U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File No. 2-70197
OCEAN BIO-CHEM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1564329
- --------------------------------------- ------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Registrant's telephone number, including area code - 954-587-6280
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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
$.01 Par Value Common Stock, 10,000,000 shares authorized.
3,706,709 issued and outstanding at June 30, 1997.
<PAGE>
PART I - Financial Information
Item l. Financial Statement
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
JUNE 30, DEC. 31,
1997 1996
----------- -----------
Current Assets:
Cash $ 93,296 $ 394,569
Trade Accounts Receivable Net of Allowances for
Doubtful Accounts of approximately $26,000
and $27,000 at June 30, 1997 and
December 31, 1996, Respectively 1,686,627 2,235,183
Due from officers 145,600 141,880
Inventories 3,084,435 2,534,862
Prepaid Expenses 258,013 132,238
----------- ----------
Total Current Assets 5,267,971 5,438,732
----------- ----------
Office Equipment and Furnishings, Net 2,826,402 2,138,815
----------- ----------
Other Assets
Trademarks, Trade Names and Patents, Net 432,258 443,754
Deposits and Other Assets 2,789,361 3,285,230
Due From Affiliated Companies, Net 666,538 648,866
----------- -----------
Total Other Assets 3,888,157 4,377,850
----------- -----------
Total Assets $11,982,530 $11,955,397
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 987,000 $ 643,409
Notes Payable - Bank 1,503,001 1,658,001
Current Portion of Long-Term Debt 360,000 280,000
Accrued Expenses Payable 76,049 119,503
----------- -----------
Total Current Liabilities 2,926,050 2,700,913
----------- -----------
Long-term Debt, Less Current Portion 4,535,000 2,710,000
----------- -----------
Shareholders' Equity:
Common Stock 37,067 37,020
Additional Paid-in Capital 3,177,790 3,172,337
Retained Earnings 1,398,939 1,418,014
Foreign Currency Translation Adjustment ( 92,316) ( 82,887)
----------- ----------
Total Shareholders' Equity 4,521,480 4,544,484
----------- ----------
Total Liabilities & Shareholders' Equity $11,982,530 $11,955,397
=========== ===========
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<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Gross Sales $3,031,391 $3,815,253 $5,604,184 $6,302,864
Allowances 238,170 99,177 527,084 232,146
---------- ---------- ---------- ----------
Net Sales 2,793,221 3,716,076 5,077,100 6,070,718
Cost of Goods Sold 1,852,222 2,485,667 3,514,105 3,979,772
---------- ---------- ---------- ---------
Gross Profit 940,999 1,230,409 1,562,995 2,090,946
Cost and Expenses:
Advertising and Promotion 188,053 176,282 305,760 257,552
Selling and Administrative 543,796 537,434 1,157,905 1,143,690
Interest Expense 89,449 62,644 189,001 104,014
---------- ---------- ---------- ----------
Total Cost and Expenses 821,298 776,360 1,652,666 1,505,256
---------- ---------- ---------- ----------
Income (Loss) From
Operations 119,701 454,049 ( 89,671) 585,690
Interest Income 35,127 655 65,924 3,831
---------- ---------- ----------- ---------
Income Before Income Taxes 154,828 454,704 ( 23,747) 589,521
Provision for Income Taxes 62,526 182,000 ( 4,672) 222,000
---------- ---------- ----------- ---------
Net Income (Loss) $ 92,302 $ 272,704 ($ 19,075) $ 367,521
========== ========== =========== =========
Net Income (Loss) Per Share $ .02 $ .07 $ (.01) $ .10
========== ========== =========== =========
Earnings per share were calculated based on the weighted average common stock
and common stock equivalent outstanding of 3,746,718 shares for the six months
and three months ending June 30, 1997 and 3,802,911 shares for the six
months and three months ended June 30, 1996. Common stock equivalents consist
of options to purchase common stock.
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<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30
(Unaudited)
1997 1996
----------- -----------
Cash Flow used by Operating Activities:
Net Income (Loss) ($ 19,075) $ 367,521
Adjustments to Reconcile Net Income
to Net Cash Provided by Operations:
Depreciation and Amortization 107,776 87,628
Change in Assets and Liabilities:
(Increase) decrease in Accounts Receivable 548,556 ( 133,622)
Increase in Inventory ( 549,573) ( 664,165)
Decrease (Increase) in Prepaid Expenses 511,227 ( 114,784)
Increase in Accounts Payable
and Accrued Expenses: 198,738 338,082
----------- -----------
Net Cash (Used) Provided by
Operating Activities: 797,649 ( 119,340)
----------- -----------
Cash Flows From Financing Activities:
Net Borrowings Under Line of Credit ( 155,000) 240,000
Advances (to) From Affiliates ( 17,672) ( 16,621)
Borrowings (Payment) on Debts, Net ( 138,454) 976,939
Sale of Stock 5,500 7,169
----------- -----------
Net Cash Provided (Used) by
Financing Activities ( 305,626) 1,207,487
----------- -----------
Cash Flows From Investing Activities:
Purchase Property, Plant, Equipment ( 783,867) ( 1,920,870)
----------- -----------
Net Cash Used by Investing Activities: ( 783,867) ( 1,920,870)
----------- -----------
Decrease in Cash Prior to
Effect of Exchange Rate on Cash ( 291,844) ( 832,723)
Effect of Exchange Rate on Cash ( 9,427) ( 7,555)
----------- -----------
Net Decrease in Cash ( 301,271) ( 840,278)
Cash at Beginning of Period 394,567 997,309
----------- -----------
Cash at June 30, $ 93,296 $ 157,031
=========== ===========
Supplemental Information
Cash Used for Interest During Period $ 173,710 $ 80,350
Cash Used for Income Taxes During Period $ 70,000 $ 194,000
----------- -----------
The company had no cash equivalents at June 30, 1997 and 1996.
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<PAGE>
OCEAN BIO-CHEM, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
l. The information contained in this Report is unaudited, but reflects all
adjustments which are, in the opinion of the management, necessary for a fair
statement of results of the interim periods, consisting only of normal
recurring accruals. The results for such interim periods are not necessarily
indicative of results to be expected for the full year.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
The primary sources of the Registrant's liquidity are its operations and a
line of credit from a commercial bank to a limit of $2.9 million. The line
of credit was renewed for one year in April 1997. The Registrant is required
to maintain minimum working capital of $1,500,000, debt to tangible net worth
of 2 to 1 and debt service coverage of 1.7 times. As of year end 1996
Registrant was in compliance with all terms.
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 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 Registrant. Registrant believes that all required capital to
maintain such increases can continue to be provided from operations and
current lending arrangements.
Results of Operations For The Three Month Period April 1-June 30:
Gross Sales decreased approximately $784,000 or 21% when comparing the quarter
ended June 30, 1997 with the comparable period of the preceding year.
Management attributes the decrease to the loss of a filling contract at the
Alabama Plant.
Cost of Goods Sold decreased approximately 4% as a percentage of gross sales
when comparing the quarter ended June 30, 1997 with the quarter ended June 30,
1996. This decrease was due to changes in the product sales mix.
Advertising and Promotion expenses increased approximately $12,000 or 7% when
comparing the three months ended June 30, 1997 to the three months ended June
30, 1996. This was not due to any one factor but reflects the effect of timing
differences.
Selling and Administrative expenses increased approximately $6,000 or 1% when
comparing the quarter ended June 30, 1996 to the comparable period in 1995.
The increase was not attributable to any one factor.
-5-
<PAGE>
Interest Expense increased approximately $27,000 comparing the quarter ended
June 30, 1997 to the comparable period in 1996. This was primarily due to
increased borrowings outstanding on the registrant's line of credit during
this period and the interest on the borrowings to purchase the Alabama Plant.
Results of Operations For the Six Month Period January 1 - June 30
Gross Sales decreased 11% or approximately $699,000 when comparing the six
month periods of 1997 and 1996. Management attributes the decrease to the
loss of a filling contract at the Alabama Plant.
Cost of Goods Sold remained relatively constant at approximately 63% as a
percentage of gross sales when comparing the six months ended June 30, 1997 to
the six months ended June 30, 1996.
Advertising and promotion expenses increased approximately 19% or $48,000 when
comparing the six months ended June 30, 1997 to the six months ended June 30,
1996. This was primarily due to seasonal variations.
Selling and administrative expenses increased for the six months ended June
30, 1997 by approximately $14,000 or 1% when compared to the six months ended
June 30, 1996. This was not significant.
Interest expense increased in 1997 for the six month period by approximately
$85,000 when compared to the six month period of 1996 reflecting increased
levels of borrowings outstanding from the Company's commercial lender during
this period and the cost of debt associated with the Alabama Plant purchase.
-6-
<PAGE>
PART II: OTHER INFORMATION
Item l - Legal Proceedings: See the Registrant's 10K for the year ended
December 31, 1996
Item 2 - Changes in Securities: Not applicable
Item 3 - Defaults Upon Senior Securities: Not applicable
Item 4 - Submission of Matters to Vote of Security Holders:
On May 14, 1996, at the Registrant's annual meeting, shareholders elected two
directors; Peter Dornau and Jeffrey Tieger. 2,336,293 voted for Peter Dornau
and 6,204 voted against; 2,336,587 voted for Jeffrey Tieger and 5,910 voted
against. Shareholders also approved Infante, Lago & Co., Certified Public
Accountants, by a vote of 2,336,587 for and 5,910 shares against, as the
Registrant's auditors for 1997.
Item 5 - Other Matters: Not applicable
Item 6 - Exhibits: Not applicable
(A) Exhibits - Not applicable
(B) Reports on Form 8-K - Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCEAN BIO-CHEM, INC.
Date: August 13,1997
/S/ PETER G. DORNAU
--------------------------------
Peter G. Dornau
Chairman of the Board and
Chief Executive Officer
/S/ PETER G. DORNAU
--------------------------------
Peter G. Dornau
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 93,296
<SECURITIES> 0
<RECEIVABLES> 1,859,227
<ALLOWANCES> 26,000
<INVENTORY> 3,084,435
<CURRENT-ASSETS> 5,267,971
<PP&E> 3,048,898
<DEPRECIATION> 582,496
<TOTAL-ASSETS> 11,982,530
<CURRENT-LIABILITIES> 2,926,050
<BONDS> 4,535,000
0
0
<COMMON> 37,067
<OTHER-SE> 4,484,413
<TOTAL-LIABILITY-AND-EQUITY> 11,982,530
<SALES> 5,604,184
<TOTAL-REVENUES> 5,670,108
<CGS> 3,514,105
<TOTAL-COSTS> 1,652,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,001
<INCOME-PRETAX> (23,747)
<INCOME-TAX> (4,672)
<INCOME-CONTINUING> (19,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,075)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
