UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

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)		(Zip Code)

954-587-6280

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.01 par value		OBCI		The NASDAQ Stock Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

At ~~May~~August 133, 2022, 9,509,799 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	1
	Condensed consolidated balance sheets at March 31, 2022 (unaudited) and December 31, 2021	1
	Condensed consolidated balance sheets at June 30, 2022 (unaudited) and December 31, 2021	1
	Condensed consolidated statements of operations (unaudited) for the three months ended March 31, 2022 and 2021	2
	Condensed consolidated statements of operations (unaudited) for the three and six months ended June 30, 2022 and 2021	2
	Condensed consolidated statements of comprehensive income (unaudited) for the three months ended March 31, 2022 and 2021	3
	Condensed consolidated statements of comprehensive (loss) income (unaudited) for the three and six months ended June 30, 2022 and 2021	3
	Condensed consolidated statements of shareholders’ equity (unaudited) for the three months ended March 31, 2022 and 2021	4
	Condensed consolidated statements of shareholders’ equity (unaudited) for the three and six months ended June 30, 2022 and 2021	4-5
	Condensed consolidated statements of cash flows (unaudited) for the three months ended March 31, 2022 and 2021	5
	Condensed consolidated statements of cash flows (unaudited) for the six months ended June 30, 2022 and 2021	6
	Notes to condensed consolidated financial statements	67-1216
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1317-1521
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1521
Item 4.	Controls and Procedures	1521
PART II	Other Information:
Item 1A.	Risk Factors	1622
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1622
Item 6.	Exhibits	1622
	Signatures	1723

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2022			December 31, 2021
	June 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash	$	107,~~216~~018,~~924~~051		$	12,684,935
Trade accounts receivable less allowances of approximately $712,000 and $632,000, respectively		10,261,547			9,544,133
Trade accounts receivable less allowances of approximately $706,000 and $632,000, respectively		11,579,761			9,544,133
Receivables due from affiliated companies		~~847~~1,~~026~~494,318			1,211,999
Inventories, net		1923,~~974~~584,~~898~~207			16,819,253
Prepaid expenses and other current assets		1,~~585~~726,~~477~~522			2,093,971
Total Current Assets		4245,~~885~~402,~~872~~859			42,354,291
Property, plant and equipment, net		1718,~~642~~310,~~008~~426			16,360,218
Operating lease – right to use		~~160~~138,~~449~~153			182,543
Intangible assets, net		1,~~309~~238,~~683~~744			1,380,652
Total Assets	$	6165,~~998~~090,~~012~~182		$	60,277,704
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt, net	$	~~743~~751,~~740~~098		$	736,531
Current portion of operating lease liability		90,424			89,600
Revolving line of credit		3,459,500			-
Accounts payable - trade		3,376,982			2,877,623
Current portion of operating lease liability		91,256			89,600
Income taxes payable		208,342			45,295
Accounts payable - trade		3,740,639			2,877,623
Accrued expenses payable		1,120,234			900,982
Income taxes payable		-			45,295
Total Current Liabilities		5,539,722			4,650,031
Accrued expenses payable		1,548,974			900,982
Deferred tax liability		453,086			347,723
Total Current Liabilities		9,591,467			4,650,031
Operating lease liability, less current portion		70,025			92,943
Deferred tax liability		455,081			347,723
Long-term debt, less current portion and debt issuance costs		7,515,735			7,750,889
Operating lease liability, less current portion		46,897			92,943
Total Liabilities		13,578,568			12,841,586
Long-term debt, less current portion and debt issuance costs		7,280,034			7,750,889
Total Liabilities		17,373,479			12,841,586
COMMITMENTS AND CONTINGENCIES
Shareholders’ Equity:
Common stock - $0.01 par value, 12,000,000 shares authorized; 9,509,799 shares and 9,503,999 shares issued and outstanding, respectively		95,098			95,040
Additional paid in capital		11,141,123			11,077,706
Accumulated other comprehensive loss		(~~291~~292,~~374~~328	)		(292,336	)
Retained earnings		3736,~~474~~772,~~597~~810			36,555,708
Total Shareholders’ Equity		4847,~~419~~716,~~444~~703			47,436,118
Total Liabilities and Shareholders’ Equity	$	6165,~~998~~090,~~012~~182		$	60,277,704

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2022			2021			2022			2021
Net sales	$	1215,~~737~~208,~~329~~834		$	1315,~~131~~688,~~224~~985		$	27,946,163		$	28,820,209
Cost of goods sold		89,~~001~~859,~~347~~190			78,~~750~~416,~~503~~553			17,860,537			16,167,056
Gross profit		45,~~735~~349,~~982~~644			57,~~380~~272,~~721~~432			10,085,626			12,653,153
Operating Expenses:
Advertising and promotion		1,~~071~~633,~~579~~975			~~941~~1,~~814~~265,583			2,705,554			2,207,397
Selling and administrative		24,~~000~~045,~~030~~057			12,~~972~~641,~~812~~657			6,045,087			4,614,469
Total operating expenses		35,~~071~~679,~~609~~032			23,~~914~~907,~~626~~240			8,750,641			6,821,866
Operating income		1,664,373			2,466,095
Operating (loss) income		(329,388	)		3,365,192			1,334,985			5,831,287
Other (expense) income
Interest (expense), net		(3179,~~682~~128	)		(3740,~~187~~823	)		(110,810	)		(78,010	)
Income before income taxes		1,632,691			2,428,908
(Loss) income before income taxes		(408,516	)		3,324,369			1,224,175			5,753,277
Provision for income taxes		(333,410	)		(524,639	)
Income tax benefit (provision)		87,121			(723,054	)		(246,289	)		(1,247,693	)
Net income	$	1,299,281		$	1,904,269
Net (loss) income	$	(321,395	)	$	2,601,315		$	977,886		$	4,505,584
Earnings per common share	$	0.14		$	0.20
Loss (earnings) per common share	$	(0.03	)	$	0.27		$	0.10		$	0.48
Dividends declared per common share	$	0.04		$	0.03		$	0.08		$	0.06

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2022			2021			2022		2021
Net income	$	1,299,281		$	1,904,269
Net (loss) income	$	(321,395	)	$	2,601,315		$	977,886	$	4,505,584
Foreign currency translation adjustment		~~962~~(954	)		~~(596~~1,077	)		8		481
Comprehensive income	$	1,300,243		$	1,903,673
Comprehensive (loss) income	$	(322,349	)	$	2,602,392		$	977,894	$	4,506,065

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2022 AND 2021

(UNAUDITED)

							Additional			Accumulated Other
	Common Stock						Paid In			Comprehensive			Retained
	Shares			Amount			Capital			Loss			Earnings			Total
December 31, 2021		9,503,999		$	95,040		$	11,077,706		$	(292,336	)	$	36,555,708		$	47,436,118
Net income		-			-			-			-			1,299,281			1,299,281
Dividends, common stock		-			-			-			-			(380,392	)		(380,392	)
Common stock repurchased and retired		(600	)		(6	)		(5,639	)		-			-			(5,645	)
Portion of 2021 stock based compensation for shares issued in 2022		6,400			64			69,056			-			-			69,120
Foreign currency translation adjustment		-			-			-			962			-			962
March 31, 2022		9,509,799		$	95,098		$	11,141,123		$	(291,374	)	$	37,474,597		$	48,419,444
Net loss		-			-			-			-			(321,395	)		(321,395	)
Dividends, common stock		-			-			-			-			(380,392	)		(380,392	)
Foreign currency translation adjustment		-			-			-			(954	)		-			(954	)
June 30, 2022		9,509,799		$	95,098		$	11,141,123		$	(292,328	)	$	36,772,810		$	47,716,703

					Additional		Accumulated Other
	Common Stock				Paid In		Comprehensive			Retained
	Shares		Amount		Capital		Loss			Earnings			Total
December 31, 2020		9,481,799	$	94,818	$	10,816,100	$	(294,324	)	$	29,290,477		$	39,907,071
Net income		-		-		-		-			1,904,269			1,904,269
Dividends, common stock		-		-		-		-			(284,454	)		(284,454	)
Foreign currency translation adjustment		-		-		-		(596	)		-			(596	)
March 31, 2021		9,481,799	$	94,818	$	10,816,100	$	(294,920	)	$	30,910,292		$	41,526,290
Net income		-		-		-		-			2,601,315			2,601,315
Dividends, common stock		-		-		-		-			(284,454	)		(284,454	)
Stock based compensation		4,000		40		55,740		-			-			55,780
Foreign currency translation adjustment		-		-		-		1,077			-			1,077
June 30, 2021		9,485,799	$	94,858	$	10,871,840	$	(293,843	)	$	33,227,153		$	43,900,008

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED)

	Three Months Ended
							Additional			Accumulated Other
	March 31,
	Common Stock						Paid In			Comprehensive			Retained
	2022			2021
	Shares			Amount			Capital			Loss			Earnings			Total
Cash flows from operating activities:
December 31, 2021		9,503,999		$	95,040		$	11,077,706		$	(292,336	)	$	36,555,708		$	47,436,118
Net income	$	~~1,299,281~~-		$	~~1,904,269~~-			-			-			977,886			977,886
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Dividends, common stock		-			-			-			-			(760,784	)		(760,784	)
Depreciation and amortization		405,022			357,594
Common stock repurchased and retired		(600	)		(6	)		(5,639	)		-			-			(5,645	)
Deferred income taxes		105,363			(88,566	)
Portion of 2021 stock based compensation for shares issued in 2022		6,400			64			69,056			-			-			69,120
Provision for bad debts		80,003			88,289
Foreign currency translation adjustment		-			-			-			8			-			8
Provision for slow moving and obsolete inventory		70,049			9,756
June 30, 2022		9,509,799		$	95,098		$	11,141,123		$	(292,328	)	$	36,772,810		$	47,716,703
Other operating non-cash items		311			(1,572	)
Changes in assets and liabilities:
Trade accounts receivable		(797,417	)		(2,110,546	)
Receivables due from affiliated companies		364,973			358,826
Inventories		(3,225,694	)		(1,068,795	)
Prepaid expenses and other current assets		508,494			(162,596	)
Accounts payable – trade		499,359			1,174,548
Income taxes payable		163,047			576,626
Accrued expenses payable		288,372			169,969
Net cash (used in) provided by operating activities		(238,837	)		1,207,802
Cash flows from investing activities:
Purchases of property, plant and equipment		(1,610,684	)		(915,899	)
Net cash used in investing activities		(1,610,684	)		(915,899	)
Cash flows from financing activities:
Payments on long-term debt		(233,104	)		(130,092	)
Dividends paid to common shareholders		(380,392	)		(284,454	)
Repurchase of common stock		(5,645	)		-
Net cash used in financing activities		(619,141	)		(414,546	)
Effect of exchange rate on cash		651			976
Net decrease in cash and restricted cash		(2,468,011	)		(121,667	)
Cash and restricted cash at beginning of period		12,684,935			11,601,152
Cash and restricted cash at end of period	$	10,216,924		$	11,479,485
Supplemental disclosure of cash flow information:
Cash paid for interest during period	$	28,786		$	32,606
Cash paid for income taxes during period	$	65,000		$	-
Cash paid under operating lease	$	23,700		$	23,700
Cash	$	10,216,924		$	11,161,761
Restricted cash		-			317,724
Total cash and restricted cash	$	10,216,924		$	11,479,485

					Additional		Accumulated Other
	Common Stock				Paid In		Comprehensive			Retained
	Shares		Amount		Capital		Loss			Earnings			Total

December 31, 2020		9,481,799	$	94,818	$	10,816,100	$	(294,324	)	$	29,290,477		$	39,907,071

Net income		-		-		-		-			4,505,584			4,505,584

Dividends, common stock		-		-		-		-			(568,908	)		(568,908	)

Stock based compensation		4,000		40		55,740		-			-			55,780

Foreign currency translation adjustment		-		-		-		481			-			481

June 30, 2021		9,485,799	$	94,858	$	10,871,840	$	(293,843	)	$	33,227,153		$	43,900,008

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	977,886		$	4,505,584
Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization		866,096			726,441
Deferred income taxes		107,358			371
Stock based compensation		-			55,780
Provision for bad debts		73,207			92,057
Provision for slow moving and obsolete inventory		40,138			20,395
Other operating non-cash items		346			(1,294	)

Changes in assets and liabilities:

Trade accounts receivable		(2,108,835	)		(4,423,070	)
Receivables due from affiliated companies		(282,319	)		597,826
Inventories		(6,805,092	)		(3,586,128	)
Prepaid expenses and other current assets		367,449			(267,649	)
Accounts payable – trade		863,016			2,327,290
Income taxes payable		(45,295	)		3,107
Accrued expenses payable		717,112			432,491
Net cash (used in) provided by operating activities		(5,228,933	)		483,201

Cash flows from investing activities:
Purchases of property, plant and equipment		(2,664,078	)		(2,922,273	)
Net cash used in investing activities		(2,664,078	)		(2,922,273	)

Cash flows from financing activities:
Borrowings on revolving line of credit		3,459,500			-
Payments on long-term debt		(466,606	)		(290,570	)
Dividends paid to common shareholders		(760,784	)		(568,908	)
Repurchase of common stock		(5,645	)		-
Net cash provided by (used) in financing activities		2,226,465			(859,478	)

Effect of exchange rate on cash		(338	)		1,775

Net decrease in cash and restricted cash		(5,666,884	)		(3,296,775	)

Cash and restricted cash at beginning of period		12,684,935			11,601,152
Cash and restricted cash at end of period	$	7,018,051		$	8,304,377

Supplemental disclosure of cash flow information:
Cash paid for interest during period	$	94,646		$	64,824
Cash paid for income taxes during period	$	502,146		$	1,207,636
Cash paid under operating lease	$	47,400		$	47,400

Cash	$	7,018,051		$	8,304,377
Restricted cash		-			-
Total cash and restricted cash	$	7,018,051		$	8,304,377

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 intercompany accounts and transactions have been eliminated in consolidation. 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 Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

The financial information furnished herein ~~reflects~~ 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 ~~March~~June 3130, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

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, 2021.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP 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

The Company’s inventories at ~~March~~June 3130, 2022 and December 31, 2021 consisted of the following:

	March 31, 2022			December 31, 2021
	June 30, 2022			December 31, 2021
Raw materials	$	811,~~745~~260,~~696~~102		$	7,465,011
Finished goods		1112,~~552~~679,~~825~~074			9,669,073
Inventories, gross		2023,~~298~~939,~~521~~176			17,134,084
Inventory reserves		(~~323~~354,~~623~~969	)		(314,831	)
Inventories, net	$	1923,~~974~~584,~~898~~207		$	16,819,253

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, which are included in inventories, net, amounted to approximately $~~987~~712,000 and $1,051,000 at ~~March~~June 3130, 2022 and December 31, 2021, respectively.

PROPERTY, PLANT & EQUIPMENT

The Company’s property, plant and equipment at ~~March~~June 3130, 2022 and December 31, 2021 consisted of the following:

	Estimated Useful Life	~~March~~June 3130, 2022			December 31, 2021
Land		$	278,325		$	278,325
Building and improvements	30 years		15,~~180~~190,~~235~~163			9,710,244
Manufacturing and warehouse equipment	6-20 years		1314,~~577~~564,~~478~~192			12,858,638
Office equipment and furniture	3-5 years		12,~~941~~091,~~521~~538			1,805,002
Leasehold improvements	10-15 years		621,903			587,183
Finance leases – right to use	5 years		113,741			113,741
Vehicles	3 years		10,020			10,020
Construction in process (1)			1,883,726			6,633,112
Construction in process			1,790,461			6,633,112
Property, plant and equipment, gross			3334,~~606~~660,~~949~~343			31,996,265
Less accumulated depreciation			(1516,~~964~~349,~~941~~917	)		(15,636,047	)
Property, plant and equipment, net		$	1718,~~642~~310,~~008~~426		$	16,360,218

Depreciation expense totaled $384,976 (1of which $359,949 is included in cost of goods sold and $25,027 is included in selling and administrative expenses) Inand ~~April~~$292,781 ~~2022~~(of which $268,231 is included in cost of goods sold and $24,550 is included in selling and administrative expenses) for the ~~Company’s~~three ~~wholly~~months ~~owned~~ended ~~subsidiary~~June 30, ~~KINPAK~~2022 ~~Inc.~~and 2021, respectively, and $713,869 (~~“Kinpak”)~~of which $663,941 ~~placed~~is included ~~into~~in ~~service~~cost ~~assets~~of ~~relating~~goods tosold anand ~~expansion~~$49,928 is included in selling and administrative expenses) and $574,310 (of ~~its~~which ~~manufacturing~~$525,371 is included in cost of goods sold and ~~distribution~~$48,939 ~~facilities~~is included in selling and administrative expenses) for the six months ended June 30, 2022 and 2021, respectively.

Depreciation expense totaled $328,893 (of which $303,992 is included in cost of goods sold and $24,901 is included in selling and administrative expenses) and $281,529 (of which $257,140 is included in cost of goods sold and $24,389 is included in selling and administrative expenses) for the three months ended March 31, 2022 and 2021, respectively.

LEASES

The Company has one operating lease and two finance leases.

Under the operating lease, the Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by Peter G. Dornau, the Company’s 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 base 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 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. Operating lease expense was $24,~~553~~554 and $24,339 for the three months ended ~~March~~June 3130, 2022 and 2021, respectively., and $49,107 and $48,678 for the six months ended June 30, 2022 and 2021, respectively. At ~~March~~June 3130, 2022 and December 31, 2021, the Company had a right to use asset and a corresponding liability of $~~160~~138,~~449~~153 and $182,543, respectively, related to the operating lease. Set forth below is a schedule of future minimum rent payments under the operating lease.

Twelve-month period ending March 31,
Twelve-month period ending June 30,
2023	$	94,800
2024		7147,~~100~~400
Total future minimum lease payments		~~165~~142,~~900~~200
Less imputed interest		(54,~~451~~047	)
Total operating lease liability	$	~~160~~138,~~449~~153

The Company’s two finance leases relate to office equipment. See Note 3 for information regarding the carrying value of the Company’s finance lease right to use assets and Note 7 for information regarding the finance lease payment schedule.

Expenses incurred with respect to the Company’s leases during the three and six months ended ~~March~~June 3130, 2022 and 2021 are set forth below.

	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Operating lease expense	$	24,~~553~~554	$	24,339
Finance lease amortization		5,~~350~~377		5,~~254~~277
Finance lease interest		~~337~~310		~~433~~412
Total lease expense	$	30,~~240~~241	$	30,~~026~~028

The remaining lease term with respect to the operating lease, weighted average remaining lease term with respect to the finance leases and discount rate with respect to the operating lease and finance leases at March 31, 2022 and December 31, 2021 are set forth below:

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Operating lease expense	$	49,107	$	48,678
Finance lease amortization		10,727		10,531
Finance lease interest		647		845
Total lease expense	$	60,481	$	60,054

	March 31, 2022
Remaining lease term – operating lease		1.75 years
Weighted average remaining lease term – finance leases		3.4 years
Discount rate – operating lease		3.7	%
Weighted average discount rate – finance leases		1.8	%

The remaining lease term with respect to the operating lease, weighted average remaining lease term with respect to the finance leases and discount rate with respect to the operating lease and finance leases at June 30, 2022 and December 31, 2021 are set forth below:

	June 30, 2022
Remaining lease term – operating lease		1.5 years
Weighted average remaining lease term – finance leases		3.2 years
Discount rate – operating lease		3.7	%
Weighted average discount rate – finance leases		1.7	%

	December 31, 2021
Remaining lease term – operating lease		2.0 years
Weighted average remaining lease term – finance leases		3.7 years
Discount rate – operating lease		3.7	%
Weighted average discount rate – finance leases		1.8	%

INTANGIBLE ASSETS

The Company’s intangible assets at ~~March~~June 3130, 2022 and December 31, 2021 consisted of the following:

~~March~~June 3130, 2022

Intangible Assets	Cost		Accumulated Amortization		Net
Patents	$	622,733	$	~~609~~622,~~871~~733	$	~~12,862~~-
Trade names and trademarks		1,715,325		~~675~~684,~~195~~950		1,~~040~~030,~~130~~375
Customer list		584,468		~~416~~445,~~328~~551		~~168~~138,~~140~~917
Product formulas		292,234		~~208~~222,~~168~~782		8469,~~066~~452
Royalty rights		160,000		~~155~~160,~~515~~000		~~4,485~~-
Total intangible assets	$	3,374,760	$	2,~~065~~136,~~077~~016	$	1,~~309~~238,~~683~~744
December 31, 2021
Intangible Assets	Cost		Accumulated Amortization		Net
Patents	$	622,733	$	596,980	$	25,753
Trade names and trademarks		1,715,325		665,440		1,049,885
Customer list		584,468		387,105		197,363
Product formulas		292,234		193,554		98,680
Royalty rights		160,000		151,029		8,971
Total intangible assets	$	3,374,760	$	1,994,108	$	1,380,652

~~December~~Amortization expense 31related to intangible assets was $70,939 and $71,162 for the three months ended June 30, 2022 and 2021, respectively, and $141,908 and $142,323 for the six months ended June 30, 2022 and 2021, respectively.

Intangible Assets	Cost		Accumulated Amortization		Net
Patents	$	622,733	$	596,980	$	25,753
Trade names and trademarks		1,715,325		665,440		1,049,885
Customer list		584,468		387,105		197,363
Product formulas		292,234		193,554		98,680
Royalty rights		160,000		151,029		8,971
Total intangible assets	$	3,374,760	$	1,994,108	$	1,380,652

Amortization expense related to intangible assets was $70,969 and $71,161 for the three months ended March 31, 2022 and 2021, respectively.

REVOLVING LINE OF CREDIT

On August 6, 2021, the Company and Regions Bank (“the “Lender”) entered into a Business Loan Agreement (the “Business Loan Agreement”), effective as of July 30, 2021, under which the Company was provided a revolving line of credit in the amount of Six Million Dollars ($6,000,000). The Business Loan Agreement supersedes the Company’s previous $6,000,000 revolving line of credit from the Lender, entered into on August 31, 2018, that was scheduled to expire on August 31, 2021. The revolving line of credit under the Business Loan Agreement is evidenced by a promissory note and is secured principally by the Company’s inventory and accounts receivable.

The Business Loan Agreement bears interest at a variable annual rate of LIBOR plus 1.35%, computed on a 365/360 basis. All outstanding principal plus all accrued unpaid interest is due upon Lender’s demand or when the Business Loan Agreement expires on August 30, 2024.

There has been no negative impact in the availability of funds to the Company as a result of the COVID-19 pandemic.

At ~~March~~June 3130, 2022 and December 31, 2021, the Company had no borrowings of $3,459,500 and $0, respectively, under the revolving line of credit provided by the current and former Business Loan Agreements.

LONG TERM DEBT

Term Loan

On July 30, 2021, Kinpak and Regions Bank (the “Lender”) entered into a Credit Agreement (the “Credit Agreement”), effective as of July 20, 2021, under which the Company was extended a term loan (the “Term Loan”) in the original principal amount of Five Million Dollars ($5,000,000). The Company is using the proceeds of the Term Loan for a 69,000 square foot expansion of Kinpak’s manufacturing, warehouse and distribution facilities in Montgomery, Alabama. The Term Loan is evidenced by a promissory note (the “Note”) and is secured by a second priority mortgage of the assets pledged in Kinpak’s industrial development bond financing obtained on September 26, 2017 (see below for further information).

The Company has unconditionally guaranteed the payment to the Lender promptly when due, by acceleration or otherwise, of all obligations of Kinpak to the Lender.

The Term Loan bears interest at an annual rate of 3.25% and is due in 119 monthly installments of $35,249 each, plus interest then accrued, beginning on August 20, 2021. The final installment shall be due and payable on July 20, 2031 in an amount equal to all principal and interest then remaining unpaid. Assuming that all amounts due prior to that date are paid in a timely manner, the final installment would be $1,977,047.

The Credit Agreement provides that prepayments on the Term Loan are subject to a prepayment penalty of 5% during the first year the Term Loan is outstanding, with such penalty declining 1% each year thereafter until there is no prepayment penalty after five years. However, the Lender has agreed to waive the prepayment provisions.

The Credit Agreement includes financial covenants requiring that the Company maintain a minimum fixed charge coverage ratio (generally, the ratio of (A) EBITDA for the most recently completed four fiscal quarters minus the sum of the Company’s distributions to its shareholders, taxes paid and unfunded capital expenditures during such period to (B) prior period current maturities of Company long term debt plus interest expense incurred over the most recently completed four fiscal quarters) of at least 1.20 to 1, tested quarterly, and a maximum “debt to cap” ratio (generally, funded debt divided by the sum of net worth and funded debt) of 0.75 to 1, as of the end of each fiscal quarter. For purposes of computing the fixed charge coverage ratio, “EBITDA” generally is defined as net income before taxes and depreciation expense plus amortization expense, plus interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income. The Credit Agreement also requires that the majority shareholder’s ownership does not drop below 50% of the outstanding shares of Kinpak.

The Credit Agreement contains cross-default and cross-collateral provisions relating to any other indebtedness with the Lender, including without limitation the Company’s obligations under its $6,000,000 revolving line of credit from the Lender.

The Credit Agreement also contains negative covenants restricting the Company’s ability to, among other things, create or assume indebtedness for borrowed money exceeding $250,000 other than trade payables incurred in the normal course of business, create liens other than permitted liens (as defined in the Credit Agreement), acquire an interest in another entity or incur any obligation as surety or guarantor other than in the ordinary course of business.

Industrial Development Bond Financing

On September 26, 2017, Kinpak indirectly obtained a $4,500,000 loan from Regions Capital Advantage, Inc. (the “Lender”). The proceeds of the loan have been used in full as of June 30, 2021, principally to pay or reimburse costs relating to the expansion of Kinpak’s manufacturing, warehouse and distribution facilities in Montgomery, Alabama, as well as the purchase and installation of associated machinery and equipment (the “Expansion Project”).

The loan was funded by the Lender’s purchase of a $4,500,000 industrial development bond (the “Bond”) issued by The Industrial Development Board of the City of Montgomery, Alabama (the “IDB”). The Bond is a limited obligation of the IDB and is payable solely out of revenues and receipts derived from the leasing or sale of Kinpak’s facilities. In this regard, Kinpak is obligated to fund the IDB’s payment obligations by providing rental payments under a lease between the IDB and Kinpak (the “Lease”), under which Kinpak leases its facilities from the IDB. Kinpak inherited the lease structure when it first acquired its facilities from its predecessor-in-interest in 1996. The Lease provides that prior to the maturity date of the Bond, Kinpak may repurchase the facilities for $1,000 if the Bond has been redeemed or fully paid.

The Bond bears interest at the rate of 3.07% ~~per~~ per annum, calculated on the basis of a 360-day year and the actual number of days elapsed (subject to increase to 6.07% per annum upon ~~the~~ the occurrence of an event of default), and is payable in 118 monthly installments of $31,324 beginning on November 1, 2017 and ending on on August 1, 2027, with a final principal and interest payment to be made on September 1, 2027. The amount of the final payment was originally scheduled to be $1,799,201, however at ~~March~~June 3130, 2022 the final payment is scheduled to be $1,~~600~~547,~~861~~739 because the Company has made additional debt payments. The Bond provides that the interest rate will be subject to adjustment if it is determined by the United States Treasury Department, the Internal Revenue Service, or a similar government entity that the interest on the Bond is includable in the gross income of the Lender for federal income tax purposes.

Under the Lease, Kinpak is required to make rental payments for the account of the IDB to the Lender in such amounts and at such times as are necessary to enable the payment of all principal and interest due on the Bond and other charges, if any, payable in respect of the Bond. The Lease also provides that Kinpak may redeem the Bond, in whole or in part, by prepaying its rental payment obligations in an amount sufficient to effect the redemption. In addition, the Lease contains provisions relating to the Expansion Project, including limitations on utilization of Bond proceeds, deposit of unused proceeds into a custodial account (as described below) and investment of monies held in the custodial account.

Payment of amounts due and payable under the ~~Bond~~ Bond and other related agreements are guaranteed by the Company and its other consolidated subsidiaries. In connection with the guarantee ~~agreement~~ agreement under which the Company provided its guarantee, the Company is subject to certain covenants, including financial covenants requiring that the Company maintain (i) a minimum fixed charge ratio (generally, the ratio of (A) EBITDA minus the sum of Company’s ~~distributions~~ distributions to its shareholders, taxes paid and unfunded capital expenditures to (B) current maturities of Company long-term debt plus interest expense) of 1.20 to 1, tested quarterly, and (ii) a ratio of funded debt (as defined in the guaranty agreement) divided by the sum of net worth and funded debt of 0.75 to 1, tested quarterly. For purposes of computing the fixed charge coverage ratio, “EBITDA” ~~generally~~ generally is defined as net income before taxes and depreciation expense plus amortization expense, plus interest expense, plus non-recurring and/or non-cash losses and expenses, minus non-recurring and/or non-cash gains and income; “unfunded capital expenditures” ~~generally~~ generally is defined as capital expenditures made from Company funds other than funds borrowed through term debt incurred to finance such capital expenditures. At ~~March~~June 3130, 2022, the Company was in compliance with these financial covenants.

The Company incurred debt financing costs of $196,095 in connection with the financing. These costs are shown as a reduction of the debt balance and are being amortized over the life of the Bond.

Other Long-Term Obligations

In connection with the Company’s agreement to purchase assets of Snappy Marine, Inc. (“Snappy Marine”) on July 13, 2018, the Company provided to Snappy Marine a promissory note in the amount of $1,000,000, including interest (of the $1,000,000 amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an imputed interest rate of 2.87% per annum, is being recorded as interest expense over the term of the note). The note is payable in equal installments of $16,667 over a 60- month period that commenced on August 1, 2018, with a final payment due and payable on July 1, 2023. If the note is prepaid in full, the entire outstanding balance of the note (including all unpaid amounts allocated to interest over the remaining term of the note) must be paid.

On June 22, 2020, the Company entered into a lease agreement with Canon Solutions America, Inc. to lease office equipment. The lease obligates the Company to pay $100,009 in 63 equal monthly payments of $1,587. The lease is classified as a finance lease. The Company recorded a lease liability which is included in long term debt and a corresponding right to use asset that is included in property, plant and equipment of $96,039 based on a discount rate of 1.53%.

At ~~March~~June 3130, 2022 and December 31, 2021, the Company was obligated under lease agreements covering office equipment utilized in the Company’s operations (inclusive of the lease referenced in the preceding paragraph). The office equipment leases, aggregating approximately $7368,000 and $79,000 at ~~March~~June 3130, 2022 and December 31, 2021, respectively, have maturities through 2025 and carry interest rates ranging from approximately 1.53% to 3.86% per annum. The office equipment leases are classified as finance leases. During the three months ended ~~March~~June 3130, 2022 and 2021, the Company paid $5,687 ($5,~~350~~377 principal and $~~337~~310 interest) and $5,~~687~~689 ($5,~~254~~277 principal and $~~433~~412 interest), respectively, and during the six months ended June 30, 2022 and 2021, the Company paid $11,374 ($10,727 principal and $647 interest) and $11,376 ($10,531 principal and $845 interest), respectively, under the lease agreements.

10The following table provides information regarding the Company’s long-term debt at June 30, 2022 and December 31, 2021:

The following table provides information regarding the Company’s long-term debt at March 31, 2022 and December 31, 2021:

	Current Portion						Long Term Portion
	June 30, 2022			December 31, 2021			June 30, 2022			December 31, 2021
Term loan	$	270,317		$	265,918		$	4,485,724		$	4,622,204
Obligations related to industrial development bond financing		283,208			276,036			2,822,939			3,057,773
Note payable related to Snappy Marine asset acquisition		196,455			193,660			16,627			115,558
Office equipment finance leases		21,755			21,554			46,364			57,292
Total principal of long- term debt		771,735			757,168			7,371,654			7,852,827
Debt issuance costs		(20,637	)		(20,637	)		(91,620	)		(101,938	)
Total long- term debt	$	751,098		$	736,531		$	7,280,034		$	7,750,889

	Current Portion						Long Term Portion
	March 31, 2022			December 31, 2021			March 31, 2022			December 31, 2021
Term loan	$	268,085		$	265,918		$	4,553,837		$	4,622,204
Obligations related to industrial development bond financing		279,585			276,036			2,940,566			3,057,773
Note payable related to Snappy Marine asset acquisition		195,052			193,660			66,270			115,558
Obligation related to Check Corporation asset acquisition					-			-			-
Office equipment finance leases		21,655			21,554			51,841			57,292
Total principal of long- term debt		764,377			757,168			7,612,514			7,852,827
Debt issuance costs		(20,637	)		(20,637	)		(96,779	)		(101,938	)
Total long- term debt	$	743,740		$	736,531		$	7,515,735		$	7,750,889

Required principal payments under the Company’s long- term obligations are set forth below:

Twelve-month period ending March 31,
Twelve-month period ending June 30,
2023	$	~~764~~771,~~377~~735
2024		~~653~~608,~~179~~759
2025		~~602~~608,~~545~~857
2026		~~613~~615,~~847~~564
2027		~~622~~629,~~381~~031
Thereafter		54,~~120~~909,~~562~~443
Total	$	8,~~376~~143,~~891~~389

RELATED PARTY TRANSACTIONS

The Company sells products to companies affiliated with Peter G. Dornau, who is the Company’s Chairman, President and Chief Executive Officer. The affiliated companies resell, outside of the United States and Canada, products they purchase from the Company. The Company also provides administrative services to these ~~companies~~ companies and pays certain business-related expenditures for the affiliated companies, for which the Company is reimbursed. Sales to the affiliated companies aggregated approximately $~~492~~452,000 and $~~513~~543,000 for the three months ended ~~March~~June 3130, 2022 and 2021, respectively, and approximately $944,000 and $1,056,000 for the six months ended June 30, 2022 and 2021, respectively. Fees for administrative ~~services~~ services aggregated approximately $~~188~~343,000 and $~~168~~289,000 for the three months ended ~~March~~June 3130, 2022 and 2021, respectively, and approximately $531,000 and $457,000 for the six months ended June 30, 2022 and 2021, respectively. Amounts billed to the affiliated companies to reimburse the Company for business related expenditures made on behalf of the affiliated companies aggregated approximately $29,000 and $3627,000 during the three months ended ~~March~~June 3130, 2022 and 2021, respectively, and approximately $57,000 and $63,000 during the six months ended June 30, 2022 and 2021, respectively. The Company had accounts receivable from the affiliated companies in connection with the product sales, administrative services and business- related expenditures aggregating approximately $~~847~~1,494,000 and $1,212,000 at ~~March~~June 3130, 2022 and December 31, 2021, respectively.

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 an aggregate of ~~approximately~~ $3514,000 ($12,000 for research and development services and $62,000 for charter boat services that the Company used to provide sales incentives to customers) and $21,000 ($12,000 for research and development services, $7,000 for charter boat services that the Company used to provide sales incentives to customers and $172,000 for the production of television commercials ) for the three months ended June 30, 2022 and 2021, respectively, and $2349,000 ($1224,000 for research and development services, $78,000 for charter boat services that the Company used to provide sales incentives for customers and $17,000 for the production of television commercials ) and $444,000 ($24,000 for research and development services, $14,000 for charter boat services that the Company used to provide sales incentives for customers and $6,000 for the production of television commercials ) for the ~~three~~six months ended ~~March~~June 3130, 2022 and 2021, respectively. Expenditures for the research and development services are included in the condensed consolidated statements of operations within selling and administrative expenses. Expenditures for the charter boat services are included in the condensed consolidated statements of operations within advertising and promotion expenses.

The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. See Note 4 for a description of the lease terms.

ASee ~~director~~Note ~~of the Company is Regional Executive Vice President of an insurance broker through which the Company sources most of its insurance needs. During the three months ended March 31~~13, ~~2022~~Merger ~~and 2021~~Agreement, ~~the~~for a ~~Company~~discussion ~~paid an aggregate~~ of ~~approximately~~certain ~~$283,000~~transaction ~~and~~relating ~~$397,000,~~to ~~respectively, in insurance premiums on policies obtained through~~ the ~~insurance~~above-described ~~broker~~entities.

11A director of the Company is Regional Executive Vice President of an insurance broker through which the Company sources most of its insurance needs. During the three months ended June 30, 2022 and 2021, the Company paid an aggregate of approximately $355,000 and $432,000, respectively, and during the six months ended June 30, 2022 and 2021, the Company paid an aggregate of approximately $638,000 and $829,000, respectively in insurance premiums on policies obtained through the insurance broker.

9. (LOSS) EARNINGS PER COMMON SHARE

The Company did not have any potentially dilutive securities during the three and six months ended ~~March~~June 3130, 2022 and 2021. Therefore, the Company’s earnings per share are calculated by by dividing net income by the weighted average number of shares outstanding during the reporting period.

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	1,299,281	$	1,904,269
Net (loss) income	$	(321,395)	$	2,601,315	$	977,886	$	4,505,584
Weighted average number of common shares outstanding		9,509,~~670~~799		9,~~481~~482,~~799~~854		9,509,735		9,482,329
Earnings per common share	$	0.14	$	0.20
(Loss) earnings per common share	$	(0.03)	$	0.27	$	0.10	$	0.48

10.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

No stock compensation expense was incurred during ~~each of~~ the three and six months ended ~~March~~June 3130, 2022. Stock compensation expense during the three and six months ended June 30, 2021 was $55,780, all ~~and~~of atwhich ~~March~~relates 31to the shares of Company common stock issued to the Company’s non-employee directors as part of their compensation for service on the Board of Directors. At June 30, 2022, there were no outstanding stock options or unrecognized compensation expense related to stock options.

11.

CASH DIVIDENDS

OnSix ~~February~~months ~~24,~~ended ~~2022,~~June ~~the Company’s Board of Directors declared a regular quarterly dividend of $0.04 per common share payable on March 25~~30, 2022 ~~to all shareholders of record on March 10, 2022. There were 9,509,799 shares of common stock outstanding on March 10, 2022; therefore, dividends aggregating $380,392 were paid on March 25, 2022.~~

On February 25, 2021, the Company’s Board of Directors declared a regular quarterly dividend of $0.03 per common share payable on March 25, 2021 to all shareholders of record on March 11, 2021. There were 9,481,799 shares of common stock outstanding on March 11, 2021; therefore, dividends aggregating $284,454 were paid on March 25, 2021.

Declaration Date	Type	Record Date	Payment Date	Dividends Per Share		Amount
February 24, 2022	Quarterly	March 10, 2022	March 25, 2022	$	0.04	$	380,392
May 25, 2022	Quarterly	June 8, 2022	June 23, 2022		0.04		380,392
Total				$	0.08	$	760,784

Six months ended June 30, 2021

Declaration Date	Type	Record Date	Payment Date	Dividends Per Share		Amount
February 25, 2021	Quarterly	March 11, 2021	March 25, 2021	$	0.03	$	284,454
May 21, 2021	Quarterly	June 4, 2021	June 18, 2021		0.03		284,454
Total				$	0.06	$	568,908

12.

CUSTOMER CONCENTRATION

During the three months ended ~~March~~June 3130, 2022 ~~and 2021~~, the Company had net sales to each of two customers that constituted inat ~~excess~~least of 10% of its net sales. Net sales to these two customers represented approximately 3843.70% (2224.68% and 1618.~~1%) and 43.~~2% ~~(29.5% and 13.7%~~) of the Company’s net sales for the three months ended ~~March~~June 3130, 2022 ~~and 2021, respectively~~.

AtDuring ~~March~~the ~~31,~~three ~~2022~~months ended ~~and~~June ~~December 31~~30, 2021, the Company had net sales to each of three customers that constituted at least of 10% of ~~the~~its ~~Company’s~~net ~~gross trade accounts receivable~~sales. ~~The~~Net ~~gross trade accounts receivable~~sales ~~balances~~to ~~for~~ these three customers represented approximately 6547.51% (2618.96%, 2418.95%, and 1310.~~7%) and 60.1% (22.2%, 19.~~0%~~, and 18.9%~~) of the Company’s ~~gross~~ ~~trade~~net ~~accounts~~sales ~~receivable~~for atthe ~~March~~three ~~31,~~months ended ~~2022~~June ~~and December 31~~30, 2021~~, respectively~~.

12During the six months ended June 30, 2022 and 2021, the Company had net sales to each of two customers that constituted at least of 10% of its net sales. Net sales to these two customers respectively represented approximately 41.0% (20.8% and 20.2%) and 39.8% (23.5% and 16.3%) of the Company’s net sales, respectively, for the six months ended June 30, 2022 and 2021.

At June 30, 2022 and December 31, 2021, three customers constituted at least 10% of the Company’s gross trade accounts receivable. The gross trade accounts receivable balances for these customers represented approximately 64.1% (31.1%, 21.6%, and 11.4%) and 60.1% (22.2%, 19.0%, and 18.9%) of the Company’s gross trade accounts receivable at June 30, 2022 and December 31, 2021, respectively.

13.

MERGER AGREEMENT

On June 22, 2022, the Company announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 21, 2022, with OneWater Marine Inc., a Delaware corporation (“Parent”), and OBCMS, Inc., a Florida corporation, and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation (the “Surviving Corporation”) and wholly owned subsidiary of Parent following the effectiveness of the Merger.

At the effective time of the Merger (the “Effective Time”):

each share of the Company common stock that is owned by the Company (as treasury stock or otherwise) or any of its direct or indirect wholly owned subsidiaries as of immediately prior to the Effective Time (“Cancelled Shares”) will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange;

each share of Company common stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares and Dissenting Shares as defined by the Merger Agreement) will be converted into the right to receive $13.08 in cash, without interest (the “Merger Consideration”);

all shares of Company common stock will no longer be outstanding and all shares of Company common stock will be cancelled and retired and will cease to exist, and, subject to Section 2.03 of the merger agreement, each holder of: (i) a certificate formerly representing any shares of Company common stock; or (ii) any book-entry shares which immediately prior to the Effective Time represented shares of Company common stock will, subject to applicable Law in the case of Dissenting Shares, cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with Section 2.02 of the Merger Agreement; and

each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid, and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation with the same rights, powers, and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of Merger Sub common stock shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

Entry into the Merger Agreement has been unanimously approved by the board of directors of the Company, based in part on the recommendation of a special committee of the board of directors composed entirely of directors who are not parties to the Merger directly or indirectly, other than as a result of being a shareholder of the Company, and who have no direct or indirect material financial interest or other material interest in the Merger.

Following execution of the Merger Agreement on June 21, 2022, holders of a majority of the issued and outstanding shares of Company common stock (the “Consenting Shareholders”) duly executed and delivered to the Company a written consent (the “Written Consent”), approving and adopting the Merger Agreement and the transactions contemplated thereby, including the Merger. No further approval of the Company’s shareholders is required to adopt the Merger Agreement or will be sought. As a result of receipt of the Written Consent, the Company is prohibited from engaging in any further discussions or solicitations regarding an alternative potential acquisition of the Company.

The consummation of the Merger is subject to customary closing conditions, including (i) receiving the approval of holders of a majority of the voting power of the outstanding Company common stock, which approval was effected after execution of the Merger Agreement through the Written Consent, (ii) the absence of legal restraints preventing the consummation of the Merger, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iv) the payoff of certain indebtedness of the Company and (v) the closing or satisfaction or waiver of the closing conditions of transactions in which (A) Peter G. Dornau, the Chairman of the Board, President and Chief Executive Officer of the Company, and Mr. Dornau’s wife, will, pursuant to an equity purchase agreement entered into in connection with the Merger Agreement, sell to an affiliate of Parent and Merger Sub all of the issued and outstanding shares of common stock of Star Brite Europe, Inc. for an aggregate purchase price of $7,000,000, subject to certain adjustments and (B) an entity of which Mr. Dornau is the sole managing member will, pursuant to a real estate sales contract entered into in connection with the Merger Agreement, sell to an affiliate of Parent and Merger Sub certain real property, consisting of the Company’s executive offices and warehouse facilities in Fort Lauderdale, Florida, for a purchase price of $3,600,000, subject to certain adjustments.

The Merger Agreement includes customary representations, warranties and covenants of the Company, Parent and Merger Sub. Among other things, the Company has agreed to use commercially reasonable efforts to conduct its business in the ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve intact its businesses until the Merger is consummated. The Company and Parent have also agreed to use their respective reasonable best efforts to obtain any approvals from governmental authorities for the Merger, including all required antitrust approvals, on the terms and subject to the conditions set forth in the Merger Agreement.

The Merger Agreement contains certain provisions giving each of Parent and the Company rights to terminate the Merger Agreement under certain circumstances, including the right for either Parent or the Company to terminate the Merger Agreement if the Merger has not been consummated on or before September 30, 2022. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee of $3,375,000. The Merger Agreement further provides that Parent will be required to pay the Company a reverse termination fee of $5,000,000 under certain circumstances if Parent is does not confirm in writing to the Company that it has available cash in an amount which, together with the Debt Financing (as defined below), is required to pay the Merger Consideration.

A copy of the Merger Agreement can be found as an exhibit to the Company’s Current Report on Form 8-K filed on June 22, 2022.

During the three and six months ended June 30, 2022, the Company incurred approximately $950,000 of expenses related to the proposed Merger. Such expenses are included in selling and administrative expenses in the accompanying unaudited condensed consolidated statement of operations.

The closing of the Merger is expected to occur during the quarter ending September 30, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements:

Certain statements contained in this Quarterly Report on Form 10-Q, including without limitation, our ability to provide required capital to support inventory levels, the effect of price increases in raw materials that are petroleum or chemical based or commodity chemicals on our margins, and the sufficiency of funds provided through operations and existing sources of financing to satisfy our cash requirements constitute forward-looking statements. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “believe,” “may,” “will,” “expect,” “anticipate,” “intend,” or “could,” including the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. These statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by such forward-looking statements. Factors that may affect these results include, but are not limited to, matters relating to the proposed Merger; the impact of the COVID-19 pandemic on our business and the economy in general,; the highly competitive nature of our industry; reliance on certain key customers; changes in consumer demand for marine, recreational vehicle and automotive products; expenditures on, and the effectiveness of our advertising and promotional efforts; adverse weather conditions; unanticipated litigation developments; exposure to market risks relating to changes in interest rates, foreign currency exchange rates and prices for raw materials that are petroleum or chemical based, availability in general of raw materials and other factors addressed in the sections entitled “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2021 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Overview:

On June 21, 2022, the Company entered into an agreement with One Water Marine Inc. in which all of the Company’s common shares will be converted into the right to receive $13.08 per share. For additional information see our Form 8-K filed with the SEC on June 22, 2022, and Note 13, Merger Agreement, to the unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q.

We are engaged in the manufacture, marketing and distribution of a broad line of appearance, performance, and maintenance products for the marine, automotive, power sports, recreational vehicle and outdoor power equipment markets, under the Star brite® and other trademarks within the United States and Canada. In addition, we produce private label formulations of many of our products for various customers and provide custom blending and packaging services for these and other products. We also manufacture, market and distribute chlorine dioxide-based deodorizing, disinfectant and sanitizing products. We sell our products through national retailers and to national and regional distributors. In addition, we sell products to two companies affiliated with Peter G. Dornau, our Chairman, President and Chief Executive Officer; these companies distribute the products outside of the United States and Canada.

Critical accounting estimates:

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for information regarding our critical accounting estimates.

Results of Operations:

Three Months Ended ~~March~~June 3130, 2022 Compared to the Three Months Ended ~~March~~June 3130, 2021

The following table provides a summary of our financial results for the three months ended ~~March~~June 3130, 2022 and 2021:

	For The Three Months Ended March 31,
	For The Three Months Ended June 30,
							Percent			Percentage of Net Sales
	2022			2021			Change			2022			2021
Net sales	$	1215,~~737~~208,~~329~~834		$	13$15,~~131~~688,~~224~~985			(3.01)	)%		100.0	%		100.0	%
Cost of goods sold		89,~~001~~859,~~347~~190			78,~~750~~416,~~503~~553			317.21	%		6264.8	%		5953.06	%
Gross profit		45,~~735~~349,~~982~~644			57,~~380~~272,~~721~~432			(1226.04)	)%		3735.2	%		4146.04	%
Advertising and promotion		1,~~071~~633,~~579~~975			~~941~~1,~~814~~265,583			1329.81	%		810.47	%		78.21	%
Selling and administrative		24,~~000~~045,~~030~~057			12,~~972~~641,~~812~~657			153.41	%		1526.76	%		1516.08	%
Operating income		1,664,373			2,466,095			(32.5	)%		13.1	%		18.8	%
Operating (loss) income		(329,388)			3,365,192			(109.8)	%		(2.2)	%		21.4	%
Interest (expense), net		(3179,~~682~~128)	)		(3740,~~187~~823)	)		~~(14~~93.8	)%		0.25	%		0.3	%
Provision for income taxes		(333,410	)		(524,639	)		(36.4	)%		2.6	%		4.0	%
Benefit (provision) for income taxes		87,121			(723,054)			(112.0)	%		(0.6	)%		4.6	%
Net income	$	1,299,281		$	1,904,269			(31.8	)%		10.2	%		14.5	%
Net (loss) income	$	(321,395)		$	2,601,315			(112.4)	%		(2.1)	%		16.6	%

Net sales for the three months ended ~~March~~June 3130, 2022 decreased by approximately $~~394~~480,000, or 3.01%, as compared to the three months ended ~~March~~June 3130, 2021. The ~~three~~Company ~~months~~had ~~ended~~lower ~~March~~sales ~~31, 2021 benefitted from an unusually high amount~~ of ~~open~~core ~~orders~~marine atproducts ~~the~~partially ~~end~~offset ~~of 2020, which was caused~~ by anstrong ~~increase~~sales inof ~~demand~~winterizing ~~for marine~~ products ~~as the economy began to open from the pandemic~~.

Cost of goods sold increased by approximately $~~251~~1,443,000, or 317.21%, during the three months ended ~~March~~June 3130, 2022, as compared to the three months ended ~~March~~June 3130, 2021. ~~The~~Cost ~~increase~~of ~~was~~sales increased ~~principally~~at a ~~result~~higher ofrate ~~the~~than ~~mix~~net of sales, ~~and~~primarily because of cost increases in ~~freight,~~both petroleum-based and other raw materials ~~and~~in ~~other~~addition ~~manufacturing~~to transportation cost increases from imports and domestic shipment freight cost to customers.

13Gross profit decreased by approximately $1,923,000, or 26.4%, for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. Gross profit primarily decreased due to the Company’s cost of goods sold described above. As a percentage of net sales, gross profit was approximately 35.2% and 46.4% for the three months ended June 30, 2022 and 2021, respectively.

~~Gross~~Advertising ~~profit~~and ~~decreased~~promotion byexpenses increased by approximately $~~645~~368,000, or 1229.01%, ~~for~~during the three months ended ~~March~~June 3130, 2022, as compared to the three months ended ~~March~~June 3130, 2021. ~~Gross~~The ~~profit~~increase ~~decreased~~in ~~due~~advertising toand ~~the~~promotion ~~changes~~expenses inwas ~~net~~principally ~~sales~~a ~~and~~result ~~cost~~ of ~~goods~~increased ~~sold~~marketing ~~described~~programs, ~~above~~internet advertising and television advertising. As a percentage of net sales, ~~gross profit~~advertising ~~was~~and ~~approximately~~promotion ~~37.2%~~expenses ~~and~~increased 41to 10.07% for the three months ended June ~~March 31~~30, 2022, ~~and~~from ~~2021~~8.1% for the three months ended June 30, ~~respectively~~2021.

~~Advertising~~Selling and ~~promotion~~administrative expenses increased by approximately $~~130~~1,~~000~~403,000 or 1353.81%, during the three months ended ~~March~~June 3130, 2022, as compared to the three months ended ~~March~~June 3130, 2021. The increase in ~~advertising~~selling and ~~promotion~~administrative expenses was ~~principally~~primarily a result of antwo ~~increased~~factors. ~~focus~~The onCompany ~~social~~incurred ~~media~~legal and ~~digital~~other ~~marketing~~professional costs associated with the pending merger with OneWater Marine, Inc. In addition, the Company incurred higher employee compensation expenses. As a percentage of net sales, ~~advertising~~selling and ~~promotion~~administrative expenses increased to 826.46% for the three months ended ~~March~~June 3130, 2022, from 716.28% for the three months ended ~~March~~June 3130, 2021.

Selling and administrative expenses increased by approximately $27,000, or 1.4%, during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. As a percentage of net sales, selling and administrative expenses increased to 15.7% for the three months ended March 31, 2022, from 15.0% for the three months ended March 31, 2021. 18

Interest (expense), net for the three ~~months~~ months ended ~~March~~June 3130, 2022 ~~decreased~~increased by approximately $638,000 or 1493.8%, as compared to the three months ended ~~March~~June 3130, 2021. The increase principally resulted from interest expense related to our term loan for the expansion at Kinpak.

~~Provision~~Benefit ~~for~~from income taxes for the ~~three~~ three months ended ~~March~~June 3130, 2022 was approximately $~~333~~87,000, or 2021.43% of our income before income taxes. For the three months ended ~~March~~ 31June 30, 2021 the provision for income taxes was approximately $~~525~~723,000, or 21.68% of our income before income taxes.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

The following table provides a summary of our financial results for the six months ended June 30, 2022 and 2021:

	For The Six Months Ended June 30,
							Percent			Percentage of Net Sales
	2022			2021			Change			2022			2021
Net sales	$	27,946,163		$	28,820,209			(3.0)	%		100.0	%		100.0	%
Cost of goods sold		17,860,537			16,167,056			10.5	%		63.9	%		56.1	%
Gross profit		10,085,626			12,653,153			(20.3)	%		36.1	%		43.9	%
Advertising and promotion		2,705,554			2,207,397			22.6	%		9.7	%		7.7	%
Selling and administrative		6,045,087			4,614,469			31.0	%		21.6	%		16.0	%
Operating income		1,334,985			5,831,287			(77.1)	%		4.8	%		20.2	%
Interest (expense), net		(110,810	)		(78,010	)		42.0	%		0.4	%		0.3	%
Provision for income taxes		(246,289	)		(1,247,693	)		(80.3)	%		0.9	%		4.3	%
Net income	$	977,886		$	4,505,584			(78.3)	%		3.5	%		15.6	%

Net sales for the six months ended June 30, 2022 decreased by approximately $874,000, or 3.0%, as compared to the six months ended June 30, 2021. The decrease in net sales was principally a result of several customers adjusting their inventory levels of Star brite^® branded marine products, private label marine and RV products.

Cost of goods sold increased by approximately $1,693,000, or 10.5%, during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase in cost of goods sold was a result primarily of higher cost of petroleum based raw materials, imported material shipping costs of containers along with higher domestic transportation costs in addition to higher cost of manufacturing operating costs.

Gross profit decreased by approximately $2,568,000, or 20.3%, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Gross profit decreased due to lower sales volume and higher cost of sales as described above. As a percentage of net sales, gross profit was approximately 36.1% and 43.9% for the six months ended June 30, 2022 and 2021, respectively.

Advertising and promotion expenses increased by approximately $498,000, or 22.6%, during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase in advertising and promotion expenses was principally a result of increased TV advertising in addition to several marketing programs targeting consumer brand awareness to our branded products. As a percentage of net sales, advertising and promotion expenses increased to 9.7% for the six months ended June 30, 2022, from 7.7% for the six months ended June 30, 2021.

Selling and administrative expenses increased by approximately $1,431,000, or 31.0%, during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase in selling and administrative expenses was primarily a result of our pending merger with One Water Marine. In additional the Company incurred higher employee compensation expenses. As a percentage of net sales, selling and administrative expenses increased to 21.6% for the six months ended June 30, 2022, from 16.0% for the six months ended June 30, 2021.

Interest (expense), net for the six months ended June 30, 2022 increased by approximately $33,000 or 42.0%, as compared to the six months ended June 30, 2021. The increase principally resulted from interest expense related to our term loan for the expansion at Kinpak.

Provision for income taxes for the six months ended June 30, 2022 was approximately $246,289, or 20.1% of our income before taxes. For the six months ended June 30, 2021 the provision was approximately $1,248,000, or 21.7% of our income before taxes.

Liquidity and capital resources:

Our cash balance was approximately $107,~~217~~018,000 at ~~March~~June 3130, 2022 and approximately $12,685,000 at December 31, 2021.

The following table summarizes our cash flows for the ~~three~~six months ended ~~March~~June 3130, 2022 and 2021:

	Three Months Ended March 31,
	Six Months Ended June 30,
	2022			2021
Net cash (used in) provided by operating activities	$	(~~238~~5,~~837~~228,933	)	$	1483,~~207,802~~201
Net cash used in investing activities		(12,~~610~~664,~~684~~078	)		(~~915~~2,~~899~~922,273	)
Net cash used in financing activities		(619,141	)		(414,546	)
Net cash provided by (used in) financing activities		2,226,465			(859,478	)
Effect of exchange rate fluctuations on cash		~~651~~(338	)		~~976~~1,775
Net decrease in cash and restricted cash	$	(25,~~468~~666,~~011~~884	)	$	(~~121~~3,~~667~~296,775	)

Net cash used in operating activities for the ~~three~~six months ended ~~March~~June 3130, 2022 was approximately $~~238~~5,229,000, as compared to net cash provided by operating activities of approximately $1483,~~208,~~000 for the ~~three~~six months ended ~~March~~June 3130, 2021. During the ~~three~~six months ended ~~March~~June 3130, 2022, net income decreased by approximately $~~605~~3,528,000, noncash adjustments to net income increased by approximately $~~295~~193,000, and changes in working capital used approximately $12,~~137~~378,000 more in cash, as compared to the ~~three~~six months ended ~~March~~June 3130, 2021.

Net trade accounts receivable at ~~March~~June 3130, 2022 aggregated approximately $1011,~~261~~580,000, an increase of approximately $~~717~~2,036,000, or 721.53%, as compared to approximately $9,544,000 in net ~~trade~~ trade accounts receivable outstanding at December 31, 2021. The increase was principally a result of our net sales during the ~~first quarter~~second quarter of 2022. Receivables due from affiliated companies aggregated approximately $~~847~~1,494,000 at ~~March~~June 3130, 2022, aan ~~decrease~~increase of approximately $~~365~~282,000, or 3023.13%, from receivables due from affiliated companies of approximately $1,212,000 at December 31, 2021. The ~~decrease~~increase was primarily a result of ~~payments~~ ~~received~~our ~~during~~net sales to the ~~three~~affiliated ~~months~~companies ~~ended~~in ~~March~~the ~~31,~~second quarter of 2022.

Inventories, net were approximately $1923,~~975~~584,000 and $16,819,000 at ~~March~~June 3130, 2022 and December 31, 2021, respectively, representing an increase of approximately $36,~~156~~765,000, or 1840.82%, during the ~~three~~six months ended ~~March~~June 3130, 2022. We believe the higher levels of inventories were necessary in order to reduce potential ~~supply~~ supply chain problems and material price increases.

Net cash used in investing activities for the ~~three~~six months ended ~~March~~June 3130, 2022 ~~increased~~decreased by approximately $~~695~~258,000, or 758.98%, as compared to the ~~three~~six months ended ~~March~~June 3130, 2021. The ~~increase~~ decrease in cash used was principally due to ~~expand~~the winding down of our expansion of our manufacturing, warehouse and distribution facilities at Kinpak.

Net cash ~~used~~provided inby financing activities for ~~the~~ ~~three~~the six months ended ~~March~~June 3130, 2022 ~~increased~~was by approximately $~~205~~2,226,000, ~~or 49.4%,~~ as compared to net cash used in financing activities of approximately $859,000 for the ~~three~~six months ended ~~March~~June 3130, 2021. The principal reason for the change is that during the six months ended June 30, 2022, we had approximately $3,460,000 in borrowings under our revolving line of credit, as compared to no borrowing during the first six months of 2021. During the ~~three~~six months ended ~~March~~June 3130, 2022, the Company paid dividends to common shareholders aggregating approximately $~~380~~761,000 ~~and~~ and made payments on long term debt of approximately $~~233~~467,000, as compared to dividends paid to common shareholders aggregating approximately $~~284~~569,000 and payments on long term debt of approximately $~~130~~291,000 during the ~~three~~six months ended ~~March~~June 3130, 2021.

See Notes 6 and 7 to the condensed consolidated financial statements included in this report for information concerning our principal credit facilities, consisting of Kinpak’s obligations relating to a term loan, the payment of which we have guaranteed, an industrial development bond financing, the payment of which we have guaranteed, and a revolving line of credit. At ~~March~~June 3130, 2022 and December 31, 2021, we had outstanding balances of approximately $4,~~822~~756,000 and $4,888,000, respectively, under Kinpak’s obligation relating to the term loan, $3,~~220~~106,000 and $3,334,000, respectively, under Kinpak’s obligations relating to the industrial development bond financing, and noapproximately $3,460,000 and $0, respectively, in borrowings under our revolving credit facility.

1420

The loan agreement pertaining to our revolving credit facility, as amended, has a stated term that expires on August 30, 2024, although as was the case with earlier revolving lines of credit provided to us in recent years, amounts outstanding are payable on demand. Nevertheless, the loan agreement pertaining to our revolving line of credit contains various covenants, including financial covenants that are described in Note 6 to the condensed ~~consolidated~~ ~~financial~~consolidated financial statements included in this report. At ~~March~~June 3130, 2022, we were in compliance with these financial covenants. The revolving credit facility is subject to several events of default, including a decline of the majority shareholder’s ownership below 50% of our outstanding shares.

Our guarantee of Kinpak’s obligations related to the industrial development bond financing are subject to various covenants, including financial covenants that are described in Note 7 to the condensed consolidated financial statements included in this report. At ~~March~~June 3130, 2022, we were in compliance with these financial covenants.

In connection with our acquisition of assets of of Snappy Marine, we issued a promissory note in the amount of $1,000,000, including interest (of the $1,000,000 amount of the promissory note, $930,528 was recorded as principal, and the remaining $69,472, representing an imputed interest rate of 2.87% per annum, is being recorded as interest expense over the term of the note). At ~~March~~June 3130, 2022, we had an outstanding balance of $~~266~~216,~~666~~667 under the promissory note (including $~~261~~213,~~322~~082 recorded as principal and $53,~~344~~585 to be recorded as interest expense over the remaining term of the note).

We also obtained financing through leases for office equipment, totaling approximately $7368,000 and $79,000 at ~~March~~June 3130, 2022 and December 31, 2021, respectively.

Some of our assets and liabilities are denominated in Canadian dollars and are subject to currency exchange rate fluctuations. We do not engage in currency hedging and address currency risk as a pricing issue. For the ~~three~~six months ended ~~March~~June 3130, 2022, we recorded $~~962~~8 in foreign currency translation adjustments (increasing shareholders’ equity by $~~962~~8).

During the past few years, we have introduced a number of new products. At times, new product introductions have required us to increase our overall inventory and have resulted in lower inventory turnover rates. The effects of reduced inventory turnover have not been material to our overall operations. We believe that all required capital to maintain such increases will continue to be provided by operations and our current revolving line of credit or a renewal or replacement of the facility.

Many of the raw materials that we use in the manufacturing process are petroleum or chemical based and commodity chemicals that are subject to fluctuating prices. The nature of our business does not enable us to pass through the price increases to our national retailer customers and to our distributors as promptly as we experience increases in raw material costs. This may, at times, adversely affect our margins.

We believe that funds provided through operations and our revolving line of credit will be sufficient to satisfy our 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 Rules 13a-15(f) and 15d-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, the Company’s internal control over financial reporting.

1521

PART II - OTHER INFORMATION

Item 1A. Risk Factors

The business, results of operations, financial condition, cash flow, and stock price of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Risk Factors,” any one or more of which could, directly or indirectly, cause the Company’s actual financial condition, operating results and cash flow to vary materially from past, or from anticipated future, financial condition operating results and cash flow. In addition, the following supplements the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021:

Failure to complete the Merger could negatively impact the market price of our common stock.

If the Merger is not completed for any reason, we will be subject to a number of material risks, including the following:

	●	the market price of our common stock may decline;

	●	costs relating to the Merger, such as legal, accounting and financial advisory fees, and, in specified circumstances, termination fees, must be paid by us, even if the Merger is not completed; and

●

the diversion of management’s attention from our day-to-day business, the potential disruption to our employees and our relationships with customers, suppliers and distributors and potential diversion from certain aspects of its previously announced product development program may make it difficult for us to regain our financial and market positions if the Merger is not completed.

Further, if the Merger is terminated and our Board of Directors seeks another merger or business combination, shareholders cannot be certain that we will be able to find a party willing to pay an equivalent or better price than the price to be paid in the proposed merger.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Period	Total Number of Shares Purchased		Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
January 1 - January 31, 2022		600	$	9.41		600	$	2,955,243
February 1 - February 28, 2022		-		-		-	$	2,955,243
March 1 - March 31, 2022		-		-		-	$	2,955,243
Total		600				600

None.

(1) Represents approximate dollar value of shares that could have been purchased under the plan in effect at the end of the month.

Item 6. Exhibits

Exhibit No.		Description
2.1+		Agreement and Plan of Merger, dated as of June 21, 2022, by and among Ocean Bio-Chem, Inc., OneWater Marine Inc. and OBCMS, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 22, 2022).
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.INS		XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

16+ Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request.

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.
Dated: May 16, 2022	/s/ Peter G. Dornau
Dated: August 4, 2022	/s/ Peter G. Dornau
	Peter G. Dornau
	Chairman of the Board, President and
	Chief Executive Officer
Dated: May 16, 2022	/s/ Jeffrey S. Barocas
Dated: August 4, 2022	/s/ Jeffrey S. Barocas
	Jeffrey S. Barocas
	Vice President and
	Chief Financial Officer

1723

Filing Compare · OCEAN BIO CHEM INC