Item 2. Properties
The Registrant's executive offices and warehouse are located in Fort Lauderdale, Florida and held under a lease with an entity owned by officers of the Company which expires April 30, 1998. The lease covers approximately 12,000 square feet of office and warehouse space at an annual rental of approximately $84,000 including applicable sales taxes and subject to annual increases/ decreases based on the prevailing prime lending rate. This space has been leased since 1988.
In November 1994 the Company leased approximately a 10,000 square foot building for manufacturing, warehousing and office space. The agreement calls for a one year rental renewable yearly for five years. The cancellation requires a one year notification. The annual rental is approximately $69,000 which can be increased at each annual lease anniversary for the change in the consumer price index for the Miami area.
The Kinpak facility contains approximately 50,000 square feet of office, plant and warehouse space located on approximately 20 acres of land (the "Plant") and also includes a leased 1.5 acre docking facility on the Alabama River located eleven miles from the Plant.
Item 3.
Item 3. Legal Proceedings
The Company is involved in two related lawsuits:
1. Duane H. Newville and The Boden Co., d/b/a Adjust-A-Brush v. Star brite Distributing,Inc. ("Star brite") and Peter Dornau, Sr. ("Dornau"), pending in the United States District Court, Middle District of Florida was filed in 1994. In this action, Plaintiffs have sued Star brite and Dornau. This action arises out of Star brite's use of a product called Extend-A- Brush. Plaintiff seeks injunction relief and damages. Registrant and Dornau have filed a counterclaim for declaratory relief and antitrust violations. Registrant intends to pursue its counterclaim vigorously and to vigorously defend against the claim asserted by Plaintiffs.
2. Star brite Distributing, Inc. v. The Boden Co., d/b/a Adjust-A-Brush ("Boden"), pending in the Circuit court in and for Pinellas County, Florida was filed in 1993. This action involves the break-up of a business arrangement whereby Star brite was to market adjustable brushes manufactured by Boden, to the marine industry. Star brite has sued Boden for damages and injunctive relief. Boden has filed a counterclaim against Star brite and Dornau, seeking damages and injunctive relief. Registrant intends to vigorously pursue its claims and vigorously defend against the asserted counterclaims. This case has been stayed pending the outcome of the related case set forth in paragraph (1) above.
The Registrant does not believe that the results of this litigation would have a material adverse effect on its future results of operations, and it has not accrued any amounts for loss contingencies in this litigation based on its evaluation of the merits thereof.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5.
Item 5. Market For the Registrant's Common Equity and Related Stockholder Matters
A. The Registrant's Common Stock was sold to the public initially on March 26, 1981. The Common Stock of the Company is traded on the NASDAQ National Market System under the symbol OBCI. A summary of the trading ranges during each quarter of 1995 and 1994 is presented below.
The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.
B. The approximate number of Common Stock owners was 600 at December 31, 1995. The aforementioned number was calculated from a list provided by the transfer agent and registrar and indications from broker dealers of shares held by them as nominee for actual shareholders.
C. The Registrant has not paid any dividends since it has been organized.
D. The Company has no other dividend policy except as stated in (C) directly above.
Item 6.
Item 6. Selected Financial Data
The following tables set forth selected financial data as of, and for the years ending December 31,
Peter Dornau, a founder of the Company, has been President and a Director since 1973.
Jeffrey Tieger joined the Company in June 1977 as Vice President-Advertising.
Julio DeLeon joined the Company in June 1988 as Corporate Controller. In 1994 the Board of Directors elected Mr. DeLeon to serve as Vice President of Finance.
Item 11.
Item 11. Management Remuneration and Transactions
The information required by this section has been incorporated by reference to the Registrant's proxy statement in conjunction to the annual stockholder's meeting which shall be sent out to stockholders prior to 120 days past the Registrant's year end of December 31, 1995.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information at December 31, 1995 with respect to the beneficial ownership of the Registrant's Common Stock by holders of more than 5% of such stock and by all directors and officers of the Registrant as a group:
*Includes Options to purchase 273,000 shares as follows:
On February 3, 1993 the Company granted Mr. Dornau an option to purchase 100,000 shares of the Company's common stock at $1.38 per share. The option expires 5 years from grant. The option was granted in consideration of Mr. Dornau personally guaranteeing $1,300,000 of bank loans to the Company. The option exercise price of $1.38 is 100% of the price of the Company's common stock on the date of grant.
On April 13, 1994 the Company granted Mr. Dornau a five year option for 150,000 shares at a price of $2.25 representing 100% of the price at the time of grant in consideration of his personally guaranteeing the Company's $1,500,000 loan from its commercial bank.
Pursuant to the Company's various stock option plans Mr. Dornau may exercise 23,000 shares within 60 days of the issuance of the Registrant's financial statements.
Item 13.
Item 13. Certain Relationships and Related Transactions
On April 4, 1988, the Company entered a five year lease with a five year option for approximately 12,000 square feet of office and warehouse facilities in Ft. Lauderdale, Florida from an entity owned by officers of the Registrant. The lease requires a minimum rental of $84,000 with provision for yearly increases based on the Consumer Price Index (base: March 1988=100) and has provision for real estate taxes, operating and maintenance charge pass through. Additionally, the annual rental can increase or decrease 7% annually for every 1% increase or decrease in the lessor's commercial bank's rate from a base of 8.5%.
The Registrant has rights to the "Star brite" name and products only for the United States and Canada as a condition to its original public offering. The President of the Registrant is the beneficial owner of three companies which market Star brite products outside the United States. Registrant has advanced monies to assist in such foreign marketing in order to establish an international trademark. As of December 31, 1995 and 1994 amounts owed to Registrant by the two companies was approximately $547,000 and $302,000, respectively. These amounts have been advanced by the Registran on open account with requirements of repayment between five and seven years. Advances bear interest at the rate of interest charged to the Registrant on its bank line of credit.
A subsidiary of the Registrant currently uses the services of an entity which is owned by the President of the Registrant to conduct product research and development. The entity received $30,000 per year for the years 1995, 1994 and 1993 under such relationship.
Item 14.
Item 14. Exhibits and Financial Statement Schedules
The following documents are filed as a part of this report.
(A) Consolidated Financial Statements.
(i) Consolidated Balance Sheets, December 31, 1995 and 1994.
(ii) Consolidated Statements of Income for each of the three years ended December 31, 1995, 1994, and 1993.
(iii) Consolidated Statement of Shareholders' Equity for each of the three years ended December 31, 1995, 1994, and 1993.
(iv) Consolidated Statements of Cash Flows for each of the three years ended December 31, 1995, 1994 and 1993.
(v) Notes to Consolidated Financial Statements.
(vi) Schedules for each of the three years Ended December 31, 1995, 1994 and 1993.
(a) All other schedules are omitted because either they are not applicable or the required information is shown in the Consolidated Financial Statements or the Notes thereto.
(B) Exhibits
(3) Articles of Incorporation and by-laws are incorporated by reference to the Company's Registration statement on Form S-18 filed on March 26, 1981.
(16.1) Letter re: change in certifying accountant incorporated by reference as filed with form 8-K dated September 26,1995.
(22) Subsidiaries of the Registrant.
SIGNATURES
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.
OCEAN BIO-CHEM, INC. Registrant
By: /S/ PETER G. DORNAU
PETER G. DORNAU Chairman of the Board ofDirectors and Chief Executive Officer
March 28, 1996
By:/S/ PETER G. DORNAU PETER G. DORNAU Chief Financial Officer
March 28, 1996
SIGNATURES
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.
By:/S/ JEFFREY TIEGER JEFFREY TIEGER Director
March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has not sent an annual report or proxy material to security-holders as of this date. Subsequent to this filing the Registrant wil produce an annual report and proxy for its yearly security-holders meeting. Copies of such shall be sent to the SEC pursuant to current requirements.
EXHIBIT (See 22)
The following is a list of the Registrant's subsidiaries:
OCEAN BIO-CHEM INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
INFANTE, LAGO & COMPANY ILC CERTIFIED PUBLIC ACCOUNTANTS A. ROGER INFANTE, C.P.A. Biscayne Centre Suite 288 JESUS A. LAGO, JR., C.P.A. 11900 Biscayne Boulevard North Miami, Florida 33181 Telephone [305] 893-4341 Fax [305] 893-4507
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Directors Ocean Bio-Chem, Inc.
We have audited the accompanying consolidated balance sheet of Ocean Bio-Chem, Inc. ("The Company") and its subsidiaries as of December 31, 1995 and the related consolidated statements of income, shareholders' equity and cash flows for the year in the period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company as of and for the years ended December 31, 1994 and 1993 were audited by other auditors whose report dated February 22, 1995, expressed an unqualified opinion on those statement.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ocean Bio-Chem, Inc. and its subsidiaries as of December 31, 1995 and the consolidated results of its operations and its cash flows for the year in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
/S/ INFANTE, LAGO & COMPANY
May 11, 1996
LEVI, RATTNER, CAHLIN & CO. Certified Public Accountants
Allen S. Levi, C.P.A. Members of: Stephen J. Rattner, C.P.A American Institute of Richard A. Cahlin, C.P.A. Certified Public Accountants Florida Institute of Certified Public Accountants
Report of Independent Certified Public Accountants
Shareholders and Board of Directors Ocean Bio-Chem, Inc. and Subsidiaries Fort Lauderdale, FL 33314
We have audited the accompanying consolidated balance sheet of Ocean Bio-Chem, Inc. and subsidiaries as of December 31, 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material respects, the consolidated financial position of Ocean Bio-Chem, Inc. and subsidiaries as of December 31, 1994, and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
/S/ LEVI, RATTNER, CAHLIN & CO.
Miami, Florida February 22, 1995
Dade (304) 937-2272 Broward (305) 921-2272 Fax (305) 937-4721 20590 W. Dixie Highway North Miami Beach, Florida 33180-1129
The accompanying notes are an integral part of these financial statements.
Net income per share for the years prior to 1995 has been restated to reflect a 5% stock dividend distributed on April 15, 1995.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The Company had no cash equivalents at December 31, 1995, 1994 and 1993.
The accompanying notes are an integral part of these financial statements.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994, and 1993
Note 1 - Organization and summary of significant accounting policies:
Organization - The Company was organized during November, 1973 under the laws of the state of Florida and operates as a manufacturer and distributor of products to the recreational vehicle and marine aftermarkets. On October 11, 1984, the Board of Directors approved a change in the corporate name to Ocean Bio-Chem,Inc.,(the parent corporation) from the former name Star Brite Corporation.
Principles of consolidation - The consolidated financialstatements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Inventories - Inventories are primarily composed of finished goods and is stated at the lower of cost, using the first-in, first-out method, or market.
Prepaid advertising and promotion - During the years ended December 31, 1995 and 1994, the Company introduced several new products in the marine and recreational vehicle aftermarket industries. In connection therewith, the Company produced new promotional items to be distributed over a period of time and increased its catalog advertising. The Company follows the policy of amortizing these costs over a one year basis. At December 31, 1995 and 1994, the accumulated cost of materials on hand and other deferred promotional costs that will be charged against subsequent years operations amounted to $23,396 and $29,528, respectively.
Office equipment and furnishings - Office equipment and furnishings are stated at cost. Depreciation is provided over thee stimated useful lives of the related assets. In 1993 the Company changed its depreciation policy to the straight line method over the accelerated methods previously used. The effect of such change has not been provided on the financial statements since they are not significant. Depreciation expense for the years ended December 31, 1995, 1994 and 1993 was $74,384, $58,683 and $22,547 respectively.
Property and Plant - On February 27, 1996, the Registrant purchased the assets of Kinpak, Inc., a subsidiary of Kinark, Inc. The assets consist of a plant facility of approximately 50,000 square feet on approximately 20 acres in Montgomery, Alabama. The facility has filling and blow-molding capacity. The cost of the facility was $1,850,000 including an assumption of debt of $990,000.
Income taxes - The Company and its subsidiaries file consolidated income tax returns. During February 1992, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards 109, "Accounting for Income Taxes." The statement is required to be implemented for fiscal years beginning after December 15, 1992. The application of SFAS 109 caused no material changes on the financial statements. There are no significant temporary differences.
The Components of income taxes are as follows: Year ended December 31,
The reconciliation of income tax expense at the statutory rate to the reported income tax expense is as follows:
Year Ended December 31,
Trademarks, trade names and patents - The Star brite trade name and trademark were purchased in 1980 for $880,000. The cost of trademarks and trade names is being amortized on a straight-line basis over the prescribed useful life of 40 years. The Registrant has two patents which it believes are valuable in limited product lines, but not material to its success or competitiveness in general. There are no capitalized costs for these two patents. The Registrant's trade name has been trademarked and the Registrant has had no incidents of infringement.
Earnings per share - Earnings per share for the year ended December 31, 1995, 1994, and 1993 were calculated on the basis of 3,476,473, 3,278,241, and 3,240,378 weighted average common stock and common stock equivalent outstanding, respectively. The common stock equivalent consists of options to purchase common stock. The weighted average shares outstanding for the year ended 1994 and 1993 have been restated to reflect a 5% stock dividend given in 1995 and a 5% stock dividend given in 1994.
Translation of Canadian currency - The accounts of the Company's Canadian subsidiary are translated in accordance with Statement of Financial Accounting Standard No. 52, which requires that foreign currency assets and liabilities be translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates prevailing throughout the period. The effects of unrealized exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated as the cumulative translation adjustment in shareholders' equity. Realized gains and losses from foreign currency transactions are included in net earnings for the period. Fluctuations arising from inter-company transactions that are of a long term in nature are accumulated as cumulative translation adjustments.
Reclassifications - Certain financial statement items for the years ended December 31, 1994 and 1993 have been reclassified to conform with the 1995 presentation.
Note 2 - Office equipment and furnishings:
The Company's office equipment and furnishings consisted of the following:
During 1992 the Company adopted an incentive stock option plan covering 200,000 shares of common stock. The following schedule shows the status of outstanding options under this plan.
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994, and 1993
On February 3, 1993 the Company granted the President an option to purchase 100,000 shares of the Company's common stock at $1.38 per share. The option expires in 5 years. The option exercise price is 100% of the price of the Company's common stock on the date of the grant. The options were granted to Mr. Dornau in connection with his guarantee of the Company's loan from its commercial bank.
On April 13, 1994 the Company granted Mr. Dornau an option to purchase 150,000 shares of the Company's common stock at $2.25 per share. The option expires in 5 years The option exercise price is 100% of the price of the Company's common stock on the date of the grant. The options were granted to Mr. Dornau in connection with the guarantee of the Company's current loan from its commercial bank.
Note 11 - Major Customers
The Company has one major customer, Wal-mart. Sales to this customer represent approximately 20% of revenues. The Company enjoys good relations with this customer. However, the loss of this customer could have an adverse impact on the Company.