Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 11, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | OCEAN BIO CHEM INC | |
Entity Central Index Key | 350,737 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,146,937 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash | $ 1,085,767 | $ 2,468,415 |
Trade accounts receivable less allowances of approximately $143,000 and $78,000, respectively | 9,413,500 | 5,092,040 |
Receivables due from affiliated companies | 822,594 | 1,051,091 |
Inventories, net | 8,955,477 | 7,914,950 |
Prepaid expenses and other current assets | 1,015,785 | 942,820 |
Total Current Assets | 21,293,123 | 17,469,316 |
Property, plant and equipment, net | 4,931,716 | 5,356,388 |
Intangible assets, net | 985,258 | 1,037,968 |
Total Assets | 27,210,097 | 23,863,672 |
Current Liabilities: | ||
Accounts payable - trade | 2,993,860 | 1,101,720 |
Current portion of long-term debt | 386,340 | 451,148 |
Accrued expenses payable | 1,490,085 | 1,098,721 |
Total Current Liabilities | 4,870,285 | 2,651,589 |
Deferred tax liability | 219,526 | 239,677 |
Long-term debt, less current portion | 55,181 | 328,818 |
Total Liabilities | 5,144,992 | 3,220,084 |
Commitments and contingencies | ||
Shareholders' Equity: | ||
Common stock - $.01 par value, 12,000,000 shares authorized; 9,146,937 shares and 8,983,374 shares issued, respectively | 91,469 | 89,834 |
Additional paid in capital | 9,604,634 | 9,287,313 |
Foreign currency translation adjustment | (285,533) | (284,442) |
Retained earnings | 12,654,535 | 11,550,883 |
Total Shareholders' Equity | 22,065,105 | 20,643,588 |
Total Liabilities and Shareholders' Equity | $ 27,210,097 | $ 23,863,672 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Trade accounts receivable less allowances | $ 143,000 | $ 78,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 12,000,000 | 12,000,000 |
Common stock, shares issued | 9,146,937 | 8,983,374 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Gross sales | $ 12,801,963 | $ 11,339,560 | $ 29,025,944 | $ 26,812,739 |
Less: discounts, returns, and allowances | 594,826 | 502,741 | 1,344,384 | 1,234,786 |
Net sales | 12,207,137 | 10,836,819 | 27,681,560 | 25,577,953 |
Cost of goods sold | 7,306,999 | 7,274,360 | 16,728,575 | 16,814,747 |
Gross profit | 4,900,138 | 3,562,459 | 10,952,985 | 8,763,206 |
Operating Expenses: | ||||
Advertising and promotion | 782,249 | 763,936 | 2,367,769 | 2,311,441 |
Selling and administrative | 1,911,317 | 2,351,427 | 6,191,142 | 5,829,801 |
Total operating expenses | 2,693,566 | 3,115,363 | 8,558,911 | 8,141,242 |
Operating income | 2,206,572 | 447,096 | 2,394,074 | 621,964 |
Other expense | ||||
Interest, net (expense) | (3,933) | (7,888) | (14,730) | (26,783) |
Other (expense) | (12,522) | |||
Income before income taxes | 2,202,639 | 439,208 | 2,379,344 | 582,659 |
Provision for income taxes | 674,195 | 143,656 | 735,161 | 189,336 |
Net income | $ 1,528,444 | $ 295,552 | $ 1,644,183 | $ 393,323 |
Earnings per common share - basic and diluted | $ 0.17 | $ 0.03 | $ 0.18 | $ 0.04 |
Dividends declared per common share | $ 0.06 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net Income | $ 1,528,444 | $ 295,552 | $ 1,644,183 | $ 393,323 |
Foreign currency translation adjustment | (885) | (76) | (1,091) | (5,844) |
Comprehensive income | $ 1,527,559 | $ 295,476 | $ 1,643,092 | $ 387,479 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net Income | $ 1,644,183 | $ 393,323 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization | 735,478 | 679,463 |
Deferred income taxes | (20,151) | (23,082) |
Loss on sale of property, plant and equipment | 12,522 | |
Stock based compensation | 292,880 | 162,225 |
Other operating non-cash items | 149,094 | 94,799 |
Changes in assets and liabilities: | ||
Trade accounts receivable | (4,386,416) | (2,800,873) |
Inventories | (1,109,493) | (1,301,659) |
Prepaid expenses and other current assets | (72,965) | (157,156) |
Receivables due from affiliated companies | 228,497 | 246,697 |
Accounts payable and other accrued expenses | 2,275,080 | 1,709,060 |
Net cash used in operating activities | (263,813) | (984,681) |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (258,096) | (845,567) |
Cash paid for patent and trademark registration | (11,902) | |
Sale of property, plant, and equipment | 55,000 | |
Net cash used in investing activities | (258,096) | (802,469) |
Cash flows from financing activities: | ||
Payments on long-term debt | (338,445) | (326,772) |
Dividends paid to common shareholders | (540,531) | |
Proceeds from exercise of stock options | 21,600 | |
Net cash used in financing activities | (857,376) | (326,772) |
Effect of exchange rates on cash | (3,363) | (15,943) |
Net decrease in cash | (1,382,648) | (2,129,865) |
Cash at beginning of period | 2,468,415 | 3,062,729 |
Cash at end of period | 1,085,767 | 932,864 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest during period | 15,683 | 27,703 |
Cash paid for income taxes during period | $ 744,000 | $ 118,000 |
Summary of Accounting Policies
Summary of Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Accounting Policies [Abstract] | |
SUMMARY OF ACCOUNTING POLICIES | 1. SUMMARY OF ACCOUNTING POLICIES Interim reporting The accompanying unaudited condensed consolidated financial statements include the accounts of Ocean Bio-Chem, Inc. and its wholly-owned subsidiaries. All significant inter-company accounts and transactions 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” refers to 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 nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 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. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2016 | |
Recent Accounting Pronouncements [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | 2. RECENT ACCOUNTING PRONOUNCEMENTS Accounting Guidance Adopted by the Company In November 2015, the Financial Accounting Standards Board FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” The guidance under ASU 2015-17 is designed to simplify the presentation of deferred tax assets and liabilities within the balance sheet by requiring generally that all deferred tax assets and liabilities be classified as non-current. Under previously applicable guidance, an entity was required to separate deferred tax liabilities and assets into a current amount and a noncurrent amount. The guidance is effective for years beginning after December 15, 2016 with early adoption permitted, and can be applied prospectively or retrospectively. The Company adopted this guidance in the quarter ended September 30, 2016, retrospectively to January 1, 2016. As a result of the adoption, we made the following reclassifications to the 2015 condensed consolidated balance sheet: a $125,335 decrease to current deferred tax asset and a $125,335 decrease to noncurrent deferred tax liability. Accounting Guidance Not Yet Adopted by the Company In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers (Topic 606)". ASU 2014-19, which has been modified on several occasions, provides new guidance designed to enhance the comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of the new guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new guidance also requires disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those years; early application is permitted for annual periods beginning after December 15, 2016. The Company currently is evaluating this guidance to determine its impact on the Company’s financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. The principal change under this new accounting guidance is that lessees under leases classified as operating leases generally will recognize a right-of-use asset and a lease liability on the balance sheet. Current lease accounting standards do not require lessees to recognize assets and liabilities arising under operating leases on the balance sheet. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements; the guidance provides certain practical expedients. The Company is currently evaluating this guidance to determine its impact on the Company’s financial statements. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
INVENTORIES | 3. INVENTORIES The Company’s inventories at September 30, 2016 and December 31, 2015 consisted of the following: September 30, 2016 December 31, 2015 Raw materials $ 3,931,965 $ 3,749,702 Finished goods 5,372,360 4,445,130 Inventories, gross 9,304,325 8,194,832 Inventory reserves (348,848 ) (279,882 ) Inventories, net $ 8,955,477 $ 7,914,950 The inventory reserves shown in the table above reflect slow moving and obsolete inventory. The Company manages an inventory program for one of its customers to improve the promotion of the Company's products. The Company manages the inventory levels at the 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 $801,000 and $543,000 at September 30, 2016 and December 31, 2015, respectively, and are included in inventories, net on the condensed consolidated balance sheets. |
Property, Plant & Equipment
Property, Plant & Equipment | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant & Equipment [Abstract] | |
PROPERTY, PLANT & EQUIPMENT | 4. PROPERTY, PLANT & EQUIPMENT The Company’s property, plant and equipment at September 30, 2016 and December 31, 2015 consisted of the following: Estimate Useful Life September 30, 2016 December 31, 2015 Land $ 278,325 $ 278,325 Building and improvements 30 years 4,652,669 4,652,669 Manufacturing and warehouse equipment 6-20 years 9,254,707 9,072,162 Office equipment and furniture 3-5 years 1,315,191 1,293,609 Construction in process 216,331 215,155 Leasehold improvements 10-15 years 558,666 544,146 Vehicles 3 years 10,020 42,283 Property, plant and equipment, gross 16,285,909 16,098,349 Less accumulated depreciation (11,354,193 ) (10,741,961 ) Property, plant and equipment, net $ 4,931,716 $ 5,356,388 |
Revolving Line of Credit
Revolving Line of Credit | 9 Months Ended |
Sep. 30, 2016 | |
Revolving Line of Credit and Long Term Debt [Abstract] | |
REVOLVING LINE OF CREDIT | 5. REVOLVING LINE OF CREDIT On August 4, 2014, the Company and Regions Bank entered into a Business Loan Agreement (the“Business Loan Agreement”), under which the Company was provided a renewed revolving line of credit. Under the renewed 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 (as defined in the Business Loan Agreement) plus 50% of eligible inventory (as defined in the Business Loan Agreement). Interest on amounts borrowed under the revolving line of credit is payable monthly at the 30 day LIBOR rate plus 1.65% per annum, unless the Company’s debt service coverage ratio (generally, net operating profit plus depreciation, amortization and lease/rent expense divided by current maturities of long-term debt plus interest and lease/rent expense, calculated on a trailing twelve month basis) falls to or below 2.0 to 1, in which case interest is payable at the 30 day LIBOR rate plus 2.65% per annum. The revolving line of credit, which expired on July 6, 2016, was extended through October 31, 2016 on substantially the same terms as previously in effect (the Company currently is engaged in negotiations with Regions Bank with regard to a new revolving line of credit facility). The Company’s obligations under the revolving line of credit was secured by, among other things, the Company’s accounts receivable, inventory, contract rights and general intangibles and, as a result of cross-collateralization of the Company’s obligations under the term loan described in Note 6 and the revolving line of credit, real property and equipment at the Montgomery, Alabama facility of the Company’s subsidiary, Kinpak, Inc. ("Kinpak"). The Business Loan Agreement includes financial covenants requiring a minimum debt service coverage ratio (generally, net operating profit plus depreciation, amortization and lease/rent expense divided by current maturities of long-term debt plus interest and lease/rent expense) of 1.75 to 1.00, calculated on a trailing twelve month basis, and a maximum debt to capitalization ratio (generally, funded debt divided by the sum of total net worth and funded debt) of 0.75 to 1, tested quarterly. At September 30, 2016 and December 31, 2015, the Company was in compliance with these covenants. The line of credit was subject to several events of default, including a decline in the majority shareholder’s ownership below 50% of all outstanding shares. At September 30, 2016 and December 31, 2015, the Company had no borrowings under the revolving line of credit. |
Long Term Debt
Long Term Debt | 9 Months Ended |
Sep. 30, 2016 | |
Revolving Line of Credit and Long Term Debt [Abstract] | |
LONG TERM DEBT | 6. LONG TERM DEBT On July 6, 2011, REFCO provided to the Company a $2,430,000 term loan with a fixed interest rate of 3.54%, subject to an increase to 4.55% in the event the Company's debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense, calculated on a trailing four-quarter basis) falls to or below 2.0 to 1. Principal and interest on the term loan are payable in equal monthly installments through July 6, 2017, the date on which the term loan matures. The proceeds of the term loan were used to pay the Company’s remaining obligations under a lease agreement relating to industrial revenue bonds used to fund the expansion of Kinpak’s facilities and acquisition of related equipment. At September 30, 2016, approximately $369,000 was outstanding under the term loan. The term loan and the revolving line of credit under the Bank Loan Agreement are cross-defaulted (i.e., a default under one instrument is a default under the other). At September 30, 2016 and December 31, 2015, the Company was obligated under capital lease agreements covering equipment utilized in the Company’s operations. The capital leases, aggregating approximately $72,000 and $88,000 at September 30, 2016 and December 31, 2015, respectively, mature on July 1, 2020 and carry an interest rate of 2%. The following table provides information regarding the Company’s long term debt at September 30, 2016 and December 31, 2015: Current Portion Long Term Portion September 30, December 31, 2015 September 30, December 31, Term loan $ 369,091 $ 432,601 $ --- $ 259,503 Capitalized equipment leases 17,249 18,547 55,181 69,315 Total long term debt $ 386,340 $ 451,148 $ 55,181 $ 328,818 Required principal payments under the Company’s long term obligations are set forth below: 12 month period ending September 30, 2017 $ 386,340 2018 19,150 2019 19,503 2020 16,528 Total $ 441,521 |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 7. RELATED PARTY TRANSACTIONS During the three and nine months ended September 30, 2016 and 2015, the Company sold products to companies affiliated with its Chairman, President and Chief Executive Officer. The affiliated companies distribute the products outside of the United States and Canada. The Company also provides administrative services to these companies. Sales to the affiliated companies aggregated approximately $263,000 and $198,000 during the three months ended September 30, 2016 and 2015, respectively, and approximately $1,269,000 and $1,416,000 for the nine months ended September 30, 2016 and 2015, respectively. Administrative fees aggregated approximately $183,000 and $112,000 during the three months ended September 30, 2016 and 2015, respectively, and $485,000 and $381,000 for the nine months ended September 30, 2016 and 2015, respectively. The Company had accounts receivable from the affiliated companies in connection with the product sales and administrative services aggregating approximately $823,000 and $1,051,000 at September 30, 2016 and December 31, 2015, respectively. Transactions with the affiliated companies were made in the ordinary course of business. While the terms of sale to the affiliated companies differed from the terms applicable to other customers, the affiliated companies bear their own warehousing, distribution, advertising, selling and marketing costs, as well as their own freight charges (the Company pays freight charges in connection with sales to its domestic customers on all but small orders). Moreover, the Company does not pay sales commissions with respect to products sold to the affiliated companies. As a result, the Company believes its profit margins with respect to sales of its products to the affiliated companies are similar to the profit margins it realizes with respect to sales of the same products to its larger domestic customers. Management believes that the sales transactions did not involve more than normal credit risk or present other unfavorable features. An entity that is owned by the Company’s Chairman, President and Chief Executive Officer provides several services to the Company. Under this arrangement, the Company paid the entity $10,500 for each of the three month periods ended September 30, 2016 and 2015, and $31,500 for each of the nine month periods ended September 30, 2016 and 2015, for research and development services. In addition, during the nine months ending September 30, 2016, the Company paid this entity $25,000 for the production of television commercials and $9,000 for providing charter boat services for entertainment of Company customers. The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. The Company believes that its rental payments under the lease are below market rates. See Note 8 for a description of the lease terms. A director of the Company is Regional Executive Vice President of an entity from which the Company sources most of its insurance needs at an arm’s length competitive basis. During the three months ended September 30, 2016 and 2015, the Company paid an aggregate of approximately $371,000 and $490,000, respectively, and during the nine months ended September 30, 2016 and 2015, the Company paid an aggregate of approximately $552,000 and $883,000, respectively, in insurance premiums on policies obtained through the entity. The decrease in 2016 is primarily attributable to the Company’s prepayment of the entire annual premium for its general liability policy rather than paying the premium in installments. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 8. COMMITMENTS AND CONTINGENCIES The Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. The lease, as extended, expires on December 31, 2023. The lease requires an annual minimum base rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the minimum rent since the Company entered into a previous lease agreement in 1998. Additionally, the leasing entity is entitled to reimbursement of all taxes, assessments, and any other expenses that arise from its ownership of the leased property. 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 approximately $24,000 for each of the three months ended September 30, 2016 and 2015, respectively, and was approximately $73,000 for each of the nine month periods ended September 30, 2016 and 2015, respectively. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 9. EARNINGS PER SHARE Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the reporting period. Diluted earnings per share reflect additional dilution from potential common stock issuable upon the exercise of outstanding stock options. 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 Nine Months Ended 2016 2015 2016 2015 Earnings per common share – Basic Net income $ 1,528,444 $ 295,552 $ 1,644,183 $ 393,323 Weighted average number of common shares outstanding 9,096,852 8,935,951 9,030,764 8,926,176 Earnings per common share – Basic $ 0.17 $ 0.03 $ 0.18 $ 0.04 Earnings per common share – Diluted Net income $ 1,528,444 $ 295,552 $ 1,644,183 $ 393,323 Weighted average number of common shares outstanding 9,096,852 8,935,951 9,030,764 8,926,176 Dilutive effect of employee stock options 50,732 77,889 52,511 90,411 Weighted average number of common shares outstanding - Diluted 9,147,584 9,013,840 9,083,275 9,016,587 Earnings per common share – Diluted $ 0.17 $ 0.03 $ 0.18 $ 0.04 The Company had no stock options outstanding during each of the three and nine month periods ended September 30, 2016 and 2015, respectively, that were anti-dilutive and therefore not included in the diluted earnings per common share calculation. |
Securities Authorized for Issua
Securities Authorized for Issuance under Equity Compensation Plans | 9 Months Ended |
Sep. 30, 2016 | |
Securities Authorized for Issuance Under Equity Compensation Plans [Abstract] | |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS | 10. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS On July 6, 2016, as part of the Company’s regular compensation for its non-employee directors, the Company issued to the directors stock awards, aggregating 3,000 shares of Company common stock, under the Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan. On August 4, 2016, the Company provided stock awards under the Ocean Bio-Chem, Inc. 2015 Equity Compensation Plan to officers, other employees and a consultant. The stock awards aggregated 139,000 shares of Company common stock, of which 135,082 shares were issued and 3,918 shares were withheld to satisfy tax withholding obligations. During the three months ended September 30, 2016 no stock options were exercised. During the nine months ended September 30, 2016, stock options to purchase an aggregate of 30,000 shares were exercised. The Company received a total of $21,600, withheld 4,519 shares in connection with the net exercise feature of the stock options and delivered an aggregate of 25,481 shares to the option holders who exercised their options. Stock compensation expense during the three and nine months ended September 30, 2016 and 2015, all of which was attributable to stock awards provided during the respective 2016 and 2015 periods, was approximately $293,000 and $162,000, respectively. The following table provides information at September 30, 2016 regarding outstanding Plan Date Granted Shares Underlying Options Outstanding Shares Underlying Exercisable Options Exercise Price Expiration Date Weighted Average Remaining Term 2002NQ 12/17/07 40,000 40,000 $ 1.32 12/16/17 1.2 2008NQ 1/11/09 40,000 40,000 $ 0.69 1/10/19 2.3 2008NQ 4/26/10 20,000 20,000 $ 2.07 4/25/20 3.6 100,000 100,000 $ 1.22 2.1 |
Special Cash Dividend
Special Cash Dividend | 9 Months Ended |
Sep. 30, 2016 | |
Special Cash Dividend [Abstract] | |
SPECIAL CASH DIVIDEND | 11. SPECIAL CASH DIVIDEND On April 26, 2016, the Company paid a special cash dividend of $0.06 per common share to all shareholders of record on April 12, 2016. The dividend aggregated $540,531. |
Major Customers
Major Customers | 9 Months Ended |
Sep. 30, 2016 | |
Major Customers [Abstract] | |
MAJOR CUSTOMERS | 12. MAJOR CUSTOMERS The Company had sales to each of two major customers that constituted in excess of 10% of the Company’s consolidated net sales for each of the three and nine months ended September 30, 2016 and 2015. Sales to these customers aggregated approximately 39.8% and 46.3% of consolidated net sales for the three months ended September 30, 2016 and 2015, respectively, and 35.1% and 39.8% of consolidated net sales for the nine months ended September 30, 2016 and 2015, respectively. The Company’s top five unaffiliated customers represented approximately 56.2% and 58.5%, of consolidated net sales for the three months ended September 30, 2016 and 2015, respectively, and approximately 51.9% and 50.1% of consolidated net sales for the nine months ended September 30, 2016 and 2015, respectively. While the Company enjoys good relations with these customers, the loss of any of these customers could have an adverse impact on the Company’s operations. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 13. SUBSEQUENT EVENTS The Company evaluated subsequent events and transactions that occurred after our September 30, 2016 unaudited condensed consolidated balance sheet date for potential recognition or disclosure in our condensed consolidated financial statements. |
Summary of Accounting Policies
Summary of Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Accounting Policies [Abstract] | |
Interim reporting | Interim reporting The accompanying unaudited condensed consolidated financial statements include the accounts of Ocean Bio-Chem, Inc. and its wholly-owned subsidiaries. All significant inter-company accounts and transactions 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” refers to 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 nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. |
Use of estimates | 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. |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
Summary of composition of inventories | September 30, 2016 December 31, 2015 Raw materials $ 3,931,965 $ 3,749,702 Finished goods 5,372,360 4,445,130 Inventories, gross 9,304,325 8,194,832 Inventory reserves (348,848 ) (279,882 ) Inventories, net $ 8,955,477 $ 7,914,950 |
Property, Plant & Equipment (Ta
Property, Plant & Equipment (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant & Equipment [Abstract] | |
Summary of property, plant and equipment | Estimate Useful Life September 30, 2016 December 31, 2015 Land $ 278,325 $ 278,325 Building and improvements 30 years 4,652,669 4,652,669 Manufacturing and warehouse equipment 6-20 years 9,254,707 9,072,162 Office equipment and furniture 3-5 years 1,315,191 1,293,609 Construction in process 216,331 215,155 Leasehold improvements 10-15 years 558,666 544,146 Vehicles 3 years 10,020 42,283 Property, plant and equipment, gross 16,285,909 16,098,349 Less accumulated depreciation (11,354,193 ) (10,741,961 ) Property, plant and equipment, net $ 4,931,716 $ 5,356,388 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Revolving Line of Credit and Long Term Debt [Abstract] | |
Summary of company's long term debt | Current Portion Long Term Portion September 30, December 31, 2015 September 30, December 31, Term loan $ 369,091 $ 432,601 $ --- $ 259,503 Capitalized equipment leases 17,249 18,547 55,181 69,315 Total long term debt $ 386,340 $ 451,148 $ 55,181 $ 328,818 |
Summary of principal payments under Company's long term obligations | 12 month period ending September 30, 2017 $ 386,340 2018 19,150 2019 19,503 2020 16,528 Total $ 441,521 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Summary of computation of basic and diluted earnings per common share | Three Months Ended Nine Months Ended 2016 2015 2016 2015 Earnings per common share – Basic Net income $ 1,528,444 $ 295,552 $ 1,644,183 $ 393,323 Weighted average number of common shares outstanding 9,096,852 8,935,951 9,030,764 8,926,176 Earnings per common share – Basic $ 0.17 $ 0.03 $ 0.18 $ 0.04 Earnings per common share – Diluted Net income $ 1,528,444 $ 295,552 $ 1,644,183 $ 393,323 Weighted average number of common shares outstanding 9,096,852 8,935,951 9,030,764 8,926,176 Dilutive effect of employee stock options 50,732 77,889 52,511 90,411 Weighted average number of common shares outstanding - Diluted 9,147,584 9,013,840 9,083,275 9,016,587 Earnings per common share – Diluted $ 0.17 $ 0.03 $ 0.18 $ 0.04 |
Securities Authorized for Iss25
Securities Authorized for Issuance under Equity Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Securities Authorized for Issuance Under Equity Compensation Plans [Abstract] | |
Schedule of outstanding stock options under company's stock options plans | Plan Date Granted Shares Underlying Options Outstanding Shares Underlying Exercisable Options Exercise Price Expiration Date Weighted Average Remaining Term 2002NQ 12/17/07 40,000 40,000 $ 1.32 12/16/17 1.2 2008NQ 1/11/09 40,000 40,000 $ 0.69 1/10/19 2.3 2008NQ 4/26/10 20,000 20,000 $ 2.07 4/25/20 3.6 100,000 100,000 $ 1.22 2.1 |
Recent Accounting Pronounceme26
Recent Accounting Pronouncements (Details) | Dec. 31, 2015USD ($) |
Recent Accounting Pronouncements (Textual) | |
Decrease to current deferred tax asset | $ 125,335 |
Decrease to noncurrent deferred tax liability | $ 125,335 |
Inventories (Details)
Inventories (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Summary of composition of inventories | ||
Raw materials | $ 3,931,965 | $ 3,749,702 |
Finished goods | 5,372,360 | 4,445,130 |
Inventories, gross | 9,304,325 | 8,194,832 |
Inventory reserves | (348,848) | (279,882) |
Inventories, net | $ 8,955,477 | $ 7,914,950 |
Inventories (Details Textual)
Inventories (Details Textual) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories (Textual) | ||
Inventories managed at the customer's warehouses | $ 801,000 | $ 543,000 |
Property, Plant & Equipment (De
Property, Plant & Equipment (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Summary of property, plant and equipment | ||
Land | $ 278,325 | $ 278,325 |
Building and improvements | 4,652,669 | 4,652,669 |
Manufacturing and warehouse equipment | 9,254,707 | 9,072,162 |
Office equipment and furniture | 1,315,191 | 1,293,609 |
Construction in process | 216,331 | 215,155 |
Leasehold improvements | 558,666 | 544,146 |
Vehicles | 10,020 | 42,283 |
Property, plant and equipment, gross | 16,285,909 | 16,098,349 |
Less accumulated depreciation | (11,354,193) | (10,741,961) |
Property, plant and equipment, net | $ 4,931,716 | $ 5,356,388 |
Building and Improvements [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 30 years | |
Manufacturing and warehouse equipment [Member] | Minimum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 6 years | |
Manufacturing and warehouse equipment [Member] | Maximum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 20 years | |
Office equipment and furniture [Member] | Minimum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 3 years | |
Office equipment and furniture [Member] | Maximum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 5 years | |
Leasehold improvements [Member] | Minimum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 10 years | |
Leasehold improvements [Member] | Maximum [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 15 years | |
Vehicles [Member] | ||
Summary of property, plant and equipment | ||
Estimate Useful Life | 3 years |
Revolving Line of Credit (Detai
Revolving Line of Credit (Details) - USD ($) $ in Millions | Aug. 04, 2014 | Sep. 30, 2016 |
Revolving line of credit (Textual) | ||
Term of 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 (as defined in the Business Loan Agreement) plus 50% of eligible inventory (as defined in the Business Loan Agreement). | |
Maximum borrowing capacity of the company | $ 6 | |
Percentage of eligible accounts receivables as part of borrowing base | 80.00% | |
Percentage of eligible inventory as part of the borrowing base | 50.00% | |
Description of interest on the revolving line of credit | 30 day LIBOR rate plus 1.65% per annum | |
Minimum debt service coverage ratio to qualify for LIBOR plus 1.65 % | 2.0 to 1 | |
Alternate interest rate condition if it doesn't satisfy the debt coverage ratio | 30 day LIBOR rate plus 2.65% per annum | |
Due date of outstanding principal and interest borrowed under revolving line of credit | Jul. 6, 2016 | |
Extended due date of outstanding principal and interest borrowed under revolving line of credit | Aug. 30, 2016 | |
Financial covenants under credit agreement | A minimum debt service coverage ratio (generally, net operating profit plus depreciation, amortization and lease/rent expense divided by current maturities of long-term debt plus interest and lease/rent expense) of 1.75 to 1.00, calculated on a trailing twelve month basis, and a maximum debt to capitalization ratio (generally, funded debt divided by the sum of total net worth and funded debt) of 0.75 to 1, tested quarterly. | |
Debt service coverage ratio | 1.75 to 1.00 | |
Debt capitalization ratio | 0.75 to 1 | |
Ownership requirement of majority shareholder to prevent default | The line of credit is subject to several events of default, including a decline in the majority shareholder's ownership below 50% of all outstanding shares. |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Summary of long term debt | ||
Total long term debt, Current Portion | $ 386,340 | $ 451,148 |
Total long term debt, Long Term Portion | 55,181 | 328,818 |
Term loan [Member] | ||
Summary of long term debt | ||
Term loan, Current Portion | 369,091 | 432,601 |
Term loan, Long-term Portion | 259,503 | |
Capitalized equipment leases [Member] | ||
Summary of long term debt | ||
Capitalized equipment leases, Current Portion | 17,249 | 18,547 |
Capitalized equipment leases, Long-term Portion | $ 55,181 | $ 69,315 |
Long Term Debt (Details 1)
Long Term Debt (Details 1) | Sep. 30, 2016USD ($) |
Summary of principal payments under Company's long term obligations | |
2,017 | $ 386,340 |
2,018 | 19,150 |
2,019 | 19,503 |
2,020 | 16,528 |
Total | $ 441,521 |
Long Term Debt (Details Textual
Long Term Debt (Details Textual) - USD ($) | Jul. 06, 2011 | Sep. 30, 2016 | Dec. 31, 2015 |
Long Term Debt (Textual) | |||
Term loan | $ 369,000 | ||
Aggregate capital lease | $ 72,000 | $ 88,000 | |
Maturity period for capital lease | Mature on July 1, 2020 | ||
Debt service coverage ratio | 2.0 to 1 | ||
REFCO [Member] | |||
Long Term Debt (Textual) | |||
Term loan | $ 2,430,000 | ||
Interest rate | 3.54% | ||
Term loan maturity date | Jul. 6, 2017 | ||
Percentage of interest rates | 2.00% | ||
Term loan description | Term loan with a fixed interest rate of 3.54%, subject to an increase to 4.55% in the event the Company's debt service coverage ratio (net profit plus taxes, interest, depreciation, amortization and rent expense divided by debt service plus interest and lease/rent expense, calculated on a trailing four-quarter basis) falls to or below 2.0 to 1. |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Related Party Transactions (Textual) | |||||
Sales to the affiliated companies | $ 263,000 | $ 198,000 | $ 1,269,000 | $ 1,416,000 | |
Administrative fees | 183,000 | 112,000 | 485,000 | 381,000 | |
Receivables due from affiliated companies | 823,000 | 823,000 | $ 1,051,000 | ||
Amount paid to entity for research and development services | 10,500 | 10,500 | 31,500 | 31,500 | |
Insurance premiums paid | $ 371,000 | $ 490,000 | 552,000 | $ 883,000 | |
Production of television commercials expense | 25,000 | ||||
Marketing expense | $ 9,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Fort Lauderdale Florida Facility [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Commitments (Textual) | ||||
Extended expiration date of lease | Dec. 31, 2023 | |||
Minimum base rent | $ 94,800 | |||
Maximum annual percentage increase in base rent | 2.00% | |||
Period to review term of lease | 3 years | |||
Rent expense under the lease | $ 24,000 | $ 24,000 | $ 73,000 | $ 73,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings per common share - Basic | ||||
Net income | $ 1,528,444 | $ 295,552 | $ 1,644,183 | $ 393,323 |
Weighted average number of common shares outstanding | 9,096,852 | 8,935,951 | 9,030,764 | 8,926,176 |
Earnings per common share - Basic | $ 0.17 | $ 0.03 | $ 0.18 | $ 0.04 |
Earnings per common share - Diluted | ||||
Net income | $ 1,528,444 | $ 295,552 | $ 1,644,183 | $ 393,323 |
Weighted average number of common shares outstanding | 9,096,852 | 8,935,951 | 9,030,764 | 8,926,176 |
Dilutive effect of employee stock-based awards | 50,732 | 77,889 | 52,511 | 90,411 |
Weighted average number of common shares outstanding - Diluted | 9,147,584 | 9,013,840 | 9,083,275 | 9,016,587 |
Earnings per common share - Diluted | $ 0.17 | $ 0.03 | $ 0.18 | $ 0.04 |
Securities Authorized for Iss37
Securities Authorized for Issuance under Equity Compensation Plans (Details) | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Summary of outstanding options, exercisable options, exercise price, expiration date, weighted average remaining life under company stock option plans | |
Shares Underlying Options Outstanding | 100,000 |
Shares Underlying Exercisable Options | 100,000 |
Exercise Price | $ / shares | $ 1.22 |
Weighted Average Remaining Term | 2 years 1 month 6 days |
2002NQ One [Member] | |
Summary of outstanding options, exercisable options, exercise price, expiration date, weighted average remaining life under company stock option plans | |
Date Granted | Dec. 17, 2007 |
Shares Underlying Options Outstanding | 40,000 |
Shares Underlying Exercisable Options | 40,000 |
Exercise Price | $ / shares | $ 1.32 |
Expiration Date | Dec. 16, 2017 |
Weighted Average Remaining Term | 1 year 2 months 12 days |
2008NQ One [Member] | |
Summary of outstanding options, exercisable options, exercise price, expiration date, weighted average remaining life under company stock option plans | |
Date Granted | Jan. 11, 2009 |
Shares Underlying Options Outstanding | 40,000 |
Shares Underlying Exercisable Options | 40,000 |
Exercise Price | $ / shares | $ 0.69 |
Expiration Date | Jan. 10, 2019 |
Weighted Average Remaining Term | 2 years 3 months 18 days |
2008NQ Two [Member] | |
Summary of outstanding options, exercisable options, exercise price, expiration date, weighted average remaining life under company stock option plans | |
Date Granted | Apr. 26, 2010 |
Shares Underlying Options Outstanding | 20,000 |
Shares Underlying Exercisable Options | 20,000 |
Exercise Price | $ / shares | $ 2.07 |
Expiration Date | Apr. 25, 2020 |
Weighted Average Remaining Term | 3 years 7 months 6 days |
Securities Authorized for Iss38
Securities Authorized for Issuance under Equity Compensation Plans (Details Textual) - USD ($) | Aug. 04, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jul. 06, 2016 |
Securities Authorized for Issuance Under Equity Compensation Plans (Textual) | ||||||
Stock option exercised | 30,000 | |||||
Amount received from exercise of stock options | $ 21,600 | |||||
Number of shares withhold in connection with net exercise feature of options | 4,519 | 4,519 | ||||
Shares received from exercise of options | 25,481 | |||||
Stock compensation expense | $ 0 | $ 0 | $ 0 | $ 0 | ||
Unrecognized compensation expense related to stock options | 0 | 0 | ||||
Stock awards issued | $ 293,000 | $ 293,000 | $ 162,000 | $ 162,000 | ||
Nonemployee Directors [Member] | ||||||
Securities Authorized for Issuance Under Equity Compensation Plans (Textual) | ||||||
Issued stock awards under 2015 Equity Compensation Plan | 3,000 | |||||
Officers Other Employees And Consultant [Member] | ||||||
Securities Authorized for Issuance Under Equity Compensation Plans (Textual) | ||||||
Issued stock awards under 2015 Equity Compensation Plan | 139,000 | |||||
Shares withheld to pay income taxes | 3,918 | |||||
Shares issued | 135,082 |
Special Cash Dividend (Details)
Special Cash Dividend (Details) | Apr. 26, 2016USD ($)$ / shares |
Special Cash Dividend [Abstract] | |
Dividend paid | $ | $ 540,531 |
Dividends paid amount per share | $ / shares | $ 0.06 |
Major Customers (Details)
Major Customers (Details) - Customers | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Major Customers (Textual) | ||||
Percentage of consolidated net revenues by customers with sales in excess of 10% of consolidated net revenues | 39.80% | 46.30% | 35.10% | 39.80% |
Number of customers with sales in excess of 10% of consolidated net revenues | 2 | 2 | 2 | 2 |
Percentage of consolidated net revenues from the Company's top five unaffiliated customers | 56.20% | 58.50% | 51.90% | 50.10% |
Number of top unaffiliated customers | 5 | 5 | 5 | 5 |