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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, 2000
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.
$ 1,325,593 as of February 1, 2001
Indicate the number of shares outstanding of Registrant's common stock
as of February 1, 2001.
4,105,889 shares of common stock, par value $.01 per share
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement to be filed within 120 days of December 31, 2000.
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.
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.
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.
Automotive: Through December 31, 2000, this line was primarily composed of
anti-freeze, windshield washes and polishes. The Company has completed a major
capital expansion program at its Alabama plant including increased tankage
capacity and new fluids filling lines and intends to introduce a line of oils,
lubricants and other engine fluids during the early part of fiscal 2001.
Aircraft: The Aircraft product line consists primarily of polishes and
cleaners.
Although the above products are utilized for different types of vehicles
and boats, 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
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.
2
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 chains such as Wal-mart and K mart 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: 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.
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.
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
and/or its subsidiaries employ the following personnel:
Full-Time
Location Description Employees
- ----------------------- ------------------------------ ----------
Montgomery, Alabama Manufacturing and distribution 59
Fort Lauderdale, Florida Manufacturing and distribution 35
----
94
====
3
New Product Development: The Company continues to develop specialized
products for the marine and recreational vehicle trade. During fiscal 2001, the
Registrant anticipates launching a line of automotive oils, fluids and related
products. 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,
2000 1999 1998
---- ---- ----
United States:
Northeast $ 3,429,000 $ 2,829,000 $ 2,526,000
Southeast 4,863,000 4,463,000 3,628,000
Central 5,075,000 4,575,000 4,259,000
West Coast 3,929,000 3,381,000 3,019,000
----------- ----------- -----------
17,296,000 15,248,000 13,432,000
Canada (US Dollars) 777,000 704,000 646,000
----------- ----------- -----------
$18,073,000 $15,592,000 $14,078,000
=========== =========== ===========
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 "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.
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 officers
of the Company. The lease covers approximately 12,700 square feet of office and
warehouse space. On May 1, 1998, the Registrant entered into a new 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 its pro-rata share
of all taxes, assessments, insurance premiums, operating changes, maintenance
charges and any other expenses which arise from ownership.
4
During November 1994, the Company leased an approximately 10,000 square
foot building in Fort Lauderdale, Florida for manufacturing, warehousing and
office space. Such lease terminates on October 31, 2001. Rent charged to
operations during the year ended December 31, 2000 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, 2000, approximately $41,500 was held in trust to pay for equipping
future equipment required at the facility.
Item 3. Legal Proceedings
The Company, from time to time in the ordinary course of business, is named
as a defendant in lawsuits. At December 31, 2000, the Company was a party to
litigation associated with a patent held on one of its products. Although the
courts have awarded the Company partial recovery of legal fees to date, it is
difficult to assess the amount or range of potential damages insofar as the
discovery into these claims has been stayed.
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 2000 and 1999 is presented below.
Market Range of
Common Stock Bid: 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---------------- -------- -------- -------- --------
2000 High $2.56 $1.44 $1.09 $1.00
Low $1.19 $1.06 $ .97 $ .57
1999 High $1.19 $1.25 $1.13 $1.25
Low $1.06 $1.06 $ .94 $ .88
The quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not represent actual transactions.
5
B. The approximate number of Common Stock owners was 800 at December 31,
2000. 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 1996 the Company issued a 5% stock dividend. 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.
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,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operations
Gross sales $18,072,784 $15,952,165 $14,077,993 $12,849,507 $12,436,918
Net sales $16,139,256 $14,317,485 $12,705,473 $11,599,113 $11,826,340
Net income (loss) $( 244,823) $ 431,484 $ 83,059 $ (168,506) $ 354,672
Earnings (loss) per
common share $ (.06) $ .11 $ .02 $ (.05) $ .09
Balance sheet
Working capital $ 1,653,343 $ 2,797,708 $ 1,956,647 $ 1,976,517 $ 2,737,817
Total assets $15,410,264 $13,547,452 $12,846,794 $13,276,542 $11,955,397
Long term
obligations $ 3,892,445 $ 4,152,332 $ 4,070,000 $ 4,370,000 $ 4,710,000
Total liabilities $10,737,972 $ 8,629,991 $ 8,390,036 $ 8,866,122 $ 7,410,913
Shareholders'
equity $ 4,672,292 $ 4,917,461 $ 4,456,758 $ 4,410,420 $ 4,544,484
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.
6
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 less .25%,
and is secured by the Registrant's trade receivables, inventory, and intangible
assets. The Registrant is required to maintain a minimum working capital of $2.5
million and meet other financial covenants during the term of the agreement. As
of December 31, 2000, the Company was obligated under this arrangement in the
amount of $4,250,000 and was not in compliance with certain applicable loan
covenants. The lender has agreed to waive such covenant violations through April
30, 2001.
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 $41,500 was held in trust at
December 31, 2000 for equipping the expansion.
The bonds are marketed weekly at the prevailing rates for such instruments.
Currently such bonds carry interest between 5.25% to 5.75% 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 year ended December 31, 2000. Such amount was net of the balance
which remained in escrow from its Alabama Industrial Revenue Bond Issue for
future equipment needs aggregating approximately $285,000 at January 1, 2000 and
represented new equipment, personnel and related costs associated with the
program. Through December 31, 2000, 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, it
is not contemplated that full-scale operations related to this line will be
accomplished until early 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, 2000
Fourth Quarter Results:
Comparing the quarters ended December 31, 2000 and 1999, net sales
increased approximately $970,000 or 27%.This was primarily due to increased
sales of antifreeze, private label products, and sales of brushes and straps.
7
Results of Operations:
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 20% 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 19% 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.
Calendar year 1999/1998: Sales and earnings varied when comparing the year
ended December 31, 1999 to 1998 principally due to the factors enumerated below.
Net sales - Net sales increased 13% or approximately $1,612,000 comparing
the year ended December 31, 1999 with the 1998 period. This was primarily due to
increased sales of anti- freeze, private label product sales, and sales of
brushes and straps.
Cost of goods sold - Cost of goods sold decreased from 71% to 69% as a
percentage of net sales when comparing 1999 to 1998. This was primarily
attributable to a differing product mix and improved utilization of the
Company's manufacturing plant's capacity.
Advertising and promotion - Advertising expense decreased approximately
$141,200 or 20% when comparing 1999 to 1998. 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 increased approximately $175,700 of 7% when comparing 1999 to 1998.
This change was attributable to increased personnel costs and normal
inflationary trends.
Interest expense - Interest expense incurred during 1999 increased by
approximately $47,800 or 13% over 1998. The increase was primarily due to
increased borrowings and interest rates.
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, 2000.
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 61
Director since 1973
Jeffrey Tieger Vice President, Secretary and Director 57
since 1977
Edward Anchel Vice President-Finance, Chief Financial 54
Officer since 1999 and Director since 1998
James Kolisch Director since 1998 49
Laz Schneider Director since 1998 61
John B. Turner Director since 2000 53
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, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information at December 31, 2000 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 2,315,146* 56.4%
4041 S. W. 47 Avenue
Ft. Lauderdale, FL 33314
Common All directors and officers as a group
3 individuals 2,451,8187* 59.7%
*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.
Pursuant to the Company's various stock option plans, Mr. Dornau has
options to acquire 80,000 shares of the Company's common stock of which 20,000
shares are exercisable within 60 days of the issuance of the Registrant's
December 31, 2000 financial statements.
Pursuant to the Company's various stock option plans, the Company's
directors and officers, as a group, have options to acquire 250,000 shares of
the Company's common stock of which 73,000 shares are exercisable within 60 days
of the issuance of the Registrant's December 31, 2000 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 requires 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 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, 2000 and
1999 amounts owed to Registrant by affiliates were approximately $598,200 and
$847,000 respectively. These amounts have been advanced to such affiliates with
repayment requirements of between five and seven years bearing interest at the
rate charged the Registrant pursuant to its line of credit. Sales of such
affiliates aggregated approximately $360,600 and $252,500 during the years ended
December 31, 2000 and 1999, 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, 2000,
1999 and 1998 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, 2000 and 1999.
(ii) Consolidated statements of operations for each of the
three years ended December 31, 2000, 1999 and 1998.
(iii) Consolidated statement of shareholders' equity for each of
the three years ended December 31, 2000, 1999 and 1998.
(iv) Consolidated statements of cash flows for each of the
three years ended December 31, 2000, 1999 and 1998.
(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, 2000, 1999 AND 1998
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
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 6-13
BERKOVITZ, LAGO & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
8211 West Broward Boulevard
Suite 340
Plantation, Florida 33324
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, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended. 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. The consolidated
statements of operations, shareholders' equity, and cash flows of the Company
for the year ended December 31, 1998, were audited by other auditors whose
report thereon, dated March 19, 1999, expressed and unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 2000 and 1999, and the consolidated
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
BERKOVITZ, LAGO & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
March 22, 2001
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
Current Assets: 2000 1999
---- ----
Cash $ 123,515 $ 433,772
Trade accounts receivable net of allowance for
doubtful accounts of approximately $ 23,000
and $22,500, respectively 3,417,827 2,804,072
Inventories 4,506,987 3,730,321
Income taxes receivable 173,404 -
Due from officer 161,100 161,100
Prepaid expenses and other current assets 116,037 146,102
----------- -----------
Total current assets 8,498,870 7,275,367
----------- -----------
Property, plant and equipment, net 5,643,550 4,515,305
----------- -----------
Other assets:
Funds held in escrow for equipment 41,506 285,165
Trademarks, trade names, and patents, net
of accumulated amortization 353,431 376,423
Due from affiliated companies, net 598,237 846,979
Deposits and other assets 274,670 248,213
----------- -----------
Total other assets 1,267,844 1,756,780
----------- -----------
Total assets $15,410,264 $13,547,452
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable trade $ 2,119,865 $ 872,693
Note payable bank 4,250,000 2,900,000
Current portion of long-term debt 355,306 314,359
Accrued expenses payable 120,356 390,607
----------- -----------
Total current liabilities 6,845,527 4,477,659
----------- -----------
Long-term debt less current portion 3,892,445 4,152,332
----------- -----------
Commitments and contingencies
Shareholders' equity:
Common stock - $.01 par value, 10,000,000 shares
authorized, 4,105,889 and 3,822,499 shares
issued and outstanding at December 31,
2000 and 1999, respectively 41,060 38,225
Additional paid-in capital 3,720,377 3,282,932
Foreign currency translation adjustment ( 209,398) ( 160,872)
Retained earnings 1,128,448 1,764,051
------------ ------------
4,680,487 4,924,336
Less treasury stock, 7,519 and 5,789 shares,
at cost, respectively ( 8,195) ( 6,875)
------------ ------------
Total shareholders' equity 4,672,292 4,917,461
------------ ------------
Total liabilities and shareholders' equity $15,410,264 $13,547,452
============ ============
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, 2000, 1999, AND 1998
2000 1999 1998
---- ---- ----
Gross sales $18,072,784 $15,952,165 $14,077,993
Less returns and allowances 1,933,528 1,634,680 1,372,520
------------ ------------ ------------
Net sales 16,139,256 14,317,485 12,705,473
Cost of goods sold 11,852,435 9,915,216 9,044,501
------------ ------------ ------------
Gross profit 4,286,821 4,402,269 3,660,972
------------ ------------ ------------
Operating expenses:
Advertising and promotion 694,729 552,028 693,229
Selling and administrative 3,417,378 2,759,207 2,583,485
Interest 573,882 414,785 366,994
------------ ------------ ------------
Total Operating Expenses 4,685,989 3,726,020 3,643,708
------------ ------------ ------------
Operating profit (loss) ( 399,168) 676,249 17,264
Interest and other income 14,345 19,635 97,174
------------ ------------ ------------
Income (loss) before provision
(benefit) for income taxes ( 384,823) 695,884 114,438
Provision (benefit) for income taxes ( 140,000) 264,400 31,379
------------ ------------ ------------
Net income (loss) ( 244,823) 431,484 83,059
Other comprehensive income:
Foreign currency translation,
net of taxes ( 48,526) ( 15,206) ( 26,652)
------------ ------------ ------------
Comprehensive Income (loss) $( 293,349) $ 416,278 $ 56,407
============ ============ ============
Earnings (loss) per share:
Basic $ (.06) $ .11 $ .02
============ ============ ============
Diluted $ (.06) $ .11 $ .02
============ ============ ============
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, 2000, 1999 AND 1998
Additional Foreign
Common stock paid-in currency Retained Treasury
Shares Amount capital adjustment earnings stock Total
--------- ------- ---------- ---------- ---------- -------- ----------
January 1, 3,753,017 $37,530 $3,232,327 $(108,945) $1,249,508 $ - $4,410,420
1998
Net income 83,059 83,059
Foreign currency
translation
adjustment ( 36,721) ( 36,721)
--------- ------- ---------- ---------- ---------- -------- -----------
December 31,
1998 3,753,017 37,530 3,232,327 (145,666) 1,332,567 - 4,456,758
Net income 431,484 - 431,484
Issuance of stock 69,482 695 50,605 51,300
Acquisition of
treasury stock,
5,789 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
========= ======= ========== ========== ========== ========= ===========
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, 2000, 1999 AND 1998
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income (loss) $( 244,823) $ 431,484 $ 83,059
Adjustments to reconcile net income (loss)
to net cash provided (used) by operations:
Depreciation and amortization 410,855 329,501 280,091
Issuance of common stock to employees 49,500 51,300 -
Changes in assets and liabilities:
(Increase) in accounts receivable ( 613,755) ( 474,360) ( 171,479)
(Increase) in inventory ( 776,666) ( 38,444) ( 454,670)
(Increase) decrease in prepaid expense and other ( 169,797) 32,931 85,234
Increase in accounts payable and accrued
expenses 976,921 252,382 189,371
------------ ------------ ------------
Net cash provided (used) by operating activities ( 367,765) 584,794 11,606
------------ ------------ ------------
Cash flows from financing activities:
Net borrowings (reductions) under line of credit 1,350,000 ( 109,118) ( 245,040)
Repayment from (advances to) affiliates, net 248,742 23,171 ( 136,506)
Increases in (payments on) long term debt, net ( 218,940) 96,691 ( 340,000)
------------ ------------ ------------
Net cash (used) provided by financing activities 1,379,803 10,744 ( 721,546)
------------ ------------ ------------
Cash flows used by investing activities:
Purchase of property, plant and equipment (1,516,108) ( 446,823) ( 491,059)
Purchases of treasury shares of common stock ( 1,320) ( 6,875) -
Utilization of trust funds for equipment 243,659 298,267 459,180
------------ ------------ ------------
Net cash used by investing activities (1,273,769) ( 155,431) ( 31,879)
------------ ------------ ------------
Increase (decrease) in cash prior to effect of
exchange rate on cash ( 261,731) 440,107 ( 741,819)
Effect of exchange rate on cash ( 48,526) ( 15,206) ( 36,721)
------------ ------------ ------------
Net increase (decrease) in cash ( 310,257) 424,901 ( 778,540)
Cash at beginning of year 433,772 8,871 787,411
------------ ------------ ------------
Cash at end of year $ 123,515 $ 433,772 $ 8,871
============ ============ ============
Supplemental information
Cash used for interest during period $ 573,882 $ 398,561 $ 338,606
============ ============ ============
Cash used for income taxes during period $ 123,447 $ 72,000 $ -
============ ============ ============
The Company had no cash equivalents at December 31, 2000, 1999 and 1998.
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, 2000, 1999 AND 1998
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,
2000 and 1999, 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, 2000 and 1999, the
accumulated cost of materials on hand and other deferred promotional costs which
will be charged against the subsequent year's operations amounted approximately
to $37,700 and $41,000, 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. Statement No. 123 requires accounting for
such cost at fair value using an option pricing model such as the Black-Scholes
or a bimodal distribution.
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.
6
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 15% 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.
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, 1999 and 1998 have been
reclassified to conform with the 2000 presentation.
7
Note 2 - Property, plant and equipment:
The Company's property, plant and equipment consisted of the following:
December 31,
2000 1999
------------ ------------
Land $ 278,325 $ 278,325
Building 2,920,708 2,920,708
Manufacturing and warehouse equipment 3,063,708 1,677,835
Office equipment and furniture 602,721 654,665
Construction in process 61,581 4,100
Leasehold improvement 141,375 140,985
------------ ------------
7,068,418 5,676,618
Less accumulated depreciation 1,424,868 1,161,313
------------ ------------
Total property, plant and equipment, net $5,643,550 $4,515,305
============ ============
Depreciation expense for the years ended December 31, 2000, 1999 and 1998
amounted to $387,864, $306,509 and $257,099, respectively. Depreciation expense
includes the amortization of capitalized lease assets.
Included in property, plant and equipment are the following assets held
under capitalized leases:
2000 1999
------------ ------------
Land $ 278,325 $ 278,325
Building 2,920,708 2,920,708
Manufacturing and warehouse equipment 2,792,402 1,417,794
------------ ------------
5,991,435 4,616,827
Less accumulated amortization 761,284 520,297
------------ ------------
Total $ 5,230,151 $ 4,096,530
============ ============
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 1999, the Company secured a revolving line of credit with an
original maximum of $3.5 million from a commercial bank. Such financing is due
on demand and was amended during June, 2000 to a credit limit of $5 million
carrying an annual interest rate of prime less .25%. Pursuant to this agreement,
the Company is required to maintain minimum working capital of $2.5 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, 2000, the Company
was obligated under this arrangement in the amount of $4,250,000 and was not in
compliance with certain applicable loan covenants. The lender has agreed to
waive such covenant violations through April 30, 2001.
8
Note 4 - Long-Term debt:
Long term debt at December 31, 2000 consisted of the following:
At December 31, 2000, the Company was obligated pursuant to 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 pursuant to a note payable
aggregating $392,333 at December 31, 2000. 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 2000, the Company entered into various capital lease agreements
covering equipment utilized in the Company's Alabama plant. Such obligations,
aggregating approximating $95,200 at December 31, 2000, have varying maturities
through 2005 and carry interest rates ranging from 7% to 12%.
The composition of these obligations are as follows:
Long-Term Current
Portion Portion
------------ ------------
Industrial Revenue Bonds $ 320,000 $ 3,440,000
Note payable 5,182 387,151
Capitalized equipment leases 30,124 65,113
------------ ------------
$ 355,306 $ 3,892,264
============ ============
Required principal payment obligations attributable to the foregoing are
tabulated below:
Year ending December 31,
2001 $ 355,306
2002 355,499
2003 348,962
2004 718,567
2005 344,417
Thereafter 2,125,000
------------
Total $ 4,247,751
============
Note 5 - Income taxes:
The Components of the income tax provision (benefit) are as follows:
Year ended December 31,
----------------------------
2000 1999 1998
------------ ------------ ---------
Income tax provision (benefit):
Federal - current $( 164,000) $ 195,200 $ 11,193
- deferred 24,000 30,800 16,708
State - 38,400 3,478
------------- ------------ ---------
Total $($ 140,000) $ 264,400 $ 31,379
============ ============ =========
9
The reconciliation of income tax provision (benefit) at the statutory rate
to the reported income tax expense is as follows:
Year Ended December 31,
-----------------------------
2000 1999 1998
------------ ------------ ---------
Computed at statutory rate (34.0%) 34.0% 34.0%
State tax, net of federal benefit - 3.6 3.6
Other, net ( 2.4 ) .4 (10.2 )
------------- ------------ ----------
Effective tax rate (36.4%) 38.0% 27.4%
============= ============ ==========
At December 31, 2000, the Company reflected an income tax receivable
aggregating approximately $173,400 on the accompanying financial statements.
Accrued state and federal income taxes payable were approximately $203,000 at
December 1999.
Note 6 - Litigation:
The Company, from time to time in the ordinary course of business, is named
as a defendant in lawsuits. At December 31, 2000, the Company was a party to
litigation associated with a patent held on one of its products. Although the
courts have awarded the Company partial recovery of legal fees to date, it is
difficult to assess the amount or range of potential damages insofar as the
discovery into these claims has been stayed.
Note 7 - Related party transactions:
At December 31, 2000 and 1999, the Company had amounts due from affiliated
companies which are directly or beneficially owned by the Company's president
aggregating approximately $598,000 and $847,000, 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 $360,600
and $252,500 during the years ended December 31, 2000 and 1999, 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 year ended December 31, 2000
amounted to approximately $100,000.
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. Such lease terminates on October 31, 2001. Rent charged to operations
under this lease during the year ended December 31, 2000 amounted to
approximately $90,200.
10
The following is a schedule of minimum future rentals on the noncancellable
operating leases:
Year ending December 31,
2001 $ 179,500
2002 104,600
2003 106,600
2004 108,800
2005 110,900
Thereafter 463,900
-----------
Total $ 1,074,300
===========
Note 9 - Licensing agreement:
During 1984, the Company entered into a licensing agreement for an
indefinite period whereby the Company will market a marine anti-fouling product.
Such agreement, as amended, requires the Company to pay the licensor a royalty
equal to the greater of 7% of net sales to fund future research and development
costs of the covered product or a minimum of $4,000 per year.
Note 10 - 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, 2000:
Date Options Option Expiration
Plan granted outstanding price date
---- -------- ----------- -------- ----------
1994 01/30/96 74,500 $ 2.000 01/29/01
1994 05/04/99 136,000 $ .790 05/03/04
1994 12/20/00 145,000 $ .630 12/19/05
1992 03/01/99 25,000 $ .870 02/28/04
1991 11/12/99 150,000 $ .875 11/11/04
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.
2000 1999 1998
---------- -------- -------
Net income (loss) As reported $(244,823) $431,484 $83,059
Pro forma (278,734) $414,175 $46,959
Earnings (loss) per share As reported ($.06) $.11 $.02
Pro forma ($.06) $.10 $.01
11
A summary of the Company's stock options as of December 31, 2000, 1999 and
1998, and changes during the years ending on those dates, is presented below:
2000 1999 1998
Weighted average Weighted average Weighted average
Shares exercise price Shares exercise price Shares exercise price
-------- -------------- -------- -------------- --------- --------------
Options Outstanding
at beginning of year 655,500 $ 1.10 339,000 $ 2.11 559,000 $ 2.01
Granted 145,000 .63 511,000 .85 - -
Expired ( 70,000) ( 2.00) (194,500) (2.19) (220,000) 1.85
Exercised - - - - - -
--------- ------- --------- -------- --------- -------
Outstanding at
End of year 730,500 $ .92 655,500 $ 1.10 339,000 $ 2.11
======== ======= ========= ======== ========= =======
The following table summarizes information about the stock options
outstanding at December 31, 2000:
Options outstanding Options exercisable
---------------------------------------------------- ----------------------
Range of Number Weighted avg. Weighted avg. Number Weighted avg.
Exercise outstanding remaining exercise exercisable exercise
prices at 12/31/00 contractual life price at 12/31/00 price
------ ----------- ---------------- ------ ----------- ------
$2.000 74,500 .57 yrs. $2.000 59,600 $2.000
.875 350,000 .44 yrs. .875 230,000 .875
.840 25,000 4.17 yrs. .840 25,000 .840
.790 136,000 4.33 yrs. .790 27,200 .790
.630 145,000 5.00 yrs. .630 - -
====== ------- --------- ====== ------- ------
730,500 3.31 yrs. 341,800 $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 2000, 1999 and 1998;
risk free rate 6.5%, no dividend yield for all years, expected life of five
years and volatility of 31.6%.
Note 11 - 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, 2000. Sales to
this customer represent approximately 17.5%. 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 12 - Earnings per share:
Basic earnings per common share for the years ended December 31, 2000, 1999
and 1998 were calculated on the basis of 4,058,657, 3,796,764 and 3,753,017
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, 2000, 1999 and 1998
were identical to basic earnings (loss) per share as the effect of any common
stock equivalents would have been anti-dilutive. Common stock equivalents
consist of stock options.
Note 13 - Shareholders' equity:
During February 2000, a 5% stock dividend was declared for sjareholders of
record at the close of business on March 17, 2000 which was distributable on
March 30, 2000.
13
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 29, 2001
By: /s/ Edward Anchel
EDWARD ANCHEL
Chief Financial Officer
March 29, 2001
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 29, 2001
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.