix of lower margin antifreeze products in the quarter compared to
comparative prior year.
Advertising and promotion expenses were approximately $409,000 compared to
$572,000 for the comparative third quarters. Management has taken initiatives to
reduce spending for advertising and promotions for the balance of 2008. Selling
and administrative expenses decreased approximately $89,000 to $877,000 when
comparing the quarters ended September 30, 2008 compared to $966,000 for
comparative 2007quarter. Management continues to monitor all expenses to reduce
spending. Cost savings were realized in the quarter for non cash compensation
expense and computer consulting services.
Interest expense increased by approximately $28,000 for the quarter ended
September 30, 2008 compared to the corresponding quarter in 2007. The higher
interest expense in 2008 is associated with the financing of higher levels of
working capital items in connection with our seasonal ant-freeze business in
2008 compared to 2007.
Operating income increased to approximately $968,000 from $665,000 an
increase of $303,000 or 45.6%. This is a result of higher sales volume in the
quarter in addition to lower operating expenses.
Net profit for the quarter ended September 30, 2008 was approximately
$601,000 compared to $665,000 for the comparable period in 2007. The Company had
a tax expense for the quarter of $367,000, as a result of the Company being in a
tax paying position, as compared to the comparative quarter 2007 in which the
Company was utilizing a loss tax carry-forward.
For the Nine Months Ended September 30, 2008 compared to the Nine Months
Ended September 30, 2007
14
Net sales were approximately $16,957,000 for the nine month period ending
September 30, 2008 compared to $16,407,000 for the 2007 comparative period, an
increase of $550,000 or 3%. The increase in sales for the nine month period as
discussed above in the current quarter MD&A narrative is primarily higher sales
of our winterizing products, antifreeze being the largest product in this group.
In addition the Company is increasing its sales of the fuel additive StarTron
that helps eliminate the E- 10 (ethanol) gasoline problems. The Company also
increased the sales of other marine products.
Cost of goods sold as a percentage of sales increased to 71.1% of sales
compared to 66.1 % for the comparative 2007 nine month period. The cost of goods
sold percentage increased 5.0 %. This was a result of the unprecedented increase
in oil prices and the resulting increase in the company's raw material costs
that could not be fully passed on to our customers. In addition, due to the
higher sales mix of antifreeze which is at lower gross margin, it increased the
overall cost of goods percentage of sales.
Advertising and promotion expenses were approximately $1,079,000 for the
nine month period compared to $1,246,000 for the comparative nine month period
of 2007. Management has reduced the placement of ads in trade magazines to
partially offset the increase in cost of goods sold.
Selling and administrative expenses decreased to approximately $2,954,000
for the nine months ended September 30, 2008 compared to $3,191,000 for the nine
months ended September 30, 2007, a decrease of $237,000 or 7%. The significant
decrease was reduced general and administrative, non cash compensation expenses
and computer service expenses.
Interest expense for the 2008 period decreased approximately $16,000 when
compared to the same nine month period of 2007. This principally resulted from
reduced average borrowings on the Company's credit facility and lower interest
rates than for the comparative nine month period.
The net income was approximately $377,000 for the nine months ended
September 30, 2008 compared to a net income of approximately $896,000 for the
nine months ended September 30, 2007 a decrease of $519,000. The decrease
resulted from a combination of higher costs of goods as a result of the impact
of higher material cost due to higher oil prices. In addition the Company had
fully utilized its tax carry forward and had an income tax provision of $271,000
in 2008, compared to no income tax provision in 2007.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures: The Company has carried
out an evaluation under the supervision of management, including the President
and Chief Executive Officer ("CEO") and the Vice President - Finance and Chief
Financial Officer ("CFO"), of the effectiveness of the design and operation of
its disclosure controls and procedures. Based on that evaluation, our CEO and
CFO have concluded that, as of December 31, 2007, our disclosure controls and
procedures were effective to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC,
and include controls and procedures designed to ensure that information required
to be disclosed by us in such reports is accumulated and communicated to
management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosures.
Changes in Internal Control Over Financial Reporting. No change in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the most recent fiscal quarter
that has materially affected, or reasonably likely to materially affect, our
internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings:
We are not a party to any material litigation presently pending nor, to the
best knowledge of the Company, have any such proceedings been threatened.
15
Item 1A. - Risk Factors
Not Applicable
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds:
On July 1, 2008, 15,000 shares of the Registrant's common stock were issued
pursuant to the employee bonus program.
Item 3. - Defaults Upon Senior Securities:
Not Applicable
Item 4 - Submission of Matters to Vote of Security Holders:
Not applicable
Item 5 - Other Matters
Not applicable
Item 6. - Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf by the Undersigned
there unto duly authorized.
OCEAN BIO-CHEM, INC.
Date: November 10, 2008 /s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board of Directors
and Chief Executive Officer
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
16
Exhibit 31.1
CERTIFICATION
I, Peter G. Dornau certify that:
1. I have reviewed this Form 10-Q of Ocean Bio-Chem, Inc. as of and for the
period ended September 30, 2008;
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
-affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: November 10, 2008 /s/ Peter G.Dornau
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
17
Exhibit 31.2
CERTIFICATION
I, Jeffrey S. Barocas certify that:
1. I have reviewed this Form 10-Q of Ocean Bio-Chem, Inc. as of and for the
period ended September 30, 2008;
2.Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: November 10, 2008 /s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
18
Exhibit 32.1
CERTIFICATION
Pursuant to 18U.S.C.Section 1350, the undersigned officers of Ocean
Bio-Chem, Inc. (the "Company"), hereby certify that the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2008 (the "Report")
fully complies with the requirements of Section 13(a) or 15(d), as applicable,
of the Securities Exchange Act of 1934 and that the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operation of the Company.
Dated: November 10, 2008
/s/ Peter G. Dornau
Peter G. Dornau
Chairman of the Board of
Directors and Chief
Executive Officer
/s/ Jeffrey S. Barocas
Jeffrey S. Barocas
Chief Financial Officer
19