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

                                    FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
                   For the fiscal year ended December 31, 2007
                                       OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                         Commission file number 0-11102

                              OCEAN BIO-CHEM, INC.
             (Exact name of Registrant as specified in its charter)

   Florida                             59-1564329               2842,2899,2891
(State or other jurisdiction         (IRS Employer           (Primary Standard
of incorporation or organization)   Identification No.)    Industrial Classific-
                                                            ation Code Number)

                                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.       |X|

     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated  filer, a non-accelerated  filer, or a smaller reporting company.
See definition of " large accelerated filer",  "accelerated filer"' and "smaller
reporting  company"  in Rule  12b-2  of the  Exchange  Act.
    Large accelerated filer                Accelerated filer
    Non-accelerated filer |X|              Smaller Reporting   [X]
Company [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.

     As of March 20, 2008, the number of shares of the registrant's Common Stock
outstanding was 7,871,816.  The aggregate  market value of the Common Stock held
by  non-affiliates  of the  registrant  as of March 20,  2008 was  approximately
$1,855,119  based on a closing  sale price of $1.41 for the Common Stock on such
date.  For  purposes  of the  foregoing  computation,  all  executive  officers,
directors and 5 percent  beneficial  owners of the  registrant  are deemed to be
affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE
                Part iii incorporates Definitive Proxy Statement
<PAGE>

                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES


                                TABLE OF CONTENTS

                                                                            Page
                                     PART I
Item 1.      Business                                                         2
Item 1A.     Risk Factors                                                     5
Item 2.      Properties                                                       6
Item 3.      Legal Proceedings                                                6
Item 4.      Submission of Matters to a Vote of Security Holders              6

                                     PART II

Item 5.      Market for Registrant's Common Equity and Related
               Stockholder Matters                                            6
Item 6.      Selected Financial Data                                          7
Item 7.      Management's Discussion and Analysis of Financial
              Condition and Results of Operations                             7
Item 7A.     Quantitative and Qualitative Disclosures about Market Risk     9-13
Item 8.      Financial Statements and Supplementary Data                      13
Item 9.      Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                            14
Item 9A.     Controls and Procedures                                          14

                                    PART III

Item 10.     Directors, Executive Officers of the Registrant               14-17
Item 11.     Executive Compensation                                        17-19
Item 12.     Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters                     20
Item 13.     Certain Relationships and Related Transactions, and
               Director Independence                                          21
Item 14.     Principal Accounting Fees and Services                           22

                                     PART IV
Item 15. Exhibits and Financial Statement Schedules                        22-23

..


<PAGE>
     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:

     The Company adopted SEC Staff Accounting Bulletin No. 108, "Considering the
Effects of Prior Year  Misstatements  when Quantifying  Misstatements in Current
Year  Financial  Statements"  (SAB No.  108),  effective  January  1,  2007.  In
accordance  with the  requirements  of SAB No. 108,  the Company has recorded an
adjustment  in the  amount of  approximately  $70,000  to the  opening  retained
earnings  balance  as of  January  1,  2007  in  the  accompanying  consolidated
financial  statements,  to  correct  errors  in the  accounting  of  share-based
compensation and contingent legal liabilities in 2006.

     In 2007,  the Company  made  certain  revisions  in the  valuation of stock
option grants that vested in 2006. The revised valuation resulted in an increase
in  compensation  expense of  approximately  $40,000 for 2006. Also in 2007, the
Company  discovered that a liability in the amount of approximately  $30,000 for
legal costs  incurred in 2006 should have been  recorded as of December 31, 2006
under the criteria of Statement of Financial  Accounting  Standards No. 5. There
was no  corporate  tax  effect  for the  adjustments  due to the  Company's  tax
position in 2006.

     The above 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. 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(R) 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:

                                        2
<PAGE>
     Marine:  Our Marine line consists of polishes,  cleaners,  protectants  and
waxes of  various  formulations  under the Star  brite(R)  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(R) brand name including  StarTron(R) 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(R)  brand as well as under
private  labels for  customers.  We also produce a line of automotive  polishes,
cleaners and associated appearance items.

     Recreational  vehicle:  Our  recreational  vehicle  products are made up of
cleaners,  polishes,  detergents,  fabric  cleaners  and  protectors,   silicone
sealants,  water  proofers,  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.

                                        3
<PAGE>
     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  34% of  consolidated  revenues  for the year ended  December 31, 2007.
Sales  to our five  largest  customers  for the year  ended  December  31,  2007
amounted to  approximately  51% of  consolidated  gross revenues and outstanding
accounts  receivable  balances due us at December 31, 2007 from our five largest
customers  aggregated  approximately 44% 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,  TV
advertising and product  catalogs.  Our products are distributed  primarily from
our manufacturing and distribution facility in Alabama.

     Backlog,  seasonality,  and selling terms: We had no significant backlog of
orders as of December 31, 2007. 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.

     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 six 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(R) 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.


                                        4
<PAGE>
     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,
                                 2007                  2006
                                 ----                  ----
United States:
        Northeast           $ 4,411,000               $ 4,240,000
        Southeast             6,630,000                 6,296,000
        Central               6,142,000                 6,158,000
        West Coast            5,130,000                 4,950,000
                           ------------              -------------
                             22,313,000                21,644,000

Canada (US Dollars)             996,000                   694,000
                           ------------              -------------

                           $ 23,309,000               $22,338,000
                           ============               ===========


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

     The following is a tabulation of the full time number of personnel  working
for the Company and/or its subsidiaries as of December 31, 2007:

                                                                      Full-time
Location                         Description                          Employees
Fort Lauderdale, Florida         Administrative                           23
Fort Lauderdale, Florida         Manufacturing and distribution           10
Montgomery, Alabama              Manufacturing and distribution           66
                                                                          --
                                                                          99
                                                                          ==

     Item 1A. Risk factors

     N/A


                                        5
<PAGE>
     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 July 12, 2006 we renewed our lease
agreement for a term of ten years.  The lease  required an initial annual rental
of $ 100,500 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  thru
December 31, 2007. 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, 2007,  2006 and
2005 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, 2007.

     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 2007.

                                     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 2007 and
2006 is presented below.
<TABLE>
<CAPTION>

     Market Range of
     Common Stock Bid:    1st Qtr.        2nd Qtr.        3rd Qtr.      4th Qtr.
                          --------        --------        --------      --------
<S>     <C>               <C>             <C>             <C>           <C>
2007    High              $ 5.11          $ 2.78          $ 2.55        $ 1.98
        Low               $ 1.80          $ 1.64          $ 1.73        $ 1.27

2006    High              $ 1.21          $ 1.85          $ 1.75        $ 4.03
        Low               $  .90          $ 1.00          $  .85        $  .80
</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, 2007. 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.

                                        6

<PAGE>

     D.  Securities  authorized  for  issuance at December 31, 2007 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)           930,500                    $ 1.31                         96,000
       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                            2,161,500                    $ 1.20                         96,000
                                              =========                    ======                         ======

</TABLE>

     (1) Includes  270,000  options  granted under the 2002 Qualified  Incentive
Stock Option Plan,  185,000  options under the 2002  Non-Qualified  Stock Option
Plan,  154,500 options under the 1994 Qualified Stock Option Plan (this plan has
expired  and no further  awards can be made under its  provisions),  and 321,000
options under the 2007 qualified incentive stock option plan.

     (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 is equal to 110%
of the fair value of the  underlying  security at the close of business  one day
prior to the date of grant.

     Item 6. Selected Financial Data

     N/A

 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.

     The Company adopted SEC Staff Accounting Bulletin No. 108, "Considering the
Effects of Prior Year  Misstatements  when Quantifying  Misstatements in Current
Year  Financial  Statements"  (SAB No.  108),  effective  January  1,  2007.  In
accordance  with the  requirements  of SAB No. 108,  the Company has recorded an
adjustment  in the  amount of  approximately  $70,000  to the  opening  retained
earnings  balance  as of  January  1,  2007  in  the  accompanying  consolidated
financial  statements,  to  correct  errors  in the  accounting  of  share-based
compensation and contingent legal liabilities in 2006.

                                        7

<PAGE>

     In 2007,  the Company  made  certain  revisions  in the  valuation of stock
option grants that vested in 2006. The revised valuation resulted in an increase
in  compensation  expense of  approximately  $40,000 for 2006. Also in 2007, the
Company  discovered that a liability in the amount of approximately  $30,000 for
legal costs  incurred in 2006 should have been  recorded as of December 31, 2006
under the criteria of Statement of Financial  Accounting  Standards No. 5. There
was no  corporate  tax  effect  for the  adjustments  due to the  Company's  tax
position in 2006.

     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. 8


     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, 2007 and 2006 are  allowances  for  doubtful
accounts  aggregating  approximately  $47,000 and $192,700,  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,  2007  and 2006  aggregated  approximately  $ 24,000  and $ 71,000
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,  or  market  using  the
first-in, first-out method,

     Prepaid  expenses - In any given year we introduce  certain new products to
our customers.  In connection therewith,  we produce new collateral materials to
be  distributed  over an  introduction  period of time.  We follow the policy of
Statement of Position (SOP) 93-7  amortizing  these costs based on actual usage.
Advertising  expenses are expensed in the period the advertising either is aired
on TV or in the month a  advertisement  appears in a magazine in accordance with
SOP 93-7.

     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, 2007,  the Company had options
outstanding  under four  stock-based  compensation  plans and one  non-qualified
plan,  which are  described  below.  On  January 1, 2006,  the  Company  adopted
Statement  of  Financial   Accounting   Standards  No.  123R   (revised   2004),
"Share-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.

     Concentration  of cash - At various  times of the year and at December  31,
2007,  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.



                                        8
<PAGE>
     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.  We adopted the provisions of FASB  Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes -- an  Interpretation of FASB Statement No. 109"
("FIN 48"),  which  clarified the  accounting  for  uncertainty  in income taxes
recognized in accordance with SFAS 109, on January 1, 2007. FIN 48 clarifies the
application  of SFAS 109 by defining  criteria that an  individual  tax position
must meet for any part of the benefit of that  position to be  recognized in the
financial statements.

     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
these  intangible  assets  have  indefinite  lives  and  therefore  we no longer
recognize  amortization expense. 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

     N/A

     Item 7A. Quantitative and Qualitative Disclosures about Market RisK

     Liquidity and Capital Resources:

     Cash  increased  significantly  in the year  increasing  to $ 751  thousand
dollars from  approximately $71 thousand  dollars,  an increase of approximately
$679 thousand  dollars.  The increase in cash is a result of increased cash flow
from  operations,   managements'   decisions  to  invest  prudently  in  capital
expenditures and improved cash management.
                                       9
<PAGE>


     The amount of short-term borrowings  outstanding at December 31, 2007 was $
1.75 million  dollars.  This is a reduction  of $ 400 thousand  dollars from the
December 31, 2006, balance of $ 2.15 million dollars.

     During the year ended December 31, 2007 the Company  focused on programs to
more  effectively  manage working capital.  Accounts  receivable at December 31,
2007 and 2006 aggregated  approximately $ 2.0 million dollars  respectively.  In
2007, net sales increased $ 885 thousand dollars or 4.3%,  without a comparative
increase in accounts receivable.

     In addition,  inventory levels increased,  from  approximately $5.6 million
dollars to $6.0  million  dollars,  comparing  December  31,  2007 and 2006,  an
increase  of  approximately  $300  thousand  or 6.0%.  The  increase  was mainly
attributable to the timing of year purchases of materials, against a January 1st
price increases from our vendors on key raw materials.

     Accounts  payable at December  31, 2007  increased  to  approximately  $1.0
million dollars from $944 thousand  dollars.  The increase is reflective of year
end vendor invoices for purchases of raw materials.

     As a result of the above in 2007,  the  Company  continued  to improve  its
current ratio,  to 2.3 to 1 at December 31, 2007,  from 2.0 to 1 at December 31,
2006.

     At December 31, 2007 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, 2008,  bears interest at the 30 Day LIBOR
plus 275 basis points  (approximately 6.03% at December 31, 2007) 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, 2007,
we were  obligated  under  this  arrangement  in the amount of  $1,750,000.  The
Company plans on renewing the line of credit upon maturity to be used to finance
our working capital as needed.

     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, 2008,  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, 2007 such bonds carried interest
ranging  between  3.56% and 4.27%  annually.  Interest and principal are payable
quarterly.   We  believe  current   operations  are  sufficient  to  meet  these
obligations. The bonds maturity date is April 15, 2010.

     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, 2007
was $233,344 and interest rate is LIBOR plus 2.5% per annum (or 5.78%).

     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.

     In the year ended  December  31, 2007 the Company  recorded a $33  thousand
foreign currency translation  adjustment as a result of the strengthening of the
Canadian  dollar in  relationship  to the US dollar,  in the  conversion  of the
Company's Canadian subsidiary balance sheet to US dollars.

                                       10
<PAGE>
     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, 2007 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 2007.  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.

     Results of Operations:

     Years ended December 31, 2007 and 2006:

     For the year ended  December 31,  2007,  compared to December 31, 2006 both
revenue and profits increased principally due to the factors enumerated below.

     Net sales increased to $21.3 million dollars from $20.4 million dollars, an
increase of $885 thousand  dollars or 4.3%. The increase sales to customers were
Wal-Mart, West Marine - Starbrite's branded products, Donovan Marine and Boaters
World partially offset by lower sales to Kellogg Marine and other customers. The
Company with the support of advertising  programs  increased  sales of StarTron,
Mildew Stain Remover Wax Polishes and other products.

     Cost of Sales and Gross  Margins - For the  year,  gross  profit  increased
approximately $1.1 million dollars or 19.8%,  increasing from approximately $5.7
million dollars in 2006, to  approximately  $6.8 million dollars in 2007.  Gross
margin  percentages also increased from approximately 28% to 32%, an improvement
of approximately 4%. This increase is mainly attributable to improved sales mix,
increasing  sales of higher  margin  products,  i.e.  StarTron  and Mildew Stain
Remover,  in  addition to improved  margins of anti freeze  products.  The gross
margin benefited from lower sales of lower margin products i.e. motor oils.

     Cost of  Sales - Cost of  sales  decreased  as a  percentage  of sales as a
result  sales mix  discussed  above,  in addition to improved  margins  from our
wholly  owned  manufacturing  facility  -  Kinpak.  In  2008  we  will  continue
management's  initiatives  to decrease plant  operating  costs and saving in raw
material  costs at  Kinpak.  .  Operating  Expenses  - For the  year,  operating
expenses   aggregated   approximately  $5.9  million  dollars,  an  increase  of
approximately  $590  thousand  dollars  from  2006.  As a  percentage  of  sales
operating  expenses increased from 26.2% to 27.8%. Major increases - Advertising
& Promotion  increased  $419  thousand  dollars.  This  increase was a result of
managements'  initiatives to  promote/advertise  StarTron/Starbrite  products in


                                       12
<PAGE>
both the TV Media as well as target advertising in specific industry  magazines.
Selling, general & administrative expenses increased approximately $437 thousand
dollars. The primary increase was in compensation expense, computer services and
professional fees. During the year the Company, added key personnel in the sales
and  marketing/computer  support areas. In addition the Company  recorded an non
cash  compensation  expense of  approximately  $147 thousand  dollars under FASB
Statement  123R -Share  based  Payments,  which  requires  the  measurement  and
recognition of compensation expense for all share based awards made to employees
and  directors  based on estimated  fair values.  The Company also improved its'
computer  software  systems using third party vendors which were expensed in the
current year.

     The interest expense decreased  approximately $326 thousand dollars to $355
thousand in 2007,  compared to $681 thousand in 2006.  Increased  cash flow from
operations  in addition to improved  cash  management  resulted in the decreased
borrowings and decreased interest expense.

     Income from operations - Income from operations  increased to approximately
$907 thousand dollars in 2007 from an operating  profit of  approximately  $373,
thousand in 2006, an increase of $534 thousand dollars or 143%.

     Income Taxes - The Company fully utilized its net operating  losses (NOL's)
in the  current  year.  As a result  the  Company  had a tax  provision  of $140
thousand dollars.

     Net Income - increased to approximately $785 thousand dollars in 2007, from
a net  income  of  approximately  $ 392  thousand  in 2006 an  increase  of $385
thousand dollars or 120%.

     Contractual obligations:

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

                                         Total              2008        2009-2012       2013 and thereafter
                                       ----------       ----------     ------------    --------------------
<S>                                    <C>             <C>             <C>               <C>
  Long-term debt obligations           $6,268,344      $2,309,996      $1,958,348        $2,000,000
  Capital leases                           60,540          29,910          30,630              -
  Operating leases                        939,900         102,500         430,914           406,486
                                       ----------       ---------      ----------        ----------

Total                                  $7,268,784      $2,442,406      $2,419,892        $2,406,486
                                       ==========      ==========      ==========        ==========

</TABLE>

     Item 7A. Quantitative and Qualitative Disclosure About Market Risk

     N/A

     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.


                                       13
<PAGE>

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

     None.

     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, 2007,  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 Control Over Financial Reporting. No change in internal
control  over  financial  reporting  (as  defined  in Rule  13a-15(f)  under the
Exchange  Act)  occurred  during  the forth  quarter  2007  that has  materially
affected,  or reasonably likely to materially affect , our internal control over
financial reporting.

     Management's  Report on Internal  Control  Over  Financial  Reporting.  Our
management is responsible for  establishing  and maintaining  adequate  internal
control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our
management  conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control - Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission. Based on this evaluation, our management concluded that our internal
controls over  financial  reporting was effective as of December 31, 2007.  This
Annual  Report  on Form  10-K  does not  include  an  attestation  report of our
independent  registered public  accounting firm regarding  internal control over
financial  reporting.  Management's report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange  Commission that permit us to provide only  management's
report in the Annual Report on Form 10-K.


                                    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, 2007.

     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.


                                       14
<PAGE>
<TABLE>
<CAPTION>

     NAME                              OFFICER/DIRECTOR                                                  AGE

<S>                                 <C>                                                                   <C>
Peter G. Dornau                     President, Chief Executive Officer, and                               68
                                      Director since 1973

Jeffrey Barocas                     Vice President-Finance, Chief Financial                               60
                                      Officer and Director since 2007

William W. Dudman                   Vice President-Operations and Director since 2007                     43

Gregor M. Dornau                    Executive Vice President-Sales & Marketing and Director               39
                                      since 2007

Edward Anchel                       Director since 1998                                                   61

James M. Kolisch                    Director since 1998                                                   57

Laz L. Schneider                    Director since 1998                                                   69

John B. Turner                      Director since 2000                                                   61

Sonia B. Beard                      Director since 2002                                                   37

</TABLE>

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

     Jeffrey  Barocas  joined our company in December  2006 and was elected Vice
President-Finance  and Chief Financial Officer in April 2007. For the five years
immediately  preceding  his  employment,  he was an officer  of both  public and
privately owned  companies.  He was initially  elected to serve as a Director of
the Company in June 2007.

     William  W.  Dudman  joined  our  company  in  February  2004  as our  Vice
President-Operations  and  Director  in  2007.  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 in 2005 was elected to serve as Executive Vice  President-Sales and Director
in 2007.

     Edward Anchel was elected to serve as an outside Director of the Company in
May 1998. He joined the Company as Vice  President-Finance  and Chief  Financial
Officer in March 1999, which he held until his retirement on April 1, 2007.

     James M. Kolisch  joined our Board of  Directors as an outside  director in
May 1998. During the past five years,  provides most of our insurance coverages.
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,  SEC and  litigation
matters.





                                       15


<PAGE>
     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. In addition to his insurance credentials, Mr. Turner held a
Series  7  stock  brokerage   license.   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.

     Audit Committee

     We have an Audit  Committee,  which  consists  of Sonia B.  Beard,  John B.
Turner and James M. Kolisch as of December 31,  2007.  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.














                                       16
<PAGE>

     Item 11. Executive Compensation

     The following  table sets forth the amount of  compensation  for the fiscal
years  ended  December  31,  2007 and 2006,  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
  Name and
  Principal Position                                Annual compensation                 Long term compensation
                                                                                       Restricted     Options/
                                                                                       Stock
                                    Year           Salary           Bonus              Awards         SARs
                                    ----           ------           -----              ------
<S>                                 <C>            <C>              <C>                <C>            <C>
  Peter G. Dornau, CEO              2007           $104,166         $    -             $25,200(1)     40,000
                                    2006           $105,249         $    -             $27,540(2)     15,000


  Gregor M. Dornau, VP              2007           $107,600         $    -             $25,200(1)     40,000
                                    2006           $ 94,790         $    -             $13,770(2)     21,000
                                                                                                           -

  Jeffrey S. Barocas, CFO           2007           $100,000         $    -             $ 8,400(1)     25,000
                                    2006           $   -                               $     -            -
                                                   -

  William Dudman, VP                2007           $ 90,000         $    -             $25,200(1)     40,000
                                    2006           $ 87,555         $    -             $13,770(2)     22,000
                                                                                                       -
</TABLE>


     (1) Represents the aggregate value on the date of grant of restricted stock
awards made  during May,  2007 with  respect to 15,000  shares of the  Company's
common  stock  granted to each of Messrs.  Peter  Dornau,  William W. Dudman and
Gregor  Dornau,  and 5,000 shares of the  Company's  common stock granted to Mr.
Jeffrey S. Barocas  based on the closing price of the shares on the day prior to
the award date.

     (2) 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  granted to each of Messrs.  Peter Dornau and 15,000  shares of the
Company's  common stock granted to each of Messrs.  William W. Dudman and Gregor
Dornau, based on the closing price of the day prior to the award date.

     Option Grants in Last Fiscal Year

     On May 17, and December 17, 2007  Incentive  stock  options were granted to
our Named  Executive  Officers as well as an  additional  twenty-one  (21) other
employees.  The total awarded options aggregated 321,000 shares of which Messrs.
Peter G. Dornau,  Jeffrey S.  Barocas,  William  Dudman,  and Gregor Dornau each
received options representing 40,000, 25,000, 40,000, and 40,000 respectively.

     On December 17, 2007 the Company's outside directors, received compensation
in the  form of  non-qualified  common  stock  options.  Each  outside  director
received  10,000  non-qualified  common  stock  options,  or a total  of  50,000
non-qualified options.

                                       17
<PAGE>
     The  following  table sets forth  information  as to the  exercise of stock
options during the fiscal year ended  December 31, 2007, by our Named  Executive
Officers and the fiscal year-end values of unexercised options.


<TABLE>
<CAPTION>

                           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
----                       -----------   --------       -----------        -------------     -----------         -------------
<S>                           <C>          <C>             <C>                  <C>             <C>                 <C>
Peter G. Dornau               25,000       $34,650         1,148,500             72,000         $416,940            $   6,550
Jeffrey S. Barocas               -              -                 -              25,000              -                    150
William W. Dudman                -              -             13,400             63,600            4,280                8,920
Gregor M. Dornau              20,000        25,200            34,200             76,800            5,880                9,520
                             -------       -------         ---------            -------         --------             --------

                              45,000       $59,850         1,196,100            237,400         $427,100             $ 25,140
                             =======       =======         =========            =======         ========             ========
</TABLE>

     (1) The value of  unexercised  "in-the-money"  options at December 31, 2007
was calculated by  determining  the  difference  between $1.33,  the fair market
value of the underlying  Common Stock at December 31, 2007 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 four stock options plans:  the 1994,  2002 and 2007 Incentive Stock
Option Plans and the 2002 Non-Qualified  Stock Option Plan. All of our employees
are eligible to be selected to participate in our 1994,  2002 and 2007 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.

     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,  which  are  contributory  by  the
employees.  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 the Company
and are entirely funded by employee contributions.

     Securities  authorized  for  issuance  at December  31,  2007 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)           930,500                    $ 1.31                         96,000
       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                            2,161,500                    $ 1.20                         96,000
                                              =========                    ======                         ======

</TABLE>

                                       18


<PAGE>
     (1) Includes  270,000  options  granted under the 2002 Qualified  Incentive
Stock Option Plan,  185,000  options under the 2002  Non-Qualified  Stock Option
Plan, 154,500 options under the 1994 Qualified Incentive Stock Option Plan (this
plan has expired and no further  awards can be made under its  provisions),  and
321,000 options under the 2007 Qualified Incentive Stock Option Plan.

     (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  May 2007 we issued  102,000  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 $1.66
each. Shares were granted as follows:

Officers:
  Peter G. Dornau, President and CEO                      15,000  shares
  Jeffrey S. Barocas, Vice President and CFO               5,000  shares
  William Dudman, Vice President                          15,000  shares
  Gregor M.  Dornau, Vice President                       15,000  shares
                                                        --------
                                                          50,000  shares
  Other employees, as a group (16 individuals)            52,000  shares
                                                         -------
  Total restricted shares awarded                        102,000  shares
                                                         =======

     These  restricted  stock awards were  approved by our  shareholders  at our
Annual Meeting of Shareholders held on August 3, 2007. In addition,  the Company
issued 3,500 restricted shares on October 08, 2007, at the market price of $1.87
as an additional incentive of employment for two new employees.

     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, 2007:

                      Number of options granted during the
                             year ended December 31,
         Director          2007             2006
         --------          ----             ----
         Edward Anchel        10,000          -     shares
         Sonia B. Beard       10,000       10,000   shares
         James M. Kolisch     10,000       10,000   shares
         Laz L. Schneider     10,000       10,000   shares
         John B. Turner       10,000       10,000   shares
                              ------       ------

                              50,000       40,000   shares
                              ======       ======

                                       19


<PAGE>
     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, 2007 covering our Annual Meeting of Shareholders
which will be held on or about July 1, 2008.

     Item 12. Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets forth  information  at  December  31,  2007 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>

Title of                   Name and Address of                                  Amount and Nature of      Percent
Class                      Beneficial Owner                                     Beneficial Ownership      of Class

<S>               <C>                                                               <C>                      <C>
Common            Peter G. Dornau, President, CEO,
                     Chairman Board of Directors
                     Fort Lauderdale, FL 33317                                      5,566,368 (1)            63.0%

Common            Edward Anchel
                     Director
                     Boynton Beach, FL 33437                                          326,451 (2)             3.7%

Common            Jeffrey S. Barocas,
                     Chief Financial Officer, Director
                     Weston, Fl 33326                                                   5,000 (3)              .1%

Common            William W. Dudman, V. P.-Operations, Director
                     Fort Lauderdale, Fl 32314                                         77,700 (4)              .9%

Common            Gregor M. Dornau, Vice President-Sales, Director
                     Fort Lauderdale, FL 33315                                        304,980 (5)             3.5%

Common            James M. Kolisch, Director
                     Coral Gables, FL 33114                                            66,167 (6)              .7%

Common            Laz L. Schneider, Director
                     Fort Lauderdale, FL 33305                                         50,000 (7)              .6%

Common            John B. Turner, Director
                           Miami, FL 33186                                             79,463 (8)              .9%

Common            Sonia B. Beard, Director
                           Merritt Island, FL 32952                                    40,000 (9)              .5%
                                                                                    ---------                -----
Common            All directors and officers as a group                             6,556,129 (10)           73.9%
                    10 individuals                                                  =========                =====
</TABLE>


                                       20


<PAGE>




     (1) Includes  1,148,500 shares that are issuable upon the exercise of stock
options and/or warrants within 60 days of December 31, 2007.

     (2) Includes  43,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (3) Includes no shares that are issuable upon the exercise of stock options
within 60 days of December 31, 2007.

     (4) Includes  13,400  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (5) Includes  34,200  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (6) Includes  50,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (7) Includes  50,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (8) Includes  50,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007

     (9) Includes  20,000  shares that are  issuable  upon the exercise of stock
options within 60 days of December 31, 2007.

     (10) Includes 1,409,100 shares that are issuable upon the exercise of stock
options and/or warrants within 60 days of December 31, 2007.

     Item 13. Certain Relationships and Related Transactions

     In 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 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  notified the
Company that he was  exercising his rights to convert the $1.5 million loan into
1.5  million  shares  of our  common  stock.  Such  transactions  were  approved
unanimously by the 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.  On
July 12, 2006 we renewed our lease agreement for a term of ten years.  The lease
required a minimum  rental of $100,500 the first year and provides for a maximum
2% increase on the anniversary of the lease  throughout the term, which has been
waived thru December 31, 2007. 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, 2007 and 2006 amounted to approximately $100,500 each year.



                                       21
<PAGE>
     We acquired the rights to the Star brite(R)  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(R)  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, 2007 and 2006, we had amounts due from affiliated companies,  which
are directly or beneficially  owned by our president  aggregating  approximately
$109,000 and $231,000, 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  $732,000 and $622,300 during the
years  ended   December  31,  2007  and  2006,   respectively;   and   allocable
administrative  fees aggregated  $333,000 and , $350,000,  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, 2007 and 2006
under such relationship.

     Mr.  Kolisch  a  Director  of the  Company  sources  most of the  Company's
insurance needs at a arms length basis.

     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, 2007.

                                     Part IV

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

     (A) 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*.

     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.*

     11 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.*

                                       22
<PAGE>

     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 Ocean Bio-Chem,  Inc. 2007 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 June 20, 2007).

     10.24 Lease dated May 1, 1998  between  Star Brite  Distributing,  Inc. and
PEJE, Inc and renewal of lease dated

     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, 2006.

     ** Attached hereto.
                                       23
<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 Directors
                         and Chief Executive Officer
                         March 28, 2008

                 By:      /s/ Jeffrey S. Barocas
                    -------------------------------------------------
                         Jeffrey S. Barocas
                         Chief Financial Officer
                         March 28, 2008

     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.

Signature                   Capacity                            Date
----------                  ------------                        -----
/s/ Peter G. Dornau         President, Chief Executive          March 28, 2008
---------------------        Officer and Director
Peter G. Dornau

/s/Jeffrey S. Barocas       Chief Financial Officer             March 28, 2008
---------------------         and Director
Jeffrey S. Barocas

/s/Greg Dornau              Vice President Sales & Marketing    March 28, 2008
---------------------         and Director
Greg Dornau

/s/William Dudman           Vice President Operations           March 28, 2008
---------------------         and Director
William Dudman

/s/ Edward Anchel           Director                            March 28, 2008
---------------------
Edward Anchel

/s/ James M. Kolisch        Director                            March 28, 2008
---------------------
James M. Kolisch

/s/ Laz L. Schneider        Director                            March 28, 2008
---------------------
Laz Schneider

/s/ John B. Turner          Director                            March 28, 2008
---------------------
John B. Turner

/s/ Sonia B. Beard          Director                            March 28, 2008
---------------------
Sonia B. Beard

     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.

                                       24
<PAGE>

                                                                      EXHIBIT 21

     The following is a list of the Registrant's subsidiaries:


                  Name:                                 Ownership %

         Star brite Distributing, Inc.                     100
         Star brite Distributing Canada, Inc.              100
         D & S Advertising Services, Inc.                  100
         Star brite StaPut, Inc.                           100
         Star brite Service Centers, Inc.                  100
         Star brite Automotive, Inc.                       100
         Kinpak Inc.                                       100








































                                       26
<PAGE>

                                                                  EXHIBIT 32.1/2

                                  CERTIFICATION

     Pursuant  to  18U.S.C.  Section  1350,  the  undersigned  officers of Ocean
Bio-Chem, Inc. (the "Company"),  hereby certify that the Company's Annual Report
on Form 10-K for the year ended December 31, 2007 (the "Report")  fully complies
with  the  requirements  of  Section  13(a)  or  15(d),  as  applicable,  of the
Securities Exchange Act of 1934 and that 5he information contained in the Report
fairly presents,  in all material respects,  the financial condition and results
of operation of the Company.

Dated:  March 28, 2008

/s/ Peter G. Dornau
-------------------------
Peter G. Dornau
Chairman of the Board of
Directors  and Chief
Executive Officer



/s/ Jeffrey S. Barocas
-------------------------
Jeffrey S. Barocas
Chief Financial
Officer



























                                       26

<PAGE>



                                                                    Exhibit 31.1
                                  CERTIFICATION


         I, Peter G. Dornau certify that:

     1. I have reviewed this Form 10-K of Ocean Bio-Chem, Inc. as of and for the
period ended December 31, 2007;

     2. Based on my knowledge, this report does not contain any untrue statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The  registrant's  other  certifying  officer and I are  responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial
reporting  (as defined in Exchange Act Rules  13a-15(f) and  15d-15(f))  for the
registrant and we have:

     a)  designed  such  disclosure  controls  and  procedures,  or caused  such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting,  or caused such
internal control over financial  reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant's  disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant's internal control
over  financial  reporting  that occurred  during the  registrant's  most recent
fiscal quarter (the registrant's  fourth fiscal quarter in the case of an annual
report) that has  materially  affected,  or is  reasonably  likely to materially
affect, the registrant's internal control over financial reporting.

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

     a) All significant  deficiencies  and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

     b) Any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.


Dated:    March 28, 2008            /s/ Peter G. Dornau
                                    -------------------
                                    Peter G. Dornau
                                    Chairman of the Board and
                                    Chief Executive Officer







<PAGE>

                                                                    Exhibit 31.2
                                  CERTIFICATION

I, Jeffrey S. Barocas certify that:

     1. I have reviewed this Form 10-K of Ocean Bio-Chem, Inc. as of and for the
period ended December 31, 2007;

     2. Based on my knowledge, this report does not contain any untrue statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The  registrant's  other  certifying  officer and I are  responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal  control over financial
reporting  (as defined in Exchange Act Rules  13a-15(f) and  15d-15(f))  for the
registrant and we have:

     a)  designed  such  disclosure  controls  and  procedures,  or caused  such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting,  or caused such
internal control over financial  reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant's  disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant's internal control
over  financial  reporting  that occurred  during the  registrant's  most recent
fiscal quarter (the registrant's  fourth fiscal quarter in the case of an annual
report) that has  materially  affected,  or is  reasonably  likely to materially
affect, the registrant's internal control over financial reporting.

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

     a) All significant  deficiencies  and material  weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

     b) Any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.


Dated:    March 28, 2008            /s/ Jeffrey S. Barocas
                                    ----------------------
                                    Jeffrey S. Barocas
                                    Chief Financial Officer










<PAGE>























                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2007 AND 2006


<PAGE>









                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2007 AND 2006



                                                                       Page

  Report of independent registered public accounting firm               F-2

  Consolidated balance sheets                                           F-3

  Consolidated statements of operations                                 F-4

  Consolidated statements of shareholders' equity                       F-5

  Consolidated statements of cash flows                                 F-6

  Notes to consolidated financial statements                       F-8 - F-19













<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  sheets of Ocean
Bio-Chem,  Inc.  and  Subsidiaries  as of December  31,  2007 and 2006,  and the
related consolidated  statements of operations,  shareholders'  equity, and cash
flows  for  the  years  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 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 audits 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, 2007 and 2006 and the  consolidated
results of its  operations  and its  consolidated  cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.





Berenfeld Spritzer Shechter & Sheer LLP
Certified Public Accountants

March 31, 2008
Ft. Lauderdale, Florida













                                       F-2



<PAGE>


                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2007 AND 2006
<TABLE>
<CAPTION>

                                     ASSETS
                                                                                    2007                          2006
                                                                                   -------                       -------


  <S>                                                                            <C>                           <C>
  Current Assets:
    Cash                                                                         $   750,901                   $    71,080
    Trade accounts receivable net of allowance for
      doubtful accounts of approximately $47,000
      and $192,700, respectively                                                   1,974,654                     2,026,870
    Inventories                                                                    5,993,657                     5,647,933
    Prepaid expenses and other current assets                                        285,126                       218,151
                                                                                 -----------                   -----------

          Total current assets                                                     9,004,338                     7,964,034
                                                                                 -----------                   -----------

  Property, plant and equipment, net                                               6,235,812                     6,800,176
                                                                                 -----------                   -----------

  Other assets:
    Trademarks, trade names, and patents                                             330,439                       330,439
     Due from affiliated companies                                                   109,310                       231,200
    Deposits and other assets                                                        253,718                       203,510
                                                                                 -----------                   --------------
         Total other assets                                                          693,467                       765,149
                                                                                 -----------                   ------------

         Total assets                                                            $15,933,617                   $15,529,359
                                                                                 ===========                   ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

  Current liabilities:
     Accounts payable trade                                                      $ 1,010,263                   $   943,907
     Note payable bank                                                             1,750,000                     2,150,000
     Current portion of long-term debt                                               589,906                       586,060
     Accrued expenses payable                                                        511,758                       363,669
                                                                                 -----------                   -----------
         Total current liabilities                                                 3,861,927                     4,043,636
                                                                                 -----------                   ------------


  Long-term debt less current portion                                              3,988,978                     4,550,190
                                                                                 -----------                   ------------

  Commitments and contingencies                                                         -                            -

  Shareholders' equity:
  Common stock - $.01 par value, 10,000,000 shares authorized,
    7,871,816 and 7,621,316 shares issued and outstanding at December
    31, 2007 and 2006, respectively                                                   78,718                        76,213
  Additional paid-in capital                                                       7,780,547                     7,257,447
  Foreign currency translation adjustment                                        (   209,049)                  (   176,094)
  Retained earnings (deficit)                                                        440,691                   (   213,838)
                                                                                 -----------                   ------------
                                                                                   8,090,907                     6,943,728
  Less treasury stock 7,519 shares, at cost                                      (     8,195)                  (     8,195)
                                                                                 ------------                  ------------
         Total shareholders' equity                                                8,082,712                     6,935,533
                                                                                 ------------                  ------------

         Total liabilities and shareholders' equity                              $15,933,617                   $15,529,359
                                                                                 ============                  ============
</TABLE>



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

                                       F-3


<PAGE>



                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2007 AND 2006

<TABLE>
<CAPTION>

                                                                  2007                           2006
                                                                  ----                           ----

<S>                                                             <C>                           <C>
      Gross Sales                                               $23,308,891                   $22,338,500

      Less discounts, returns and allowances                      1,996,635                     1,911,368
                                                                -----------                   -----------
      Net sales                                                  21,312,256                    20,427,132

      Cost of goods sold                                         14,470,397                    14,719,006
                                                                -----------                   -----------
      Gross profit                                               6,841,859                      5,708,126
                                                                -----------                   -----------

      Operating expenses:
         Advertising and promotion                                1,562,423                     1,143,420
         Selling and administrative                               4,018,150                     3,510,715
         Interest                                                   354,622                       680,572
                                                                -----------                   -----------
         Total operating expenses                                 5,935,195                     5,334,707
                                                                -----------                   -----------

      Income from operations                                        906,664                       373,419

      Interest and other income                                      18,597                        18,638
                                                                -----------                   -----------

      Income  before provision
         for income taxes                                           925,261                       392,057

      Provision for income taxes                                    200,260                           -
                                                                -----------                   -----------

      Net income                                                    725,001                       392,057

      Other comprehensive income (loss):
         Foreign currency translation,
         net of taxes                                           (    32,955)                        3,559
                                                                -----------                   -----------

      Comprehensive income                                      $   692,046                   $   395,616
                                                                ===========                   ===========

      Earnings per share:
         Basic                                                  $       .09                   $       .06
                                                                ===========                   ===========
         Diluted                                                $       .08                   $       .05
                                                                ===========                   ===========

      Weighted average shares- basic                              7,690,191                      6,207,983
                                                                ===========                   ===========
      Weighted average shares - diluted                           8,826,259                     7,214,326
                                                                ===========                   ===========
</TABLE>

      The accompanying notes are an integral part of these financial statements

                                       F-4


<PAGE>



                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2007 AND 2006
<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,
 2006                       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

Stock based compensation                                 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

Adjustment for SAB 108
  implementation                                         40,200                         (  70,472)                          (30,272)

Net Income                                                                                725,001                           725,001

Bonus shares to employees     105,500     1,055         146,850                                                             147,905

Exercise of stock options     145,000     1,450         189,066                                                             190,516

Stock based compensation                                146,984                                                             146,984

Foreign currency translation
adjustment                                                              (   32,955)                                      (   32,955)
                            ---------  --------      ----------         ----------      ----------      --------         -----------

December 31,                7,871,816   $78,718      $7,780,547         ($ 209,049)     $ 440,691       ($8,195)         $8,082,712
2007                        =========  ========      ==========         ===========     ==========      ========         ===========

</TABLE>









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




                                       F-5


<PAGE>



                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2007 AND 2006
<TABLE>
<CAPTION>

                                                                         2007               2006
                                                                         ----               ----
<S>                                                                   <C>                <C>
  Cash flows from operating activities:
       Net Income                                                     $  725,001         $  392,057
  Adjustment to reconcile net income to net cash
    provided by operations
  Depreciation and amortization                                          785,064            780,753
       Stock based compensation                                          294,889            195,030
       Accounts receivable allowance for doubtful accounts               168,874         (   61,408)
  Changes in assets and liabilities:
       Accounts receivable                                            (  197,916)            61,700
       Inventory                                                      (  345,724)           612,879
       Deposit and other assets                                       (   50,210)               -
       Recoverable income taxes                                             -               274,500
       Prepaid expenses                                               (   66,975)            44,242
       Accounts payable, accrued taxes, and other                        148,090         (  401,041)
                                                                      -----------        -----------
            Cash provided by operating activities                      1,461,093          1,898,712
                                                                      -----------        -----------
  Cash flows used by investing activities:
       Purchases of property, plant & equipment                       (   95,665)        (  270,289)
                                                                      -----------        -----------
            Cash (used in) investing activities                       (   95,665)        (  270,289)
                                                                      -----------        -----------
  Cash flows from financing activities:
       Borrowings (repayments) line of credit                         (  400,000)        (1,850,000)
       Proceeds from stock options exercises                             190,516            147,050
       Amounts due from affiliates                                       121,890         (  202,178)
       (Payments of) proceeds from long-term debt                     (  565,058)           139,683
                                                                      -----------        -----------
            Cash provided (used in) financing activities              (  652,652)        (1,765,445)
                                                                      -----------        -----------
  Cash prior to effect of exchange rate on cash                          712,776         (  137,022)

       Effect of exchange rate on cash                                (   32,955)             3,559
                                                                      -----------        -----------
        Net effect in cash                                               679,821         (  133,463)
       Cash at beginning of year                                          71,080            204,543
                                                                      -----------        -----------
       Cash at end of year                                            $  750,901         $   71,080
                                                                      ==========         ===========

  Supplemental disclosure of cash transactions
       Cash paid for interest during year                             $  354,621         $  680,572
                                                                      ===========        ===========
       Cash paid for income taxes during year                         $  200,000                -
                                                                      ===========        ===========
  Supplemental disclosure of non-cash transactions
       Conversion of the Company indebtedness to
           P. Dornau to equity                                        $     -            $1,241,000
                                                                      ===========        ==========
       Forgiveness of indebtedness to an affiliate                    $      -            $  295,752
                                                                     ===========        ===========


</TABLE>




  The accompanying notes are an integral part of these financial statements

                                       F-6


<PAGE>


                      OCEAN BIO-CHEM, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED STATEMENTS
                     YEARS ENDED DECEMBER 31, 2007 AND 2006

     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(R) 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.  Reported  net sales are net of  customer  prompt  pay
discounts, contractual allowances, authorized customer returns, consumer rebates
and  other  allowable  deductions  from our  invoices.  Cooperative  advertising
deductions,  based on our customers'  promotion of our products is recognized as
an advertising cost and charged against operations as an operating expense.  The
Company  follows the policy of reporting  sales taxes as a net amount  -receipts
and payments recorded in a liability account.

     Collectibility  of  accounts  receivable  -  Included  in the  consolidated
balance  sheets as of December  31, 2007 and 2006 are  allowances  for  doubtful
accounts  aggregating  approximately  $47,000 and $192,700,  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,  2007 and  2006  aggregated   approximately  $22,000  and  $71,000
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, 2007
and 2006 are as follows:

                              2007           2006
                              ----           ----
    Raw materials          $3,247,359    $3,423,030
    Finished goods          2,821,861     2,244,903
                           ----------    ----------
                           $6,069,220    $5,667,933

    Inventory Reserves    (    75,563)   (   20,000)
                          ------------   -----------
     Inventory Net         $5,993,657    $5,647,933
                          ============   ===========

     At December  31, 2007 and 2006 and for the years then ended,  approximately
$75,600 and $20,000  respectively is reflected in the accompanying  consolidated
financial statements as a reserve for slow moving inventory.

     Shipping and handling  costs - All shipping and handling  costs incurred by
us are included in operating  expenses on the statements of income.  These costs
totaled  approximately  $834,850 and  $880,535 for the years ended  December 31,
2007 and 2006 respectively.

     Prepaid  expenses - During the years ended  December  31, 2007 and 2006 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.  At December 31,
2007 the Company did not have any  accumulated  cost of collateral  materials on
hand. For the year 2006 the Company amortized $15,400.

                                      F-7


<PAGE>




     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),  "Share 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.

     Staff Accounting Bulletin No. 108 - In September 2006, the SEC staff issued
Staff  Accounting  Bulletin  No.  108,  "Considering  the  Effects of Prior Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements"  ("SAB No. 108"). This SAB provides guidance on the consideration of
the  effects  of  prior  year   misstatements   in   quantifying   current  year
misstatements  for  the  purpose  of  a  materiality  assessment.  SAB  No.  108
establishes  an approach that  requires  quantification  of financial  statement
errors based on the effects on each of the Company's  financial  statements  and
related  financial  statement  disclosures.  The  SAB  permits  existing  public
companies to record the cumulative effect of initially applying this approach in
the first year  ending  after  November  15,  2006 by  recording  the  necessary
correcting  adjustments to the carrying  values of assets and  liabilities as of
the  beginning  of that  year with the  offsetting  adjustment  recorded  to the
opening balance of retained  earnings.  Additionally,  the use of the cumulative
effect transition  method requires detailed  disclosure of the nature and amount
of each individual error being corrected  through the cumulative  adjustment and
how and when it arose. At December 31, 2007, the Company  recorded an adjustment
under SAB No. 108.

     The  transition  provisions of SAB No. 108 permit the Company to adjust for
the  cumulative  effect on retained  earnings of immaterial  errors  relating to
prior years.  Such adjustments do not require  previously filed reports with the
SEC to be amended.

     The Company  adopted SAB No. 108  effective  January 1, 2007. In accordance
with the  requirements  of SAB No. 108,  the Company  has  adjusted  the opening
retained  earnings balance for 2007 in the accompanying  consolidated  financial
statements  for adoption of SFAS No.  123-R , in addition to the  recording of a
contingent legal liability.

     At the end of 2007,  the Company  re-evaluated  its Black Scholes model and
the  adoption  of SFAS No.  123 R and  recorded  an  adjustment  to the  opening
retained  earnings of  approximately  $40,000.  In addition under SAB No 108 the
Company recorded an adjustment to record a contingent liability of approximately
$30,000 to opening  retained  earnings.  The adjustments had no impact on income
tax expense.

     The Company considers this adjustment to be immaterial as it did not impact
the consolidated statements of operations and the adjustment was not material to
the consolidated balance sheets in prior periods.

                                       F-8

<PAGE>
     The cumulative  effect of the adjustment  above on the opening  balances of
the balance sheet is as follows (in thousands):

   As of January 1, 2007
                                                               Liabilities and
   Balance Sheet Accounts as Adjusted                            Shareholders'
   Increase (Decrease)                          Assets            Equity
   -------------------------------

   Retained earnings                       $    -            $      70,472
   Additional Paid in Capital                   -            (      40,200)
   Accrued Liabilities                          -            (      30,272)
                                           -----------       --------------
        Total                              $    -            $       -
                                           ===========       =============

     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.

     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  51% and 59% of  consolidated  gross  revenues for the years ended
December 31, 2007 and 2006; and 44% and 57% of consolidated  accounts receivable
at December  31,  2007 and 2006,  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,
2007,  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.

     Impairment  of  long-lived  assets - Potential  impairments  of  long-lived
assets are reviewed annually or when events and circumstances warrant an earlier
review. In accordance with SFAS No. 144, impairment is determined when estimated
future  undiscounted  cash  flows  associated  with an asset  are less  than the
asset's carrying value.

     Income Taxes - Income taxes are accounted for under the asset and liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit carry-forwards.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

     In  assessing  the  ability to realize a portion of  deferred  tax  assets,
management considers whether it is more likely than not that some portion or all
of the  deferred tax assets will not be realized.  The ultimate  realization  of
deferred tax assets is dependent  upon the  generation of future  taxable income
during the  periods in which  those  temporary  differences  become  deductible.
Management  considers the  scheduled  reversal of deferred tax  liabilities  and
projected future taxable income in making the assessment.

     Effective  January  1,  2007,  the  Company  adopted  Financial  Accounting
Standards Board ("FASB) Interpretation No. (FIN) 48, "Accounting for Uncertainty
in Income Taxes" and FSP FIN 48-1,  which amended certain  provisions of FIN 48.
FIN 48 clarifies the  accounting for  uncertainty in income taxes  recognized in
financial  statements in accordance  with SFAS No. 109,  "Accounting  for Income
Taxes." FIN 48 prescribes a recognition  threshold and measurement attribute for
the financial  statement  recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 requires that the Company determine
whether the benefits of the  Company's tax positions are more likely than not of
being  sustained  upon audit based on the technical  merits of the tax position.
The   provisions   of  FIN  48  also   provide   guidance   on   de-recognition,
classification,  interest  and  penalties,  accounting  in interim  periods  and
disclosure. The Company did not have any unrecognized tax benefits and there was
no effect on the  financial  condition or results of  operations  for the twelve
months ended December 31, 2007 as a result of implementing  FIN 48, or FIN 48-1.
In  accordance  with  FIN 48 the  Company  adopted  the  policy  of  recognizing
penalties in selling and administrative  expenses and interest,  if any, related
to  unrecognized  tax positions as income tax expense.  The tax years  2004-2007
remain subject to examinations by major tax jurisdictions.

                                       F-9


<PAGE>
     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 these  intangible  assets have indefinite  lives and therefore we no longer
recognize  amortization expense. 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.

     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.

     Earnings per share - The Company computes  earnings per share in accordance
with the  provisions of SFAS No. .128,  "Earnings per share," which  establishes
standards  for computing and  presenting  basic and diluted  earnings per share.
Basic  earnings  per share is computed by dividing  net  earnings  available  to
common  shareholders by the weighted average number of shares outstanding during
the period.  Diluted  earnings  per share is computed  assuming  the exercise of
stock  options  under the  treasury  stock  method and the related  income taxes
effects,  if not  anti-dilutive.  For loss periods common share  equivalents are
excluded from the calculation, as their effect would be anti-dilutive.  See Note
10 Earnings per share computation of basic and diluted number of shares.

     Reclassifications   -  Certain  items  in  the  accompanying   consolidated
financial   statements   for  the  years  ended  December  31,  2006  have  been
reclassified to conform with the 2007 presentation.

     Note 2 - Property, plant and equipment:

     The Company's property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
                                                    Estimated
                                              Useful Life - Years

                                                                                December 31,
                                                                             2007               2006
                                                                             -----              ----
<S>                                                                       <C>                <C>
   Land                                                                   $   278,325        $  278,325
   Building                                          30 years               4,389,155         4,389,155
   Manufacturing and warehouse equipment           6-20 years               6,367,883         6,521,010
   Office equipment and furniture                   3-5 years                 509,496           678,537
   Construction in process                                                     21,079            47,798
   Leasehold improvement                          10-15 years                 122,644           145,505
                                                    -----                 -----------        ----------
                                                                           11,688,582        12,060,330
            Less accumulated depreciation                                   5,452,770         5,260,154
                                                                          -----------       -----------
   Total property, plant and equipment, net                                $6,235,812        $6,800,176
                                                                          ===========        ==========
</TABLE>

     Depreciation  expense for the years ended  December 31, 2007 and 2006 which
includes  amortization  of  capitalized  lease assets,  amounted to $785,064 and
$780,753 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:
<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                             2007              2006
                                                                             ----              ----
<S>                                                                       <C>                <C>
   Land                                                                   $   278,325        $  278,325
   Building                                                                 4,389,154         4,389,154
   Manufacturing and warehouse equipment                                    6,340,073         6,203,283
   Construction in process                                                     21,079            23,391
   Office equipment and furniture                                             372,689           361,221
                                                                          -----------        ----------
                                                                           11,401,320        11,255,374
   Less accumulated depreciation                                            5,339,212         4,598,825
                                                                          -----------        ----------
   Total property, plant and equipment, net                               $ 6,062,108        $6,656,549
                                                                          ===========        ==========
</TABLE>

                                      F-10

<PAGE>
     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.

     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
6.03% and 8.10% at December 31, 2007 and 2006 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, 2007 the
Company was in compliance  with all financial  covenants of the loan  agreement.
This financing matures on May 31, 2008.

     As of  December  31,  2007  and  2006  the  Company  was  obligated  to its
commercial  lender  under this  arrangement  in the  amounts of  $1,750,000  and
$2,150,000  respectively.  The average  outstanding  loan  balances and interest
incurred  for the years  ended  December  31,  2007 and 2006 were  approximately
$2,209,000, $4,081,000 and $177,700 and $321,500, respectively.

     Note 4 - Long-term debt:

     Long-term debt at December 31, 2007 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, 2007,  $1,445,000 and $2,840,000 were
outstanding attributable to the 1997 and 2002 series,  respectively.  During the
year ended  December 31, 2007  interest  rates ranged  between  3.56% and 4.27%.
During the year ended  December 31, 2006 interest rates ranged between 3.08% and
4.24%.  Interest  expense  for  2007 and 2006  was  approximately  $184,316  and
$188,200,  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.



                                      F-11


<PAGE>
     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 2007 and 2006,  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  $60,540 and $57,300 at, December 31, 2007, and 2006 respectively,
have varying maturities through 2012 and carry interest rates ranging from 7% to
12% for both years.

     On April 12, 2005 the Company  entered  into a  financing  obligation  with
Regions Bank whereby the bank advanced the Company $500,000 to finance equipment
acquisitions  at  the  Kinpak  facility.  Such  obligation  is  due  in  monthly
installments of principal  aggregating  approximately $8,300 plus interest.  The
outstanding  balance and interest  rate on this  obligation at December 31, 2007
and 2006 were approximately $233,344 and $333,300 respectively. Interest rate is
calculated at libor plus 2.5% per annum,  respectively  or 5.78% at December 31,
2007,  through the  maturity on April 15, 2010.  Interest  incurred for 2007 and
2006 was approximately $27,000 and $29,000 respectively.

     In 2005 Mr.  Dornau  loaned the  Company  $1.5  million in order to bolster
working capital. In connection with the 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
notified  the  Company  that he was  exercising  his rights to convert  the $1.5
million loan 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, 2007 and 2006 were as
follows:
<TABLE>
<CAPTION>

                                          Current Portion                     Long Term Portion
                                          ---------------                     -----------------
                                           2007          2006                 2007              2006
                                           ----          ----                 ----              ----

<S>                                      <C>            <C>               <C>               <C>
   Industrial Development Bonds          $460,000       $460,000          $3,825,000        $4,283,107
   Notes payable                           99,996         99,996             133,348           233,344
   Capitalized equipment leases            29,910         26,064              30,630            33,739
                                       ==========     ==========          ==========        ==========
                                         $589,906       $586,060          $3,988,978        $4,550,190
                                       ==========       ========          ==========        ==========
</TABLE>

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

                                   Year ending December 31,
                           2008     $  589,906
                           2009        574,749
                           2010        501,619
                           2011        466,565
                           2012        446,045
                       Thereafter    2,000,000
                                    ----------
                            Total   $4,578,884
                                    ==========










                                      F-12


<PAGE>

     Note 5 - Income taxes:

     The  Components of the Company's  consolidated  income tax provision are as
follows:
                                             2007             2006
                                             ----             ----

Income tax provision:
      Federal - current                    $200,260       $   -
              - deferred                         -            -
      State                                      -            -
                                           --------       --------
                            Total          $200,260       $   -
                                           ========       ========

     The  reconciliation  of Income Tax provision at the  statutory  rate to the
Income Tax expense is as follows:

                                             2007          2006
                                           --------       --------
Computed at statutory rate                 $314,602       $133,280
Increase (reduction) in income taxes
 resulting from:
Change in valuation allowance              (382,237)      (262,769)
Share based compensation                    100,300        129,489
Other, permanent adjustments                116,703             -
Other permanent adjustments- state
taxes                                        50,892             -

                                           --------       ---------

                                           $200,260       $     -
                                           ========       =========


     For the year 2007 the Company had available tax loss  carryovers  available
to offset current  taxable  income  aggregating  approximately  none for federal
taxes and  approximately  $218,000 for State tax  purposes,  expiring in various
years through 2026.

     At  December  31,  2006 the  Company  had  available  tax  loss  carryovers
available to offset  against future  taxable  income  aggregating  approximately
$804,000  and  $1,611,000  for  federal  and  state tax  purposes,  respectively
expiring in various years through 2025.

     The Company's  deferred tax asset and liability  accounts  consisted of the
following at December 31:

                                            2007            2006
                                           --------       --------
Deferred tax assets:

Depreciation of property and equipment     $  9,666       $  9,666

Reserves for bad debts and inventory
  valuation                                  43,891         76,147

Net operating loss carryforwards             11,990        361,971

                                           --------       --------
                                             65,547        447,784

Less valuation allowance                   ( 65,547)       (447,784)
                                           ---------      ---------
Net deferred tax asset                     $     -        $    -
                                           ========       ========

     The Company has provided for a valuation allowance against the deferred tax
asset,  as there is no assurance  that the Company will generate  future taxable
income to derive  benefit  from all or a part of the  deferred  tax assets.  The
change in the valuation allowance was $382,200 in 2007.

                                      F-13


<PAGE>
     Note 6 - Related party transactions:

     At December 31, 2007 and 2006, 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
$109,000  and  $231,000,  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  $390,410, and $622,300 during the
years  ended   December  31,  2007,  and  2006,   respectively;   and  allocable
administrative  fees  aggregated  $333,000  and $350,000  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  the  debt.  The  Company
recognized  additional  paid-in capital  attributable to this transaction in the
amount of $295,752.

     Mr.  Kolisch,  a Director  of the  Company  sources  most of the  Company's
insurance needs at a arms length competitive basis.

     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  $100,500  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,  2007.  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, 2007, and 2006 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 $273,752
and $306,936 at December 31, 2007 and 2006,  respectively,  is primarily secured
by the real estate leased to the Company.

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

      Year ending December 31,
           2008                      $102,500
           2009                       104,560
           2010                       106,640
           2011                            -
           Thereafter                 626,200
                                     --------
             Total                   $939,900
                                     ========

                                      F-14

<PAGE>
     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.

     During 2007,  the Company  adopted a qualified  employee  stock option plan
covering 400,000 shares of its common stock.

     The following schedule reflects the status of outstanding options under the
Company's four stock option plans and  non-option  plan as of December 31, 2007,
as adjusted for the Company's stock dividend distributions of 2000 and 2002.
<TABLE>
<CAPTION>


                                           Summary


                                                                                           Wt. Av.
                   Date         Options      Exercisable      Exercise   Expiration      remaining
          Plan    granted     outstanding      options         price        date           life
          ----    -------     -----------      -------         -----        ----           ----
      <S>          <C>             <C>          <C>             <C>        <C>               <C>
      Non Plan     03/25/99        231,000      231,000         0.76       03/24/09          1.2
          1994     10/26/04        154,500       92,700         1.05       10/25/09          1.8
          2002     03/02/04        137,000       82,200         1.62       03/01/09          1.2
          2002     11/06/06        133,000       26,600         0.93       11/08/11          3.9
          2007     05/17/07        162,500          -           1.68       05/16/12          4.4
          2007     10/08/07          2,000          -           1.87       10/07/12          4.8
          2007     12/17/07        156,500          -           1.32       12/16/07          5.0
        2002NQ     10/22/02         35,000       35,000         1.26       10/22/12          4.8
        2002NQ     06/20/03         30,000       30,000         1.03       06/20/13          5.5
        2002NQ     05/25/04         40,000       40,000         1.46       05/25/14          6.4
        2002NQ     04/03/06         30,000       30,000         1.08       04/03/16          8.3
        2002NQ     12/17/07         50,000       50,000         1.32       12/16/17         10.0
                                 ---------      -------                                     ----
                                 1,161,500      617,500                                      3.5
                                 ==========     =======                                     ====
</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.




                                      F-15


<PAGE>

     A summary of the Company's  stock options as of December 31, 2007, 2006 and
2005, and changes during the years ending on these dates, is presented below:
<TABLE>
<CAPTION>


                                              2007                        2006
                                              ----             -          ----
                                        Weighted Average         Weighted Average
                                        ----------------         -----------------
                                     Optioned     Exercise     Optioned       Exercise
                                      Shares       Price        Shares         Price
                                      -------       -----       -------         -----
    <S>                                 <C>           <C>      <C>              <C>
              Options outstanding
             at beginning of year
                                         945,500      $1.11      964,500        $1.12
                          Granted        373,000                 175,000

                          Expired      (  12,000)              (  51,000)
                        Exercised      ( 145,000)              ( 143,500)
                                       ----------              ----------
    Options outstanding at end of

                             year      1,161,500      $1.05      945,500        $1.11
                                      ==========      =====    ==========       =====
</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 years ended December 31, 2007 and 2006  attributable
to stock options amounted to $146,984 and $74,178, respectively.

     The fair value of each option grant was estimated  using the  Black-Scholes
option pricing model with the following assumptions for the years 2007 and 2006;
risk free rate  ranging  from 3.57% to 4.88%,  no dividend  yield for all years,
expected life from five years to ten years and volatility of approximately 84.9%
to 107.8%.

     As of December 31, 2007 there was  approximately  $241,672 of  unrecognized
compensation  cost related to unvested  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  with  sales  in  excess  of 10% of
consolidated gross revenue for the years ended December 31, 2007 and 2006. Sales
to this customer  represented  approximately  43%,and 26% of consolidated  gross
revenues for such periods, respectively.

     The Company's top five customers represented  approximately 51% and 59%, of
consolidated revenues for the years ended December 31, 2007 and 2006 and 44% and
57% of consolidated  trade receivables for the years ended December 31, 2007 and
2006 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.



                                      F-16


<PAGE>
     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
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, 2007 and 2006:

                                                       2007              2006
                                                       ----              ----
   Basic weighted-average common shares
   outstanding                                      7,690,191          6,207,983

   Dilutive effect of stock plans, other
   options & conversion rights                      1,136,068          1,006,343
                                                    ---------          ---------
   Dilutive weighted-average shares outstanding     8,826,259          7,214,326
                                                    =========          =========

     Note 11 - Shareholders' equity:

     During the years  ended  December  31,  2007 and 2006 the  Company  granted
105,500 and 129,000 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
$147,000 and $119,400 for each period, respectively.

     During  October 2007 and December  2006,  certain  employees of the Company
exercised stock options  scheduled to expire during the respective  current year
covering  145,000  and  143,000  shares of its common  stock  respectively.  The
aggregate exercise price of such transactions amounted to approximately $191,000
and $147,000 and is reflected in the accompanying financial statements as common
stock and 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  the  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 a $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).  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 $1,295,940.

                                      F-17


<PAGE>

     Note 12 - Restatements to the Consolidated Financial Statements:

     Year ended December 31, 2007:

     The Company adopted SEC Staff Accounting Bulletin No. 108, "Considering the
Effects of Prior Year  Misstatements  when Quantifying  Misstatements in Current
Year  Financial  Statements"  (SAB No.  108),  effective  January  1,  2007.  In
accordance  with the  requirements  of SAB No. 108,  the Company has recorded an
adjustment  in the  amount of  approximately  $70,000  to the  opening  retained
earnings  balance  as of  January  1,  2007  in  the  accompanying  consolidated
financial  statements,  to  correct  errors  in the  accounting  of  share-based
compensation  and contingent  legal  liabilities in 2006. The  adjustments  were
considered to be immaterial to the  consolidated  financial  statements  for the
year ended December 31, 2006.

     In 2007,  the Company  made  certain  revisions  in the  valuation of stock
option grants that vested in 2006. The revised valuation resulted in an increase
in  compensation  expense of  approximately  $40,000 for 2006. Also in 2007, the
Company  discovered that a liability in the amount of approximately  $30,000 for
legal costs  incurred in 2006 should have been  recorded as of December 31, 2006
under the criteria of Statement of Financial  Accounting  Standards No. 5. There
was no  corporate  tax  effect  for the  adjustments  due to the  Company's  tax
position in 2006.



     Note -13 - Recent Accounting Pronouncements

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 157,  "Fair Value  Measures."  SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and enhances disclosures
about fair value measures  required under other accounting  pronouncements,  but
does not change existing  guidance as to whether or not an instrument is carried
at fair  value.  SFAS No. 157 is  effective  for fiscal  years  beginning  after
November 15, 2007. We are currently  evaluating  the impact that the adoption of
SFAS No. 157 will have on our future consolidated financial statements.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and  Financial  Liabilities  -- Including an amendment of FASB
Statement  No.  115." SFAS No. 159 permits  entities  to choose to measure  many
financial  instruments and certain other items at fair value.  Unrealized  gains
and losses on items for which the fair value  option  has been  elected  will be
recognized  in  earnings  at each  subsequent  reporting  date.  SFAS No. 159 is
effective  for us on January  1, 2008.  We are  evaluating  the impact  that the
adoption  of SFAS No. 159 will have on our  future  results  of  operations  and
financial position.

     In December  2007,  the FASB issued SFAS No. 141 (revised  2007)  "Business
Combinations"  ("FASB No.  141(R)").  FASB No.  141(R)  retains the  fundamental
requirements of the original pronouncement requiring that the purchase method be
used for all business combinations.  FASB No. 141(R) defines the acquirer as the
entity  that  obtains  control  of  one  or  more  businesses  in  the  business
combination,  establishes  the  acquisition  date as the date that the  acquirer
achieves  control and requires the  acquirer to recognize  the assets  acquired,
liabilities assumed and any non-controlling  interest at their fair values as of
the  acquisition  date.  FASB No. 141(R) also requires that  acquisition-related
costs  be  recognized  separately  from the  acquisition.  FASB  No.  141(R)  is
effective  for the Company for fiscal 2010.  The Company is currently  assessing
the impact of FASB No. 141(R) on its consolidated financial position and results
of operations.


                                      F-18


<PAGE>

     In December  2007,  the FASB  issued  Statement  No.  160,  "Noncontrolling
Interests  in  Consolidated  Financial  Statements--an  amendment  of ARB No. 51
("FASB No.  160")." The  objective of FASB No. 160 is to improve the  relevance,
comparability,  and  transparency of the financial  information that a reporting
entity  provides  in  its  consolidated  financial  statements  by  establishing
accounting  and  reporting  standards  for  the  Noncontrolling  interest  in  a
subsidiary and for the  deconsolidation of a subsidiary.  This Statement applies
to  all  entities  that  prepare  consolidated   financial  statements,   except
not-for-profit organizations. FASB No. 160 amends ARB 51 to establish accounting
and reporting standards for the Noncontrolling  interest in a subsidiary and for
the  deconsolidation  of a  subsidiary.  It  also  amends  certain  of ARB  51's
consolidation  procedures for consistency  with the requirements of FASB No. 141
(R). This  Statement is effective for fiscal years,  and interim  periods within
those fiscal years, beginning on or after December 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends). Earlier adoption is prohibited. The
effective  date of this  Statement is the same as that of the related  Statement
141(R).  FASB No. 160 will be effective  for the  Company's  fiscal  2010.  This
Statement shall be applied  prospectively as of the beginning of the fiscal year
in which this Statement is initially  applied,  except for the  presentation and
disclosure  requirements.  The presentation and disclosure requirements shall be
applied retrospectively for all periods presented.


































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