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EXCEL - IDEA: XBRL DOCUMENT - OCEAN BIO CHEM INCFinancial_Report.xls


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ending June 30, 2011
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 0-11102
 
OCEAN BIO-CHEM, INC.
(Exact name of registrant as specified in its charter)
Florida
 
59-1564329
(State Or Other Jurisdiction Of
Incorporation Or Organization)
 
(I.R.S. Employer
Identification No.)

4041 SW 47 AVENUE
FORT LAUDERDALE, FLORIDA  33314
(Address of principal executive offices)
 
954-587-6280
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
 
Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer    o
Accelerated filer    o
Non-accelerated filer    o
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x
 
At August 15, 2011, 7,997,613 shares of the registrant’s Common Stock were outstanding.  



 
 

 
 
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
 
TABLE OF CONTENTS

     
Page
 
PART I
Financial Information:
     
         
 
Item 1. Financial Statements
     
         
 
Condensed consolidated balance sheets as of
    3  
 
June 30, 2011(unaudited) and December 31, 2010
       
           
 
Condensed consolidated statements of operations for the
    4  
 
three months and six months ended June 30, 2011 and 2010 (unaudited)
       
           
 
Condensed consolidated statements of comprehensive income for the
    5  
 
three months and six months ended June 30, 2011 and 2010 (unaudited)
       
           
 
Condensed consolidated statements of cash flows for the
    6  
 
six months ended June 30, 2011 and 2010 (unaudited)
       
           
 
Notes to condensed consolidated financial statements
    7-12  
           
 
Item 2. Management’s Discussion and Analysis of Financial Condition
    12-16  
 
             and Results of Operations
       
           
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
    16  
           
 
Item 4. Controls and Procedures
    16  
           
PART II
Other Information:
       
           
 
Item 1A. Risk Factors
    16  
           
 
Item 6. Exhibits
    17  
           
Signatures
      18  
 
 
2

 
 
PART 1-FINANCIAL INFORMATION
 
Item 1.-Financial Statements
 
OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
2011
   
December 31,
 2010
 
   
(Unaudited)
       
ASSETS
           
Current Assets:
           
Cash
 
$
538,597
   
$
615,044
 
Trade accounts receivable net of allowance for doubtful accounts of approximately $85,600 and $63,600 at June 30, 2011 and December 31, 2010, respectively
   
3,509,620
     
2,266,695
 
Receivables due from affiliated companies
   
125,425
     
-
 
Inventories, net
   
9,184,234
     
7,725,580
 
Prepaid expenses and other current assets
   
430,198
     
289,930
 
Deferred tax asset
   
165,577
     
127,676
 
Total Current Assets
   
13,953,651
     
11,024,925
 
                 
Property, plant and equipment, net
   
5,298,080
     
5,421,787
 
                 
Other Assets:
               
Trademarks, trade names and patents, net
   
896,366
     
947,814
 
Due from affiliated companies, net
   
-
     
212,736
 
Other assets
   
57,541
     
75,036
 
                 
Total Other Assets
   
953,907
     
1,235,586
 
Total Assets
 
$
20,205,638
   
$
17,682,298
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts payable – trade
 
$
1,054,549
   
$
1,417,959
 
Revolving line of credit
   
2,600,000
     
-
 
Notes payable related party
   
-
     
471,950
 
Current portion of long term debt
   
230,151
     
490,127
 
Income taxes payable
   
-
     
539,628
 
Accrued expenses payable
   
1,178,189
     
993,010
 
Total Current Liabilities
   
5,062,889
     
3,912,674
 
                 
Deferred tax liability
   
261,046
     
81,030
 
Long term debt, less current portion
   
2,268,279
     
2,507,985
 
Total Liabilities
   
7,592,214
     
6,501,689
 
                 
Commitments and contingencies
               
Shareholders’ Equity:
               
Common stock - $.01 par value, 10,000,000 shares authorized; 8,349,116 and 8,205,116 shares issued at June 30, 2011 and December 31, 2010, respectively
   
83,491
     
82,051
 
Additional paid in capital
   
8,075,219
     
7,689,183
 
Less cost of common stock in treasury, 351,503 shares at June 30, 2011 and December 31, 2010, respectively
   
(288,013)
     
(288,013)
 
Foreign currency translation adjustment
   
(267,968)
     
(271,939)
 
Retained earnings
   
4,703,908
     
3,666,211
 
Total Shareholders’ Equity of Ocean Bio-Chem, Inc.
   
12,306,637
     
10,877,493
 
                 
Noncontrolling interest
   
306,787
     
303,116
 
                 
Total Shareholders’ Equity
   
12,613,424
     
11,180,609
 
Total Liabilities and Shareholders’ Equity
 
$
20,205,638
   
$
17,682,298
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
3

 

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Gross sales
  $ 8,669,305     $ 7,692,395     $ 15,754,782     $ 13,090,811  
Less: discounts, returns, and allowances
    451,331       338,976       804,301       539,518  
                                 
Net sales
    8,217,974       7,353,419       14,950,481       12,551,293  
                                 
Cost of goods sold
    5,240,420       4,640,107       9,463,886       8,105,416  
                                 
Gross profit
    2,977,554       2,713,312       5,486,595       4,445,877  
                                 
Operating Expenses:
                               
Advertising and promotion
    656,811       417,645       1,029,779       687,274  
Selling and administrative
    1,673,694       1,642,143       2,776,614       2,425,382  
Total operating expenses
    2,330,505       2,059,788       3,806,393       3,112,656  
                                 
Operating income
    647,049       653,524       1,680,202       1,333,221  
                                 
Other income (expense)
                               
Interest expense
    (47,443 )     (40,403 )     (73,219 )     (67,972 )
Other income
    1,563       -       25,511       22,317  
                                 
Income before income taxes
    601,169       613,121       1,632,494       1,287,566  
                                 
Provision for income taxes
    224,352       294,700       627,968       574,700  
                                 
Net income
    376,817       318,421       1,004,526       712,866  
                                 
Loss attributable to noncontrolling interests
    12,579       53,589       33,171       53,589  
Net income attributable to Ocean-Bio Chem, Inc.
  $ 389,396     $ 372,010     $ 1,037,697     $ 766,455  
                                 
Income per common share – basic
  $ 0.05     $ 0.05     $ 0.13     $ 0.10  
                                 
Income per common share – diluted
  $ 0.05     $ 0.04     $ 0.12     $ 0.09  
                                 
Weighted average shares - basic
    7,897,985       7,746,886       7,875,923       7,724,722  
Weighted average shares - diluted
    8,418,591       8,615,326       8,315,186       8,362,719  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
4

 

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (UNAUDITED)

 
For The
Three Months Ended
   
For The
Six Months Ended
 
 
June 30,
   
June 30,
 
                     
 
2011
 
2010
   
2011
   
2010
 
                     
Net Income
  $ 376,817     $ 318,421     $ 1,004,526     $ 712,866  
                                 
Foreign currency translation adjustment
    518       32,557       3,971       6,868  
                                 
Comprehensive income
    377,335       350,978       1,008,497       719,734  
                                 
Comprehensive loss attributable to noncontrolling interests
    12,579       53,589       33,171       53,589  
                                 
Comprehensive income attributable to Ocean-Bio Chem, Inc.
  $ 389,914     $ 404,567     $ 1,041,668     $ 773,323  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
5

 

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Six Months Ended
 
   
June 30,
 
   
2011
   
2010
 
Cash flows from operating activities:
           
             
Net income attributable to Ocean Bio-Chem, Inc.
  $ 1,037,697     $ 766,455  
Adjustment to reconcile net income to net cash (used in) provided by operations:
               
Loss attributable to noncontrolling interest
    (33,171 )     (53,589 )
Depreciation and amortization
    418,708       333,289  
Stock based compensation
    365,598       337,386  
Other operating non cash items
    51,586       87,904  
Changes in assets and liabilities:
               
Accounts receivable
    (1,264,996 )     (159,942 )
Amounts due from affiliates
    87,311       (98,584 )
Inventory
    (1,470,636 )     (1,186,777 )
Other assets
    17,495       63,298  
Deferred taxes
    142,115       -  
Prepaid expenses
    (140,268 )     209,024  
Accounts payable and other accrued liabilities
    (717,859 )     (135,604 )
Net cash (used in) provided by  operating activities
    (1,506,420 )     162,860  
Cash flows from investing activities:
               
Purchases of property, plant and equipment
    (243,553 )     (322,747 )
Trademarks, trade names and patents, net
    -       (177,036 )
Contributions  from (to)  joint venture
    36,842       (103,627 )
Net cash used in investing activities
    (206,711 )     (603,410 )
Cash flows from financing activities:
               
Borrowings under revolving line of credit, net
    2,600,000       750,000  
Payments on related party notes
    (471,950 )     -  
Payments on long-term debt
    (499,682 )     (240,049 )
Proceeds from exercise of stock options
    6,300       7,085  
Net cash provided by financing activities
    1,634,668       517,036  
Effect of exchange rates on cash
    2,016       (560 )
Net (decrease) increase in cash
    (76,447 )     75,926  
Cash at beginning of period
    615,044       494,973  
Cash at end of period
  $ 538,597     $ 570,899  
Supplemental disclosure of cash transactions:
               
Cash paid for interest during period
  $ 81,421     $ 44,022  
Cash paid for income taxes during period
  $ 1,204,000     $ 450,000  
Supplemental disclosure of non-cash investing activities:
               
Assets contributed to consolidated joint venture by noncontrolling partner
               
Patents
          $ 440,339  
Inventory
            22,965  
Equipment
            14,700  
Total assets contributed to consolidated joint venture by noncontrolling partner
          $ 478,004  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
6

 

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. SUMMARY OF ACCOUNTING POLICIES
 
Interim reporting
 
The accompanying unaudited condensed consolidated financial statements include the accounts of Ocean Bio-Chem, Inc. and its subsidiaries, all of which are wholly-owned, and OdorStar Technology LLC (“OdorStar”), a joint venture in which the Company has a controlling interest.  All significant inter-company transactions and balances have been eliminated in consolidation.  Certain prior-period data have been reclassified to conform to the current period presentation.  Unless the context indicates otherwise, the term “Company” includes Ocean Bio-Chem, Inc. and its subsidiaries.
 
The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
 
The financial information furnished herein reflects all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods.  The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011.
 
For further information, please refer to the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
Use of estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and assumptions.
 
Revenue recognition

Revenue from product sales is recognized when persuasive evidence of a contract exists, the sales price is fixed and determinable, the title of goods passes to the customer, and collectability of the related receivable is probable.  Reported net sales are net of customer prompt pay discounts, contractual allowances, authorized customer returns, consumer rebates and other sales incentives.

Advertising and Promotion Expense

Advertising and promotion expense consists of advertising costs and catalog costs.  Advertising costs are expensed in the period in which the advertising occurs and were approximately $657,000 and $418,000 for the three months ended June 30, 2011 and 2010, respectively and approximately $1,030,000 and $687,000 for the six months ended June 30, 2011 and 2010, respectively.  The Company capitalizes the direct cost of producing its catalogs.  Capitalized catalog costs are amortized, once a catalog is distributed, over the expected net sales period, which is generally from one to 12 months.  At June 30, 2011 and December 31, 2010, the Company did not have any significant cost of advertising materials on hand.
 
Stock based compensation

The Company records stock-based compensation in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, “Accounting for Stock Compensation,” which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services.  Under FASB ASC Topic 718, the Company recognizes an expense for the fair value of its outstanding stock options and grants as they vest, whether held by employees or others.
 
 
7

 
 
Noncontrolling interest

Noncontrolling interest represents the portion of OdorStar equity that the Company does not own.  Profits and losses in OdorStar are allocated equally between the Company and its joint venture partner, and contributions to OdorStar are made equally by the Company and its joint venture partner.  Because the Company manages OdorStar, it has a controlling interest in OdorStar, and the Company consolidates OdorStar in its financial statements.  The Company accounts for and reports its noncontrolling interest in accordance with the provisions of the FASB ASC 810.
 
Subsequent events

The Company evaluates events through the date the financial statements are filed for events requiring adjustment to or disclosure in the financial statements.

On July 6, 2011, the Company and its subsidiary Kinpak, Inc. (“Kinpak”) entered into a Credit Agreement (the “Credit Agreement”) with Regions Bank and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”).  Under the Credit Agreement, the Company’s revolving line of credit with Regions Bank was renewed, and under the Equipment Finance Addendum, REFCO provided to the Company a new fixed term loan in the amount of $2,430,000, the proceeds of which were used to repay the Company’s remaining obligations in connection with the 2002 Series of Industrial Development Revenue Bonds (Kinpak, Inc. Project) issued by the City of Montgomery, Alabama (the “Series 2002 Bonds”).

2. RECENT ACCOUNTING PRONOUNCEMENTS

There have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2011 that are expected to have a material impact on the Company’s financial position, results of operations or cash flows.  Accounting pronouncements that became effective during the six months ended June 30, 2011 had no material impact on disclosures or on the Company’s financial position, results of operations or cash flows.
 
3. INVENTORIES

The composition of inventories at June 30, 2011 and December 31, 2010 are as follows:
 
   
June 30,
2011
   
December 31,
 2010
 
Raw materials
 
$
3,969,012
   
$
4,116,577
 
Finished goods
   
5,556,830
     
3,938,629
 
Inventories, gross
   
9,525,842
     
8,055,206
 
                 
Inventory reserves
   
(341,608)
     
(329,626)
 
                 
Inventories, net
 
$
9,184,234
   
$
7,725,580
 
 
The inventory reserves shown in the table above reflect slow moving and obsolete inventory.

The Company operates a vendor managed inventory program with one of its customers to improve the promotion of the Company’s products.  The Company manages the inventory levels at this customer’s warehouses and recognizes revenue as the products are sold by the customer.  The inventories managed at the customer’s warehouses amounted to approximately $398,000 and $352,000 at June 30, 2011 and December 31, 2010, respectively.
 
 
8

 
 
4. PROPERTY, PLANT, & EQUIPMENT

The Company’s property, plant and equipment consisted of the following at June 30, 2011 and December 31, 2010:
 
   
Estimate
Useful Life
 
June 30,
 2011
   
December 31,
 2010
 
                 
Land
      $ 278,325     $ 278,325  
Building
 
30 years
    4,402,275       4,402,275  
Manufacturing and warehouse equipment
 
6-20 years
    7,625,681       7,481,644  
Office equipment and furniture
 
3-5 years
    620,636       552,306  
Construction in process
        59,437       76,499  
Leasehold improvement
 
10-15 years
    122,644       122,644  
 Property, plant and equipment, gross
        13,108,998       12,913,693  
                     
Less accumulated depreciation
    (7,810,918 )     (7,491,906 )
                     
Property, plant and equipment, net
      $ 5,298,080     $ 5,421,787  
 
5. NONCONTROLLING INTEREST
 
On May 10, 2010, the Company announced the formation of OdorStar, a joint venture between the Company and BBL Distributors, LLC.  OdorStar owns patents that relate to a formula and delivery system, for use with products containing chlorine dioxide, designed to safely prevent and eliminate all types of odors relating to mold, mildew and other sources of unpleasant odors.  The Company and BBL Distributors, LLC share equally in profits or losses from OdorStar.  Because the Company manages OdorStar, it has consolidated OdorStar in its financial statements.  The Company’s condensed consolidated financial statements include $592,000 and $625,000 in assets and $7,000 and $10,000 in liabilities from OdorStar at June 30, 2011 and December 31, 2010, respectively.  The Company’s condensed consolidated financial statements also include OdorStar’s operating losses of approximately $25,000 and $107,000 during the three months ended June 30, 2011 and 2010, respectively, and $66,000 and $107,000 during the six months ended June 30, 2011 and 2010, respectively.
 
6. REVOLVING LINE OF CREDIT

The Company’s revolving line of credit with Regions Bank matured on June 30, 2011.  At June 30, 2011, the Company was in compliance with the terms of the revolving line of credit, including financial covenants.  At June 30, 2011, the Company’s principal obligation under the revolving line of credit was $2,600,000.

On July 6, 2011, under the terms of the Credit Agreement, the Company renewed its revolving line of credit with Regions Bank.  Under the new revolving line of credit, the Company may borrow up to the lesser of (i) $6 million or (ii) a borrowing base equal to 80% of eligible accounts receivable plus 50% of eligible inventory.  Interest on the revolving line of credit is payable at the 30 day LIBOR rate plus 1.74% per annum (unless the Company’s debt service coverage ratio (net profit plus interest, depreciation, amortization and rent expense divided by debt service plus interest) falls below 2.0 to 1, in which case the additional percentage will be 2.75% per annum).  In no event will the interest rate be less than 2.0% per annum.  The Company’s obligations under the revolving line of credit are secured by the Company’s accounts receivable and inventory, as well as real property and equipment at Kinpak’s Montgomery, Alabama facility.  The Company’s obligations under the revolving line of credit and the term loan are cross-collateralized under the Credit Agreement.  The Credit Agreement includes financial covenants requiring a minimum debt service coverage ratio of 1.75 to 1.00, and a maximum debt to capitalization ratio (funded debt divided by the sum of total net worth and funded debt) of 0.75 to 1.

7. LONG TERM DEBT

At June 30, 2011, the Company had outstanding rent obligations under the Second Supplemental Lease Agreement (the “Lease Agreement”) between its subsidiary, Kinpak, Inc. (“Kinpak”), and the Industrial Development Board of the City of Montgomery, Alabama (the “Board”).  The Company’s payments under the lease agreement were used to pay debt service on the Series 2002 Bonds, which were issued by the Board.  The Company entered into the Lease Agreement to fund the expansion of Kinpak’s facilities and acquisition of related equipment.  Kinpak previously entered into a similar lease arrangement with the Board in 1997, in connection with the Board’s issuance of industrial revenue bonds (the “Series 1997 Bonds”), related to Kinpak’s facilities and related equipment.  On March 1, 2011, the Series 1997 Bonds were paid in full.  At June 30, 2011, $2,420,000 was outstanding under the Series 2002 Bonds.  At December 31, 2010, $425,000 and $2,480,000 were outstanding under the Series 1997 Bonds and Series 2002 Bonds, respectively.  The bonds bore interest at tax-free rates that adjusted weekly.  During the six months ended June 30, 2011 the interest rate per annum was 4.0%, and during year ended December 31, 2010, interest rates per annum ranged between 2.0% and 4.0%.  Interest expense for the three months ended June 30, 2011 and June 30, 2010 was approximately $25,000 and $27,000, respectively, and for the six months ended June 30, 2011 and June 30, 2010 was $40,000 and $54,000, respectively.  
 
 
9

 

 On July 6, 2011, Regions Equipment Finance Company (REFCO) provided to the Company a new $2,430,000 term loan with a fixed interest rate of 3.54%.  Principal and interest on the term loan are payable in equal monthly installments through July 6, 2017, the date the term loan matures.  The proceeds of the term loan were used to pay the Company’s remaining obligations under the Lease Agreement.

At June 30, 2011 and December 31, 2010, the Company was obligated under various capital lease agreements covering equipment utilized in the Company’s operations.  The capital leases, aggregating $78,430 and $93,112 at June 30, 2011 and December 31, 2010, respectively, have varying maturities through 2015 and carry interest rates ranging from 7% to 14%.

The composition of these obligations at June 30, 2011 and December 31, 2010 were as follows:
 
   
Current Portion
   
Long Term Portion
 
   
June 30,
2011
   
December 31,
 2010
   
June 30,
2011
   
December 31,
 2010
 
                         
Industrial Development Bonds
 
$
200,000
   
$
460,000
   
$
2,220,000
   
$
2,445,000
 
Capitalized equipment leases
   
30,151
     
30,127
     
48,279
     
62,985
 
                                 
Total long term debt
 
$
230,151
   
$
490,127
   
$
2,268,279
   
$
2,507,985
 
 
Required principal payments under these obligations are set forth below:

12 month period ending June 30,
     
 2012
  $ 230,151  
2013
    460,397  
2014
    455,378  
2015
    449,161  
2016
    443,343  
       Thereafter
    460,000  
        Total         
  $ 2,498,430  
 
8. RELATED PARTY TRANSACTIONS

At June 30, 2011 and December 31, 2010, the Company had amounts receivable from affiliated companies owned by the Company’s Chief Executive Officer, aggregating approximately $125,000 and $213,000, respectively.  The accounts receivable relate to sales of the Company’s products to the affiliated companies, which distribute these products outside of the United States and Canada, and administrative services provided to the affiliated companies.
 
Sales to the affiliated companies aggregated approximately $404,000 and $340,000 during the three months ended June 30, 2011 and 2010, respectively, and $834,000 and $771,000 for the six months ended June 30, 2011 and 2010, respectively.  Administrative fees aggregated approximately $50,000 and $45,300 during the three months ended June 30, 2011 and 2010, respectively, and $100,000 and $95,300 for the six month period ended June 30, 2011 and 2010, respectively.

The transactions with the affiliated companies were made in the ordinary course of business but were not made on substantially the same terms and conditions as those prevailing at the same time for comparable transactions with other customers.  Management believes that the sales transactions did not involve more than normal credit risk or present other unfavorable features.

The Company currently uses the services of an entity that is owned by the Company’s Chief Executive Officer to conduct product research and development.  The Company paid $10,500 and $14,500 to the entity for the three months ended June 30, 2011 and 2010, respectively, and $21,000 and $22,000 during the six months ended June 30, 2011 and 2010, respectively, for these services.
 
 
10

 

A director of the Company is a regional executive vice president of a company that sources most of the Company’s insurance needs at an arm’s length competitive basis.  During the three months ended June 30, 2011 and 2010, the Company paid an aggregate of approximately $110,000 and $91,000 in insurance premiums on policies obtained through the director’s company, respectively, and during the six months ended June 30, 2011 and 2010 the Company paid an aggregate of approximately $224,000 and $168,000 in insurance premiums on policies obtained through the director’s company, respectively.

The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chief Executive Officer.  See Note 9 “Commitments” for a description of the lease terms.

9. COMMITMENTS

On May 1, 2008, the Company renewed for ten years its existing lease with an entity owned by its Chief Executive Officer for its executive offices and warehouse facilities in Fort Lauderdale, Florida.  The lease requires minimum base rent of $94,800 for the first year and provides for a maximum annual 2% increase in base rent in subsequent years.  Additionally, the leasing entity is entitled to reimbursement of all taxes, assessments, and any other expenses that arise from ownership.  Each of the parties to the lease has agreed to review the terms of the lease every three years at the request of the other party.  Rent expense under the lease was $24,000 and $26,000 for the three months ended June 30, 2011 and 2010, respectively.  Rent expense for the six months ended June 30, 2011 and 2010 amounted to approximately $49,000 and $52,000, respectively.

The Company leases a 1.5 acre docking facility on the Alabama River from the Alabama State Port Authority, located approximately eleven miles from the Company’s Alabama manufacturing facility.  The lease expires September 30, 2014, and requires the Company to pay rent and additional expenses totaling approximately $7,800 annually.

10.  EARNINGS PER SHARE

Basic earnings per share is calculated based on net income attributable to Ocean-Bio Chem, Inc. and the weighted average number of shares outstanding during the reported period.  Diluted earnings per share reflect additional dilution from potential common stock issuable upon the exercise of outstanding stock options and, during 2010, warrants.  The following table sets forth the computation of basic and diluted earnings per common share, as well as a reconciliation of the weighted average number of common shares outstanding to the weighted average number of shares outstanding on a diluted basis

 
  
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
  
2011
   
2010
   
2011
   
2010
 
Earnings per common share -Basic
  
     
  
     
  
     
  
     
                                 
Net income attributable to OBCI
  
$
389,396
  
  
$
372,010
  
  
$
1,037,697
  
  
$
766,455
  
         
Weighted average number of common shares outstanding
  
 
7,897,985
  
  
 
7,746,886
  
  
 
7,875,923
  
  
 
7,724,722
  
         
Earnings per common share - Basic
  
$
0.05
  
  
$
0.05
  
  
$
0.13
  
  
$
0.10
  
         
Earnings per common share – Diluted
  
     
  
     
  
     
  
     
                                 
Net income attributable to OBCI
  
$
389,396
  
  
$
372,010
  
  
$
1,037,697
  
  
$
766,455
  
         
Weighted average number of common shares outstanding
  
 
7,897,985
  
  
 
7,746,886
  
  
 
7,875,923
  
  
 
7,724,722
  
                                 
Effect of employee stock-based awards
  
 
520,606
  
  
 
868,440
  
  
 
439,263
  
  
 
637,997
  
 
  
     
  
     
  
     
  
     
Weighted average number of common shares outstanding - assuming dilution
  
 
8,418,591
  
  
 
8,615,326
  
  
 
8,315,186
  
  
 
8,362,719
  
 
  
     
  
     
  
     
  
     
Earnings per common share - Diluted
  
$
0.05
  
  
$
0.04
  
  
$
0.12
  
  
$
0.09
  
 
 
11

 
 
11. SECURITES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

On June 3, 2011, the Company’s shareholders approved the 2011 Omnibus Equity Compensations Plan (the “Plan”).  Under the Plan, equity grants and awards of up to 750,000 shares of the Company’s common stock may be issued to the Company’s directors, officers, employees, consultants and advisors.

On June 3, 2011, the Company issued stock awards covering 139,000 shares of common stock under the Plan.  The Company recognized compensation expense based upon the market price per share at the time of issuance, $2.82, and an assumed forfeiture rate of 15%.

Stock based compensation recognized during the three months ended June 30, 2011 and 2010 attributable to equity grants and awards totaled approximately $321,000 and $247,000, respectively.  There was no stock compensation expense related to equity grants and awards during the three months ended March 31, 2011 and 2010.  Stock compensation expense attributable to stock options was $22,000 and $66,000 for the three months ended June 30, 2011 and 2010, respectively.  Stock compensation expense attributable to stock options was $45,000 and $90,000 for the six months ended June 30, 2011 and 2010, respectively.

At June 30, 2011 there was approximately $115,000 of unrecognized compensation cost related to options awarded to employees.  This cost will be charged against operations as the respective options vest through 2013.

The following schedule reflects the status of outstanding options under the Company’s three qualified stock option plans and two non-qualified plans, as well as a non-plan option at June 30, 2011.  The plans labeled ISO are incentive stock option plans, and the plans labeled NQ are non-qualified plans.  No further grants will be made under these plans; future grants will be made under the Omnibus Equity Compensation Plan.

June 30, 2011
                   
Weighted
 
Date
 
Options
   
Exercisable
   
Exercise
 
Expiration
Average
Plan
granted
 
outstanding
   
options
   
price
 
date
Remaining life
2002 ISO
11/06/06
   
113,500
     
90,800
    $
0.93
 
11/05/11
0.4
2007 ISO
05/17/07
   
167,500
     
134,000
     
1.66
 
05/16/12
.9
2007 ISO
10/08/07
   
2,500
     
1,500
     
1.87
 
10/07/12
1.3
2007 ISO
12/17/07
   
154,600
     
92,760
     
1.32
 
12/16/12
1.5
2008 ISO
08/25/08
   
156,100
     
62,440
     
0.97
 
08/21/13
2.2
2002NQ
10/22/02
   
30,000
     
30,000
     
 1.26
 
10/21/12
1.3
2002NQ
06/20/03
   
30,000
     
30,000
     
1.03
 
06/19/13
2.0
2002NQ
05/25/04
   
30,000
     
30,000
     
1.46
 
05/24/14
2.9
2002NQ
04/03/06
   
40,000
     
40,000
     
1.08
 
04/02/16
4.8
2002NQ
12/17/07
   
50,000
     
50,000
     
1.32
 
12/16/17
6.6
2008NQ
01/11/09
   
50,000
     
50,000
     
0.69
 
01/10/19
7.6
2008NQ
04/26/10
   
25,000
     
25,000
     
2.07
 
04/25/20
9.0
Non-Plan Option
      03/25/09
   
     115,000
     
     115,000
     
           0.55
 
      03/24/14
                2.8
       
964,200
     
751,500
    $
1.16
   
2.5
 
Item 2. Management’s Discussion and Analysis of financial Conditions and Results of Operations

Forward-looking Statements:

Certain statements contained in this report, including without limitation expectations as to future sales and operating results, constitute forward-looking statements.  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 similar words are intended to identify forward-looking statements.  These statements involve known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from the results expressed or implied by such forward-looking statements.  Factors that may affect the Company’s results include, but are not limited to, the highly competitive nature of the Company’s business, reliance on certain key customers, consumer demand for marine recreational vehicle and automotive products, advertising and promotional efforts, and other factors.  The Company does not assume any obligation to update any forward-looking statements, except as required by law.
 
 
12

 
 
Overview:

We are principally engaged in the manufacturing, marketing and distribution of a broad line of appearance and maintenance products for boats, recreational vehicles, automobiles and home care under the Star brite® and other trademarks within the United States of America and Canada.  In addition, we produce private label formulations of many of our products for various customers and provide custom blending and packaging services of these and other products.  We sell our products through national retailers and to national and regional distributors who, in turn, sell our products to specialized retail outlets.

Critical accounting policies and estimates:

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 for information regarding the Company’s critical accounting estimates.

Results of Operations:

For the Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010

Net sales increased to approximately $8,218,000 during the three months ended June 30, 2011 from approximately $7,353,000 during the corresponding period in 2010, an increase of $865,000 or 11.8%.  The sales increase primarily reflects customer growth in newer markets, including recreational vehicle, power sports, agriculture and other power equipment.  The Company also continued to increase sales to both existing and new customers in our core marine market. 

Cost of goods sold and gross profit – Cost of goods sold during the three months ended June 30, 2011 increased by approximately $600,000 or 12.9%, to approximately $5,240,000 from approximately $4,640,000 during the three months ended June 30, 2010.  The increase in cost of goods sold is a result of the increase in net sales.  The Company’s gross margin percentage remained stable with only a .7% decrease in 2011, combined with the increase in net sales resulted in a $264,000 increase in gross profit.

Advertising and promotion increased to approximately $657,000 during the three months ended June 30, 2011 from $418,000 during the corresponding period in 2010, an increase of approximately $239,000 or 57.3%.  The increase is due to a radio advertising campaign as well as increased magazine and newspaper advertising.  As a percentage of net sales, advertising and promotion expense increased from 5.7% in the second quarter of 2010 to 8.0% in the second quarter of 2011.  The Company expects the increased rate of advertising and promotion to continue during the remainder of 2011.

Selling and administrative expenses increased by approximately $32,000 or 1.9% during the three months ended June 30, 2011 as compared to the same period in 2010.  As a percentage of net sales, selling and administrative expenses decreased from 22.3% to 20.4%.  The increase in expenses was primarily due to an increase in variable expenses that are affected by increased sales, including commissions, selling expenses, shipping costs and fuel costs.

Interest expense increased by approximately $7,000 to $47,000 during the three months ended June 30, 2011, compared to $40,000 during the three months ended June 30, 2010. The increase is attributable to the increased utilization of the Company’s revolving line of credit, primarily to fund increased working capital needs related to accounts receivable and inventories.

Operating income – As a result of the foregoing, operating income was approximately $647,000 in 2011 compared to an operating profit of approximately $653,000 in 2010, a decrease of $6,000 or .9%.

Income taxes - The Company had a tax expense of approximately $224,000 in 2011 or 37.3% of pretax income, compared to $295,000 in 2010 or 48.1% of pretax income.

Net income and Net income attributable to Ocean-Bio Chem, Inc.  As a result of the items mentioned above, net income increase approximately 18.3% or approximately $58,000 to $376,000 from approximately $318,000.  Net income attributable to Ocean Bio-Chem. Inc. increased to approximately $389,000 in 2011, from approximately $372,000 in 2010, an increase of $17,000 or 4.7%.

 
13

 

For the Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010
 
Net sales increased to approximately $14,950,000 during the six months ended June 30, 2011 from approximately $12,551,000 in the corresponding period in 2010, an increase of $2,399,000 or 19.1%.  As discussed in the three month analysis above, the sales increase primarily reflects customer growth in newer markets, including recreational vehicle, power sports, agriculture and other power equipment.  The Company also continued to increase sales to both existing and new customers in its core marine market.

Cost of goods sold and gross profit – Cost of goods sold in 2011 increased 16.8%, to approximately $9,464,000 from approximately $8,105,000 in 2010.  The increase in cost of goods sold is mostly attributable to the increase in net sales.   The Company’s gross margin percentage increased by approximately 1.3%, from approximately 35.4% to 36.7%, combined with the increase in net sales resulted in an increase in gross profit of approximately $1,041,000 or 23.4%

Advertising and promotion increased to approximately $1,030,000 during the six months ended June 30, 2011 from $687,000 during the same period in 2010, an increase of approximately $343,000 or 49.8%.  The increase is due to a radio advertising campaign, increased magazine and newspaper advertising, and customer cooperative advertising allowances related to higher sales. As a percentage of net sales, advertising and promotion expense increased from 5.5% during the six months ended June 30, 2010 to 6.9% during the six months ended June 30, 2011.  The Company expects the increased rate of advertising and promotion to continue during the remainder of 2011.

Selling and administrative expenses increased by approximately $352,000 to $2,777,000 during the six months ended June 30, 2011 from $2,425,000, during the comparative period in 2010. The increase is mostly due to an increase in variable expenses as it relates to increased sales including commissions and selling expenses in addition to higher shipping costs due to higher volume along with increased fuel costs to ship products.  As a percentage of net sales, selling and administration expenses decreased from 19.3% in the first half of 2011 to18.6% in the first half of 2010.

Interest expense increased approximately $5,000 to $73,000 in 2011 compared to $68,000 in 2010.  The increase in interest expense is attributable to increased borrowing in the second quarter, as described above.

Operating income – As a result of the foregoing, operating income increased to approximately $1,680,000 in 2011 from an operating profit of approximately $1,333,000 in 2010, an increase of $347,000 or 26.0%.

Income taxes - The Company had a tax expense of approximately $628,000 or 38.5% of pretax income compared to $575,000 or 44.6% of pretax income, for the corresponding 2010 period.

Net income and Net income attributable to Ocean-Bio Chem, Inc. As a result of the items mentioned above, net income increased approximately 40.9% or approximately $292,000 to $1,005,000 from $713,000 in 2010.  Net income attributable to Ocean Bio Chem, Inc. increased to approximately $1,038,000 in 2011, from approximately $766,000 in 2010, an increase of approximately $272,000 or 35.4%.

Liquidity and capital resources:

The Company’s cash balance was approximately $539,000 at June 30, 2011 compared to approximately $615,000 at December 31, 2010.  At June 30, 2011, the Company had $2,600,000 in short-term borrowings outstanding under the Company’s revolving line of credit compared to no short-term borrowings under the revolving line of credit at December 31, 2010.

Net cash used by operating activities during the six months ended June 30, 2011 was approximately $1,506,000 compared to approximately $163,000 provided by operating activities for the six months ended June 30, 2010, principally due to increased working capital needs.  During the six months ended June 30, 2011, inventory increased by approximately $1,471,000 and accounts receivable increased by approximately $1,265,000.  The inventory buildup related to a strategy of purchasing in anticipation of higher petroleum prices and also to support a higher level of customer orders.  The increase in accounts receivable is mostly a result of strong June 2011 sales.  The Company also used approximately $718,000 to pay accounts payable and other accrued expenses.  The uses of cash were partially offset by net income attributable to OBCI of approximately $1,038,000 and non-cash charges of approximately $803,000.  The major non-cash charges were stock based compensation of approximately $366,000 and depreciation and amortization of approximately $419,000.
 
 
14

 

Net cash used by investing activities was approximately $207,000 for the six months ended June 30, 2011 compared to approximately $603,000 for the six months ended June 30, 2010.  In the current period, the Company used approximately $244,000 to purchase manufacturing equipment at its Kinpak facility, partially offset by a $36,000 contribution the Company received from our joint venture partner.

Net cash provided by financing activities was approximately $1,635,000 for the six months ended June 30, 2011 compared to approximately $517,000 for the six months ended June 30, 2010.  During the six months ended June 30, 2011, cash was provided through the Company’s borrowing of $2,600,000 under its revolving line of credit, partially offset by the payment of its entire lease obligation used to fund debt service on the 1997 Series Industrial Revenue Bonds that were issued to finance in connection with Kinpak’s facilities and acquisition of related equipment, as well as quarterly lease payments funding debt service under the 2002 Series of Industrial Revenue Bonds issued in connection with expansion of Kinpak’s facilities and acquisition of related equipment, and payment of the related party note, totaling approximately $972,000.

The Company’s revolving line of credit with Regions Bank matured on June 30, 2011.  At June 30, 2011 the Company had $2,600,000 outstanding under the line of credit agreement compared to no amounts outstanding under the line of credit at December 31, 2010.  On July 6, 2011, the $2,600,000 balance was refinanced by a new revolving line of credit agreement with Regions Bank described below.

On July 6, 2011, the Company, together with its subsidiary, Kinpak Inc. (“Kinpak”), entered into a Credit Agreement with Regions Bank (and, pursuant to an Equipment Finance Addendum to the Credit Agreement, Regions Equipment Finance Corporation (“REFCO”)) under which (a) the Company’s revolving line of credit with Regions Bank was renewed, and (b) REFCO provided to a new term loan in the amount of $2,430,000, the proceeds of which were used to pay the Kinpak’s remaining lease obligations in connection with the 2002 Series of Industrial Development Revenue Bonds issued by the City of Montgomery, Alabama to fund the expansion of Kinpak’s facilities and acquisition of related equipment.

Under the extended revolving line of credit, the Company may borrow up to the lesser of (i) $6 million and (ii) a borrowing base equal to 80% of eligible accounts receivable plus 50% of eligible inventory.  Interest on the revolving line of credit is payable at the 30 day LIBOR rate plus 1.74% per annum (unless the Company’s debt service coverage ratio falls below 2.0 to 1, in which case the additional percentage will be 2.75% per annum).  In no event will the interest rate be less than 2.0% per annum.  Outstanding amounts under the revolving line of credit are payable on demand.  If no demand is made, the Company may repay and reborrow funds from time to time.  Interest payments are made in monthly installments on outstanding average balances with all outstanding principal and interest payable on July 6, 2014.

Under the new term loan, the Company will pay the $2,430,000 principal, together with interest, at the fixed rate of 3.54% per annum, in 72 consecutive monthly payments of $37,510.61 over the six year period beginning on August 6, 2011, with the final payment on July 6, 2017.  In the event the Company’s debt service coverage ratio falls below 2.0 to 1, interest on the term loan will increase by 1.01% per annum.

The Credit Agreement defines “debt service coverage ratio” as meaning net profit plus interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense.  The Credit Agreement contains various covenants, including financial covenants requiring a minimum debt coverage ratio of 1.75 to 1.00, and a maximum debt to capitalization ratio (funded debt divided by the sum of total net worth and funded debt) of 0.75 to 1.

The Company’s obligations under the Credit Agreement are secured by the Company’s accounts receivable and inventory, as well as real property and equipment at the Kinpak’s Montgomery, Alabama facility.
 
In addition to the revolving line of credit and term loan, the Company has obtained financing through capital leases for both manufacturing and office equipment, totaling approximately $78,430 and $93,112 at June 30, 2011 and December 31, 2010, respectively.

The Company sells its products in the Canadian market and is subject to currency fluctuations relating to the Canadian dollar.  The Company does not engage in currency hedging and addresses currency risk as a pricing issue.  In the six months ended June 30, 2011, the Company recorded approximately $4,000 in foreign currency translation adjustments (increasing shareholders’ equity by $4,000) as a result of the strengthening of the Canadian dollar in relation to the US dollar.

During the past few years, the Company has introduced various new products to its customers.  At times, new product introductions have required the Company to increase its overall inventory and have resulted in lower inventory turnover rates.  The effects of reduced inventory turnover have not been material to the Company’s overall operations.  The Company believes that it can continue to provide, through its operations and financing arrangements, all required capital to support increased inventory levels.
 
 
15

 

Many of the raw materials that the Company uses in the manufacturing process are petroleum or chemical based and commodity chemicals that are subject to fluctuating prices.  The nature of the Company’s business does not enable it to pass through the price increases to its national retailers and distributors as promptly as it experiences increases in raw material costs.  This may, at times, adversely affect the Company’s margins.

At June 30, 2011 and through the date of this report, the Company did not and does not have any material commitments for capital expenditures or inventories, nor does it have any other present commitment that is likely to result in the Company’s liquidity increasing or decreasing in any material way.

The Company believes that funds provided through operations and their existing sources of financing will be sufficient to satisfy its cash requirements over at least the next twelve months

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures:

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) at the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act are (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the disclosure.
 
Change in Internal Controls over Financial Reporting:

No change in internal control over financial reporting (as defined in rule 13a-15(f) under the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1A. – Risk Factors
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results.
 
 
16

 

Item 6. – Exhibits
 
 
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
     
 
3.2
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010).
     
 
10.1
Ocean Bio-Chem, Inc. Omnibus Equity Compensation Plan (incorporated by reference to Exhibit 99.1 to the registration statement on Form S-8 (file no. 333-174659), filed by Ocean Bio-Chem, Inc. on June 2, 2011
     
 
10.2
Credit Agreement, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Bank (the “Credit Agreement”) (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
     
 
10.3
Equipment Finance Addendum, dated July 6, 2011, among the Company, Kinpak, Inc. and Regions Equipment Finance Corporation (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
     
 
10.4
Promissory Note, dated July 6, 2011, issued by the Company to Regions Bank in connection with the revolving line of credit under the Credit Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
     
 
10.5
Promissory Note, dated July 6, 2011, issued by the Company and Kinpak, Inc. to Regions Equipment Finance Corporation in connection with the term loan under the Credit Agreement (incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed on July 12, 2011).
     
 
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.*
     
 
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.*
     
 
32.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.*
     
 
32.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.*
     
 
101
The following materials from Ocean Bio-Chem, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2011 and 2010, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2011 and 2010; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
 

* Filed herewith.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf by the Undersigned there unto duly authorized.
 
   
OCEAN BIO-CHEM, INC.
 
       
Date: August 15, 2011
 
/s/ Peter G. Dornau  
    Peter G. Dornau  
   
Chairman of the Board, President
 
   
and Chief Executive Officer
 
   
(Principal Executive Officer)
 
       
       
   
/s/ Jeffrey S. Barocas
 
   
Jeffrey S. Barocas
 
   
Vice President
 
   
Chief Financial Officer
 
 
 
(Principal Financial and Accounting Officer)
 
 
 
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