-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RqqBfFlbP9RWDO7EPyg22hvygF63aojTgwjVudiTkg1eJFznwKetf0fcKVD8aU/+ zzbwgtPzQuohsui3UQI+HQ== 0000350737-02-000026.txt : 20020415 0000350737-02-000026.hdr.sgml : 20020415 ACCESSION NUMBER: 0000350737-02-000026 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCEAN BIO CHEM INC CENTRAL INDEX KEY: 0000350737 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] IRS NUMBER: 591564329 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11102 FILM NUMBER: 02588583 BUSINESS ADDRESS: STREET 1: 4041 SW 47TH AVE CITY: FORT LAUDERDALE STATE: FL ZIP: 33314 BUSINESS PHONE: 9545876280 MAIL ADDRESS: STREET 1: 4041 SW 47TH AVE CITY: FT LAUDERDALE STATE: FL ZIP: 33028 FORMER COMPANY: FORMER CONFORMED NAME: STAR BRITE CORP DATE OF NAME CHANGE: 19841204 10-K 1 form10k-1201.txt SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 form 10K /s/ Annual Report Pursuant to Section 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 (fee required) For the Fiscal Year Ended December 31, 2001 Commission File 2-70197 OCEAN BIO-CHEM, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as specified in its charter) Florida 59-1531532 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4041 S. W. 47 Avenue, Fort Lauderdale, Florida 33314 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (954) 587-6280 Securities registered pursuant to Section 12 (g) of the Act Common Stock, Par Value $.01 - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (x) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. $1,980,000 as of February 1, 2002 Indicate the number of shares outstanding of Registrant's common stock as of February 1, 2002. 4,239,889 shares of common stock, par value $.01 per share DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement to be filed within 120 days of December 31, 2001. PART 1 Item 1. Business General: The Company was organized on November 13, 1973 under the laws of the state of Florida. The Company is principally engaged in the manufacturing, marketing and distribution of a broad line of appearance and maintenance products for boats, recreational vehicles, automotive and aircraft under the Star brite name. In addition, the Company produces private label formulations of many of its products for various customers as well as provides custom blending and packaging services to customer specifications. The Registrant's trade name has been trademarked and the Registrant has had no incidents of infringement. In the event of such infringement, the Registrant would defend its trade name vigorously. The Registrant has two patents which it believes are valuable in limited product lines, but not material to its success or competitiveness in general. Products of the Company: Set forth is a general description of the products which the Company manufactures and markets: Marine: The Marine line consists of polishes, cleaners, protectants and waxes of various formulations. The line also includes various vinyl protectants, cleaners, teak cleaners, teak oils, bilge cleaners, hull cleaners, silicone sealants, polyurethane sealants, polysulfide sealants, gasket materials, lubricants, antifouling additives and anti-freeze coolants. In addition, the Company manufactures a line of brushes, poles and tie-downs. Automotive: The company manufactures a line of automotive products under the Star brite brand name including brake and transmission fluids, hydraulic, gear and motor oils, and related items. In addition, antifreeze and windshield washes are produced in varying formulations both under the Star brite brand as well as private labeled for customers. The Company also has a line of automotive polishes, cleaners and asociated appearance items. Recreational vehicle: The recreational vehicle products are made up of cleaners, polishes, detergents, fabric cleaners and protectors, silicone sealants, waterproofers, gasket materials, degreasers, vinyl cleaners, protectors and anti-freeze coolants. Aircraft: The Aircraft product line consists primarily of polishes and cleaners. Although the above products are utilized for different types of vehicles, boats and household purposes, it is management's view that they all constitute one industry segment. Manufacturing: The Company manufactures and packages its products as well as contracts with unrelated companies to package its products which are manufactured to the Company's specifications, using the Company's formulas for each product. All raw materials used in manufacturing are readily available. Each external packager enters into a confidentiality agreement with the Company. The Company has patent protection on some of its products. The Company designs its own packaging and supplies the external manufacturers with the appropriate design and packaging. Manufacturing is primarily performed by the Company and two independent entities located in the northeastern area of the country. The Company believes that its internal manufacturing capacity as well as the 2 arrangements with the present outside manufacturers are adequate for its present needs. In the event that these arrangements are discontinued with any manufacturer, the Company believes that substitute facilities can be found without substantial adverse effect on manufacturing and distribution. On February 27, 1996, the Registrant, through a wholly-owned operating subsidiary, Kinbright, Inc. (an Alabama corporation), acquired certain assets of Kinpak, Inc., (a Georgia corporation) ("Kinpak"), and assumed two (2) leases of land and facilities leased by Kinpak from the Industrial Development Board of the City of Montgomery, Alabama and the Alabama State Docks Department. On December 20, 1996, the Registrant entered a new agreement with the Industrial Development Board of the City of Montgomery, Alabama to issue new Industrial Development Bonds in the amount of $4,990,000 to repay certain financial costs and to expand the capacity of the Alabama facility. The leased premises consist of a manufacturing and distribution facility containing approximately 110,000 square feet located on approximately 20 acres of real property and a docking facility located on the Alabama River. In addition, Registrant purchased the machinery, equipment and inventory located on the leased premises. Subsequent to the acquisition, the Registrant changed the name of its subsidiary, Kinbright, Inc. to Kinpak Inc. (an Alabama corporation). Marketing: The Company's marine products and recreational vehicle products are sold through national mass merchandisers such as Wal-mart and Home Depot and through specialized marine retailers such as West Marine and Boat America Corporation. The Company also uses distributors who in turn sell its products to specialized retail outlets for that specific market. Currently the Company has one customer (West Marine, Inc.) to which sales exceed 10% of consolidated revenues. The Company markets its products through internal salesmen and approximately 250 independent sales representatives who work on an independent contractor- commission basis. The Officers of the Company also participate in sales. The Company also aids marketing through advertising campaigns in national magazines related to specific marketplaces. The products are distributed primarily from the Company's manufacturing and distribution facility in Alabama. As of this date, the Company has no significant backlog of orders. The Registrant does not give customers the right to return product. The majority of the Company's products are non-seasonal and are sold throughout the year. Competition: Marine: The Company has two major and a number of smaller regional competitors in the marine marketplace. The principal elements of competition are brand recognition, price, service and the ability to deliver products on a timely basis. In the opinion of management no one or few competitors holds a dominant market share. Management believes that it can increase or maintain its market share through its present methods of advertising and distribution. Automotive: The automotive marketplace into which the Company began selling various products during 2001 is the largest in which the Company operates. There are many entities, both national and regional, which represent competition to the Company. Many are more established and have greater financial resources than the Company. However, the market is so large that even a minimal market share could be significant to the Company. The principal elements of competition are brand recognition, price, service and the ability to deliver products on a timely basis. Management believes that it can establish a reasonable market share through its present methods of advertising and distribution. Recreational Vehicle: The recreation vehicle appearance and maintenance market is parallel to that of the marine market. In this market the Company competes with two major and a number of smaller competitors none of which singly or as a few have a dominant market share. Management is of the opinion that it can increase or maintain the Company's market share by utilizing similar methods as those employed in the marine market. 3 Personnel: The Company employs approximately 18 full time employees at its corporate office in Fort Lauderdale, Florida. These employees are engaged in administration, clerical, and accounting functions. In addition, the Company has manufacturing and fabrication personnel in both Florida and Alabama. The following is a tabulation of the total number of personnel working for the Company and/or its subsidiaries: Full-time Location Description Employees Montgomery, Alabama Manufacturing and distribution 75 Fort Lauderdale, Florida Manufacturing and distribution 35 --- 110 === New Product Development: The Company continues to develop specialized products for the marine, automotive, and recreational vehicle trade. During fiscal 2001, the Registrant launched a line of automotive oils, fluids and related products. During late 2001 and early 2002 the Company started production and shipment of a line of marine engine oils. The Company believes that its current operations and working capital financing arrangement are sufficient to meet development expenditures without securing external funding. Financial Information Relating to Approximate Domestic and Canadian Gross Sales:
Year ended December 31, 2001 2000 1999 ---- ---- ---- United States: Northeast $ 3,709,000 $ 3,429,000 $ 2,829,000 Southeast 5,520,000 4,863,000 4,463,000 Central 5,684,000 5,075,000 4,575,000 West Coast 4,354,000 3,929,000 3,381,000 ------------ ------------ ------------ 19,267,000 17,296,000 15,248,000 Canada (US Dollars) 609,000 777,000 704,000 ------------ ------------ ------------ $ 19,876,000 $ 18,073,000 $ 15,592,000 ============ ============ ============
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 Litigation 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 "believe", "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 which 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. 4 Item 2, Properties The Registrant's executive offices and warehouse are located in Fort Lauderdale, Florida and are held under a lease with an entity owned by certain officers of the Company. The lease covers approximately 12,700 square feet of office and warehouse space. On May 1, 1998, the Registrant renewed its lease agreement for a term of ten years. The lease calls for an initial annual rental of $94,800 increasing by 2% per annum on the annual anniversary of the lease for the term thereof. Additionally, the landlord is entitled to collect from the Company its pro-rata share of all taxes, assessments, insurance premiums, operating changes, maintenance charges and any other expenses which arise from ownership. During November 1994, the Company leased an approximately 10,000 square foot building in Fort Lauderdale, Florida for manufacturing, warehousing and office space from an unrelated third party. Such lease terminates on October 31, 2002. Rent charged to operations during the year ended December 31, 2001 amounted to approximately $90,000. The Montgomery, Alabama facility contains approximately 110,000 square feet of office, plant and warehouse space located on 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. The Registrant financed the facility and its improvements with an Industrial Revenue Bond in the amount of $4,900,000. At December 31, 2001, approximately $9,000 was held in trust to pay for equipping future equipment required at the facility. Item 3. Legal Proceedings The Company is a party to litigation associated with a patent it holds on one of its products. (North American Oil Company, Inc. v. Star Brite Distributing, Inc., Case No. 01-1575-1576, pending in the United States Court of Appeals for the Federal Circuit (on appeal from the United States District Court for the Northern District of Georgia, Atlanta Division, Civil Action No. 1-98-CV-1589-RWS). The U.S. District Court issued an Order granting North American Oil Company, Inc.'s motion for a partial summary judgement finding against the Company during March, 2001. At present, such Order is before the Court of Appeals. Both the Company and its counsel believe that the lower court's Order is flawed and will be reversed. However, there is no assurance that such result will be achieved. In either event, the case must go back to the District Court to resolve the remaining issues associated with the case including, among other things, damages to be awarded, if any, to the prevailing party. Item 4. Submission of Matters to a Vote of Security Holders None 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 2001 and 2000 is presented below.
Market Range of Common Stock B 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2001 High $1.00 $1.00 $1.88 $1.82 Low $ .62 $ .53 $ .84 $1.11 2000 High $2.56 $1.44 $1.09 $1.00 Low $1.19 $1.06 $ .97 $ .57
5 A. 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 800 at December 31, 2001. 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 cash dividends since it has been organized. However, in 2000 and 1996 the Company issued a 5% stock dividend. D. The Company has no other dividend policy except as stated in C. directly above. Item 6. Selected Financial Data The following tables set forth selected financial data as of, and for the years ending December 31,
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Operations Gross sales $19,876,095 $18,072,784 $15,952,165 $14,077,993 $12,849,507 Net sales $18,013,393 $16,139,256 $14,317,485 $12,705,473 $11,599,113 Net income (loss) $ 106,384 ($ 244,823) $ 431,484 $ 83,059 ($ 168,506) Earnings (loss) per common share $ .03 ($ .06) $ .11 $ .02 ($ .05) Balance sheet Working capital $ 1,371,577 $ 1,724,043 $ 2,797,708 $ 1,956,647 $ 1,976,517 Total assets $15,030,206 $15,410,264 $13,547,452 $12,846,794 $13,276,542 Long term obligations $ 3,830,076 $ 3,963,145 $ 4,152,332 $ 4,070,000 $ 4,370,000 Total liabilities $10,268,884 $10,737,972 $ 8,629,991 $ 8,390,036 $ 8,866,122 Shareholders' equity $ 4,761,322 $ 4,672,292 $ 4,917,461 $ 4,456,758 $ 4,410,420
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Company's consolidated financial statements contained herein as Item 14. Liquidity and Capital Resources: The primary sources of the Registrant's liquidity are its operations and short-term borrowings from a commercial bank. The Registrant's line of credit aggregates $5.0 million, is due on demand, bears interest at prime and is secured by the Registrant's trade receivables, inventory, and intangible 6 assets.The Registrant is required to maintain a minimum working capital of $1.5 million and meet other financial covenants during the term of the agreement. As of December 31, 2001, the Company was obligated under this arrangement in the amount of $3,665,860 and was not in compliance with certain applicable loan covenants. The lender has agreed to waive such covenant violations through March 30, 2002. The Registrant obtained an irrevocable letter of credit in order to market its Alabama Industrial Revenue Bonds at favorable rates. Under such letter of credit agreement, renewable annually with a current maturity of December 20, 2001, the Company is required to maintain working capital of $1.5 million, debt to tangible net worth of 2 to 1, and a debt service coverage of 1.7 times. In connection with the purchase and expansion of the Alabama facility, the Registrant closed on an Industrial Revenue Bond for the repayment of certain advances used to purchase the Alabama facility and to expand such facility for the Registrant's future needs. During March, 1997, the Registrant refinanced $4,990,000 of such bonds of which approximately $9,000 was held in trust at December 31, 2001 for equipping the expansion. The bonds are marketed weekly at the prevailing rates for such instruments. Currently such bonds carry interest ranging between 1.4 % and 1.8 % annually. Interest and principal are payable quarterly. The Registrant believes that current operations are sufficient to meet these obligations. The Registrant is involved in making sales in the Canadian market and must deal with the currency fluctuations of the Canadian currency. The Registrant does not engage in currency hedging and deals with such currency risk as a pricing issue. During the past few years, the Registrant has introduced various new products to the marketplace. This has required the Registrant 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 the overall operations of the Registrant. The Registrant believes that all required capital to maintain such increases can continue to be provided by operations and current financing arrangements. In connection with the previously announced automotive oils and related fluids program, the Company expended approximately $1,600,000 of its resources during the years ended December 31, 2001 and 2000. Such amount was net of the balance which remained in escrow from its Alabama Industrial Revenue Bond Issue for future equipment needs. Such expenditures represented new equipment, personnel and related costs associated with the program. Through December 31, 2001, the financial impact of these transactions was a short-term reduction in liquidity and profitability. Although limited production commenced and initial customer orders were received during 2000, full-scale operations related to this line were not accomplished until mid- 2001. The program comprises approximately forty (40) new line items in the Company's product line and represents the Company's re-entry into the automotive aftermarket. Year ended December 31, 2001 Fourth Quarter Results: Comparing the quarters ended December 31, 2001 and 2000, net sales increased approximately $ 172,000 or 3.9%. This was primarily due to increased sales of antifreeze, oils, automotive fluids, and private label products. 7 Results of Operations: Calendar year 2001/2000: Sales and earnings varied when comparing the year ended December 31, 2001 to 2000 principally due to the factors enumerated below. Net sales - Net sales increased 11.6% or approximately $ 1,874,000 comparing the year ended December 31, 2001 with the 2000 period. This was primarily due to increased sales of anti- freeze, private label products, automotive fluids, and marine items. Cost of goods sold - Cost of goods sold increased from 73.4% to 76.3 % as a percentage of net sales when comparing 2001 to 2000. This was primarily attributable to a differing product mix which was impacted by introductory pricing of the Company's new automotive fluids and an increase in private packaging revenues which typically yield lower margins. Advertising and promotion - Advertising expense decreased approximately $ 30,800 or 4.4% when comparing 2001 to 2000. This was primarily due to planned decreases in media advertising expenditures and lower customer co-op advertising. Selling, general and administrative - Selling, general and administrative expenses decreased approximately $ 470,000 or 13.8 % when comparing 2001 to 2000. The most significant single item reflected therein was a decrease in legal fees. Increased personnel costs and anticipated increases in other administrative expenses also affected the change for the year. Interest expense - Interest expense incurred during 2001 decreased by approximately $ 62,600 over 2000. The decrease was primarily due to recently announced reductions in prevailing interest rates. Calendar year 2000/1999: Sales and earnings varied when comparing the year ended December 31, 2000 to 1999 principally due to the factors enumerated below. Net sales - Net sales increased 12.7% or approximately $1,821,800 comparing the year ended December 31, 2000 with the 1999 period. This was primarily due to increased sales of antifreeze, private label products, and sales of brushes and straps. Cost of goods sold - Cost of goods sold increased approximately 4.2% as a percentage of net sales when comparing 2000 to 1999. This change was due the lower than anticipated margins on anti-freeze products resulting from increased materials costs and, increased manufacturing overhead at the Company's Alabama plant somewhat related to the above mentioned automotive oils and related fluids program. Advertising and promotion - Advertising expense increased approximately $142,700 or 26% when comparing 2000 to 1999. This was primarily due to planned increases in the advertising budget. Selling, general and administrative - Selling, general and administrative expenses increased approximately $658,200 or 24% when comparing 2000 to 1999.This was attributable to increased personnel costs primarily associated with the above mentioned automotive oils and related fluids program, increased professional fees and other normal incremental costs of operations. Interest expense - Interest expense incurred during 2000 increased by approximately $159,100 over 1999 reflecting the effect of recently promulgated interest rate increases as well as increased borrowings. Item 8. Financial Statements and Supplementary Data See consolidated financial statements as set forth in Item 14. 8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 10. Executive Officers and Directors of the Registrant The following tables set forth the name and ages of all elected directors and officers of the Registrant, as of December 31, 2001. All directors will serve until the next annual meeting of directors or until their successors are duly elected and qualified. Each officer serves at the pleasure of the board of directors. There are no arrangements or understandings between any of the officers or directors of the Company and the Company and any other persons pursuant to which any officer or director was or is to be selected as a director or officer.
NAME OFFICE AGE ---- ------ --- Peter G. Dornau President, Chief Executive Officer, and 62 Director since 1973 Jeffrey Tieger Vice President, Secretary and Director 58 since 1977 Edward Anchel Vice President-Finance, Chief Financial 55 Officer since 1999 and Director since 1998 James Kolisch Director since 1998 50 Laz Schneider Director since 1998 62 John B. Turner Director since 2000 54
Peter G. 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. Edward Anchel joined the Company in March 1999 as Vice President-Finance. For the five years immediately preceding his employment, he was an officer of a privately owned manufacturing company and in private practice as a Certified Public Accountant. He was elected to serve as an outside Director of the Company during May, 1998. James Kolisch is engaged in the insurance industry and was elected to serve as an outside Director of the Company during May, 1998. Mr. Kolisch provides services to the Company in the capacity of insurance agent. Laz Schneider is an attorney in private practice and was elected to serve as an outside Director of the Company during May, 1998. Mr. Schneider is a partner in the law firm that serves as the Company's lead counsel in various corporate and litigation matters. John B. Turner is a retired insurance executive who holds a Series 7 stock brokerage license. His professional experience in the aforementioned areas spans in excess of twenty-five years. 9 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 shareholders' meeting which shall be sent out to shareholders prior to 120 days past the Registrant's year end of December 31, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information at December 31, 2001 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:
Title of Name and Address of Amount and Nature of Percent Class Beneficial Owner Beneficial Ownership of Class - -------- ------------------- -------------------- -------- Common Peter G. Dornau, President, Director 2,537,861* 56.0% 4041 S. W. 47 Avenue Ft. Lauderdale, FL 33314 Common All directors and officers as a group 6 individuals 2,920,005* 64.5%
*Includes options to purchase shares of the Company's common stock as follows: On March 25, 1999, the Company granted Messrs. Dornau and Tieger a five year option for 100,000 shares each at an exercise price of $.89 representing the market price at the time of grant. Such grants were awarded in consideration of their making a loan to the Company in the amount of $400,000 from an affiliated company in which they are each 50% co-shareholders. As of December 31, 2001, pursuant to the Company's various stock option plans, Mr. Dornau has options to acquire 90,000 shares of the Company's common stock of which 21,000 shares are exercisable within 60 days of the issuance of the Registrant's December 31, 2001 financial statements. As of December 31, 2001, pursuant to the Company's various stock option plans, the Company's directors and officers, as a group, have options to acquire 295,000 shares of the Company's common stock of which 88,000 shares are exercisable within 60 days of the issuance of the Registrant's December 31, 2001 financial statements. Item 13. Certain Relationships and Related Transactions On May 1, 1998, the Company entered into a ten year lease for approximately 12,700 square feet of office and warehouse facilities in Fort Lauderdale, Florida from an entity owned by officers of the Registrant. The lease required a minimum rental of $94,800 the first year increasing by 2% on the anniversary of the lease throughout the term. Additionally, the landlord is entitled to collect from the Company its pro- rata share of all taxes, assessments, insurance premiums, operating charges, maintenance charges and any other expenses which arise from ownership. The Registrant believes that the terms of this lease are comparable to those of similar properties in the same geographic area of the Company available from unrelated third parties. 10 The Registrant acquired the rights to the "Star brite" name and products only for the United States and Canada in conjunction with its original public offering during March, 1981. The President of the Registrant is the beneficial owner of three companies which market Star brite products outside the United States. The Registrant has advanced monies to assist in such foreign marketing in order to establish an international trademark. As of December 31, 2001 and 2000 amounts owed to Registrant by affiliates were approximately $563,700 and $598,200, respectively. These amounts have been advanced to such affiliates with repayment requirements of between five and seven years bear interest at the rate charged the Registrant pursuant to its line of credit. Sales to such affiliates aggregated approximately $319,700 and $360,600 during the years ended December 31, 2001 and 2000, respectively. A subsidiary of the Registrant currently uses the services of an entity which is owned by its President to conduct product research and development. Such entity received $30,000 per year during the years ended December 31, 2001, 2000 and 1999 under such relationship. Item 14. Exhibits, Financial Statements, Schedules and Reports Filed on Form 8K The following documents are filed as part of this report: (A) Consolidated financial statements: (i) Consolidated balance sheets, December 31, 2001 and 2000. (ii) Consolidated statements of operations for each of the three years ended December 31, 2001, 2000 and 1999. (iii) Consolidated statement of shareholders' equity for each of the three years ended December 31, 2001, 2000 and 1999. (iv) Consolidated statements of cash flows for each of the three years ended December 31, 2001, 2000 and 1999. (v) Notes to consolidated financial statements. (a) All schedules are omitted because either they are not applicable or the required information is shown in the consolidated financial statement or the notes thereto. 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. (22) Subsidiaries of the Registrant. (B) Reports Filed on Form 8K 11 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 Page ---- Report of independent auditors 1 Consolidated balance sheets 2 Consolidated statements of operations 3 Consolidated statement of shareholders' equity 4 Consolidated statements of cash flows 5 Notes to consolidated financial statements 6-12 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders Ocean Bio-Chem, Inc. and its Subsidiaries Ft. Lauderdale, Florida We have audited the consolidated balance sheets of Ocean Bio-Chem, Inc. (the "Company") and its Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 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 its Subsidiaries at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with generally accepted accounting principles. BERKOVITS, LAGO & COMPANY, LLP March 21, 2002 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000 ASSETS
Current Assets: 2001 2000 ---- ---- Cash $ 82,000 $ 123,515 Trade accounts receivable net of allowance for doubtful accounts of approximately $152,500 and $23,000, respectively 3,286,848 3,417,827 Inventories 4,296,183 4,506,987 Income taxes receivable - 173,404 Due from officer - 161,100 Prepaid expenses and other current assets 145,354 116,037 ----------- ----------- Total current assets 7,810,385 8,498,870 ----------- ----------- Property, plant and equipment, net 6,002,445 5,643,550 ----------- ----------- Other assets: Funds held in escrow for equipment 9,084 41,506 Trademarks, trade names, and patents, net of accumulated amortization 330,439 353,431 Due from affiliated companies, net 563,731 598,237 Deposits and other assets 314,122 274,670 ----------- ----------- Total other assets 1,217,376 1,267,844 ----------- ----------- Total assets $15,030,206 $15,410,264 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable trade $ 2,163,245 $ 2,119,865 Note payable bank 3,665,860 4,250,000 Current portion of long-term debt 470,994 355,306 Accrued expenses payable 138,709 49,656 ----------- ----------- Total current liabilities 6,438,808 6,774,827 ----------- ----------- Deferred income taxes payable 111,200 70,700 ----------- ---------- Long-term debt less current portion 3,718,876 3,892,445 ----------- ----------- Commitments and contingencies Shareholders' equity: Common stock - $.01 par value, 10,000,000 shares authorized, 4,239,889 and 4,105,889 shares issued and outstanding at December 31, 2001 and 2000, respectively 42,399 41,060 Additional paid-in capital 3,755,219 3,720,377 Foreign currency translation adjustment ( 262,933) ( 209,398) Retained earnings 1,234,832 1,128,448 ----------- ----------- 4,769,517 4,680,487 Less treasury stock 7,519 shares, at cost ( 8,195) ( 8,195) ----------- ----------- Total shareholders' equity 4,761,322 4,672,292 ----------- ----------- Total liabilities and shareholders' equity $15,030,206 $15,410,264 =========== ===========
The accompanying notes are an integral part of these financial statements. 2 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
2001 2000 1999 ---- ---- ---- Gross sales $19,876,095 $18,072,784 $15,952,165 Less returns and allowances 1,862,702 1,933,528 1,634,680 ----------- ----------- ----------- Net sales 18,013,393 16,139,256 14,317,485 Cost of goods sold 13,744,703 11,852,435 9,915,216 ----------- ----------- ----------- Gross profit 4,268,690 4,286,821 4,402,269 ----------- ----------- ----------- Operating expenses: Advertising and promotion 663,922 694,729 552,028 Selling and administrative 2,947,489 3,417,378 2,759,207 Interest 511,292 573,882 414,785 ----------- ----------- ----------- Total Operating Expenses 4,122,703 4,685,989 3,726,020 ----------- ----------- ----------- Operating profit (loss) 145,987 ( 399,168) 676,249 Interest and other income 897 14,345 19,635 ----------- ----------- ----------- Income (loss) before provision (benefit) for income taxes 146,884 ( 384,823) 695,884 Provision (benefit) for income taxes 40,500 ( 140,000) 264,400 ----------- ----------- ----------- Net income (loss) 106,384 ( 244,823) 431,484 Other comprehensive income: Foreign currency translation, net of taxes ( 53,535) ( 48,526) ( 15,206) ----------- ----------- ----------- Comprehensive Income (loss) $ 52,849 ($ 293,349) $ 416,278 =========== =========== =========== Earnings (loss) per share: Basic $ .03 ($ .06) $ .11 =========== =========== =========== Diluted $ .03 ($ .06) $ .11 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 3 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Foreign Common stock Additional currency Retained Treasury Shares Amount paid-in capital adjustment earnings stock Total ------- ------ --------------- ---------- -------- --------- --------- January 1, 3,753,017 $37,530 $3,232,327 ($145,666) $1,332,567 $ - $ 4,456,758 1999 Net income 431,484 - 431,484 Issuance of stock 69,482 695 50,605 51,300 Acquisition of treasury stock, 6,875 shares ( 6,875) ( 6,875) Foreign currency translation adjustment ( 15,206) ( 15,206) ---------- -------- --------- -------- --------- -------- ------------ December 31, 1999 3,822,499 38,225 3,282,932 ( 160,872) 1,764,051 ( 6,875) 4,917,461 Net loss ( 244,823) ( 244,823) Issuance of stock 283,390 2,835 437,445 ( 390,780) 49,500 Acquisition of treasury stock, 1,730 shares ( 1,320) ( 1,320) Foreign currency translation adjustment ( 48,526) ( 48,526) ---------- ------- --------- --------- --------- -------- ------------ December 31, 2000 4,105,889 41,060 3,720,377 ( 209,398) 1,128,448 ( 8,195) 4,672,292 Net income 106,384 106,384 Issuance of stock 134,000 1,339 34,842 36,181 Foreign currency translation adjustment ( 53,535) ( 53,535) ---------- ------- --------- --------- --------- ------- ------------ December 31, 2001 4,239,889 $42,399 $3,755,219 ($262,933) $1,234,832 ($ 8,195) $4,761,322 ========= ====== ========= ======== ========= ======= ============
The accompanying notes are an integral part of these financial statements. 4 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ 106,384 ($ 244,823) $ 431,484 Adjustments to reconcile net income (loss) to net cash provided (used) by operations: Depreciation and amortization 494,901 410,855 329,501 Issuance of common stock to employees 36,181 49,500 51,300 Changes in assets and liabilities: (Increase) decrease in accounts receivable 130,979 ( 613,755) ( 474,360) (Increase) decrease in inventory 210,804 ( 776,666) ( 38,444) (Increase) decrease in prepaid expense and other 265,737 ( 169,797) 32,931 Increase in accounts payable and accrued expenses 172,931 976,921 252,382 ------------- ------------ ---------- Net cash provided (used) by operating activities 1,417,917 ( 367,765) 584,794 ------------- ------------ ---------- Cash flows from financing activities: Net borrowings (reductions) under line of credit ( 584,140) 1,350,000 ( 109,118) Repayment of amounts due from affiliates, net 34,506 248,743 23,171 Increases in (payments on) long term debt, net ( 57,881) ( 218,940) 96,691 ------------ ------------ ---------- Net cash (used) provided by financing activities ( 607,515) 1,379,803 10,744 ------------ ------------ ---------- Cash flows used by investing activities: Purchase of property, plant and equipment ( 830,804) ( 1,516,108) ( 446,823) Purchases of treasury shares of common stock - ( 1,320) ( 6,875) Utilization of trust funds for equipment purchased 32,422 243,659 298,267 ------------- ----------- ---------- Net cash used by investing activities ( 798,382) ( 1,273,769) ( 155,431) ------------- ----------- ---------- Increase (decrease) in cash prior to effect of exchange rate on cash 12,020 ( 261,731) 440,107 Effect of exchange rate on cash ( 53,535) ( 48,526) ( 15,206) ------------- ----------- ---------- Net increase (decrease) in cash ( 41,515) ( 310,257) 424,901 Cash at beginning of year 123,515 433,772 8,871 -------------- ----------- ---------- Cash at end of year $ 82,000 $ 123,515 $ 433,772 ============ ============ ========== Supplemental information Cash used for interest during period $ 511,292 $ 573,882 $ 398,561 ============ =========== ========= Cash used for income taxes during period $ - $ 123,447 $ 72,000 ============ =========== =========
The Company had no cash equivalents at December 31, 2001, 2000 and 1999. The accompanying notes are an integral part of these financial statements. 5 OCEAN BIO-CHEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 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 marine, automotive, and recreational vehicle aftermarkets. On October 11, 1984, the Board of Directors approved a change in the corporate name to Ocean Bio-Chem, Inc. (the parent company) from its former name, Star brite Corporation. Principles of consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. Inventories - Inventories are primarily composed of raw materials and finished goods and are stated at the lower of cost, using the first-in, first-out method, or market. Prepaid advertising and promotion - During the years ended December 31, 2001 and 2000, the Company introduced certain 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, 2001 and 2000, the accumulated cost of materials on hand and other deferred promotional costs which will be charged against the subsequent year's operations amounted to approximately $24,800 and $37,700, respectively. Property, plant and equipment - Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. Stock based compensation - The Company follows the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, to record compensation costs. Opinion No. 25 requires that compensation cost be based on the difference, if any, between the quoted market price of the stock and the price the employee must pay to acquire the stock depending on the terms of the award. The company has not adopted Statement of Financial Accounting Standards No. 123 to record such compensation costs. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of credit risk - Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. Concentrations of credit with respect to accounts receivable are limited because the majority of the accounts receivable are with large retail customers. The single largest customer's receivable represents approximately 17% of the consolidated balance. Fair value of financial instruments - The carrying amount of cash approximates its fair value. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities, and the carrying amount approximates fair value. 6 Income taxes - The Company and its subsidiaries file consolidated income tax returns. The Company has adopted Statement of Financial Accounting Standards No. 109 in the accompanying consolidated financial statements. The only temporary differences included therein are attributable to differing methods of reflecting depreciation for financial statement and income tax purposes. 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 an estimated useful life of 40 years. The Company 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. Translation of Canadian currency - The accounts of the Company's Canadian subsidiary are translated in accordance with Statement of Financial Accounting Standards 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 rate 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 or the period. Fluctuations arising from inter- company transactions that are of a long term in nature are accumulated as cumulative translation adjustments. Reclassifications - Certain items in the accompanying consolidated financial statements for the years ended December 31, 2000 and 1999 have been reclassified to conform with the 2001 presentation. Note 2 - Property, plant and equipment: The Company's property, plant and equipment consisted of the following:
December 31, 2001 2000 ---------- ----------- Land $ 278,325 $ 278,325 Building 2,928,548 2,920,708 Manufacturing and warehouse equipment 3,844,356 3,063,708 Office equipment and furniture 629,787 602,721 Construction in process 76,831 61,581 Leasehold improvement 141,375 141,375 ---------- ----------- 7,899,222 7,068,418 Less accumulated depreciation 1,896,777 1,424,868 ---------- ----------- Total property, plant and equipment, net $6,002,445 $ 5,643,550 ========== ===========
Depreciation expense for the years ended December 31, 2001, 2000 and 1999 amounted to $471,909, $387,864 and $306,509, respectively. Depreciation expense includes the amortization of capitalized lease assets. 7 Included in property, plant and equipment are the following assets held under capitalized leases:
2001 2000 ----------- ----------- Land $ 278,325 $ 278,325 Building 2,928,548 2,920,708 Manufacturing and warehouse equipment 3,573,051 2,792,402 ----------- ----------- 6,779,924 5,991,435 Less accumulated amortization 1,124,264 761,284 ----------- ----------- Total $ 5,655,660 $ 5,230,151 =========== ===========
On February 27, 1996, the Company purchased the assets of Kinpak, Inc. a subsidiary of Kinark, Inc. In order to meet the Company's future needs, it entered into an agreement with the City of Montgomery to issue Industrial Revenue Bonds to cover an expansion of the Alabama facility. The expansion consisted of an additional building, which was completed during October, 1997, bringing the current facility to approximately 110,000 square feet. Such facility serves as a manufacturing and distribution center. Obligations for future payments attributable to this capitalized lease are discussed in Note 4. Note 3 - Note payable, bank: During 2000, the Company secured a revolving line of credit with a maximum of $5 million from a commercial bank carrying an annual interest rate at the lender's prime rate. Pursuant to this agreement, the Company is required to maintain minimum working capital of $1.5 million, a ratio of debt to tangible net worth of at least 2.5:1, and debt coverage ratio of at least 1.15 times. The line is collateralized by the Company's inventory, trade receivables, and intangible assets. As of December 31, 2001, the Company was obligated under this arrangement in the amount of $3,665,860 and was not in compliance with certain applicable loan covenants. The lender has agreed to waive such covenant violations through March 30, 2002. Note 4 - Long-Term debt: Long term debt at December 31, 2001 consisted of the following: At December 31, 2001, the Company was obligated pursuant to a capital lease financed through Industrial Revenue Bonds requiring principal payable quarterly at various specified amounts. Interest is computed weekly at market rates and is paid quarterly along with prescribed principal amount. On December 20, 1996, the Company issued $4,990,000 of Industrial Revenue Bonds in order to finance the expansion of the Alabama property and to refinance the original acquisition costs. A certain portion of these bonds were reissued in March of 1997 in order to take advantage of tax free financing. The Bonds have varying maturities through March 1, 2012. The Company is obligated to an affiliated entity owned by certain officers of the Company pursuant to a note payable aggregating $381,028 at December 31, 2001. Such obligation requires monthly installments of $3,357 including principal and interest at 7.5% through April 1, 2004 when a balloon payment of $373,089 is due. During 2001 and 2000, the Company, through certain subsidiaries, entered into various capital lease agreements covering equipment utilized in the Company's Alabama plant and its corporate offices. Such obligations, aggregating approximately $75,000 at December 31, 2001, have varying maturities through 2005 and carry interest rates ranging from 7% to 12%. 8 During the 2001, the Company financed the acquisition of approximately $484,000 of equipment through a financial institution. The obligation requires monthly installments of $11,097 including principal and interest at 8.4% per annum through maturity in May, 2004. The obligation is secured by the underlying equipment purchased. The composition of these obligations at December 31, 2001 and 2000 were as follows:
Long-Term Current Portion Portion 2001 2000 2001 2000 -------- -------- ---------- ----------- Industrial Revenue Bonds $320,000 $320,000 $3,120,000 $3,440,000 Notes payable 118,996 5,182 555,831 387,151 Capitalized equipment leases 31,998 30,124 43,045 65,113 -------- -------- ---------- ---------- $470,994 $355,306 $3,718,876 $3,892,264 ======== ======== ========== ==========
Required principal payment obligations attributable to the foregoing are tabulated below:
Year ending December 31, 2002 $ 470,994 2003 473,185 2004 775,306 2005 345,385 2006 340,000 Thereafter 1,785,000 ----------- Total $ 4,189,870 ===========
Note 5 - Income taxes: The Components of the Company's consolidated income tax provision (benefit) are as follows:
Year ended December 31, 2001 2000 1999 ---- ---- ---- Income tax provision (benefit): Federal - current $ - ($ 164,000) $ 195,200 - deferred 40,500 24,000 30,800 State - - 38,400 --------- ----------- --------- Total $ 40,500 ($ 140,000) $ 264,400 ========= =========== =========
The reconciliation of income tax provision (benefit) at the statutory rate to the reported income tax expense is as follows:
Year Ended December 31, 2001 2000 1999 ---- ---- ---- Computed at statutory rate 34.0% ( 34.0%) 34.0% State tax, net of federal benefit - - 3.6% Other, net ( 6.4%) ( 2.4%) .4% -------- -------- ------ Effective tax rate 27.6% ( 36.4%) 38.0% ======== ======== ======
9 Note 6 - Litigation: At December 31, 2001, the Company was a party to litigation associated with a patent it holds on one of its products. The U.S. District Court issued a partial Summary Judgement Order against the Company during March, 2001. At present, the such Order is before the Federal Circuit Court of Appeals. Both the Company and its counsel believe that the lower court's Order is flawed and will be reversed. However, there is no assurance that such result will be achieved. In either event, the case must go back to the District Court to resolve the remaining issues associated with the case including, among other things, damages to be awarded, if any, to the prevailing party. Given the uncertainty of the litigation, the Company's outside counsel cannot offer an opinion as to the probable outcome of this matter and, accordingly, it is not possible to assess any potential financial outcome to the Company at this time. Note 7 - Related party transactions: At December 31, 2001 and 2000, the Company had amounts due from affiliated companies which are directly or beneficially owned by the Company's president aggregating approximately $563,700 and $598,000, respectively. Such advances were made primarily to international affiliates that are in the process of expanding sales of the Company's products in Europe, Asia and South America. These amounts have been advanced by the Company on open account with requirements of repayment between five and seven years. These advances bear interest at the rate of interest charged to the Company on its line of credit. Sales of Company products to such affiliates aggregated approximately $319,700 and $360,600 during the years ended December 31, 2001 and 2000, respectively. Note 8 - Commitments: On May 1, 1998, the Company entered into a ten year lease for approximately 12,700 square feet of office and warehouse facilities in Fort Lauderdale, Florida from an entity owned by certain officers of the Company. The lease required a minimum rental of $94,800 for the first year increasing by 2% on the anniversary of the lease throughout the term. Additionally, the landlord is entitled to its pro-rata share of all taxes, assessments, insurance premiums, operating charges, maintenance charges and any other expenses which arise from ownership. Rent charged to operations during the years ended December 31, 2001, 2000 and 1999 amounted to approximately $100,500, 100,000 and 92,900, respectively. The Company has entered into a corporate guaranty of the mortgage note obligations of such affiliate. The obligations are primarily secured by the real estate leased to the Company. In November, 1994, the Company leased an approximately 10,000 square foot building in Fort Lauderdale, Florida for manufacturing, warehousing and office space from an unrelated third party. Such lease terminates on October 31, 2001. Rent charged to operations under this lease during the year ended December 31, 2001, 2000 and 1999 amounted to approximately $92,800, 90,200 and 96,000, respectively. 10 The following is a schedule of minimum future rentals on the noncancellable operating leases: Year ending December 31,
2002 $ 291,300 2003 110,600 2004 108,800 2005 110,900 2006 113,200 Thereafter 350,800 ---------- Total $1,085,600 ==========
Subsequent to December 31, 2001, the Company entered into an agreement with a financial institution to provide financial advisory and investment banking services to the Company for a one year period ending January, 2003. Such agreement is renewable at the Company's option and requires a monthly retainer of $5,000, reimbursement of Company approved expenses and the issuance of warrants to purchase 250,000 shares of the Company's common stock at an exercise price of $1.40 per share. In addition to the foregoing, the Company has agreed to compensate the Investment Banker based on completion of certain financing arrangements and/or transactions. Note 9 - Stock options: During 1991, the Company adopted a non-qualified employee stock option plan covering 200,000 shares of its common stock. During 1992, the Company adopted an incentive stock option plan covering 200,000 shares of its common stock. During 1994, the Company adopted a non- qualified employee stock option plan covering 400,000 shares of its common stock. The following schedule shows the status of outstanding options under the plans as of December 31, 2001:
Date Options Option Expiration Plan granted outstanding price date ---- ------- ----------- ------ ----------- 1991 11/12/99 140,000 $ .875 11/11/04 1992 03/01/99 25,000 $ .870 02/28/04 1992 12/20/01 160,000 $ 1.110 12/20/06 1994 05/04/99 124,000 $ .790 05/03/04 1994 12/20/00 145,000 $ .630 12/19/05
On March 25, 1999, the Company granted two officers a five year option for 100,000 shares each at an exercise price of $.89 representing the market price at the time of grant. Such grants were awarded in consideration of their making a loan to the Company in the amount of $400,000 from an affiliated company in which they are each 50% co-shareholders. Statement of Financial Accounting Standards No. 123 requires that companies that continue to account for employer stock options under APB No. 25 disclose pro forma net income and earnings per share as if such Statement had been applied. The following is disclosed pursuant to such requirement.
2001 2000 1999 ---- ---- ---- Net income (loss) As reported $106,384 ($244,823) $431,484 Pro forma $ 94,981 ( 278,734) $414,175 Earnings (loss) per share As reported $ .03 ($.06) $.11 Pro forma $ .02 ($.06) $.10
11 A summary of the Company's stock options as of December 31, 2001, 2000 and 1999, and changes during the years ending on those dates, is presented below:
2001 2000 1999 -------- -------- -------- Weighted Weighted Weighted Optioned average Optioned average Optioned average shares exercise price shares exercise price shares exercise price ------- -------------- ------- -------------- ------- -------------- Options Outstanding at beginning of year 730,500 $ .92 655,500 $1.10 339,000 $2.11 Granted 160,000 1.11 145,000 .63 511,000 .85 Expired (96,500) ( 1.73) (70,000) (2.00) (194,500) (2.19) Exercised - - - - - - ------- ------ ------- ----- -------- ----- Outstanding at end of year 794,000 $ .89 730,500 $ .92 655,500 $1.10 ======= ====== ======= ===== ======== =====
The following table summarizes information about the stock options outstanding at December 31, 2001:
Options outstanding Options exercisable -------------------------------- ------------------- Range of Number Weighted avg. Weighted avg. Number Weighted avg. Exercise outstanding remaining exercise exercisable exercise prices at 12/31/01 contractual life price at 12/31/01 price ------ ----------- ---------------- ------ ------- ------ $1.110 160,000 .57 yrs. $1.110 - $1.110 .875 340,000 .44 yrs. .875 256,000 .875 .840 25,000 4.17 yrs. .840 25,000 .840 .790 124,000 4.33 yrs. .790 49,600 .790 .630 145,000 5.00 yrs. .630 29,000 .630 ====== ------- --------- ====== ------- ------ 794,500 3.21 yrs. 359,600 $1.250 ======= ========= ======= ======
Under the three option plans adopted by the Company, at the discretion of the Board of Directors, grants are given to selected executives and other key employees. Options typically have a five year life with vesting occurring at 20% per year on a cumulative basis with forfeiture at the end of the option, if not exercised. The fair value of each option grant was estimated using the Black-Scholes option pricing model with the following assumptions for the years ended 2001, 2000 and 1999; risk free rate 6.5%, no dividend yield for all years, expected life of five years and volatility of 31.6%. Note 10 - Major customer: The Company has one major customer, West Marine, Inc., with sales in excess of 10% of consolidated revenue for the year ended December 31, 2001. Sales to this customer represent approximately 17.3%. The Company enjoys good relations with this customer. However, the loss of this customer could have an adverse impact on the Company's operations. 12 Note 11 - Earnings per share: Basic earnings per common share for the years ended December 31, 2001, 2000 and 1999 were calculated on the basis of 4,169,870, 4,058,657, and 3,796,764 weighted average common shares outstanding, respectively pursuant to the provisions of Statement of Financial Accounting Standards No. 128. Diluted earnings (loss) per share for the years ended December 31, 2001, 2000 and 1999 were identical to basic earnings (loss) per share as the effect of certain common stock equivalents would have been anti-dilutive. Common stock equivalents consist of stock options. Note 12 - Shareholders' equity: During February 2000, a 5% stock dividend was declared for shareholders of record at the close of business on March 17, 2000 which was distributed on March 30, 2000. 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, hereunto duly authorized. OCEAN BIO-CHEM, INC. Registrant By: /s/ Peter G. Dornau PETER G. DORNAU Chairman of the Board of Directors and Chief Executive Officer March 27, 2002 By: /s/ Edward Anchel EDWARD ANCHEL Chief Financial Officer March 27, 2002 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 27, 2002 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 will produce an annual report and proxy for its yearly security-holders' meeting. Copies of such shall be sent to the SEC pursuant to the current requirements. 13 EXHIBIT (See 22) The following is a list of the Registrant's subsidiaries: Name Ownership % Star brite Distributing, Inc. 100 Star brite Distributing Canada, Inc. 100 D & S Advertising Services, Inc. 100 Star brite Sta-Put, Inc. 100 Star brite Service Centers, Inc. 100 Star brite Automotive, Inc. 100 Kinpak Inc. 100 -----END PRIVACY-ENHANCED MESSAGE-----