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

                                    FORM 10-K
                                  (Mark one)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   For the fiscal year ended December 31, 2006
                                       OR
|_| 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                                 (IRS Employer
of incorporation or organization)                            Identification No.)

  4041 SW 47 Avenue
  Fort Lauderdale, FL                                                 33314-4023
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (954) 587-6280

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:
    Common stock, $0.01 par value

     Indicate by check mark whether the Registrant is a well seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes     No   |X|

     Indicate by check mark if the  Registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes     No    |X|

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.     Yes  |X|   No


     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.      Yes  |X|  No

     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer in Rule 12b-2 of the Exchange  Act.  (Check
one)
           Large accelerated filer
           Accelerated filer
           Non-accelerated filer |X|

     Indicated  by check mark  whether  the  Registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act. Yes     No |X|

     Aggregate market value of Registrant's  common stock held by non-affiliates
of the Registrant,  based upon the closing price of a share of the  Registrant's
common stock on March 01, 2007 as reported by the NASDAQ  Capital Market on that
date:  $6,683,420  For purposes of this  disclosure,  the Registrant has assumed
that  all  directors,  officers,  and  beneficial  owners  of 5% or  more of the
Registrant's  common stock are affiliates of the  Registrant and  non-affiliates
held 2,370,007 shares on March 1, 2007.


       Number of shares of the Registrant's common stock outstanding as of
         March 01, 2007: 7,621,316 shares common stock, $0.01 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE
<PAGE>
     Part III of this Form 10-K  incorporates  information  from portions of our
Definitive Proxy Statement , which will be filed within 120 days of December 31,
2006 covering our Annual Meeting of Shareholders  which will be held on or about
June 14, 2007.


Forward-looking Statements:

     Certain statements  contained in this Annual Report on Form 10-K, including
without  limitation  expectations  as to  future  sales and  operating  results,
constitute  forward-looking statements pursuant to the safe harbor provisions of
the Private  Securities  Litigation  Reform Act of 1995.  For this purpose,  any
statements  contained in this report that are not statements of historical  fact
may be deemed forward-looking statements. Without limiting the generality of the
foregoing,  words such as  "believe",  "may",  "will',  "expect",  "anticipate",
"intend",  "could"  including  the  negative  or  other  variations  thereof  or
comparable  terminology  are  intended to identify  forward-looking  statements.
These  statements  involve  known and  unknown  risks,  uncertainties  and other
factors which may cause our actual  results,  performance or  achievements to be
materially  different  from any  future  results,  performance  or  achievements
expressed  or implied by such  forward-looking  statements.  Factors,  which may
affect these  results  include,  but are not limited to, the highly  competitive
nature of our industry;  reliance on certain key customers;  consumer demand for
marine recreational vehicle and automotive products; advertising and promotional
efforts; and other factors.

Explanatory note - Restatements:

     As more  fully  disclosed  in our Form 8-K  filed  with the  United  States
Securities  and  Exchange  Commission  on  August  14,  2006,  our Form 10-K was
restated for the  financial  statements as of December 31, 2005 and 2004 and the
years then ended. The substantive  changes reflected were (a) the recognition of
the compensation  cost associated with stock options of which certain terms were
modified  during the year ended  December 31, 2004 and (b) the  reclassification
between debt and additional  paid-in capital of certain of the proceeds from the
Revolving  Subordinated  Obligation to our  President  and CEO,  Peter G. Dornau
received during the year ended December 31, 2005.  Neither of these items had an
impact on our  previously  reported  cash  flows.  These  matters are more fully
discussed in Note 12 - Restatements, to the Consolidated Financial Statements.

     We have also  included  the  aforementioned  restated  amounts  in Item 6 -
"Selected Financial Data" and Item 7 - "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" for those years.  Along with the
foregoing,  we have  updated our  Certifications  pursuant to Section 302 of the
Sarbanes-Oxley  Act of 2002  presented as Exhibits 31.1 and 31.2 to conform with
the current language requirements.

                                     Part I
Item 1.  Business

     General: We were organized on November 13, 1973 under the laws of the state
of Florida.  We are  principally  engaged in the  manufacturing,  marketing  and
distribution of a broad line of appearance and  maintenance  products for boats,
recreational  vehicles,  automobile and aircraft under the Star brite and other
trademarks  within the United  States of America and  Canada.  In  addition,  we
produce private label formulations of many of our products for various customers
as well as provide  custom  blending and  packaging  services of these and other
products.

Products:

     Set  forth  below  is  a  general  description  of  the  products  that  we
manufacture and market:

     Marine:  Our Marine line consists of polishes,  cleaners,  protectants  and
waxes of various formulations under the Star brite brand name as well as private
label  formulations  of these and other  products.  The line also includes motor
oils ,various  vinyl  protectants,  cleaners,  teak cleaners,  teak oils,  bilge
cleaners, hull cleaners, silicone sealants,  polyurethane sealants,  polysulfide
sealants,  gasket materials,  lubricants,  antifouling additives and anti-freeze
coolants. In addition, we manufacture a line of brushes, poles and tie-downs and
other related marine accessories.

     Automotive:  We  manufacture a line of automotive  products  under the Star
brite brand name  including  StarTron  enzyme fuel treatment for both diesel and
gas engines, brake and transmission fluids,  hydraulic, gear and motor oils, and
related items. In addition,  anti-freeze  and windshield  washes are produced in
varying  formulations  both under the Star brite brand as well as under  private
labels for customers.  We also produce a line of automotive  polishes,  cleaners
and associated appearance items.

                                        2
<PAGE>
     Recreational  vehicle:  Our  recreational  vehicle  products are made up of
cleaners,  polishes,  detergents,  fabric  cleaners  and  protectors,   silicone
sealants,   waterproofers,   gasket  materials,   degreasers,   vinyl  cleaners,
protectors, toilet treatment fluids and anti-freeze coolants.


     Contract filling and blow molded bottles: We blend and package a variety of
chemical  formulations  to  our  customers'  specifications.   In  addition,  we
manufacture for sale to various  customers  assorted styles of both PVC and HDPE
blow molded bottles.

     Although the above  products are utilized for different  types of vehicles,
boats,  aircrafts and household purposes,  it is management's view that they all
constitute one industry segment.


     Manufacturing: We produce the majority of our products at our manufacturing
facility in Montgomery, Alabama. In addition, we contract with various unrelated
companies  located in the northeastern  and mid-western  areas of the country to
package other products, which are manufactured to our specifications,  using our
provided  formulas.  Each third party  packager  enters  into a  confidentiality
agreement with us.

     We purchase raw materials  from a wide variety of suppliers,  none of which
is significant to our operations and all raw materials used in manufacturing are
readily  available.   We  design  our  own  packaging  and  supply  our  outside
manufacturers  with the  appropriate  design and packaging.  We believe that our
internal  manufacturing  capacity and our arrangements  with our current outside
manufacturers are adequate for our present needs.

     In  the  event  that  these   arrangements   are   discontinued   with  any
manufacturer,  we  believe  that  substitute  facilities  can be  found  without
substantial adverse effect on our manufacturing and distribution.

     Our  in-house  manufacturing  is  primarily  performed  by our wholly owned
subsidiary, Kinpak Inc, an Alabama corporation ("Kinpak"). On February 27, 1996,
we acquired  certain assets of Kinpak,  Inc., and assumed two (2) leases of land
and  facilities  leased by Kinpak from the Industrial  Development  Board of the
City of Montgomery,  Alabama and the Alabama State Docks Department. On December
20, 1996, we entered into a new agreement with the Industrial  Development Board
of the City of Montgomery,  Alabama to issue Industrial Development Bonds in the
amount of $4,990,000 to repay certain financial costs and to expand the capacity
of the Alabama facility.  The underlying premises,  at that time, consisted of a
manufacturing and distribution facility containing  approximately 110,000 square
feet located on  approximately  20 acres of real property and a docking facility
located on the Alabama River. In addition, we purchased the machinery, equipment
and inventory located on the leased premises.  Subsequent to the acquisition, we
changed the name of our subsidiary to Kinpak Inc.

     During July 2002,  we  completed  an  additional  $3.5  million  Industrial
Development  Bond  financing  through  the  City of  Montgomery,  Alabama.  Such
transaction   funded  an   approximate   70,000  square  foot  addition  to  the
manufacturing  facility  as  well  as  the  requisite  machinery  and  equipment
additions required therein. Such project was substantially  completed during the
year ended December 31, 2003.

     Marketing:  Our marine and  recreational  vehicle products are sold through
national  mass  merchandisers  such as  Wal-mart  and  Home  Depot  and  through
specialized  marine  retailers such as West Marine and Boater's  World.  We also
sell to national  and  regional  distributors  who in turn sell our  products to
specialized  retail  outlets for that  specific  market.  Currently  we have one
customer  (West  Marine,  Inc.,  which is an  unrelated  entity)  to whom  sales
exceeded  10% of  consolidated  revenues  for the year ended  December 31, 2006.
Sales  to our five  largest  customers  for the year  ended  December  31,  2006
amounted to  approximately  59% of  consolidated  gross revenues and outstanding
balances due us at December 31, 2006 from our five largest customers  aggregated
approximately  57% of  consolidated  trade  receivables.  We market our products
through internal salesmen and approximately 250 sales  representatives  who work
on an independent  contractor-commission basis. Our officers also participate in
sales  presentations  and trade shows.  In addition,  we aid  marketing  through
advertising  campaigns in national  magazines related to specific  marketplaces.
Our products are distributed  primarily from our  manufacturing and distribution
facility in Alabama.

     Backlog,  seasonality,  and selling terms: At December 31, 2006 our backlog
included  initial  stocking  orders for StarTron at Wal-Mart.  Adjusting for the
StarTron,  Wal-Mart orders, we had no other significant  backlog of orders as of
December  31,  2006.  We do not give  customers  the  absolute  right to  return
product.  The majority of our products are  non-seasonal and are sold throughout
the year.  Normal trade terms  offered to credit  customers  range from 30 to 60
days. However, at times special dating and/or discount  arrangements are offered
as purchasing  incentives to customers.  Such programs do not materially distort
normal margins.

                                        3
<PAGE>
     Competition:

     Marine:  We have several  national and regional  competitors  in the marine
marketplace. The principal elements of competition are brand recognition, price,
service and the ability to deliver products on a timely basis. In the opinion of
management no one or few  competitors  holds a dominant market share. We believe
that we can increase or maintain our market share through our present methods of
advertising and distribution.

     Automotive: The automotive marketplace into which the Company began selling
various  products  over the past five years is the  largest in which we operate.
There are many entities, both national and regional, which represent competition
to us. Many are more  established and have greater  financial  resources than we
do.  However,  the market is so large that even a minimal  market share could be
significant to us. The principal  elements of competition are brand recognition,
price, service and the ability to deliver products on a timely basis. We believe
that we can establish a reasonable  market share through our present  methods of
advertising and distribution.

     Recreational  Vehicle:  Our recreational vehicle appearance and maintenance
market is parallel to that of the marine marketplace.  In this market we compete
with national and regional competitors,  none of which singly or as a few have a
dominant  market  share.  The  principal   elements  of  competition  are  brand
recognition,  price,  service  and the  ability to deliver  products on a timely
basis.  Management is of the opinion that it can increase or maintain our market
share by utilizing similar methods as those employed in the marine market.

     Trademarks: We have obtained registered trademarks for Star brite and other
trade names used on our products.  We view our trademarks as significant  assets
because  they provide  product  recognition.  We believe  that our  intellectual
property is  significantly  protected,  but there are no  assurances  that these
rights can be  successfully  asserted in the future or will not be  invalidated,
circumvented or challenged.

     Patents:  We hold two  patents  which we believe  are  valuable  in limited
product lines, but not material to our success or competitiveness in general.

     New Product  Development:  We continue to develop specialized  products for
the marine,  automotive,  and recreational vehicle marketplace.  We believe that
our current operations and working capital financing  arrangement are sufficient
to meet development  expenditures without securing external funding. The amounts
expended  toward this effort in any fiscal period have not been  significant and
are charged to operations in the year incurred.

     Environmental  Costs:  We adhere to a policy of compliance  with applicable
regulatory  mandates on  environmental  issues.  Amounts expended in this regard
have not been  significant  and  management  is not  aware of any  instances  of
material non-compliance.

Financial Information Relating to Approximate Domestic and Canadian Gross Sales:

                                          Year ended December 31,
                                2006                   2005               2004
United States:                  ----                   ----               ----
        Northeast           $ 4,240,000           $ 3,585,000        $ 4,455,000
        Southeast             6,296,000             5,468,000          6,832,000
        Central               6,158,000             5,655,000          7,015,000
        West Coast            4,950,000             4,148,000          5,197,000
                            -----------           -----------        -----------
                             21,644,000            18,856,000         23,499,000

Canada (US Dollars)             694,000               850,000            862,000
                            -----------           -----------        -----------
                            $22,338,000           $19,706,000        $24,361,000
                            ===========           ===========        ===========




                                        4

<PAGE>
     Personnel:  We employ approximately 23 full time employees at our corporate
office  in  Fort   Lauderdale,   Florida.   These   employees   are  engaged  in
administration,  clerical  and  accounting  functions.  In  addition,  we employ
manufacturing and fabrication personnel in both Florida and Alabama.

     The following is a tabulation of the total number of personnel  working for
the Company and/or its subsidiaries as of December 31, 2006:

Full-time
Location                    Description                         Employees
------------------------    ------------------------------      ---------
Fort Lauderdale, Florida    Administrative                         23
Fort Lauderdale, Florida    Manufacturing and distribution          8
Montgomery, Alabama         Manufacturing and distribution         59
                                                                   --
                                                                   90
                                                                   ==
Item 1A.  Risk factors

     Concentration  of credit  risk -  Financial  instruments  that  potentially
subject  the  Company to  concentration  of credit  risk  consist  primarily  of
accounts receivable.  Our five largest customers represented  approximately 59%,
43% and 55% of  consolidated  gross  revenues  for the years ended  December 31,
2006,  2005 and 2004;  and 57% and 26% of  consolidated  accounts  receivable at
December 31, 2006 and 2005 respectively. We have had a longstanding relationship
with each of these entities and have always collected open receivable  balances.
However,  the loss of any of these customers could have an adverse impact on our
operations.

     Concentration  of cash - At various times of the year,  and at December 31,
2006,  we had a  concentration  of cash  in one  bank in  excess  of  prevailing
insurance  offered  through the Federal  Deposit  Insurance  Corporation at such
institution.   Management  does  not  consider  the  excess  deposits  to  be  a
significant risk.

Item 2.  Properties

     Our executive offices and warehouse located in Fort Lauderdale, Florida are
held under a lease with an entity fifty  percent each owned by Messrs.  Peter G.
Dornau   and   Jeffrey   J.   Tieger,    our    President    and   former   Vice
President-Advertising,  respectively.  The  lease  covers  approximately  12,700
square feet of office and warehouse  space. On May 1, 1998, we renewed our lease
agreement for a term of ten years.  The lease  required an initial annual rental
of $94,800  and  provides  for a maximum  increase of 2% per annum on the annual
anniversary  of the lease for the term  thereof  which has been  waived  through
December 31, 2006. Additionally, the landlord is entitled to collect from us its
pro-rata share of all taxes, assessments, insurance premiums, operating charges,
maintenance charges and any other expenses, which normally arise from ownership.
Rent charged to operations  during the years ended  December 31, 2006,  2005 and
2004 amounted to approximately $100,500 each year.

     Our Alabama facility currently contains  approximately  180,000 square feet
of office,  plant and warehouse  space located on 20 acres of land (the "Plant")
and also  includes a leased  1.5 acre  docking  facility  on the  Alabama  River
located  approximately  eleven miles from the Plant. This facility has undergone
two  separate  expansions  of 60,000  and 70,000  square  feet in 1998 and 2002,
respectively.  We financed the  facility's  enhancements  and related  equipment
needs with Industrial  Development  Bonds issued through the city of Montgomery,
AL. Our manufacturing  facility is subject to a priority first mortgage; and our
manufacturing  equipment serves as collateral to a financial institution,  which
issued letters of credit to secure the bonds.

Item 3.  Legal Proceedings

     We were not involved in any significant litigation at December 31, 2006.






                                        5

<PAGE>
Item 4.  Submission of Matters to a Vote of Security Holders

     No matter  was  submitted  for a vote of  shareholders  during  the  fourth
quarter of 2006.

                                     Part II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder
         Matters

     Our common stock was sold to the public  initially  on March 26, 1981.  The
common stock of the Company is traded on the NASDAQ  Capital Market System under
the symbol OBCI. A summary of the trading ranges during each quarter of 2006 and
2005 is presented below.
<TABLE>
<CAPTION>
     Market Range of
     Common Stock Bid:
                     1st Qtr.            2nd Qtr.            3rd Qtr.          4th Qtr.


      <C>          <C>                 <C>                 <C>               <C>
2006     High         $1.21               $1.85               $1.75             $4.03
         Low          $ .90               $1.00               $ .85             $ .80

2005     High         $3.11               $2.04               $1.63             $1.35
         Low          $1.07               $1.45               $1.14             $ .76
</TABLE>

     A. The quotations  reflect  inter-dealer  prices  without  retail  mark-up,
markdown or commission and may not represent actual transactions.

     B.  The  number  of  record   holders  of  our  Common   Stock  owners  was
approximately  200 at December 31, 2006. In addition,  we believe that there are
approximately  600  beneficial  holders based on  information  obtained from our
Transfer Agent and Registrar and indications  from broker dealers of shares held
by them as nominee for actual shareholders.

     C. We have  not  paid any  cash  dividends  since  it has  been  organized.
However, during the years ended December 31, 2002 and 2000, the Company declared
and distributed a 10% and a 5% stock dividend,  respectively. The Company has no
other dividend policy except as stated herein.

     D.  Securities  authorized  for  issuance at December 31, 2006 under equity
compensation plans:

<TABLE>
<CAPTION>
                                                                                                               Number of securities
                                          Number of securities             Weighted average                     remaining available
                                           to be issued upon               exercise price of                     for future issuance
                                        exercise of outstanding          outstanding options,                    under equity com-
                                       options, warrants & rights         warrants & rights                       pensation plans
<S>                                           <C>                            <C>                                     <C>
Equity compensation plans
 approved by security holders:
   Plan stock options granted (1)               714,500                      $1.23                                   45,000
   Non plan stock options granted (2)           231,000                        .76                                      -

  Warrants (3)                                1,000,000                        .88                                      -

                                              ---------                      -----                                   ------
Total equity compensation plans
  approved and not approved by
  security holders                            1,945,500                      $1.02                                   45,000
                                              =========                      =====                                   ======
</TABLE>


                                        6
<PAGE>

     (1) Includes  400,000  options  granted under the 2002 Qualified  Incentive
Stock Option Plan,  155,000  options under the 2002  Non-Qualified  Stock Option
Plan and 159,500  options under the 1994  Non-Qualified  Stock Option Plan (this
plan has expired and no further awards can be made under its provisions).

     (2) Includes 231,000 options granted to Messrs. Peter G. Dornau and Jeffrey
J. Tieger in conjunction  with a loan made to the Company by an entity 50% owned
by each of them.

     (3) On November  10,  2006,  Mr.  Dornau  notified  the Company that he was
exercising  his rights to convert a $1.5  million  loan made to the Company into
1.5 million shares of the Company's  common stock.  The transaction was approved
unanimously by the members of our Board of Directors (with Mr. Dornau abstaining
from the vote). In connection with this borrowing  facility,  we issued warrants
to Mr.  Dornau to  purchase a maximum of 1 million  shares of our common  stock.
Such  warrants are  exercisable  500,000  shares at $1.13 and 500,000  shares at
$.863.  The exercise prices were determined by the closing bid of our stock plus
ten (10) percent on each date of grant.


Item 6.  Selected Financial Data

     As more  fully  disclosed  in our Form 8-K  filed  with the  United  States
Securities  and  Exchange  Commission  on  August  14,  2006,  our Form 10-K was
restated for the  financial  statements as of December 31, 2005 and 2004 and the
years then ended. The substantive  changes reflected were (a) the recognition of
the compensation  cost associated with stock options of which certain terms were
modified  during the year ended  December 31, 2004 and (b) the  reclassification
between debt and additional  paid-in capital of certain of the proceeds from the
Revolving  Subordinated  Obligation to our  President  and CEO,  Peter G. Dornau
received during the year ended December 31, 2005.  Neither of these items had an
impact on our  previously  reported  cash  flows.  These  matters are more fully
discussed in Note 12 - Restatements, to the Consolidated Financial Statements.

     The following  tables set forth selected  financial data as of, and for the
years ended December 31,
<TABLE>
<CAPTION>


<S>                             <C>               <C>                <C>                <C>                <C>
                                    2006             2005               2004               2003               2002
                                -----------       -----------        -----------        -----------        -----------
                                                   (Restated)        (Restated)
Operations:
Gross sales                     $22,338,500       $19,706,469        $24,361,056        $22,178,352        $22,712,991
Net sales                       $20,427,132       $17,651,905        $21,657,083        $19,997,702        $20,585,898

Net income (loss)               $   392,051       ($1,813,193)       $    17,222        $   345,071        $   134,518

Earnings (loss) per
common share                    $       .06       ($      .32)       $     -            $       .03        $       .03

Balance Sheet:
Working capital                 $ 3,920,398       $ 2,713,123        $ 3,464,574        $ 2,869,172        $ 2,212,872

Total assets                    $15,529,359       $16,903,022        $19,398,344        $18,303,184        $18,650,237
Long-term
 obligations                    $ 4,550,190       $ 5,950,958        $ 5,840,250        $ 5,883,302        $ 6,745,232

Total liabilities               $ 8,593,826       $12,240,427        $13,448,849        $12,899,189        $13,727,315
Shareholders'
 equity                         $ 6,935,533       $ 4,662,595        $ 5,949,495        $ 5,403,995        $ 4,922,922
Cash dividends declared
  per share of common stock     $      -          $      -           $      -           $      -           $      -
</TABLE>

                                        7
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

     The  following   discussion   should  be  read  in  conjunction   with  our
consolidated financial statements contained herein as Item 15.

     As more  fully  disclosed  in our Form 8-K  filed  with the  United  States
Securities  and  Exchange  Commission  on  August  14,  2006,  our Form 10-K was
restated for the  financial  statements as of December 31, 2005 and 2004 and the
years then ended. The substantive  changes reflected were (a) the recognition of
the compensation  cost associated with stock options of which certain terms were
modified  during the year ended  December 31, 2004 and (b) the  reclassification
between debt and additional  paid-in capital of certain of the proceeds from the
Revolving  Subordinated  Obligation to our  President  and CEO,  Peter G. Dornau
received during the year ended December 31, 2005.  Neither of these items had an
impact on our  previously  reported  cash  flows.  These  matters are more fully
discussed in Note 12 - Restatements, to the Consolidated Financial Statements.

Overview:

     We are a leading  manufacturer  and  distributor  of chemical  formulations
serving the  appearance  and  functional  categories of the marine,  automotive,
recreational  vehicle and home care  markets.  We were  founded in 1973 and have
conducted  operations  within the  aforementioned  categories since then. During
1984, we changed our corporate name to Ocean Bio-Chem, Inc. (the parent company)
from our former name, Star brite Corporation. Our operations were conducted as a
privately owned company through March, 1981 when we completed our initial public
offering of common stock.

Critical accounting policies and estimates:

     Principles of consolidation - Our consolidated financial statements include
the  accounts  of the parent  company  and its wholly  owned  subsidiaries.  All
significant   inter-company   accounts  and   transactions   are  eliminated  in
consolidation.

     Collectibility  of  accounts  receivable  -  Included  in the  consolidated
balance  sheets as of December  31, 2006 and 2005 are  allowances  for  doubtful
accounts aggregating  approximately  $192,700 and $131,000,  respectively.  Such
amounts  are based on  management's  estimates  of the  creditworthiness  of its
customers,   current  economic  conditions  and  other  historical  information.
Consolidated  bad debt expense  charged  against  operations for the years ended
December 31, 2006, 2005 and 2004 aggregated  approximately $71,000,  $32,000 and
$66,000, respectively.

     Revenue  recognition  -  Revenue  from  product  sales is  recognized  when
persuasive evidence of an arrangement exists, delivery to customer has occurred,
the sales price is fixed and  determinable,  and  collectibility  of the related
receivable is probable.

     Inventories  -  Inventories  are  primarily  composed of raw  materials and
finished  goods  and are  stated  at the  lower of  cost,  using  the  first-in,
first-out method, or market.

     Prepaid  expenses - In any given year we introduce  certain new products to
our customers. In connection therewith, we produce new collatral materials to be
distributed  over a period of time.  We follow  the policy of  amortizing  these
costs over a one-year basis.

     Property, plant and equipment - Property, plant and equipment are stated at
cost.  Depreciation  is provided over the estimated  useful lives of the related
assets using the straight-line method.

     Stock based  compensation  - At December 31, 2006,  the Company had options
outstanding  under three  stock-based  compensation  plans,  which are described
below. On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004),  share-based payment ("SFAS  No.123R"),  which
requires  the  measurement   and  recognition  of  compensation   cost  for  all


                                       8
<PAGE>
share-based  payment  awards made to employees and directors  based on estimated
fair values.  Prior to the adoption of SFAS No. 123R, the Company  accounted for
its  stock-based  employee  compensation  related  to stock  options  under  the
intrinsic value recognition and measurement  principles of Accounting Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB 25') and
the  disclosure   alternative  prescribed  by  SFAS  No.  123,  "Accounting  for
Stock-Based   Compensation,"  as  amended  by  SFAS  No.  148,  "Accounting  for
Stock-Based Compensation - Transition and Disclosure." Accordingly,  The Company
presents  pro- forma  information  for the periods prior to the adoption of SFAS
No. 123R and no employee  compensation  cost was recognized for the  stock-based
compensation  plans other than the grant date intrinsic  value,  if any, for the
options granted prior to January 1, 2006.

     Concentration  of credit  risk -  Financial  instruments  that  potentially
subject  the  Company to  concentration  of credit  risk  consist  primarily  of
accounts receivable.  Our five largest customers represented  approximately 59%,
43% and 55% of  consolidated  gross  revenues  for the years ended  December 31,
2006,  2005 and 2004;  and 29% and 57% of  consolidated  accounts  receivable at
December 31, 2006 and 2005 respectively. We have had a longstanding relationship
with each of these entities and have always collected open receivable  balances.
However,  the loss of any of these customers could have an adverse impact on our
operations.


     Concentration  of cash - At various  times of the year and at December  31,
2006,  we had a  concentration  of cash  in one  bank in  excess  of  prevailing
insurance  offered  through the Federal  Deposit  Insurance  Corporation at such
institution.   Management  does  not  consider  the  excess  deposits  to  be  a
significant risk.

     Fair  value  of  financial  instruments  -  The  carrying  amount  of  cash
approximates  its fair  value.  The fair  value  of  long-term  debt is based on
current rates at which we could borrow funds with similar remaining  maturities,
and the carrying amount approximates fair value.

     Income taxes - We file  consolidated  federal and state income tax returns.
We have  adopted  Statement  of Financial  Accounting  Standards  No. 109 in the
accompanying  consolidated  financial  statements.   The  temporary  differences
included   therein  are   attributable   to  differing   methods  of  reflecting
depreciation and stock based compensation for financial statement and income tax
purposes.

     Trademarks,  trade  names  and  patents  - The Star  brite  trade  name and
trademark  were  purchased  in 1980 for  $880,000.  The cost of such  intangible
assets was amortized on a straight-line  basis over an estimated  useful life of
40 years through  December 31, 2001.  Effective  January 1, 2002 and pursuant to
Statement of Financial Accounting Standards No. 142, we have determined that the
carrying value of such  intangible  assets relating to its Star brite brand does
not require  further  amortization.  In  addition,  we own two  patents  that we
believe are valuable in limited  product lines,  but not material to our success
or  competitiveness  in  general.  There are no  capitalized  costs of these two
patents.

     Translation of Canadian currency - The accounts of our Canadian  subsidiary
are translated in accordance  with Statement of Financial  Accounting  Standards
No.  52,  which  requires  that  foreign  currency  assets  and  liabilities  be
translated using the exchange rates in effect at the balance sheet date. Results
of  operations  are  translated  using  the  average  exchange  rate  prevailing
throughout the period.  The effects of unrealized  exchange rate fluctuations on
translating  foreign  currency  assets and  liabilities  into U.S.  dollars  are
accumulated as the  translation  adjustment in  shareholders'  equity.  Realized
gains and losses from foreign currency transactions, if any, are included in net
earnings of the period.

Performance Comparisons

     The following  chart  compares our Annual  Shareholder  Return for the five
years ended December 31, 2006 to the cumulative total shareholder  return of (a)
the NASDAQ market US stocks, and (b) an Industry Index, the NASDAQ Non-Financial
Stocks index. This graph will not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or under the Securities Act of 1934,
except to the extent that we specifically  incorporate it by reference, and will
not  otherwise  be deemed to be  soliciting  material  or to be filed under such
Acts.

     We believe that no single peer index or peer company is totally  comparable
to our  business.  The peer indices  used to compare  total  shareholder  return
include  companies  which  supply  to  diverse  markets.   Some  of  our  direct
competitors are divisions that represent small portions of companies and are not
included in the peer  comparisons  since  information  is not available to us to
show those divisions separately from the parent.





                                        9


<PAGE>

     A five  year  Performance  Graph  depicted  by the  following  figures  was
included our Annual Report to Shareholders.
<TABLE>
<CAPTION>

                             2001      2002       2003        2004       2005      2006
                            -------   -------    -------    -------    -------    -------
<S>                         <C>       <C>        <C>         <C>        <C>       <C>
Ocean Bio-Chem, Inc.        100.00%   101.38%    117.24%     76.86%     70.34%    144.83%

NASDAQ US                   100.00%    69.13%    103.36%    112.49%    114.88%    126.22%

NASDAQ Non financial
  entities                  100.00%    65.33%    100.01%    107.86%    110.30%    120.97%


</TABLE>
































                                       10


<PAGE>
Liquidity and Capital Resources:

     The amount of short term  borrowings  outstanding  at December 31, 2006 was
$2.15  million  dollars.  This is a reduction of $1.85 million from the December
31, 2005, balance of $4.0 million dollars.

     During the year ended December 31, 2006 the Company  focused on programs to
more  effectively  manage working capital.  Accounts  receivable at December 31,
2006 and 2005 aggregated  approximately  $2.0 million dollars.  However in 2006,
net sales  increased  $2.7 million or 15.7%  without a  comparative  increase in
accounts receivable.

     In addition  inventory levels decreased,  from $6.3 million dollars to $5.7
million  dollars,   comparing   December  31,  2006  and  2005,  a  decrease  of
approximately $613,000 on a 15.7% increase in sales.

     The Company also reduced its accounts  payable at December 31, 2006 to $944
thousand dollars from $ 1.3 million dollars,  a decrease of 25% or $312 thousand
dollars, in addition to reducing short term borrowings, discussed above.

     As a result of the above, the Company improved its current ratio, to 2:1 at
December 31, 2006, compared to 1.4:1 at December 31, 2005.

     As of  December  31,  2006  the  Company  was in  compliance  with its debt
covenants.

     The primary  sources of our liquidity  are our  operations  and  short-term
borrowings from Regions Bank pursuant to a revolving line of credit  aggregating
$6 million.  Such line matures May 31, 2007,  bears interest at the 30 Day LIBOR
plus 275 basis points  (approximately 8.10% at December 31, 2006) and is secured
by our trade  receivables,  inventory and intangible  assets. We are required to
maintain  a minimum  working  capital of $1.5  million  and meet  certain  other
financial  covenants during the term of the agreement.  As of December 31, 2006,
we were obligated under this arrangement in the amount of $2,150,000.

     In connection with the purchase and expansion of the Alabama  facility,  we
closed on Industrial  Development  Bonds during 1997. The proceeds were utilized
for both the repayment of certain advances used to purchase the Alabama facility
and to expand such facility for our future needs. During July 2002, we completed
a second Industrial  Development Bond financing aggregating $3.5 million through
the City of Montgomery,  Alabama.  Such transaction funded an approximate 70,000
square foot  addition  to the  manufacturing  facility as well as the  remaining
machinery  and  equipment   additions   required   therein.   This  project  was
substantially completed during 2003.

     In order to market the Industrial  Development Bonds at favorable rates, we
obtained a substitute  irrevocable letter of credit for the 1997 issue and a new
irrevocable  letter of credit for the 2002 issue.  Under such  letters of credit
agreements  maturing on July 31, 2007,  we are required to maintain a stipulated
level of working  capital,  a designated  maximum debt to tangible ratio,  and a
required debt service  coverage  ratio.  Such letters of credit are secured by a
first priority mortgage on the underlying Alabama facility and equipment.

     The bonds are marketed  weekly at the prevailing  rates for such tax-exempt
instruments. During the year ended December 31, 2006 such bonds carried interest
ranging  between  3.08% and 4.24%  annually.  Interest and principal are payable
quarterly.   We  believe  current   operations  are  sufficient  to  meet  these
obligations.

     On April 12, 2005 we entered into a financing  obligation with Regions Bank
whereby  they  advanced  us $500,000 to finance  equipment  acquisitions  at our
Kinpak  facility.  Such  obligation is due in monthly  installments of principal
aggregating   approximately  $8,300  plus  interest  at  prevailing  rates.  The
outstanding  balance and interest  rate on this  obligation at December 31, 2006
was  approximately  $333,340 and the prime rate plus 2.5% per annum (or 10.75%).
Such obligation matures on April 15, 2010.


                                       11

<PAGE>
     On November 10, 2006, our President and CEO, Peter G. Dornau indicated that
he was exercising his right to convert our indebtedness to him into common stock
pursuant to the terms of the  Subordinated  Revolving  Line of Credit he entered
into with the Company.  Our total  long-term debt was reduced and  shareholders'
equity was increased by approximately $1,241,000,  respectively.  Net income and
related  earnings  per  share  for the  year  ended  December  31,  2006 was not
materially impacted by this event.

     We are involved in making  sales in the Canadian  market and must deal with
the currency fluctuations of the Canadian currency. We do not engage in currency
hedging and deal with such currency risk as a pricing issue.

     During the past few years, we have  introduced  various new products to our
customers.  At times this has  required us to carry  greater  amounts of overall
inventory and has resulted in lower  inventory  turnover  rates.  The effects of
such  inventory  turnover have not been material to our overall  operations.  We
believe that all required  capital to maintain such increases can continue to be
provided by operations and current financing arrangements.

     Many of the raw  materials  that we use in the  manufacturing  process  are
commodities  that are  subject  to  fluctuating  prices.  We react to  long-term
increases by passing  along all or a portion of such  increases to our customers
as it is deemed appropriate.

     As of December 31, 2006 and through the date hereof,  we did not and do not
have any material commitments for capital expenditures, nor do we have any other
present  commitment  that is likely to result  in our  liquidity  increasing  or
decreasing in any material way. In addition,  except for our need for additional
capital to finance inventory purchases,  we know of no trend, additional demand,
event or uncertainty that will result in, or that is reasonably likely to result
in, our liquidity increasing or decreasing in any material way.

     The cost of petroleum and related products, major components in many of our
products,  which were already in an  increasing  cost  spiral,  became even more
unstable in 2006.  The  practical  dynamics of our business do not afford us the
same pricing  flexibility  with our customers,  available to our  suppliers.  We
cannot as  immediately  as our suppliers  pass along the price  increases to our
national retailers and distributors. We effectuated a sales price increase which
became effective during the fourth quarter of 2005. In addition, we have alerted
customers who purchase  products,  which are heavily dependent on this petroleum
related  issue,  that we will be more  responsive to commodity  pricing and they
must be  receptive to  short-term  price swings or accept our refusal to ship at
previously established pricing.

Results of Operations:
Years ended December 31, 2006 and 2005:

     For the year ended  December 31,  2006,  compared to December 31, 2005 both
revenue and profits increased principally due to the factors enumerated below.

     Net Sales  increased to $20.4  million from $17.7  million,  an increase of
$2.7 million or 15.7 %. This was primarily due to an increase in sales volume to
a major customer - West Marine, partially offset by a decrease in sales to other
customers.  In  certain  instances  the  Company  was able to pass  along  price
increases to customers  reflecting  higher  material costs  incurred  during the
year. Net sales for the year also benefited from a reduction of sales  allowance
programs  offered to customers.  As a result,  sales  allowances  decreased from
10.4% to 8.6% of gross sales.







                                       12

<PAGE>
     Cost of Sales and Gross  Margins - For the  year,  gross  profit  increased
approximately  $2.7 million or 90 %, increasing from  approximately $3.0 million
in 2005, to  approximately  $5.7 million in 2006.  Cost of sales  decreased as a
percentage  of  sales as a result  of  management  actions  taken  during  2006.
Specifically,  management  was more  proactive  in passing on cost  increases to
customers  where  possible   resulting  from  higher  raw  material  costs  from
suppliers.  In addition,  newly  initiated  manufacturing  efficiencies  and the
increased volume produced at the Kinpak plant  significantly  contributed to the
improved gross margins. Corporate management continues its oversight relating to
both our procurement cost of raw materials as well as the overall  management of
our manufacturing  facility. We believe that these management actions have had a
major impact in the improvement of our gross margins in 2006.

     Operating   Expenses:   For  the  year,   operating   expenses   aggregated
approximately $5.3 million dollars, a decrease of $51,000 from 2005. The primary
decrease was in the selling and administrative expenses decreasing $265,000. The
decrease  reflects  a  reduction  in  staff  and  other  cost  control  programs
implemented  during the year. In addition  advertising  expenses  decreased as a
percent  of sales  from  6.3% of net sales in 2005 to 5.6% of net sales in 2006,
reflecting  management's  decision to be more selective in approving advertising
programs,  where it was believed  the Company  would  receive a higher  benefit.
These expenses were partially  offset by higher interest costs of  approximately
$181,000,  increasing  to  $681,000  from  approximately  $499,000.  The  higher
interest  cost  reflects  the higher  level of  interest  rates  during the year
compared to 2005.

     Operating  Profit.  Operating profits increased to $373,000 in 2006 from an
operating  loss of  approximately  $2.4  million in 2005,  an  increase  of $2.8
million.

     Net Income increased to approximately  $392,000 in 2006, from a net loss of
approximately $ 1.8 million in 2005.

Years ended December 31, 2005 and 2004:

     Sales and earnings  varied when  comparing the year ended December 31, 2005
to 2004 principally due to the factors enumerated below.

     Net sales decreased 18.5% to  approximately  $17,652,000 for the year ended
December  31, 2005  compared  to  approximately  $21,657,100  for the year ended
December 31, 2004.  Management  attributes  such decrease  significantly  to our
largest  customer  adopting a policy of reducing  their  inventory  levels,  the
unusually  cold  weather  earlier in the year in various  regions of our country
resulting in a delay in the start of the 2005 recreational  boating season,  and
the hurricanes experienced during the third and fourth quarters of this year.

     Cost of goods  sold  increased  to 82.9% of net  sales  for the year  ended
December 31, 2005 compared to 77.0% of net sales for the year ended December 31,
2004.  Such  increase is attributed  to  increasing  raw material  costs and the
impact of spreading fixed overhead items to a reduced level of sales.

     Advertising  and promotion  expenses  increased  approximately  $167,300 or
17.7% for the 2005 period when compared to comparable  expenses in the same time
period in the previous year. This resulted  primarily from planned  increases in
media and co-op advertising programs for the current year.

     Selling  and   administrative   expenses,   as   restated,   increased   by
approximately  $168,600 or 5% for the year ended  December 31, 2005  compared to
the year ended  December 31, 2004.  Such change was  primarily  due to increased
personnel  costs and other normal  recurring  increases  in  operating  expenses
offset by the recognition  compensation cost associated with the modification of
certain stock options during 2004 with no comparable item in 2005.


                                       13
<PAGE>
     Interest   expense  for  the  year  ended   December  31,  2005   increased
approximately  $191,600  when compared to 2004.  This  resulted from  increasing
interest rates and higher levels of borrowing  under our working capital line of
credit and other financing obligations.

     Our loss before  income  taxes was  approximately  $2,347,700  for the year
ended  December  31,  2005  compared  to  a  pre-tax  profit,   as  restated  of
approximately $124,000 for the year ended December 31, 2004.

     Our estimated benefit from income taxes amounted to approximately  $534,500
for the year ended  December  31,  2005,  and  reflects  available  tax net loss
carry-back  provisions  based on the  operations  of the  Company as well as the
reversal of deferred income tax liabilities  attributable to timing  differences
between our book and income tax methods of accounting  that are  anticipated  to
reverse during the available carryover period.

     As a result  of the  foregoing,  our net  loss  amounted  to  approximately
$1,813,200  for the year ended  December 31, 2005  compared to a net income,  as
restated of approximately $17,200 for the year ended December 31, 2004.

Contractual obligations:

     The following  table  reflects our  contractual  obligations  for the years
ended December 31,:
<TABLE>
<CAPTION>

<S>                                         <C>                <C>                <C>                <C>                <C>
                                                                                                                         2012 and
                                               Total              2007             2008-2010            2011            thereafter
                                            -----------        -----------        -----------        -----------
  Long-term debt obligations                $ 7,226,412        $ 2,709,960        $ 1,613,344        $   460,000        $2,443,108
  Capital leases                                 59,839             26,100             33,739               -                  -
  Operating leases                              211,104            104,507            106,597               -                  -

  Purchase obligations                              -                  -                  -                 -                  -
  Other                                             -                  -                  -                 -                 -
                                            -----------        -----------        -----------        -----------        ----------
Total                                       $ 7,497,355        $ 2,840,567        $ 1,753,680        $   460,000        $2,443,108
                                            ===========        ===========        ===========        ===========        ==========
</TABLE>

Item 7A.  Quantitative and Qualitative Disclosure About Market Risk

     We do not engage in derivative  transactions.  We become exposed to foreign
currency  transactions  as a result of our  operations  in Canada  and we do not
hedge such  exposure.  Our exposure to market risk for changes in interest rates
relates  primarily to the interest rate on our bonds.  The interest rates on our
bonds  adjusted  weekly and ranged  between  3.2% and 4.3% during the year ended
December 31, 2006.

Item 8.  Financial Statements and Supplementary Data

     The audited  financial  statements of the Company required pursuant to this
Item 8 are included in this Annual  Report on Form 10-K,  as a separate  section
commencing on page F-1 and are incorporated herein by reference.

     As more  fully  disclosed  in our Form 8-K  filed  with the  United  States
Securities  and  Exchange  Commission  on  August  14,  2006,  our Form 10-K was
restated for the  financial  statements as of December 31, 2005 and 2004 and the
years then ended. The substantive  changes reflected were (a) the recognition of
the compensation  cost associated with stock options of which certain terms were
modified  during the year ended  December 31, 2004 and (b) the  reclassification
between debt and additional  paid-in capital of certain of the proceeds from the
Revolving  Subordinated  Obligation to our  President  and CEO,  Peter G. Dornau
received during the year ended December 31, 2005.  Neither of these items had an
impact on our  previously  reported  cash  flows.  These  matters are more fully
discussed in Note 12 - Restatements, to the Consolidated Financial Statements.

     Neither  of these  items  have an impact on our  previously  reported  cash
flows.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

     None.

                                       14
<PAGE>
Item 9A.  Controls and Procedures:

     Evaluation of Disclosure  Controls and Procedures.  The Company has carried
out an evaluation  under the supervision of management,  including the President
and Chief  Executive  Officer ("CEO") and the Vice President - Finance and Chief
Financial  Officer ("CFO"),  of the effectiveness of the design and operation of
its disclosure  controls and procedures.  Based on that evaluation,  our CEO and
CFO have concluded  that, as of December 31,  2006, our disclosure  controls and
procedures were effective to ensure that information required to be disclosed by
the  Company  in the  reports  filed or  submitted  by it under  the  Securities
Exchange  Act of 1934,  as  amended,  is  recorded,  processed,  summarized  and
reported  within the time  periods  specified in the rules and forms of the SEC,
and include controls and procedures designed to ensure that information required
to be  disclosed  by us in such  reports  is  accumulated  and  communicated  to
management,  including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosures.

     Changes in Internal  Controls.  Since the evaluation  date by the Company's
management of its internal  controls over  financial  reporting,  there have not
been any changes in our internal  controls over  financial  reporting  that have
materially affected,  or are reasonably likely to materially affect our internal
controls over financial reporting.

     Limitations on the  Effectiveness  of Controls.  The Company's  management,
including  the CEO and CFO,  does not expect  that our  disclosure  or  internal
controls will prevent all errors or fraud. A control system,  no matter how well
conceived and operated,  can provide only  reasonable,  not absolute,  assurance
that the  objectives  of the control  system are met.  Further,  the design of a
control  system must reflect the fact that there are resource  constraints,  and
the benefits of controls must be considered relative to their costs.  Because of
the inherent limitations in a cost-effective  control system,  misstatements due
to error or fraud may occur and not be detected. Despite these limitations,  the
Company's CEO and CFO have concluded that our disclosure controls and procedures
(1) are designed to provide  reasonable  assurance of achieving their objectives
and (2) do provide reasonable assurance of achieving their objectives.

                                    Part III

Item 10.  Executive Officers and Directors of the Registrant

     The following  tables set forth the name and ages of our elected  directors
and officers, as of December 31, 2006.

     All  directors  will serve until the next annual  meeting of  directors  or
until their  successors are duly elected and  qualified.  Each officer serves at
the discretion of the board of directors.

     There are no arrangements or understandings  between any of the officers or
directors of our Company and the Company or any other persons  pursuant to which
any officer or director was or is to be selected as a director or officer.

                                       15
<PAGE>
<TABLE>
<CAPTION>


<S>                                 <C>                                                                   <C>
  NAME                              OFFICER/DIRECTOR                                                      AGE
------------------                  --------------------------------------------------                    ---
Peter G. Dornau                     President, Chief Executive Officer, and                               67
                                            Director since 1973

Edward Anchel                       Vice President-Finance, Chief Financial                               60
                                            Officer since 1999 and Director since 1998

Jeffrey J. Tieger                   Vice President-Advertising and Marketing,
                                            Secretary and Director from 1977 through
                                            January 25, 2007                                              63

William W. Dudman                   Vice President-Operations since 2004                                  42


Gregor M. Dornau                    Vice President-Sales since 2005                                       38

James M. Kolisch                    Director since 1998                                                   55

Laz L. Schneider                    Director since 1998                                                   67

John B. Turner                      Director since 2000                                                   59

Sonia B. Beard                      Director since 2002                                                   36

</TABLE>

     Peter G. Dornau is our co-founder and has served as our President,  CEO and
Chairman of Board of Directors since 1973.

     Edward  Anchel  joined  our  company  as Vice  President-Finance  and Chief
Financial  Officer in March 1999. For the five years  immediately  preceding his
employment,  he was an officer of a privately owned manufacturing company and in
private practice as a Certified Public  Accountant.  He was initially elected to
serve as an outside Director of the Company in May 1998.

     Jeffrey  J.   Tieger   joined  our   company  in  June  1977  as  our  Vice
President-Advertising  and Secretary,  and has served in such positions  through
January 25,  2007.  Effective  such date,  he resigned  these  positions  and as
disclosed our Form 8-K, as filed with the United States Securities Commission on
January 26, 2007,  Mr. Tieger  decided to retire and will no longer work for the
Company on a full-time basis.

     William  W.  Dudman  joined  our  company  in  February  2004  as our  Vice
President-Operations. For the five years immediately preceding his employment he
had held various management positions within the marine industry,  most recently
with West Marine, Inc., our largest customer.

     Gregor M. Dornau is the son of Peter G.  Dornau,  our  President  and Chief
Executive Officer.  He has been employed by the Company as a salesman since 1990
and during 2005 he was elected to serve as Vice President-Sales.

     James M. Kolisch  joined our Board of  Directors as an outside  director in
May 1998.  During  the past five  years,  Mr.  Kolisch  has been  engaged in the
insurance industry and served as president of USI Florida an entity that sources
most of the our insurance  needs.  Mr. Kolisch serves on the Board of Directors'
Audit Committee.

     Laz L.  Schneider is, and has been for the past five years,  an attorney in
private  practice and was elected to serve as an outside Director of the Company
during May 1998. Mr.  Schneider is a partner at Berger,  Singerman,  P.A., a law
firm  that  serves as our lead  counsel  in  various  corporate  and  litigation
matters.

     John B. Turner joined our Board of Directors in June 2002.  During the past
five years,  Mr. Turner has been  retired.  Prior to his  retirement,  he was an
insurance  executive.  His professional  experience in the aforementioned  areas
spans in  excess  of  twenty-five  years.  Mr.  Turner  serves  on the  Board of
Directors' Audit Committee.

     Sonia B. Beard is a Florida  Certified Public  Accountant  working for Walt
Disney  World since 1997.  She  currently  holds the  position as the Manager of
Concept  Development for the Revenue Lines of Business of Walt Disney World. Ms.
Beard has in excess of twelve  years  financial  experience.  She is an  outside
director  and serves as the  Chairperson  and  Financial  Expert of the Board of
Directors' Audit Committee.
                                       16

<PAGE>
Audit Committee

     We have an Audit  Committee,  which  consists  of Sonia B.  Beard,  John B.
Turner and James M. Kolisch as of December 31,  2006.  The Board has  designated
Sonia B. Beard as the "audit  committee  financial  expert,"  as defined by Item
401(h) of Regulation  S-K of the  Securities  Exchange Act of 1934 and serves as
its  chairperson.  The Board has determined that Sonia B. Beard,  John B. Turner
and James M.  Kolisch  are  "independent  directors"  within the  meaning of the
listing standards of the NASDAQ Capital Market.

Nominating Committee

     We do not have a standing  Nominating  Committee of the Board of Directors.
During  the past five  years we have had to  conduct  only one  search for a new
director and each member  participated  in that  process.  Accordingly,  we have
reached the decision that,  given the size of our Company and Board, all members
of the board will  actively  participate  in  prospective  searches  rather than
having this function performed by a few members.

Code of Ethics

     We have adopted a Code of Business Conduct and Ethics,  which is applicable
to all directors, officers and employees of the company, including our principal
executive officer,  our principal  financial officer,  our principal  accounting
officer or controller or other persons performing  similar  functions.  We filed
our Code of Ethics as  Exhibit  14.1 to our  Annual  Report on Form 10-K for the
year ended  December  31,  2004 and is  incorporated  herein by  reference.  The
Company  will  provide a copy of this Code of  Ethics to any  person on  written
request to our principal financial officer.

Compliance with Section 16(a) of the Exchange Act

     Based  solely  on  reviews  of  Forms  3 and  4  furnished  to  us  by  the
aforementioned individuals, it was determined that no reporting person failed to
file a timely  submission  of ownership  changes and that we were in  compliance
with Rule 16(a)3(e) of the Exchange Act during our most recent fiscal year.

Item 11.  Management Remuneration and Transactions

     The following  table sets forth the amount of  compensation  for the fiscal
years ended  December 31, 2006,  2005,  and 2004 for Peter G. Dornau and each of
our executive  officers,  whose aggregate  compensation  exceeded $100,000 on an
annual basis (the "Named Executive Officers").
<TABLE>
<CAPTION>


                                            SUMMARY COMPENSATION TABLE
  <S>                               <C>            <C>              <C>                <C>            <C>
  Name and
  Principal Position                             Annual compensation                  Long term compensation
                                                                                       Restricted
                                                                                        Stock        Options/
                                    Year            Salary           Bonus              Awards         SARs
                                    ----           --------         -------            -------        ------
  Peter G. Dornau, CEO              2006           $105,249         $   -              $27,540(1)     15,000
                                    2005           $106,983         $11,500            $23,850(2)        -
                                    2004           $108,450         $13,000            $21,875(3)     50,000

  Edward Anchel, CFO                2006           $ 96,384         $   -              $27,540(1)     15,000
                                    2005           $ 97,804         $11,500            $23,850(2)        -
                                    2004           $ 96,900         $13,000            $21,875(3)     50,000

  Jeffrey J. Tieger,VP              2006           $ 62,691         $   -              $13,770(1)     15,000
                                    2005           $ 62,759         $ 7,000            $11,925(2)        -
                                    2004           $ 63,339         $ 8,500            $12,500(3)     50,000


      William Dudman, VP            2006           $ 87,555         $   -              $13,770(1)     22,000
                                    2005           $ 88,777         $ 8,000            $11,925(2)        -

     Gregor M. Dornau, VP           2006           $ 94,790         $   -              $13,770(1)     21,000
                                    2005           $ 96,725         $ 8,000            $11,925(2)        -
</TABLE>


                                       17
<PAGE>
     Messrs.  William  Dudman and Gregor  Dornau are only reported for the years
ended  December  31,  2006 and 2005 as they  either  did not reach the  required
reporting threshold or were not officers in 2004.

     (1) Represents the aggregate value on the date of grant of restricted stock
awards made during  April,  2006 with respect to 30,000  shares of the Company's
common  stock  awarded to each of Messrs.  Peter Dornau and Edward  Anchel,  and
15,000 shares of the Company's  common stock awarded to each of Messrs.  Jeffrey
J. Tieger,  William W. Dudman and Gregor  Dornau,  based on the closing price of
the shares on the award date.

     (2) Represents the aggregate value on the date of grant of restricted stock
awards made during  April,  2005 with respect to 30,000  shares of the Company's
common  stock  awarded to each of Messrs.  Peter Dornau and Edward  Anchel,  and
15,000 shares of the Company's  common stock awarded to each of Messrs.  Jeffrey
J. Tieger,  William W. Dudman and Gregor  Dornau,  based on the closing price of
the shares on the award date.

     (3) Represents the aggregate value on the date of grant of restricted stock
awards made during  April,  2004 with respect to 35,000  shares of the Company's
common  stock  awarded to each of Messrs.  Peter Dornau and Edward  Anchel,  and
20,000  shares of the Company's  common stock awarded to each of Mr.  Jeffrey J.
Tieger, based on the closing price of the shares on the award date.

Option Grants in Last Fiscal Year

     On November  6, 2006  Incentive  stock  options  were  granted to our Named
Executive Officers as well as an additional ten (10) other employees.  The total
awarded  options  aggregated  135,000  shares of which Messrs.  Peter G. Dornau,
Edward Anchel and Jeffrey J. Tieger each received  options  representing  15,000
shares and Messrs.  William W. Dudman and Gregor M. Dornau  received  22,000 and
21,000 options, respectively.

     Aggregate Option Exercises in Fiscal 2006 and Option Values

     The  following  table sets forth  information  as to the  exercise of stock
options during the fiscal year ended  December 31, 2006, by our Named  Executive
Officers and the fiscal year-end values of unexercised options.
<TABLE>
<CAPTION>
<S>                          <C>           <C>             <C>             <C>               <C>                  <C>
                             Shares                        Number of options/SAR's/         Value of in-the-money options/
                            acquired        Value       Warrants at end of fiscal year      SAR'S at end of fiscal year (1)
Name                       by exercise     realized       exercisable    unexercisable       exercisable       unexercisable
                           -----------   ---------        -----------    -------------       ----------        -------------
Peter G. Dornau               27,000       $19,250         1,155,500       155,500           $1,260,545           $ 54,545
Edward Anchel                 27,500        22,025            50,000        50,000               43,636             54,545
Jeffrey J. Tieger             27,500        22,025            40,000         6,000              169,636             54,545
William W. Dudman               -             -               50,000        24,000                6,545             26,182
Gregor M. Dornau              22,000        17,620            36,000        49,000               39,273             53,455
                             -------       -------         ---------       -------           ----------           --------
                             104,500       $80,920         1,393,000       223,000           $1,519,635           $243,272
                             =======       =======         =========       =======           ==========           ========
</TABLE>

     (1) The value of  unexercised  "in-the-money"  options at December 31, 2006
was calculated by  determining  the  difference  between $2.10,  the fair market
value of the underlying  Common Stock at December 31, 2006 and the option price.
An option is "in-the-money"  when the fair market value of the underlying Common
Stock exceeds the exercise price of the option.

Stock Option Plans

     We have three stock  options  plans:  our 1994,  and 2002  Incentive  Stock
Option Plans (the "1994 Plan", and "2002 Plan") and the 2002 Non-Qualified Stock
Option Plan.  All of our employees are eligible to be selected to participate in
our 1994 and 2002  Qualified  Plans and in our 2002  Non-Qualified  Stock Option
Plan.  The  Plans are  administered  by the Board of  Directors,  which  selects
individuals to be  participants  and determines the type and number of awards to
be granted.
                                       18



<PAGE>

     The option price for stock options granted under all Plans is stipulated to
be not less than the fair market  value of Common Stock on the date of grant and
the term of each option is fixed by the Committee. Options become exercisable as
determined by the Board of Directors.

    Other Benefits

     We  provide  our  executive  officers  and  employees  with  group  health,
hospitalization  and life insurance  plans.  We also maintain a SAR/SEP  Savings
Plan and a 401(k)  savings plan which are sponsored by two of our  subsidiaries,
Star brite  Distributing,  Inc.  and Kinpak Inc.,  respectively.  Both plans are
non-contributory by us and are entirely funded by employee contributions.

 Securities authorized for issuance at December 31, 2006 under equity
 compensation plans:

<TABLE>
<CAPTION>
                                                                                                               Number of securities
                                          Number of securities             Weighted average                     remaining available
                                           to be issued upon               exercise price of                     for future issuance
                                        exercise of outstanding          outstanding options,                    under equity com-
                                       options, warrants & rights         warrants & rights                       pensation plans
<S>                                           <C>                            <C>                                     <C>
Equity compensation plans
 approved by security holders:
   Plan stock options granted (1)               714,500                      $1.23                                   45,000
   Non plan stock options granted (2)           231,000                        .76                                      -

  Warrants (3)                                1,000,000                        .88                                      -

                                              ---------                      -----                                   ------
Total equity compensation plans
  approved and not approved by
  security holders                            1,945,500                      $1.02                                   45,000
                                              =========                      =====                                   ======
</TABLE>

     (1) Includes  400,000  options  granted under the 2002 Qualified  Incentive
Stock Option Plan,  155,000  options under the 2002  Non-Qualified  Stock Option
Plan and 159,500  options under the 1994 Qualified  Incentive  Stock Option Plan
(this plan has expired and no further awards can be made under its provisions).

     (2) Includes 231,000 options granted to Messrs. Peter G. Dornau and Jeffrey
J. Tieger in conjunction  with a loan made to the Company by an entity 50% owned
by each of them.

     (3) Includes  1,000,000  warrants  issued to Peter G. Dornau in  connection
with a $1.5  million  Subordinated  Revolving  Line of Credit he extended to the
Company during 2005.  Such warrants are  exercisable  500,000 at $1.03 per share
and 500,000  exercisable  at $.88 per share.  The exercise price equals the fair
market value of the  underlying  security at date of issuance plus a 10% premium
factor.

Restricted Stock Awards as Compensation

     During April 2006 we issued  129,000  shares of our common stock  bearing a
restricted  legend to certain officers and other key employees as a component of
their compensation.  At the date of grant the shares had a market value of $1.08
each. Shares were awarded as follows:

                                       19


<PAGE>
Officers:
  Peter G. Dornau, President and CEO                      30,000 shares
  Edward Anchel, Vice President and CFO                   30,000 shares
  Jeffrey J. Tieger, Vice President and Secretary         15,000 shares
  William Dudman, Vice President                          15,000 shares
  Gregor M. Dornau                                        15,000 shares
                                                         -------
                                                         105,000 shares
  Other employees, as a group (7 individuals)             24,000 shares
                                                         -------
  Total restricted shares awarded                        129,000 shares
                                                         =======

     These  restricted  stock awards were  approved by our  shareholders  at our
Annual Meeting of Shareholders held on June 15, 2006.

Compensation of Outside (Independent) Directors:

     Our outside  directors,  those other than officers of the Company,  receive
compensation  only in the  form of  non-qualified  common  stock  options.  Such
options are  generally  awarded for a ten year  period,  with an exercise  price
equal to the closing market price on the date of award.  And are fully vested at
time of grant.  The following  table reflects awards made during the three years
ended December 31, 2006:

                                          Number of options granted during the
                                              year ended December 31,
         Director                     2006             2005          2004
                                     ------            -----     ------
         Sonia B. Beard             10,000 shares       -        10,000 shares
         James M. Kolisch           10,000 shares       -        10,000 shares
         Laz L. Schneider           10,000 shares       -        10,000 shares
         John B. Turner             10,000 shares       -        10,000 shares
                                    ------             ----      ------
                                    40,000 shares       -        40,000 shares
                                    ======             ====      ======

Compensation Committee

     We do not have a standing Compensation Committee of the Board of Directors.
Our Company is controlled by one  shareholder,  our President and CEO,  Peter G.
Dornau.  Mr.  Dornau is actively  involved in the recurring  operations  and has
relied on  setting  compensation  arrangements  in  consultation  with other key
executives of the Company.  All decisions reached by this group are disclosed in
various  filings with the United States  Securities and Exchange  Commission and
are submitted to our  shareholders as a component of our annual Proxy materials.
Accordingly,  we have reached the decision  that,  given the size of our Company
and Board, not to have a standing committee for this purpose


     Certain additional disclosures required under this section are incorporated
by reference to portions of our Definitive Proxy Statement,  which will be filed
within 120 days of December 31, 2006 covering our Annual Meeting of Shareholders
which will be held on or about June 14, 2007.





                                       20

<PAGE>
Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets forth  information  at  December  31,  2006 with
respect to the beneficial  ownership of our common stock by holders of more than
5% of such stock and by all of our directors and officers as a group:
<TABLE>
<CAPTION>

<S>                        <C>                                                  <C>                         <C>
Title of                   Name and Address of                             Amount and Nature of            Percent
Class                      Beneficial Owner                                Beneficial Ownership           of Class
-----------                --------------------------------------------    --------------------           --------
Common                     Peter G. Dornau, President, CEO,
                           Chairman Board of Directors
                           Fort Lauderdale, FL 33317                            5,533,368 (1)               60.4%

Common                     Edward Anchel, Vice President-Finance,
                           CFO, Director
                           Boynton Beach, FL 33437                                323,451 (2)                3.5%

Common                     Jeffrey J. Tieger,  former Vice President-
                           Advertising, Secretary, Director
                           Plantation, FL 33314                                   414,780 (3)                4.5%

Common                     William W. Dudman, Vice President-Operations            55,300 (4)                 .6%

Common                     Gregor M. Dornau, Vice President-Sales
                           Fort Lauderdale, FL 33315                              271,780 (5)                3.0%
Common                     James M. Kolisch, Director
                           Coral Gables, FL 33114                                  56,167 (6)                 .6%

Common                     Laz L. Schneider, Director
                           Fort Lauderdale, FL 33305                               40,000 (7)                 .4%

Common                     John B. Turner, Director
                           Miami, FL 33186                                         69,463 (8)                 .8%

Common                     Sonia B. Beard, Director
                           Merritt Island, FL 32952                                30,000 (9)                 .4%

Common                     All directors and officers as a group
                           8 individuals                                        6,794,309 (10)              74.1%
</TABLE>

     (1) Includes  1,155,500 shares that are issuable upon the exercise of stock
options and/or warrants within 60 days of December 31, 2006.

     (2) Includes  40,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (3) Includes  155,500  shares that are issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (4)  Includes  6,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (5) Includes  36,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (6) Includes  18,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.


                                       21

<PAGE>
     (7) Includes  40,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (8) Includes  40,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (9) Includes  30,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2006.

     (10) Includes 1,543,000 shares that are issuable upon the exercise of stock
options and/or warrants within 60 days of December 31, 2006.

     (11)  Effective  December  10, 2006 the Voting  Proxy  granted by Gregor M.
Dornau to his father, Peter G. Dornau, our President and CEO was terminated.  As
of such date Gregor M. Dornau has sole voting power over the shares he owns.

Item 13.  Certain Relationships and Related Transactions

     During 2005 Mr.  Dornau loaned the Company $1.5 million in order to bolster
working  capital.  In connection with the loan, we issued warrants to Mr. Dornau
to purchase a maximum of 1 million shares of our common stock. Such warrants are
exercisable  500,000 shares at $1.13 and 500,000  shares at $.863.  The exercise
prices were  determined by the closing bid of our stock plus ten (10) percent on
each date of grant.  In adition,  he had the right, at his sole  discretion,  to
convert  such debt into a maximum of 1.5 million  shares of our common  stock at
the rate of $1.00 per share.  On November  10,  2006,  Mr.  Dornau  notified the
Company that he was  exercising  his right to convert the $1.5 million loan into
1.5  million  shares  of  our  common  stock.   Such  transaction  was  approved
unamimously  by the  members of our Board of  Directors  with Mr.  Peter  Dornau
abstaining from the vote.

     On May 1, 1998, we entered into a ten-year lease for  approximately  12,700
square feet of office and warehouse facilities in Fort Lauderdale,  Florida from
an entity  fifty  percent  owned each by Messrs.  Peter G. Dornau and Jeffrey J.
Tieger, our President and former Vice President-Advertising,  respectively.  The
lease  required a minimum  rental of $94,800 the first year and  provides  for a
maximum 2% increase on the anniversary of the lease  throughout the term,  which
has been  waived  through  December  31,  2006.  Additionally,  the  landlord is
entitled  to  collect  from us its  pro-rata  share of all  taxes,  assessments,
insurance  premiums,  operating  charges,  maintenance  charges  and  any  other
expenses, which normally arise from ownership. We believe that the terms of this
lease are comparable to those of similar  properties in the same geographic area
of  the  Company  available  from  unrelated  third  parties.  Rent  charged  to
operations  during the years ended December 31, 2006,  2005 and 2004 amounted to
approximately $100,500 each year.

     We acquired the rights to the Star brite trademark and related products for
the United States and Canada in conjunction  with our original  public  offering
during March 1981.  Peter G. Dornau,  our  president is the direct or beneficial
owner of three  companies  that  market Star brite  products  outside the United
States and Canada. These companies serve as distributors of our products and the
terms of payment are the same as for our other  customers.  At December 31, 2006
and 2005, we had amounts due from  affiliated  companies,  which are directly or
beneficially  owned by our  president  aggregating  approximately  $231,200  and
$29,000, respectively.

     Sales to such  affiliates  were sold at cost of material  and labor plus an
amount to cover  manufacturing  overhead costs. In addition,  the affiliates are
charged for their allocable share of administrative expenses of the Company. The
sales to affiliates aggregated  approximately  $622,300,  $826,900, and $616,800
during the years ended  December 31, 2006,  2005,  and 2004,  respectively;  and
allocable  administrative  fees  aggregated  $350,000,  $300,000  and  $300,000,
respectively for such periods.


     A subsidiary of ours currently uses the services of an entity that is owned
by our  president  to conduct  product  research  and  development.  Such entity
received  $30,000 per year during the years ended  December 31,  2006,  2005 and
2004 under such relationship.

                                       22
<PAGE>
Item 14. Principal Accounting Fees and Services

     The information  required for this item is incorporated by reference to our
Definitive  Proxy Statement to be filed in conjunction  with our upcoming annual
shareholders' meeting which shall be filed with the United States Securities and
Exchange  Commission  and sent out to  shareholders  prior to 120 days  past our
year-end of December 31, 2006.

Item 15.  Exhibits, Financial Statements, Schedules and Reports Filed on Form 8K

     As more fully  discussed  in Note 12 -  Restatements,  to the  Consolidated
Financial  Statements,  we filed  an  amended  Form  10-K/A  for the year  ended
December 31, 2005 and 2004 including the following  substantive changes: (a) the
recognition  of the  compensation  cost  associated  with stock options of which
certain terms were modified  during the year ended December 31, 2004 and (b) the
reclassification  between debt and additional  paid-in capital of certain of the
proceeds  from the Revolving  Subordinated  Obligation to our President and CEO,
Peter G. Dornau  received  during the year ended  December 31, 2005.  Neither of
these items have an impact on our previously reported cash flows.

     (A) Consolidated financial statements:

     (i) Consolidated balance sheets as of December 31, 2006 and 2005.

     (ii)  Consolidated  statements  of  operations  for each of the three years
ended December 31, 2006, 2005 and 2004.

     (iii) Consolidated statements of shareholders' equity for each of the three
years ended December 31, 2006, 2005 and 2004.

     (iv)  Consolidated  statements  of cash  flows for each of the three  years
ended December 31, 2006, 2005 and 2004.

     (v) Notes to consolidated financial statements.

     (a) All schedules are omitted because either they are not applicable or the
required  information is shown in the  consolidated  financial  statement or the
notes thereto.

     (B) Exhibits

     3.1 Articles of  Incorporation  (incorporated by reference to the Company's
Registration  Statement on Form S-18 filed with the United States Securities and
Exchange Commission on March 26, 1981).

     3.2  Bylaws  (incorporated  by  reference  to  the  Company's  Registration
Statement  on Form S-18 filed with the United  States  Securities  and  Exchange
Commission on March 26, 1981).

     4.1 Form of Certificate for Series 1997 Bonds*

     4.2 Form of Certificate for Series 2002 Bond*

     4.3 Trust  Indenture dated as of December 1, 1996 between the IDB Board and
Regions  Bank,  as Trustee and  Registrar  relating to the  $4,000,000  1997 IDB
Bonds*

     4.4 Supplement to Trust Indenture for 1997 Bonds dated March 1, 1997*.

                                       23
<PAGE>

     4.5 Trust  Indenture  dated as of July 22,  2002  between the IDB Board and
Regions Bank, as Trustee and Registrar  relating to the  $3,500,000  Taxable IDB
Bonds Series 2002*

     10.1  Restated  Lease  Agreement  dated as of December 1, 1996  between The
Industrial Development Board of the City of Montgomery ("IDB Board") and Kinpak,
Inc.*

     10.2 First  Supplemental  Lease  dated as of March 1, 1997  between the IDB
Board and Kinpak, Inc.*

     10.3 Second  Supplemental  Lease  dated as of July 1, 2002  between the IDB
Board and Kinpak, Inc.*

     10.4 Credit  Agreement  dated as of July 1, 2002 by and among the  Company,
Star-Brite   Distributing,   Inc.,  Star   Brite-Automotive,   Inc.,  Star-Brite
Distributing (Canada), Inc., Kinpak Inc. and Regions Bank*

     10.5  Amendment  to Credit  Agreement  dated  June 1, 2004 by and among the
Company, Star-Brite Distributing,  Inc., Star-Brite Automotive, Inc., Star Brite
Distributing (Canada), Inc., Kinpak, Inc. and Regions Bank*

     10.6 Mortgage, Assignment of Leases and Security Agreement dated as of July
1, 2002 between Kinpak, Inc. and Regions Bank.*

     10.7 Security Agreement dated as of July 22, 2002 between Kinpak,  Inc. and
Regions Bank.*

     10.8  Irrevocable  Letter of Credit  dated July 22,  2002 issued by Regions
Bank to secure the Series 1991 Bonds*

     10.9  Irrevocable  Letter of Credit  dated July 22,  2002 issued by Regions
Bank to secure the Series 2002 Bonds*

     10.10  Extension to Credit  Agreement dated March 31, 2003 by and among the
Company, Star-Brite Distributing,  Inc., Star-Brite Automotive, Inc., Star Brite
Distributing (Canada), Inc., Kinpak, Inc. and Bank*

     10.11 Ocean Bio-Chem,  Inc. 1992 Incentive Stock Option Plan  (incorporated
by reference to Form S-8 filed with the United  States  Securities  and Exchange
Commission on June 24, 1994).

     10.12  Ocean   Bio-Chem,   Inc.  1994   Non-Qualified   Stock  Option  Plan
(incorporated  by reference to Form S-8 filed with the United States  Securities
and Exchange Commission on June 24, 1994).

     10.13 Ocean Bio-Chem,  Inc. 2002 Incentive Stock Option Plan  (incorporated
by reference to an exhibit contained in the Company's proxy statement filed with
the United States Securities and Exchange Commission on April 28, 2003).

     10.14 Lease dated May 1, 1998  between  Star Brite  Distributing,  Inc. and
PEJE, Inc.*

     14.1 Code of Ethics  (incorporated by reference to an exhibit  contained in
the  Company's  proxy  statement  filed with the United  States  Securities  and
Exchange Commission on April 13, 2004).

     21. List of Subsidiaries **

     31.1  Certification  of Chief Executive  Officer pursuant to Section 302 of
Sarbanes-Oxley **

     31.2  Certification  of Chief Financial  Officer pursuant to Section 302 of
Sarbanes-Oxley **

     32.1  Certification  of Chief Executive  Officer pursuant to Section 906 of
Sarbanes-Oxley **

     32.2  Certification  of Chief Financial  Officer pursuant to Section 906 of
Sarbanes-Oxley **

     * Incorporated  by reference to our Annual Report on Form 10-K for the year
ended December 31, 2004.

     ** Attached hereto.
                                       24

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, hereunto duly authorized.

                             OCEAN BIO-CHEM, INC.
                             Registrant

                                 By: /s/ Peter G. Dornau
                                     -----------------------
                                     PETER G. DORNAU
                                     Chairman  of the  Board  of
                                     of Directors and Chief
                                     Executive Officer
                                     March 29, 2007

                                 By: /s/ Edward Anchel
                                     ----------------------
                                     EDWARD ANCHEL
                                     Chief Financial Officer
                                     March 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>

<S>                                  <C>                                         <C>
Signature                            Capacity                                    Date
---------------------                -------------------------------             ---------------

/s/ Peter G. Dornau                  President, Chief Executive                  March 29, 2007
---------------------                Officer and Director
Peter G. Dornau

/s/ Edward Anchel                    Vice President Finance, Chief               March 29, 2007
---------------------                Financial Officer, Director
Edward Anchel


/s/ James M. Kolisch                 Director                                    March 29, 2007
---------------------
James M. Kolisch

/s/ Laz L. Schneider                 Director                                    March 29, 2007
---------------------
Laz Schneider

/s/ John B. Turner                   Director                                    March 29, 2007
---------------------
John B. Turner

/s/ Sonia B. Beard                   Director                                    March 29, 2007
---------------------
Sonia B. Beard
</TABLE>

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant has not sent an annual report or proxy  material to  security-holders
as of this date. Subsequent to this filing the Registrant will produce an annual
report and definitive  proxy  materials for its Annual Meeting of  Shareholders.
Copies of such shall be filed with the United  States  Securities  and  Exchange
Commission pursuant to the current requirements.




                                       25





<PAGE>


                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004


<PAGE>


                                       OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                   YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004




                                                                         Page
                                                                       --------
   Reports of independent registered public accounting firms            F-2-F-3

   Consolidated balance sheets                                            F-4

   Consolidated statements of operations                                  F-5

   Consolidated statements of shareholders' equity                        F-6

   Consolidated statements of cash flows                                  F-7

   Notes to consolidated financial statements                          F-8-F-17











<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Shareholders of
Ocean Bio-Chem, Inc.

     We have  audited  the  accompanying  consolidated  balance  sheet  of Ocean
Bio-Chem,  Inc.  and  Subsidiaries  as of  December 3 1, 2006,  and the  related
consolidated statements of operations,  shareholders' equity, and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

     We  conducted  our audit in  accordance  with the  standards  of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ocean Bio-Chem,
Inc. and  Subsidiaries as of December 31, 2006 and the  consolidated  results of
its  operations  and its  consolidated  cash flows for the year then  ended,  in
conformity with accounting principles generally accepted in the United States of
America.





Berenfeld Spritzer Shechter & Sheer
Certified Public Accountants

March 21, 2007
Ft. Lauderdale, Florida






































                                       F-2

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Shareholders of
Ocean Bio-Chem, Inc.
Ft. Lauderdale. Florida

We have audited the accompanying  consolidated balance sheets of Ocean Bio-Chem,
Inc. (the "Company") and subsidiaries,  as of December 31, 2005, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
the years then ended December 31, 2005 and 2004. These financial  statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Ocean Bio-Chem,
Inc. and  subsidiaries as of December 31, 2005 and the  consolidated  results of
its  operations  and its  consolidated  cash flows for the years ended  December
31,2005 and 2004, in conformity with accounting principles generally accepted in
the United States of America.


LEVI, CAHLIN & CO.
North Miami Beach, Florida
March 22, 2006, except as to note 12, as to which
  the date is August 25, 2006















                                       F-3


<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2006 AND 2005

                                     ASSETS
<TABLE>
<CAPTION>

                                                                       2006                   2005
                                                                   -----------             -----------
         <S>                                                       <C>                     <C>
         Current Assets:                                                                    (Restated)

           Cash                                                    $    71,080             $   204,543
           Trade accounts receivable net of allowance for
             doubtful accounts of approximately $192,700
             and $131,000, respectively                              2,026,870               2,027,162
           Inventories                                               5,647,933               6,260,813
           Refundable income taxes                                                             274,500
           Prepaid expenses and other current assets                   218,151                 235,574
                                                                   -----------             -----------
                 Total current assets                                7,964,034               9,002,592
                                                                   -----------             -----------

         Property, plant and equipment, net                          6,800,176               7,310,640
                                                                   -----------             -----------

         Other assets:
           Trademarks, trade names, and patents                        330,439                 330,439
           Due from affiliated companies                               231,200                  29,022
           Deposits and other assets                                   203,510                 230,329
                                                                   -----------             -----------
                Total other assets                                     765,149                 589,790
                                                                   -----------             -----------

                Total assets                                       $15,529,359             $16,903,022
                                                                   ===========             ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

         Current liabilities:
            Accounts payable trade                                 $   943,907             $ 1,256,640
            Note payable bank                                        2,150,000               4,000,000
            Current portion of long-term debt                          586,060                 580,852
            Accrued expenses payable                                   363,669                 451,977
                                                                   -----------             -----------
                Total current liabilities                            4,043,636               6,289,469
                                                                   -----------             -----------


         Long-term debt less current portion                         4,550,190               5,950,958
                                                                   -----------             -----------

         Commitments and contingencies                                                           -
                     -

         Shareholders' equity:
           Common stock - $.01 par value, 10,000,000 shares
           authorized, 7,621,316 and 5,849,316 shares
           issued and outstanding at December 31,
           2006 and 2005, respectively                                  76,213                  58,493
         Additional paid-in capital                                  7,257,447               5,397,845
         Foreign currency translation adjustment                   (   176,094)            (   179,653)
         Retained earnings (deficit)                               (   213,838)            (   605,895)
                                                                   ------------            ------------
                                                                     6,943,728              4,670,790
         Less treasury stock 7,519 shares, at cost                 (     8,195)            (     8,195)
                                                                   ------------            ------------
                Total shareholders' equity                           6,935,533               4,662,595
                                                                   ------------            ------------

                Total liabilities and shareholders' equity         $15,529,359             $16,903,022
                                                                   ============            ============

</TABLE>


The accompanying notes are an integral part of these financial statements.
                                       F-4


<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
<TABLE>
<CAPTION>


                                                                          2006                     2005                    2004
                                                                       -----------              -----------              -----------
                                                                                                (Restated)              (Restated)

      <S>                                                              <C>                      <C>                      <C>
      Gross Sales                                                      $22,338,500              $19,706,469              $24,361,056

      Less discounts, returns and allowances                             1,911,368                2,054,564                2,703,973
                                                                       -----------              -----------              -----------
      Net sales                                                         20,427,132               17,651,905               21,657,083

      Cost of goods sold                                                14,719,006               14,640,883               16,675,780
                                                                       -----------              -----------              -----------
      Gross profit                                                       5,708,126                3,011,022                4,981,303
                                                                       -----------              -----------              -----------
      Operating expenses:
         Advertising and promotion                                       1,143,420                1,110,258                  942,991
         Selling and administrative                                      3,510,715                3,775,848                3,607,205
         Interest                                                          680,572                  499,433                  307,840
                                                                       -----------              -----------              -----------
         Total operating expenses                                        5,334,707                5,385,539                4,858,036
                                                                       -----------              ------------             -----------
      Operating profit (loss)                                              373,419              ( 2,374,517)                 123,267

      Interest and other income                                             18,638                   26,824                      955
                                                                       -----------              ------------             -----------
      Income (loss) before provision (benefit)
         for income taxes                                                  392,057              ( 2,347,693)                 124,222

      Provision (benefit) for income taxes                                     -                (   534,500)                 107,000
                                                                       -----------              ------------             -----------
      Net income (loss)                                                    392,057              ( 1,813,193)                  17,222

      Other comprehensive income:
         Foreign currency translation,
         net of taxes                                                        3,559                   25,211                   32,459
                                                                       -----------              ------------             -----------
      Comprehensive income (loss)                                      $   395,616              ($1,787,982)             $    49,681
                                                                       ===========              ============             ===========
      Earnings (loss) per share:
         Basic                                                         $       .06              ($      .32)             $       .00
                                                                       ===========              ============             ===========
         Diluted                                                       $       .05              ($      .32)             $       .00
                                                                       ===========              ============             ===========

</TABLE>


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

                                       F-5
<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
                  YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
<TABLE>
<CAPTION>

                                                                        Foreign          Retained
                                   Common stock       Additional       currency          earnings      Treasury
                               Shares      Amount   paid-in capital   adjustment         (deficit)      stock           Total
                              --------     -------    -------------   -----------       -----------    ---------      ----------
<S>                           <C>          <C>        <C>              <C>              <C>            <C>            <C>
January 1,                    4,960,843    $49,608    $4,409,829       ($ 237,323)      $ 1,190,076    ($  8,195)     $5,403,995
 2004

Net income                                                                                   17,222                       17,222

Issuances of
  common stock                  456,970      4,570       312,917                                                         317,487

Compensation
   cost associated stock
   option modifications                                  178,332                                                         178,332

Foreign currency
   translation adjustment                                                  32,459                                         32,459
                              ---------    -------    ----------       -----------      ------------   ----------     -----------
December 31,
 2004 (Restated)              5,417,813     54,178     4,901,078       (  204,864)        1,207,298    (   8,195)      5,949,495

Net (loss)                                                                              ( 1,813,193)                  (1,813,193)

Issuances of
  common stock                  431,503      4,315       185,869                                                         190,184

Compensation cost
   associated with
   warrants issued
   pursuant to subordinated
   revolving Note                                        310,898                                                         310,898
Foreign currency
   translation adjustment                                                  25,211                                         25,211
                              ---------    -------    ----------       -----------      ------------   ----------     -----------
December 31,
 2005 (Restated)              5,849,316     58,493     5,397,845       (  179,653)      (   605,895)   (   8,195)      4,662,595

Net income                                                                                  392,057                      392,057

Forgiveness of debt- affiliates                          295,752                                                         295,752

P Dornau con-
   version of debt            1,500,000     15,000     1,225,920                                                       1,240,920

Bonus shares to
   employees                    129,000      1,290       118,132                                                         119,422

Exercise of stock
   options                      143,000      1,430       145,620                                                         147,050

Compensation
   cost associated
   stock option                                           74,178                                                          74,178

Foreign currency
   translation
   adjustment                                                               3,559                                          3,559
                              ---------    -------    ----------       -----------      ------------   ----------     -----------
December 31,
   2006                       7,621,316    $76,213    $7,257,447       ($ 176,094)      ($  213,838)   ($  8,195)     $6,935,533
                              =========    =======    ==========       ===========      ============   ==========     ===========
</TABLE>

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

                                       F-6


<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
<TABLE>
<CAPTION>

                                                                           2006                    2005                      2004
                                                                       -----------              -----------              -----------
                                                                                                (Restated)               (Restated)
<S>                                                                    <C>                      <C>                      <C>
Cash flows from operating activities:
   Net income (loss)                                                    $  392,057              ($1,813,193)             $   17,222
   Adjustments to reconcile net income (loss)
    to net cash provided (used) by operations:
      Depreciation and amortization                                        780,753                  762,943                 735,103
      Equity based compensation                                            195,030                   97,265                 266,145
      (Increase) decrease in accounts receivable -
         allowance for doubtful accounts                               (    61,408)             (    70,000)             (    5,000)
      Changes in assets and liabilities:
        (Increase) decrease in accounts receivable                          61,700                2,694,982              (  314,121)
        (Increase) decrease in inventory                                   612,879              ( 1,042,381)                 97,310
        (Increase) in recoverable income taxes                             274,500              (   274,500)                     -
        (Increase) decrease in prepaid expenses                             44,242              (    21,083)             (   21,120)
        (Decrease) increase in accounts payable
            and accrued taxes and other                                (   401,041)             ( 1,160,393)              1,148,030
                                                                       ------------             ------------             -----------
   Net cash provided (used) by operating activities                      1,898,712              (   826,360)              1,923,569
                                                                       ------------             ------------             -----------
Cash flows used by investing activities:
   Purchases of property, plant and equipment                          (   270,289)             (   735,983)             (  566,117)
   Utilization of (additions to) trust funds for
         equipment purchased, net                                              -                      1,851                 124,442
                                                                       ------------             ------------             -----------
   Net cash used by investing activities                               (   270,289)             (   734,132)             (  441,675)
                                                                       ------------             ------------             -----------
Cash flows from financing activities:
   Borrowings line of credit                                             2,800,000                4,338,177               2,075,000
   Principle payments - line of credit                                 ( 4,650,000)             ( 4,838,177)             (2,125,000)
   (Increase)  decrease in amounts due from affiliates                 (   202,178)                 379,454              (  235,551)
   Increase (decrease) in long-term debt                                   135,904              (   370,655)             (  513,293)
   Increase in notes payable - Peter Dornau and affiliates                     -                  1,150,000                      -
   Common stock transactions                                               145,620                   92,919                  229,674
                                                                       ------------             ------------             -----------
   Net cash provided (used) by financing activities                    ( 1,765,446)                 751,718              (  569,170)
                                                                       ------------             ------------             -----------
Increase (decrease) in cash prior to effect of
   exchange rate on cash                                               (   137,022)             (   808,774)                912,724

   Effect of exchange rate on cash                                           3,559                   25,211                  32,459
                                                                       ------------             ------------             -----------
Net increase (decrease) in cash                                        (   133,463)             (   783,563)                945,183

Cash at beginning of year                                                  204,543                  988,106                  42,923
                                                                       ------------             ------------             -----------
Cash at end of year                                                    $    71,080              $   204,543              $  988,106
                                                                       ============             ============             ===========
Supplemental information - disclosure of cash transactions:
  Cash paid for interest during year                                   $   680,572              $   499,433              $  307,840
                                                                       ============             ============             ===========
  Cash paid for income taxes during year                                       -                        -                $  149,000
                                                                       ============             ============             ===========

Supplemental information - disclosure of non - cash transactions:
  Compensation cost associated with stock options and warrants         $    74,178              $  310,898               $   178,332
                                                                       ============             ============             ===========
  Conversion of the Company's indebtedness to P. Dornau to equity      $ 1,241,000              $      -                 $       -
                                                                       ============             ============             ===========
  Foregiveness of indebtedness to an affiliate                         $   295,752              $      -                 $       -
                                                                       ============             ============             ===========
The Company had no cash equivalents at December 31, 2006, 2005, and 2004.

The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       F-7


<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                  YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

Note 1 - Organization and summary of significant accounting policies:

     Organization - The Company was incorporated during November, 1973 under the
laws of the state of Florida and operates as a manufacturer  and  distributor of
products  principally  under the Star brite brand to the marine,  automotive and
recreational vehicle aftermarkets.

     Principles of consolidation - The consolidated financial statements include
the accounts of the Company and its wholly owned  subsidiaries.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

     Revenue  recognition  -  Revenue  from  product  sales is  recognized  when
persuasive evidence of an arrangement exists, delivery to customer has occurred,
the sales price is fixed and  determinable,  and  collectibility  of the related
receivable is probable.

     Collectibility  of  accounts  receivable   - Included  in the  consolidated
balance  sheets as of December  31, 2006 and 2005 are  allowances  for  doubtful
accounts aggregating  approximately  $192,700 and $131,000,  respectively.  Such
amounts  are based on  management's  estimates  of the  creditworthiness  of its
customers,   current  economic  conditions  and  other  historical  information.
Consolidated  bad debt expense  charged  against  operations for the years ended
December 31, 2006, 2005 and 2004 aggregated  approximately $71,000,  $32,000 and
$66,000, respectively.

     Inventories  -  Inventories  are  primarily  composed of raw  materials and
finished  goods  and are  stated  at the  lower of  cost,  using  the  first-in,
first-out method, or market. The composition of inventories at December 31, 2006
and 2005 are as follows:

                                         2006             2005
                                         ----             ----
                  Raw materials      $3,423,030       $3,235,086
                  Finished goods      2,224,903        3,025,727
                                     ----------       ----------
                                     $5,647,933       $6,260,813
                                     ==========       ==========

At December  31, 2006 and for the year then ended,  $20,000 is  reflected in the
accompanying  consolidated  financial  statements  as a reserve  for slow moving
inventory.

     Prepaid expenses - During the years ended December 31, 2006, 2005 and 2004,
the Company  introduced  certain new products to its  customers.  In  connection
therewith,   the  Company  produced  new  product  collateral  materials  to  be
distributed  over a period of time of  approximately  one year.  Accordingly the
Company  follows the policy of amortizing  these costs over a one-year basis. At
December 31, 2006 and 2005, the accumulated cost of collateral materials on hand
and other deferred  promotional  costs that were or will be charged  against the
subsequent  year's  operations  amounted to  approximately  $15,400 and $16,500,
respectively.

     Property, plant and equipment - Property, plant and equipment are stated at
cost.  Depreciation  is provided over the estimated  useful lives of the related
assets using the straight-line method.


     Stock based  compensation  - The Company  adopted  Statement  of  Financial
Accounting  Standards No. 123 (revised 2004),  "Shared Based Payment" ("SFAS No.
123R"),  which requires the measurement and recognition of compensation cost for
all  share-based  payment  awards  made to  employees  and  directors  based  on
estimated  fair  values.  Prior to the  adoption of SFAS No.  123R,  The Company
accounted for its  stock-based  employee  compensation  related to stock options
under the intrinsic value  recognition and measurement  principles of Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB  25")  and  the  disclosure   alternative  prescribed  by  SFAS  No.  123,
"Accounting  for  Stock-Based   Compensation,"  as  amended  by  SFAS  No.  148,
"Accounting   for  Stock-Based   Compensation  -  Transition  and   Disclosure."
Accordingly,  The Company presents pro- forma  information for the periods prior
to the  adoption  of  SFAS  No.  123R  and no  employee  compensation  cost  was
recognized  for the  stock-based  compensation  plans  other than the grant date
intrinsic value, if any, for the options granted prior to January 1, 2006.


     Use of estimates - The  preparation  of financial  statements in conformity
with U.S.generally  accepted  accounting  principles requires management to make
estimates that affect the reported amount of assets,  liabilities,  revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.
                                       F-8
<PAGE>
     Concentration  of credit  risk -  Financial  instruments  that  potentially
subject  the  Company to  concentration  of credit  risk  consist  primarily  of
accounts   receivable.   The  Company's  five  largest   customers   represented
approximately  59%,  43% and 55% of  consolidated  gross  revenues for the years
ended December 31, 2006, 2005 and 2004; and 57% and 26% of consolidated accounts
receivable  at  December  31,  2006 and 2005,  respectively.  The  Company has a
longstanding  relationship  with each of these entities and has always collected
open receivable balances. However, the loss of any of these customers could have
an adverse impact on the Company's operations.

     Concentration  of cash - At various  times of the year and at December  31,
2006,  the  Company  had a  concentration  of cash  in one  bank  in  excess  of
prevailing  insurance offered through the Federal Deposit Insurance  Corporation
at such  institution.  Management  does not consider the excess deposits to be a
significant risk.

     Fair  value  of  financial  instruments  -  The  carrying  amount  of  cash
approximates  its fair  value.  The fair  value  of  long-term  debt is based on
current  rates at which the Company  could borrow  funds with similar  remaining
maturities, and the carrying amount approximates fair value.

     Income taxes - The Company and its subsidiaries file  consolidated  federal
and state  income tax  returns.  The Company has adopted  Statement of Financial
Accounting  Standards  No.  109  in  the  accompanying   consolidated  financial
statements.  The primary temporary differences included therein are attributable
to differing  methods of reflecting  depreciation  for  financial  statement and
income tax purposes.

     Trademarks,  trade  names  and  patents  - The Star  brite  trade  name and
trademark  were  purchased  in 1980 for  $880,000.  The cost of such  intangible
assets was amortized on a straight-line  basis over an estimated  useful life of
40 years through  December 31, 2001.  Effective  January 1, 2002 and pursuant to
Statement of Financial  Accounting Standards No. 142, the Company has determined
that the carrying  value of such  intangible  assets  relating to its Star brite
brand does not require further amortization.  In addition,  the Company owns two
patents that it believes are valuable in limited product lines, but not material
to its success or competitiveness in general.  There are no capitalized costs of
these two patents.  Management  has  considered the impact of the loss sustained
for the year  ended  December  31,  2005 in order to  determine  if a  permanent
impairment of value of these assets has been experienced. The underlying reasons
for the loss are not viewed as  permanent  in nature  and,  management  does not
believe  that  a  permanent  impairment  has  been  realized.

     Translation of Canadian  currency - The accounts of the Company's  Canadian
subsidiary are translated in accordance  with Statement of Financial  Accounting
Standards No. 52, which requires that foreign currency assets and liabilities be
translated using the exchange rates in effect at the balance sheet date. Results
of  operations  are  translated  using  the  average  exchange  rate  prevailing
throughout the period.  The effects of unrealized  exchange rate fluctuations on
translating  foreign  currency  assets and  liabilities  into U.S.  dollars  are
accumulated as the  translation  adjustment in  shareholders'  equity.  Realized
gains and losses from foreign currency transactions, if any, are included in net
earnings of the period.

     Reclassifications   -  Certain  items  in  the  accompanying   consolidated
financial  statements  for the years ended  December 31, 2005 and 2004 have been
reclassified to conform with the 2006 presentation.

                                       F-9
<PAGE>
Note 2 - Property, plant and equipment:

         The Company;s property, plant and equipment consisted of the following:

                                           Estimated
                                     Useful Life - Years
                                     -------------------      December 31,
                                                          2006           2005
                                                          ----           ----
  Land                                                 $  278,325     $  278,325
  Building                                 30 years     4,389,155      4,390,894
  Manufacturing and warehouse equipment  6-20 years     6,521,010      6,044,138
  Office equipment                        3-5 years       678,537        652,940
  Construction in process                                  47,798        278,239
  Leasehold improvement                 10-15 years       145,505        145,505
                                                       ----------     ----------
                                                       12,060,330     11,790,041

           Less accumulated depreciation                5,260,154      4,479,401
                                                       ----------     ----------
  Total property, plant and equipment, net             $6,800,176     $7,310,640
                                                       ==========     ==========

     Depreciation  expense for the years ended December 31, 2006, 2005 and 2004,
which  includes   amortization   of  capitalized   lease  assets,   amounted  to
approximately $780,800, $762,900 and $735,100, respectively.

     Included in property,  plant and equipment are the following  assets at the
Company's Alabama  subsidiary and which are substantially held under capitalized
leases securing certain City of Montgomery, AL Industrial Development Bonds:


         December 31,
                                                          2006           2005
                                                          ----           ----
         Land                                          $  278,325     $  278,325
         Building                                       4,389,154      4,390,894
         Manufacturing and warehouse equipment          6,564,504      5,747,411
         Construction in process                           23,391        274,843
                                                       ----------     ----------
                                                       11,255,374     10,691,473
         Less accumulated depreciation                  4,598,825      3,557,788
                                                       ----------     ----------
           Total                                       $6,656,549     $7,133,685
                                                       ==========     ==========

     During February 1996, the Company  purchased the assets of Kinpak,  Inc. In
order to finance the expansion contemplated by the purchase, the Company entered
into an agreement  with the City of Montgomery to issue  Industrial  Development
Bonds. The Alabama facility expansion consisted of an additional building, which
was  completed  during  October 1997,  bringing the  facility,  at that time, to
approximately 110,000 square feet. Such facility serves as the Company's primary
manufacturing and distribution center.

     During the year ended  December  31,  2002,  the  Company  entered  into an
agreement with the City of Montgomery to issue an additional  series  Industrial
Development  Bonds  aggregating  $3,500,000  to finance the  construction  of an
additional  70,000 square feet of warehousing  and  manufacturing  space and the
related equipment requirements.  Such project was substantially completed during
2003.

     Management  has  considered  the impact of the loss  sustained for the year
ended December 31, 2005 in order to determine if a permanent impairment of value
of these assets has been  experienced.  The underlying  reasons for the loss are
not viewed as  permanent  in nature  and,  management  does not  believe  that a
permanent  impairment  has been  realized.  Accordingly,  no adjustment has been
made.

     Obligations for future payments  attributable to these  capitalized  leases
are discussed in Note 4, below.



                                      F-10

<PAGE>
Note 3 - Note payable, bank:

     During 2002, the Company secured a revolving line of credit, which provided
a maximum of $6 million of working  capital from the  commercial  bank providing
the  financing for the  expansion  discussed in Note 2, above.  The line carries
interest  based on the 30 day LIBOR  rate plus 275 basis  points  (approximately
8.10% and 7.14% at December 31, 2006 and 2005 respectively)  payable monthly and
is collateralized by the Company's inventory, trade receivables,  and intangible
assets. During May, 2004, the Company and its commercial bank agreed to increase
the maximum allowed borrowing under the line to $6 million.  The remaining terms
including required financial  covenants relating to maintaining  minimum working
capital levels,  maintaining  stipulated debt to tangible net worth and adhering
to debt coverage ratios were substantially  unchanged.  At December 31, 2006 the
Company was in compliance with all financial covenants of the loan agreement. At
December 31, 2005 the bank had waived the Company's  non-compliance with certain
of its financial covenants. This financing matures on May 31, 2007.

     As of  December  31,  2006  and  2005  the  Company  was  obligated  to its
commercial  lender  under this  arrangement  in the  amounts of  $2,150,000  and
$4,000,000  respectively.  The average  outstanding  loan  balances and interest
incurred  for the years  ended  December  31,  2006 and 2005 were  approximately
$4,081,000, $4,552,000 and $321,500 and $283,000, respectively.

Note 4 - Long-term debt:

     Long-term debt at December 31, 2006 consisted of the following:

     The  Company is  obligated  pursuant  to capital  leases  financed  through
Industrial  Development  Bonds.  Such  obligations were incurred during 1997 and
2002 in  connection  with  building and  equipment  expansion  at the  Company's
Alabama manufacturing and distribution facility.  Both bear interest at tax-free
rates that adjust weekly.  At December 31, 2006,  $1,783,108 and $2,960,000 were
outstanding attributable to the 1997 and 2002 series, respectively.  At December
31, 2006 and 2005,  $2,125,000 and $3,080,000  were  outstanding,  respectively.
During the year ended  December 31, 2005 interest  rates ranged between 1.8% and
3.3%.  During the year ended  December 31, 2006  interest  rates ranged  between
3.08% and 4.24%.  Interest expense for 2006 and 2005 was approximately  $188,200
and  $156,600,  respectively.   Principal  and  accrued  interest  retiring  the
underlying bonds are payable  quarterly  through March,  2012 and July, 2017 for
the 1997 and 2002 series, respectively.  Repayment of the bonds is guaranteed by
a Letter of Credit issued by the Company's primary commercial bank. Security for
the Letter of Credit is a priority  first  mortgage on the Kinpak  facility  and
manufacturing  equipment.  During  2006  and  2005,  the  Company,  through  its
subsidiary,  Kinpak  Inc.,  was  obligated  pursuant  to various  capital  lease
agreements  covering  equipment  utilized in the Company's  Alabama plant.  Such
obligations,  aggregating  approximately  $57,300 and  $56,300,  at December 31,
2006,  and 2005  respectively,  have varying  maturities  through 2010 and carry
interest rates ranging from 7% to 12% for both years.  Interest expense for 2006
and 2005 was approximately $5,200 and $3,700 respectively.

     On April 12, 2005 we entered into a financing  obligation with Regions Bank
whereby the bank advanced us $500,000 to finance  equipment  acquisitions at our
Kinpak  facility.  Such  obligation is due in monthly  installments of principal
aggregating   approximately  $8,300  plus  interest  at  prevailing  rates  (the
outstanding  balance and interest  rate on this  obligation at December 31, 2006
and 2005 were  approximately $ 333,300 and 433,300,  respectively.  The interest
rate is  calculated  at prime  plus 2.5% per  annum,  respectively  or 10.75% at
December 31, 2006. Such obligation matures on April 15, 2010.  Interest incurred
for 2006 and 2005 was approximately $29,100 and $22,000, respectively.

     In 2005 Mr.  Dornau  loaned of the Company $1.5 million in order to bolster
working  capital.  In connection  with such loan, the Company issued warrants to
Mr. Dornau to purchase a maximum of 1 million  shares of our common stock.  Such
warrants were  exercisable  500,000 shares at $1.13 and 500,000 shares at $.863.
The  exercise  prices were  determined  by the closing bid of our stock plus ten
(10) percent on each date of grant.  In addition,  he had the right, at his sole
discretion,  to convert  such debt into a maximum of 1.5  million  shares of our
common stock at the rate of $1.00 per share.  On November 10, 2006,  Mr.  Dornau

                                      F-11
<PAGE>
notified  the  Company  that he was  exercising  his rights to convert  the $1.5
million loan made to the Company into 1.5 million shares.  Such  transaction was
approved  unanimously by the members of our Board of Directors  (with Mr. Dornau
abstaining from the vote).

     The composition of these  obligations at December 31, 2006 and 2005 were as
follows:
<TABLE>
<CAPTION>

                                                            Current Portion                   Long Term Portion
                                                           2006          2005              2006         2005
                                                       ----------     ----------       ----------     ----------
                                                                      (Restated)                      (Restated)
<S>                                                    <C>            <C>              <C>            <C>
         Industrial Development Bonds                  $  460,000     $  460,000       $4,283,107     $4,745,000
         Notes payable                                     99,996         99,996          233,344        331,448
         Capitalized equipment leases                      26,064         20,856           33,739         35,408
         Subordinated note payable-P. Dornau                  -              -                -        1,150,000-
                                                       ----------     ----------       ----------     ----------
                                                          586,060        580,852        4,550,190      6,261,856
         Less imputed interest                                -              -                -          310,898
                                                       ----------     ----------       ----------     ----------
                                                       $  586,060     $  580,852       $4,550,190     $5,950,958
                                                       ==========     ==========       ==========     ==========
</TABLE>

     Required  principal payment  obligations  attributable to the foregoing are
tabulated below:

        Year ending December 31,
                           2007              $  586,060
                           2008                 579,490
                           2009                 572,051
                           2010                 495,540
                           2011                 460,000
                       Thereafter             2,443,109
                                             ----------
                            Total            $5,136,250
                                             ==========
Note 5 - Income taxes:

     The  Components of the Company's  consolidated  income tax provision are as
follows:
<TABLE>
<CAPTION>

                                                           2006          2005             2004
                                                       ----------     ----------       ----------
    Income tax provision (benefit):                                   (Restated)       (Restated)
<S>                                                    <C>            <C>              <C>
               Federal - current                       $   -          ( $274,500)      $   47,600
                       - deferred                          -          (  260,000)          54,400
               State                                       -                 -              5,000
                                                       ----------     -----------      ----------
                            Total                      $   -          ($ 534,500)        $107,000
                                                       ==========     ===========      ==========

     The  reconciliation  of income tax provision at the  statutory  rate to the
reported income tax expense is as follows: Year ended December 31,

                                                           2006          2005             2004
                                                       ----------     ----------       ----------
    Computed at statutory rate                              34.0%     (    34.0%)           34.0%
    State tax, net of federal benefit                                                        5.5%
    Not being able to utilize entire tax benefit
        as a carry-back*                              (     34.0)          11.2%              -
    Other, principally deferred income
             taxes attributable to depreciation             -                                46.7
                                                       ----------     -----------      ----------
           Effective tax rate                               -         (    22.8%)           86.2%
                                                       ==========     ===========      ==========
</TABLE>

* The  reduction  from the statutory  rate for the year ended  December 31, 2006
represents  the Income Tax effect of  operating  loss  carryovers  to offset the
current year's Taxable Income.

     At  December  31,  2006 the  Company  had  available  tax  loss  carryovers
available as offsets  against future taxable  income  aggregating  approximately
$265,800 and $1,923,600 for federal and Florida purposes,  respectively expiring
in 2025. If fully  utilizable,  such  carryovers  would result in a deferred tax
asset of  approximately  $90,400 and  $264,100 as of December 31, 2006 and 2005,
respectively.  There is no assurance  that the Company will ever avail itself of
all or a portion of such carryovers, accordingly, a valuation allowance has been
established against this deferred asset.


                                      F-12
<PAGE>
     The Company's  deferred tax asset and liability  accounts  consisted of the
following at December 31:
<TABLE>
<CAPTION>

                                                          2006           2005
                                                       ----------     ----------
               <S>                                     <C>            <C>
               Deferred tax asset                      $   90,400     $  264,100
               Less valuation allowance                (   90,400)    (  264,100)
               Deferred Tax Liability                         -              -
                                                       ----------     -----------
                            Total                      $      -       $      -
                                                       ==========     ===========
</TABLE>
     During the year ended December 31, 2005, we reversed  deferred income taxes
payable aggregating  $260,000 as the underlying reason for such deferral was the
timing differences  between our financial  statement and income tax treatment of
depreciation  expense and such differences are anticipated to reverse during the
available time of existing income tax loss carryovers.

Note 6 - Related party transactions:

     At December 31, 2006 and 2005, the Company had amounts  receivable from and
payable to affiliated companies, which are directly or beneficially owned by the
Company's president, aggregating on a net basis to a receivable of approximately
$231,200  and  $29,000,  respectively.  Such  amounts  result  from sales to the
affiliates,  allocations  of  management  fees  incurred  by the  Company on the
affiliates' behalf, and funds advanced to or from the Company.

     Sales to such  affiliates  were sold at cost of material  and labor plus an
amount to cover  manufacturing  overhead costs. In addition,  the affiliates are
charged for their allocable share of administrative expenses of the Company. The
sales to affiliates aggregated  approximately  $622,300,  $826,900, and $616,800
during the years ended  December 31, 2006,  2005,  and 2004,  respectively;  and
allocable  administrative  fees  aggregated  $350,000,  $300,000  and  $300,000,
respectively for such periods.

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

     On March 25,  1999,  the Company  entered into a loan  arrangement  with an
entity owned 50% each by our President and former Vice  President - Advertising,
Messrs. Peter G. Dornau and Jeffrey J. Tieger,  respectively whereby we borrowed
$400,000 to be repaid in monthly installments of $3,357 plus prevailing interest
at prime plus 1%.  During  March  2006 when the  principal  balance  outstanding
amounted to $295,752, the Company received notification from the shareholders of
said entity that they were  forgiving  this  obligation  and,  accordingly,  the
Company  had no  further  obligation  associated  with this  debt.  The  Company
recognized  additional  paid-in capital  attributable to this transaction in the
amount of $295,752.

Note 7 - Commitments

     On May 1, 1998, the Company entered into a ten year lease for approximately
12,700  square  feet of office  and  warehouse  facilities  in Fort  Lauderdale,
Florida  from an entity  owned by certain  officers  of the  Company.  The lease
required a minimum  rental of  $94,800  for the first  year and  provides  for a
maximum 2% increase on the anniversary of the lease  throughout the term,  which
has been  waived  through  December  31,  2006.  Additionally,  the  landlord is
entitled to its pro-rata share of all taxes, assessments, and any other expenses
that arise from  ownership.  Rent charged to  operations  during the years ended
December 31, 2006, 2005, and 2004 amounted to approximately $100,500 each year.

     The  Company  has entered  into a  corporate  guaranty  of a mortgage  note
obligation of such affiliate. The obligation aggregating  approximately $306,000
and $336,800 at December 31, 2006 and 2005,  respectively,  is primarily secured
by the real estate leased to the Company.

                                      F-13
<PAGE>

     The following is a schedule of minimum future rentals on the non-cancelable
operating leases:

           Year ending December 31,
                                          2007         $  106,597
                                          2008            108,729
                                    Thereafter                -
                                                       ----------
                                    Total              $  215,326
                                                       ==========

     In  conjunction  with an  agreement  with an  investment  banker to provide
financial  advisory and other services,  we issued warrants to purchase  275,000
shares of the  Company's  common stock at an exercise  price of $1.27 per share.
The covered  shares and the exercise  price were  adjusted  for stock  dividends
distributed  during  the year  ended  December  31,  2002.  This  agreement  was
terminated  during 2004. During February 2005, the Company issued 150,003 shares
of its  common  stock to its former  investment  banker  pursuant  to a cashless
exercise of warrants granted during 2002.

  Note 8 - Stock options:

     During 1992,  the Company  adopted an incentive  stock option plan covering
200,000 shares of its common stock.

     During 1994, the Company adopted a non-qualified employee stock option plan
covering  400,000  shares of its  common  stock  (this plan has  expired  and no
further  awards can be made under its  provisions).  During  2002,  the  Company
adopted a qualified  employee  incentive  stock option plan and a  non-qualified
stock  option plan  covering  400,000 and  200,000  shares of its common  stock,
respectively.

     The following schedule reflects the status of outstanding options under the
Company's  three stock option plans as of December 31, 2006, as adjusted for the
Company's stock dividend distributions of 2000 and 2002.
<TABLE>
<CAPTION>

                                                                                                             Weighted
                           Date             Options         Exercisable       Exercise        Expiration      average
           Plan            granted          outstanding       options           price            date       remaining life
           <S>             <C>                <C>              <C>              <C>          <C>               <C>
           1994            10/26/04           159,500           63,800          $1.050        10/25/09         2.83
           2002            10/22/02           125,000          100,000          $1.260        10/21/07          .75
           2002            03/02/04           140,000           56,000          $1.620        03/01/09         2.25
           2002            11/09/06           135,000              -            $0.930        11/08/11         4.83
           2002  NQ        10/22/02            35,000           35,000          $1.260        10/21/12         5.75
           2002  NQ        06/20/03            40,000           40,000          $1.030        06/19/13         6.50
           2002  NQ        05/25/04            40,000           40,000          $1.460        05/04/14         7.50
           2002  NQ        04/03/06            40,000              -            $1.090        04/02/16         9.50
                                              -------          -------          ------                         ----
                                              714,500          478,000                                         3.86
                                              =======          =======                                         ====
</TABLE>

     In addition to the foregoing,  on March 25, 1999,  the Company  granted two
officers a  five-year  option for  115,500  shares  each,  as  adjusted  for the
Company's stock dividend distributions of 2000 and 2002, at an exercise price of
$.758  representing  the market  price at the time of grant.  Such  grants  were
awarded in consideration of a loan to the Company in the amount of $400,000 from
an affiliated company in which they are each 50%  co-shareholders.  During 2004,
the underlying  loan was modified to extend the maturity date and,  accordingly,
the options were extended for an additional five years expiring March 25, 2009.

     Prior to  January  1,  2006,  the  Company  accounted  for its stock  based
compensation  plans as permitted by SFAS No. 123 (R), using the intrinsic  value
method prescribed by APB No. 25 and made pro-forma  disclosures required by SFAS
148 for the years ended  December 31, 2005 and 2004.  All options  granted under
the Company's  various stock option plans had exercise  prices equal to the fair
market value of the underlying common stock on the dates of grants. Statement of
Financial  Accounting Standards No. 123 requires that companies that continue to
account for  employer  stock  options  under APB No. 25  disclose  pro forma net
income  and  earnings  per  share as if such  Statement  had been  applied.  The
following table is presented pursuant to such requirement.

                                      F-14
<PAGE>
                                                      Year ended December 31,
                                                       2005             2004
                                                    ------------      ----------
                                                     (Restated)       (Restated)

  Net (loss) income               As reported       ($1,813,193)      $ 17,222
                                  Pro forma         ($1,858,710)      ($18,604)

  Earnings (loss) per share       As reported       ($      .32)      $    -
                                  Pro forma         ($      .32)      $    -

     A summary of the Company's  stock options as of December 31, 2006, 2005 and
2004, and changes during the years ending on these dates, is presented below:
<TABLE>
<CAPTION>

                                          2006                           2005                                  2004
                                     ---------------                  ----------------                      ------------------
<S>                        <C>                <C>           <C>                <C>               <C>                   <C>
                                              Weighted                          Weighted                                Weighted
                             Optioned         average          Optioned          average             Optioned            average
                              Shares       exercise price       shares         exercise price         shares          exercise price
                            ----------     --------------     -----------      --------------       ----------
    Options outstanding
     at beginning of year         964,500      $1.12         1,183,000          $1.12             1,106,210             $ .95
    Granted                       175,000                                          -                412,500
    Expired                 (      51,000)                   (  59,000)                           (  19,240)
    Exercised               (     143,500)                   ( 159,500)                           ( 316,470)
                            --------------     -----         ----------         -----             ----------            ------
    Options outstanding at
      end of year                 945,500      $1.11           964,500          $1.12             1,183,000             $ 1.12
                            ==============     =====         ==========         =====             ==========            ======
</TABLE>

     Stock options are granted annually to selective executives,  key employees,
directors and others pursuant to the terms of the Company's  various plans. Such
grants are made at the discretion of the Board of Directors.  Options  typically
have a five-year  life with  vesting  occurring  at 20% per year on a cumulative
basis with forfeiture at the end of the option,  if not exercised.  Compensation
cost  recognized  during the year ended December 31, 2006  attributable to stock
options amounted to $74,178.

     The fair value of each option grant was estimated  using the  Black-Scholes
option pricing model with the following assumptions for the years 2006, 2005 and
2004;  risk free rate  ranging  from 4.35% to 4.84%,  no dividend  yield for all
years,   expected  life  from  five  years  to  ten  years  and   volatility  of
approximately 35.2% to 48.8%.

     As of December 31, 2006 there was  approximately  $156,200 of  unrecognized
compensation  cost related to un-vested share based  compensation  arrangements.
That cost will be charged  against  operations  as the  respective  options vest
through December, 2012.

  Note 9 - Major customers:

     The Company has one major customer, West Marine, Inc., with sales in excess
of 10% of  consolidated  gross  revenue for the years ended  December  31, 2006,
2005, and 2004. Sales to this customer  represented  approximately  43%, 26% and
39% of consolidated gross revenues for such periods, respectively.

     The Companys top five customers represented approximately 59%, 43%, and 55%
of consolidated  revenues and 57% and 26% of consolidated  trade receivables for
the years ended December 31, 2006, 2005, and 2004, and at the balance sheet date
for the years then ended,  respectively.  The Company enjoys good relations with
these  customers.  However,  the loss of any of these  customers  could  have an
adverse impact on the Company's operations.

Note 10 - Earnings per share:

     Earnings per share are reported  pursuant to the provisions of Statement of
Financial Standards No. 128. Accordingly,  basic earnings per share reflects the
weighted  average  number of shares  outstanding  during the year,  and  diluted
shares adjusts that figure by the additional  hypothetical  shares that would be
outstanding if all  exercisable  outstanding  common stock  equivalents  with an


                                      F-15
<PAGE>

exercise  price  below the current  market  value of the  underlying  stock were
exercised.  Common stock equivalents consist of stock options and warrants.  The
following  tabulation  reflects the number of shares utilized to determine basic
and diluted  earnings per share for the years ended December 31, 2006, 2005, and
2004:

                                   2006                2005              2004
                                ---------           ---------          ---------
           Basic                6,207,983           5,700,774          5,356,316
           Diluted              7,214,326           5,700,774          5,500,113

     In 2005, the Company's potentially issuable shares of common stock pursuant
to  outstanding  stock  options and  warrants are  excluded  from the  Company's
diluted computation, as their effect would be anti-dilutive.

Note 11- Shareholders' equity:

     During the years ended December 31, 2006, 2005 and 2004 the Company awarded
129,000, 122,000 and 140,500 shares of restricted common stock,  respectively to
certain  executives,   key  employees  and  others  as  a  component  of  annual
compensation.  Charges to  operations  attributable  to such  awards  aggregated
approximately $119,400, $97,300 and $87,800 for each period, respectively.

     During  December  2006 and August  2005,  certain  employees of the Company
exercised stock options  scheduled to expire during the respective  current year
covering  143,500  and  159,500  shares of its common  stock  respectively.  The
aggregate exercise price of such transactions amounted to approximately $147,000
and  $92,900  and is  reflected  in the  accompanying  financial  statements  as
additional paid-in capital.

     On March 25,  1999,  the Company  entered into a loan  arrangement  with an
entity owned 50% each by our President and former Vice  President - Advertising,
Messrs. Peter G. Dornau and Jeffrey J. Tieger,  respectively whereby we borrowed
$400,000 to be repaid in monthly installments of $3,357 plus prevailing interest
at prime plus 1%.  During  March  2006 when the  principal  balance  outstanding
amounted to $295,752, the Company received notification from the shareholders of
said entity that they were  forgiving  this  obligation  and,  accordingly,  the
Company  had no  further  obligation  associated  with this  debt.  The  Company
recognized  additional  paid-in capital  attributable to this transaction in the
amount of $295,752.

     On  November  10,  2006,  Mr.  Dornau  notified  the  Company  that  he was
exercising  his rights to convert the $1.5 million loan made to the Company into
1.5 million shares of the Company's common stock.  Such transaction was approved
unanimously by the members of our Board of Directors (with Mr. Dornau abstaining
from the vote).  Mr.  Dornau loaned the Company $1.5 million in order to bolster
working capital.  In connection with such loan, we issued warrants to Mr. Dornau
to purchase a maximum of 1 million  shares of our common  stock.  Such  warrants
were  exercisable  500,000  shares at $1.13  and  500,000  shares at $.863.  The
exercise  prices were  determined  by the closing bid of our stock plus ten (10)
percent on each date of grant. The Company recognized additional paid-in capital
attributable to this transaction in the amount of $1,240,940.

Note 12 - Restatements:

Year ended December 31, 2005:

     During the fourth  quarter of 2005,  we  finalized a financing  arrangement
with our President and Chief Executive  Officer,  Peter G. Dornau.  The terms of
such  financing  are  disclosed  above in Note 4 - Long-term  debt and Note 11 -
Shareholders'  Equity.  In our  original  Form 10-K filing we treated all of the
proceeds we received  from draws  against this  revolving  loan as debt. At that
time we did not compute the fair value of the warrants  issued to Mr. Dornau and
reclassify  such  amount as  additional  paid-in  capital  along  with a related
"compensation  cost" or imputed interest to be amortized over the five year life
of the obligation.  Utilizing a Black-Scholes pricing model, the allocation that
should  have  been  made  during   December  2005  aggregates   $310,898.   This
reclassification,  incorporated  herein, did not impact our previously  reported
cash flows or operating  results for the year ended December 31, 2005.  However,
had the  reclassification  been made on a timely  basis,  long-term  obligations
would have been reduced and  shareholders'  equity would have been  increased by
the $310,898 at December 31, 2005.




                                      F-16

<PAGE>

Year ended December 31, 2004:

     During March 1999, the Company granted two officers five-year stock options
covering115,500  shares each, in  consideration of a loan made to the Company in
the amount of  $400,000  from an  affiliated  company in which they are each 50%
co-shareholders.  During March 2004, the underlying  loan was modified to extend
the  maturity  date and,  accordingly,  the options  were also  extended  for an
additional  five years  expiring  March 25, 2009. As the options were granted at
fair market  value on the  original  date of grant,  there was no  "compensation
cost" to be recognized.  However, at the date of modification,  the market value
of our stock exceeded the options'  exercise  price.  Accordingly,  there was an
"intrinsic  value"  aggregating  $178,332  that should  have been  recorded as a
charge  against  operations  during  the year  ended  December  31,  2004.  This
adjustment,  incorporated  herein,  did not impact our previously  reported cash
flows ended December 31, 2004.

     The  effect of the  foregoing  on our  consolidated  balance  sheet and the
consolidated  statement of  operations  as of December 31, 2005 and 2004 and the
years then ended is as follows:

     Consolidated Balance Sheet at December 31, 2005 and 2004:
<TABLE>
<CAPTION>

                                                                        Long- term debt                   Shareholders' equity
                                                                      2005         2004                   2005           2004
                                                                   -----------  ----------              ----------    ----------
<S>                                                                <C>          <C>                     <C>           <C>
      As originally reported                                       $6,261,856   $5,580,250              $4,290,697    $5,888,495

      Reclassification of imputed interest associated
        with warrants issued pursuant to Subordinated
        Revolving Note Payable                                     (  310,898)         -                   310,898       -

      Recognition of compensation cost associated with
        stock options granted to Messrs. Dornau and
        Tieger as to which certain terms were modified                 -               -                    61,000        61,000
                                                                   ----------   ----------              ----------    ----------
      As restated                                                  $5,950,958   $5,580,250              $4,662,595    $5,949,495
                                                                   ==========   ==========              ==========    ==========

     Consolidated  Statement of Operations  for year ended December 31, 2005 and
2004:

                                                                            2005                                  2004
                                                                          ---------                           -------------
      Income (loss) before provision for income taxes,
             as originally reported                                            ($2,347,693)                           $  302,554

      Recognition of compensation cost associated with
        stock options granted to Messrs. Dornau and Tieger
        as to which  certain terms were modified                                       -                                 178,332
                                                                               ------------                           ----------
      Income (loss) before provision for income taxes,
             as restated                                                       ( 2,347,693)                              124,222

      Provision (benefit) for Income Taxes, as originally
      reported                                                     ($ 534,500)                          $  168,000

        Reduction in provision for Income Taxes attributable
             to the foregoing                                             -    (   534,500)            (   61,000)      107,000

                                                                   ----------  ------------            -----------    ----------
      Net income (loss), as restated                                           ($1,813,193)                           $   17,222
                                                                               ============                           ==========
      Earnings (loss) per share:
                                                                      Basic       Diluted                 Basic        Diluted
                                                                   ----------   -----------             ----------    ----------

      As originally reported                                       ($     .32)  ($     .32)             $      .00    $      .00

      Adjustment for "compensation cost"                                   -            -               (      .00)   (      .00)
                                                                   ----------   -----------             -----------   -----------
      As restated                                                  ($     .32)  ($     .32)             $      -      $       -
                                                                   ===========  ===========             ===========   ===========
</TABLE>

                                      F-17

<PAGE>

Note -13 Recent Accounting Pronouncements

     In February  2007,  the FASB issued SFAS No. 159, The Fair Value Option for
Financial  Assets and Financial  Liabilities.  SFAS No.159  permits  entities to
choose to measure eligible  financial  instruments at fair value. The unrealized
gains and  losses on items for which  the fair  value  option  has been  elected
should be reported in earnings.  The decision to elect the fair value options is
determined  on an  instrument-by-instrument  basis,  it should be  applied to an
entire  instrument,  and it is irrevocable.  Assets and liabilities  measured at
fair value  pursuant to the fair value option  should be reported  separately in
the balance sheet from those  instruments  measured  using  another  measurement
attribute.  SFAS No. 159 is  effective  as of the  beginning of the first fiscal
year that begins after November 15, 2007. The Company is currently analyzing the
potential  impact  of  adoption  of SFAS  No.159 to its  consolidated  financial
statements.

     In September  2006, the Securities and Exchange  Commission  ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements . SAB 108 provides  guidance on the  consideration  of effects of the
prior year  misstatements  in  quantifying  current year  misstatements  for the
purpose of a materiality  assessment.  The SEC staff believes  registrants  must
quantify  errors using both a balance  sheet and income  statement  approach and
evaluate  whether either  approach  results in quantifying a misstatement  that,
when all  relevant  quantitative  and  qualitative  factors are  considered,  is
material.  SAB 108 was  effective  for the  first  annual  period  ending  after
November 15, 2006 with early  application  encouraged.  The Company  adopted the
provisions  of SAB 108 on December  31, 2006 and the impact of adoption  was not
material to its consolidated financial statements.

     In September  2006, the FASB issued SFAS No. 157, Fair Value  Measurements,
("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted  accounting  principles and expands disclosures
about fair value  measurements.  SFAS 157 is effective for financial  statements
issued for fiscal years  beginning  after November 15, 2007 and interim  periods
within those fiscal  years.  The Company  does not  anticipate  adoption of this
standard will have a material impact on its consolidated financial statements.

     In June  2006,  the FASB  issued  Interpretation  No.  48,  Accounting  for
Uncertainty in Income  Taxes-an  interpretation  of SFAS 109, ("FIN 48"). FIN 48
provides  interpretive  guidance for the  financial  statement  recognition  and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 is effective for fiscal years  beginning after December 15, 2006. The Company
is reviewing the impact of adopting FIN No. 48 but does not anticipate  that the
impact will be material to its consolidated financial statements.

     In March 2006,  the FASB issued SFAS No. 156,  Accounting  for Servicing of
Financial  Assets,  which will be  effective  for fiscal  years that begin after
December 15, 2006. This statement amends SFAS 140,  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,  a replacement
of FASB Statement 125, or SFAS 140 , regarding (1) the circumstances under which
a servicing asset or servicing liability must be recognized, (2) the initial and
subsequent  measurement of recognized servicing assets and liabilities,  and (3)
information   required  to  be  disclosed   relating  to  servicing  assets  and
liabilities. The Company does not anticipate adoption of this standard will have
a material impact on its consolidated financial statements.

     In February  2006,  the FASB issued  SFAS No. 155,  Accounting  for Certain
Hybrid  Financial  Instruments,  or SFAS 155, which will be effective for fiscal
years that begin after December 15, 2006.  This  statement  amends SFAS No. 133,
Accounting  for Derivative  Instruments  and Hedging  Activities,  to narrow the
scope exception for interest-only and principal-only  strips on debt instruments
to include only such strips  representing  rights to receive a specified portion
of the contractual  interest or principal cash flows.  SFAS 155 also amends SFAS
140 to allow qualifying  special-purpose  entities to hold a passive  derivative
financial  instrument  pertaining  to  beneficial  interests  that  itself  is a
derivative  financial  instrument.  The Company does not anticipate  adoption of
this  standard  will  have  a  material  impact  on its  consolidated  financial
statements.

     In May 2005,  the FASB issued SFAS No.  154,  Accounting  Changes and Error
Corrections,  which was  adopted  effective  January  1,  2006.  This  statement
addresses the retrospective application of such changes and corrections and will
be followed if and when  necessary.  Adoption  of this  standard  did not have a
material impact on the Company's consolidated financial statements.

                                      F-18