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Delaware | 7342 | 27-3819646 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Steven R. Berrard, President and Chief Executive Officer Swisher Hygiene Inc. 4725 Piedmont Row Drive, Suite 400, Charlotte, North Carolina 28210 Telephone:(704) 364-7707 Fax:(704) 602-7980 (Name, address, including zip code, and telephone number, including area code, of agent for service) | Please send a copy of all communications to: Edward L. Ristaino Esq. Michael Francis Esq. Akerman Senterfitt One Southeast Third Ave., 25th Floor Miami, Florida 33131-1714 Telephone: (305) 982-5581 Fax: (305) 374-5095 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||||||||||
Title of Each Class of | Amount to be | Offering | Aggregate | Registration | ||||||||||||||||
Securities to be Registered | Registered | Price per Unit(1) | Offering Price(1) | Fee | ||||||||||||||||
Common Stock, par value $0.001 per share | 9,857,143 | $ | 4.60 | $ | 45,342,858 | $ | 5,265 | |||||||||||||
Common Stock, par value $0.001 per share, underlying outstanding promissory notes | 201,925 | $ | 4.60 | $ | 928,855 | $ | 108 | |||||||||||||
Total | $ | 5,373 | ||||||||||||||||||
(1) | Estimated solely for the purpose of calculating the registration fee which was computed in accordance with Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”), on the basis of the average high and low sales prices as reported on the NASDAQ Global Market on August 2, 2011. |
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The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
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Common Stock Offered: | The selling stockholders are offering a total of 10,059,068 shares of common stock. | |
Outstanding Shares of Common Stock: | As of July 31, 2011, 173,473,566 shares of our common stock were issued and outstanding. | |
Use of Proceeds: | We are not selling any securities under this prospectus and we will not receive any proceeds from the sale of shares by the selling stockholders. |
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• | build and train sales and marketing staff to create an expanding presence in the evolving marketplace for our products and services, and to keep staff informed regarding the features, issues and key selling points of our products and services; | |
• | attract and retain qualified personnel in order to continue to develop reliable and saleable products and services that respond to evolving customer needs; and | |
• | focus personnel on expanding our internal management, financial and product controls significantly, so that we can maintain control over our operations and provide support to other functional areas within our business as the number of personnel and the size of our operations increases. |
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• | competitive conditions in our industries, including new products and services, product announcements and incentive pricing offered by our competitors; | |
• | the ability to hire, train and retain sufficient sales and professional services staff; | |
• | the ability to develop and maintain relationships with partners, franchisees, distributors, and service providers; | |
• | the discretionary nature of our customers’ purchase and budget cycles and changes in their budgets for, and timing of, chemical, equipment and services purchases; |
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• | the length and variability of the sales cycles for our products and services; | |
• | strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; | |
• | our ability to complete our service obligations in a timely manner; and | |
• | timing of product development and new product and service initiatives. |
• | the absence of cumulative voting in the election of directors, which means that the holders of a majority of our common stock may elect all of the directors standing for election; | |
• | the inability of our stockholders to call special meetings; | |
• | the requirement that our stockholders provide advance notice when nominating director candidates or proposing business to be considered by the stockholders at an annual meeting of stockholders; | |
• | the ability of the our board of directors to make, alter or repeal our bylaws; | |
• | the requirement that the authorized number of directors be changed only by resolution of the board of directors; and | |
• | the inability of stockholders to act by written consent. |
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Percent of | ||||||||||||||||
Common | ||||||||||||||||
Stock to be | ||||||||||||||||
Shares of | Owned by the | |||||||||||||||
Shares of Stock | Stock Owned | Selling | ||||||||||||||
to be Offered | by the Selling Stockholder | Stockholder | ||||||||||||||
Shares of Stock | for the Selling | after | after | |||||||||||||
Owned Prior to | Stockholder’s | Completion of | Completion of | |||||||||||||
Name of Selling Stockholder | Offering | Account | the Offering | the Offering | ||||||||||||
Fidelity Independence Fund | 1,531,745 | 1,167,445 | 364,300 | + | ||||||||||||
Variable Insurance Products Fund V: Asset Manager Portfolio | 135,158 | 135,158 | — | — | ||||||||||||
Variable Insurance Products Fund V: Asset Manager: Growth Portfolio | 24,821 | 24,821 | — | — | ||||||||||||
Fidelity Materials Central Fund | 264,870 | 23,760 | 223,110 | + | ||||||||||||
Fidelity Select Portfolios: Materials | 881,771 | 141,551 | 740,220 | + | ||||||||||||
Variable Insurance Products Fund IV: | ||||||||||||||||
Materials Portfolio | 97,633 | 10,563 | 87,070 | + | ||||||||||||
Fidelity Blue Chip Growth Fund | 2,095,491 | 935,531 | 1,159,960 | + | ||||||||||||
Fidelity Select Portfolios: Chemicals Portfolio | 1,108,940 | 492,860 | 616,080 | + | ||||||||||||
Variable Insurance Products Fund III: | ||||||||||||||||
Balanced Portfolio | 261,817 | 148,167 | 113,650 | + | ||||||||||||
Fidelity Dividend Growth Fund | 2,081,064 | 1,177,734 | 903,330 | + | ||||||||||||
Fidelity Advisor Dividend Growth Fund | 202,331 | 114,531 | 87,800 | + | ||||||||||||
Variable Insurance Products Fund II: | ||||||||||||||||
Contrafund Portfolio | 1,934,695 | 523,085 | 1,411,610 | + | ||||||||||||
Fidelity Advisor Series I: Fidelity Advisor Balanced Fund | 78,700 | 78,700 | — | — | ||||||||||||
Fidelity Puritan Trust: Fidelity Balanced Fund | 1,582,581 | 1,582,581 | — | — |
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Percent of | ||||||||||||||||
Common | ||||||||||||||||
Stock to be | ||||||||||||||||
Shares of | Owned by the | |||||||||||||||
Shares of Stock | Stock Owned | Selling | ||||||||||||||
to be Offered | by the Selling Stockholder | Stockholder | ||||||||||||||
Shares of Stock | for the Selling | after | after | |||||||||||||
Owned Prior to | Stockholder’s | Completion of | Completion of | |||||||||||||
Name of Selling Stockholder | Offering | Account | the Offering | the Offering | ||||||||||||
Fidelity Devonshire Trust: FidelitySeries All-Sector Equity Fund | 1,352,605 | 1,352,605 | — | — | ||||||||||||
Fidelity Capital Trust: Fidelity Stock Selector Small Cap Fund | 986,560 | 986,560 | — | — | ||||||||||||
Fidelity Securities Fund: Fidelity Series Small Cap Opportunities Fund | 961,491 | 961,491 | — | — | ||||||||||||
Donald Gravette(1) | 201,925 | 201,925 | — | — |
+ | Less than 1%. | |
(1) | Registering the resale of 201,925 shares underlying a convertible promissory note issued in connection with our acquisition of GLC Linen, LLC. |
• | Fidelity Management & Research Company (“Fidelity”), 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 23,813,743 shares of Swisher Hygiene Inc. as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940 (the “Funds”). | |
Edward C. Johnson 3d and FMR LLC, through its control of Fidelity and the Funds, each has sole power to dispose of the 23,813,743 shares owned by the Funds. | ||
Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. | ||
Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. | ||
• | On July 22, 2011, in connection with the acquisition of certain assets of GLC Linen, LLC, Swisher Hygiene issued a promissory note to Donald Gravette, which note is convertible for up to 201,925 shares of our common stock. Mr. Gravette has no other relationship with the Company as set forth in Item 507 of Regulation S-K. |
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TSX | ||||||||
High | Low | |||||||
Fiscal Year 2009 | ||||||||
First Quarter | $ | 0.64 | $ | 0.37 | ||||
Second Quarter | $ | 0.69 | $ | 0.48 | ||||
Third Quarter | $ | 0.94 | $ | 0.55 | ||||
Fourth Quarter | $ | 1.26 | $ | 0.76 | ||||
Fiscal Year 2010 | ||||||||
First Quarter | $ | 1.23 | $ | 1.02 | ||||
Second Quarter | $ | 1.54 | $ | 1.04 | ||||
Third Quarter | $ | 3.91 | $ | 1.04 | ||||
Fourth Quarter | $ | 5.97 | $ | 3.39 | ||||
Fiscal Year 2011 | ||||||||
First Quarter | $ | 6.83 | $ | 4.76 | ||||
Second Quarter | $ | 11.44 | $ | 4.87 | ||||
Third Quarter (through August 4, 2011) | $ | 5.87 | $ | 3.97 |
NASDAQ | ||||||||
High | Low | |||||||
Fiscal Year 2011 | ||||||||
First Quarter (commencing on February 2, 2011) | $ | 6.83 | $ | 5.50 | ||||
Second Quarter | $ | 11.43 | $ | 4.87 | ||||
Third Quarter (through August 4, 2011) | $ | 5.80 | $ | 3.96 |
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• | Acquisitions of 122 businesses, including 75 franchises, and the acquisition of Choice Environmental Services, Inc, (“Choice”), a Florida based, solid waste collection service provider; | |
• | Replacement of management information systems; | |
• | Introduction of delivery service vehicles; | |
• | Addition of substantial industry experience throughout the organization; | |
• | Upgrade of branch facilities; | |
• | Significant expansion of essential product lines and services to include dust control and a complete chemical program; and | |
• | Development of a corporate account and distributor sales organization. |
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
Franchises | 4 | 10 | 15 | 35 | 39 | 45 | ||||||||||||||||||
International Master Licenses(1) | 10 | 10 | 10 | 11 | 11 | 13 |
(1) | Number of countries in which Swisher licensees operate. |
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• | On May 2, 2011, we completed the acquisition of substantially all the assets of Sarner Enterprises, Inc. (“Sarner”), a Swisher Hygiene franchisee located in Redondo Beach, California. Sarner has been a Swisher Hygiene franchisee since 1992 and became Swisher Hygiene’ largest U.S. franchisee. Sarner’s franchise territory encompasses a significant portion of Central Los Angeles County, as well as Riverside and San Bernardino Counties further inland, stretching from the Pacific Ocean to the Arizona border. We completed the acquisition of the hygiene and chemical business of Sarner for consideration consisting of (1) 729,246 shares of Swisher Hygiene common stock at a value of $8.70 per share and (2) contingent consideration of approximately $383,000. | |
• | On May 3, 2011, we completed the acquisition of substantially all the assets of ProClean of Arizona, Inc. (“ProClean”), the leading independent hygiene and chemical provider in the Southwest. ProClean has been in business since 1976 and serves over 4,000 commercial customers in Arizona, Southern California, Southern Nevada, New Mexico and West Texas through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice and hospitality industries, including ware washing, general cleaning, laundry and housekeeping services. We completed the acquisition of substantially all the assets of ProClean for consideration consisting of (1) $8,500,000 in cash, (2) 1,218,027 shares of Swisher Hygiene common stock at a value of $7.99 per share, (3) assumed debt of approximately $622,000. | |
• | On May 4, 2011, we completed the acquisition of substantially all the assets of American Chemical Concepts, Inc. (“American Chemicals”), a Virginia-based hygiene and chemicals company. American Chemicals serves the Eastern and Central Virginia markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of American Chemicals for consideration consisting of (1) $212,500 in cash, (2) 68,543 shares of Swisher Hygiene common stock at a value of $6.64 per share, and (3) contingent consideration of approximately $59,000. | |
• | On May 4, 2011, we completed the acquisition of substantially all the assets of Chem Serve, Inc. (“Chem Serve”), a California-based hygiene and chemicals company. Chem Serve serves the San Luis Obispo and central coast of California markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Chem Serve for consideration consisting of (1)$100,000 in cash and (2) 35,000 shares of Swisher Hygiene common stock at a value of $6.64 per share. | |
• | On May 9, 2011, we completed the acquisition of substantially all the assets of Mt. Hood Solutions Company (“Mt. Hood”) an independent hygiene and chemical provider in the Northwest. Mt. Hood has been in business since 1902 and serves over 4,000 commercial and industrial customers in Oregon, Washington, Northern California, Idaho, Utah and Colorado through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice, hospitality and healthcare industries, including ware washing, general cleaning, laundry and housekeeping services, |
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as well as a line of products for manufacturing companies including industrial and water treatment products. We completed the acquisition of substantially all the assets of Mt. Hood for consideration consisting of (1) $22,000,000 in cash, (2) 1,857,143 shares of Swisher Hygiene common stock at a value of $7.00 per share, and (3) contingent consideration of approximately $812,000. |
• | On May 19, 2011, we completed the acquisition of substantially all of assets of Wingspan Service Corporation (“Wingspan”), the sole remaining California Swisher Hygiene franchisee. Wingspan has been a Swisher Hygiene franchisee since 1996. Wingspan’s franchise territory encompasses the greater San Francisco, Marin, Napa, and Sacramento markets, extending from San Francisco to the Nevada border. We completed the acquisition of the hygiene and chemical business of Wingspan for consideration consisting of (1) $750,000 in cash and (2) 220,834 shares of Swisher Hygiene common stock at a value of $6.18 per share. | |
• | On May 19, 2011, we completed the acquisition of substantially all the assets of Chemical Sanitizing Systems, LTD. (“Chemical Sanitizing Systems”), an Iowa-based hygiene and chemicals company. Chemical Sanitizing Systems has been in business since 1990 and serves Iowa, Nebraska, North Dakota, South Dakota, and Minnesota along with parts of eastern and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Chemical Sanitizing Systems for consideration consisting of (1) $100,000 in cash and (2) 98,381 shares of Swisher Hygiene common stock at a value of $6.18 per share. | |
• | On May 26, 2011, we completed the acquisition of substantially all the assets of Bussey Dishwater Service, Inc. (“Bussey”), a Wisconsin-based hygiene and chemicals company. Bussey serves the Wisconsin and Northern Illinois markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Bussey for consideration consisting of (1) $250,000 in cash, (2) 126,283 shares of Swisher Hygiene common stock at a value of $5.95 per share, and (3) assumed debt of approximately $95,000. | |
• | On May 30, 2011, we completed the acquisition of substantially all the assets of Pro-Chem Industrial, Inc. (“Pro-Chem”), a Wyoming-based hygiene and chemicals company. Pro-Chem serves the Wyoming, Montana, North Dakota, and South Dakota markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. Pro-Chem is one of the largest chemical service companies in the region and extends the coverage area of Swisher Hygiene’s acquisition of Mt. Hood, described above. We completed the acquisition of substantially all the assets of Pro-Chem for consideration consisting of (1) $1,300,000 in cash, (2) 340,958 shares of Swisher Hygiene common stock at a value of $6.60 per share, and (3) assumed debt of approximately $150,000. | |
• | On June 15, 2011 we completed the acquisition of substantially all the assets of Prinova Company, Inc. (“Prinova”), a Northern California-based hygiene and chemicals company. Prinova covers the Northern and Central California markets and provides specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing and laundry services. We completed the acquisition of substantially all the assets of Prinova for consideration consisting of (1) $725,000 in cash and (2) 35,003 shares of Swisher Hygiene common stock at a value of $5.97 per share. | |
• | On June 29, 2011 we completed the acquisition of substantially all the assets of ProClean Systems, Inc. (“ProClean Systems”) a southeast Pennsylvania-based hygiene and chemicals company. Proclean Systems covers the greater Philadelphia and adjacent markets and provides specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing and laundry services. We completed the acquisition of substantially all the assets of ProClean Systems for consideration consisting of (1) $700,000 in cash and (2) 291,891 shares of Swisher Hygiene common stock at a value of $5.15 per share. | |
• | On July 1, 2011, we completed the acquisition of Sanolite (“Sanolite”), the leading independent hygiene and chemical provider in the Northeast. Sanolite was founded in 1949 by Norman Lubin and has grown to serve over 3,000 commercial and industrial customers throughout New York, New Jersey, |
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Connecticut, Maryland, Pennsylvania and Florida by offering a complete suite of specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing, housekeeping and laundry services. We completed the acquisition of substantially all the assets of Sanolite for consideration consisting of (1) $8,000,000 in cash, (2) 815,726 shares of Swisher Hygiene common stock at a value of $5.63 per share, and (3) a $1,500,000 promissory note. |
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(1) | We consider the “addressable” market as our estimate of the aggregate market potential of the products and services we currently offer and is not necessarily indicative of the actual market size today. |
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• | For commercial and industrial collection services, typically we operate under a fixed period service agreement. The fees under the agreements are influenced by factors such as collection frequency, type of collection equipment we furnish, type and volume or weight of the waste collected, distance to the disposal facility, labor costs, cost of disposal and general market factors. As part of the service, we provide steel containers to most customers to store their solid waste betweenpick-up dates. Containers vary in size and type according to the needs of our customers and the restrictions of their communities. Many are designed to be lifted mechanically and either emptied into a truck’s compaction hopper or directly into a disposal site. | |
• | For residential collection services, we have a contract with, or a franchise granted by, a municipality, homeowners’ association or some other regional authority that gives us the exclusive right to service all or a portion of the homes in an area. These contracts or franchises are typically for periods of 3 years to 8 years and generally include an option to renew. We also provide services under individual monthly subscriptions directly to households. The fees for residential collection are either paid by the municipality or authority from their tax revenue or service charges, or are paid directly by the residents receiving the service. |
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• | The Solid Waste Disposal Act, including the Resource Conservation and Recovery Act(“RCRA”). RCRA establishes a framework for regulating the handling, transportation, treatment, storage and disposal of hazardous and non-hazardous solid waste, and requires states to develop programs to ensure the safe disposal of solid waste in sanitary landfills. |
• | The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”). CERCLA, among other things, provides for the cleanup of sites from which there is a release or threatened release of a hazardous substance into the environment. CERCLA may impose strict joint and several liability for the costs of cleanup and for damages to natural resources upon current owners and operators of a site, parties who were owners or operators of a site at the time the hazardous substances were disposed of, parties who transported the hazardous substances to a site, and parties who arranged for the disposal of the hazardous substances at a site. Under the authority of CERCLA and its implementing regulations, detailed requirements apply to the manner and degree of investigation and remediation of facilities and sites where hazardous substances have been or are threatened to be released into the environment. Liability under CERCLA is not dependent on the existence or disposal of only “hazardous wastes,” but also can be based upon the existence of small quantities of more than 700 “substances,” characterized by the EPA as “hazardous” many of which are found in common household waste. |
• | The Federal Water Pollution Control Act of 1972(the “Clean Water Act”). This act regulates the discharge of pollutants from a variety of sources, including solid waste disposal sites, into streams, rivers and other waters of the United States. Runoff from our transfer stations that is discharged into surface waters through discrete conveyances must be covered by discharge permits that generally require us to conduct sampling and monitoring, and, under certain circumstances, to reduce the quantity of pollutants in those discharges. Storm water discharge regulations under the Clean Water Act require a permit for certain construction activities and for runoff from industrial operations and facilities, which may affect our operations. If a transfer station discharges wastewater through a sewage system to a |
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publicly owned treatment works, the facility must comply with discharge limits imposed by that treatment works. |
• | The Clean Air Act. The Clean Air Act imposes limitations on emissions from various sources, including our vehicle fleet. | |
• | Occupational Safety and Health Act. The Occupational Safety and Health Act of 1970, as amended (“OSHA”), establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by OSHA, and various record keeping, disclosure, and procedural requirements. Various OSHA standards may apply to our operations. |
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For the Three Months | ||||||||||||||||||||||||||||
Ended March 31, | For the Year Ended December 31, | |||||||||||||||||||||||||||
2011 | 2010 | 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||
Selected Income Statement Data: | ||||||||||||||||||||||||||||
Revenue | $ | 27,396,303 | $ | 14,728,933 | $ | 63,652,318 | $ | 56,814,024 | $ | 64,108,891 | $ | 65,190,254 | $ | 54,707,906 | ||||||||||||||
Loss from operations | $ | (5,651,252 | ) | $ | (1,304,176 | ) | $ | (15,113,172 | ) | $ | (6,849,135 | ) | $ | (10,427,572 | ) | $ | (9,271,518 | ) | $ | (13,317,705 | ) | |||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | $ | (17,570,004 | ) | $ | (7,258,989 | ) | $ | (11,987,871 | ) | $ | (10,568,357 | ) | $ | (14,775,179 | ) | |||||||
Loss per share: | ||||||||||||||||||||||||||||
Basic and diluted EPS | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.26 | ) | $ | (0.13 | ) | $ | (0.21 | ) | $ | (0.18 | ) | $ | (0.26 | ) | |||||||
Selected Balance Sheet Data: | ||||||||||||||||||||||||||||
Total assets | $ | 306,419,830 | — | $ | 106,234,262 | $ | 38,917,939 | $ | 30,280,958 | $ | 34,363,938 | $ | 31,946,669 | |||||||||||||||
Swisher Hygiene Inc. stockholders’ equity (deficit) | $ | 215,728,870 | — | $ | 45,917,138 | $ | (19,455,206 | ) | $ | (12,300,787 | ) | $ | 172,410 | $ | 8,366,774 | |||||||||||||
Long term obligations | $ | 37,527,478 | — | $ | 31,028,992 | $ | 48,874,841 | $ | 6,343,346 | $ | 20,927,665 | $ | 12,809,934 | |||||||||||||||
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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• | Acquisitions of 122 businesses, including 75 franchises, and the acquisition of Choice, a Florida based, solid waste collection service provider | |
• | Replacement of management information systems; | |
• | Introduction of delivery service vehicles; | |
• | Addition of substantial industry experience throughout the organization; | |
• | Upgrade of branch facilities; | |
• | Significant expansion of essential product lines and services to include dust control and a complete chemical program; and | |
• | Development of a corporate account and distributor sales organization. |
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
Franchises | 4 | 10 | 15 | 35 | 39 | 45 | ||||||||||||||||||
International Master Licenses(1) | 10 | 10 | 10 | 11 | 11 | 13 |
(1) | Number of countries in which Swisher licensees operate. |
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• | On May 2, 2011, we completed the acquisition of substantially all the assets of Sarner Enterprises, Inc. (“Sarner”), a Swisher Hygiene franchisee located in Redondo Beach, California. Sarner has been a Swisher Hygiene franchisee since 1992 and became Swisher Hygiene largest U.S. franchisee. Sarner’s franchise territory encompasses a significant portion of Central Los Angeles County, as well as Riverside and San Bernardino Counties further inland, stretching from the Pacific Ocean to the Arizona border. We completed the acquisition of the hygiene and chemical business of Sarner for consideration consisting of (1) 729,246 shares of Swisher Hygiene common stock at a value of $8.70 per share and (2) contingent consideration of approximately $383,000. | |
• | On May 3, 2011, we completed the acquisition of substantially all the assets of ProClean of Arizona, Inc. (“ProClean”), the leading independent hygiene and chemical provider in the Southwest. ProClean has been in business since 1976 and serves over 4,000 commercial customers in Arizona, Southern California, Southern Nevada, New Mexico and West Texas through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice and hospitality industries, including ware washing, general cleaning, laundry and housekeeping services. We completed the acquisition of substantially all the assets of ProClean for consideration consisting of (1) $8,500,000 in cash, (2) 1,218,027 shares of Swisher Hygiene common stock at a value of $7.99 per share, and (3) assumed debt of approximately $622,000. |
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• | On May 4, 2011, we completed the acquisition of substantially all the assets of American Chemical Concepts, Inc. (“American Chemicals”), a Virginia-based hygiene and chemicals company. American Chemicals serves the Eastern and Central Virginia markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of American Chemicals for consideration consisting of (1) $212,500 in cash, (2) 68,543 shares of Swisher Hygiene common stock at a value of $6.64 per share, and (3) contingent consideration of approximately $59,000. | |
• | On May 4, 2011, we completed the acquisition of substantially all the assets of Chem Serve, Inc. (“Chem Serve”), a California-based hygiene and chemicals company. Chem Serve serves the San Luis Obispo and central coast of California markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Chem Serve for consideration consisting of (1) $100,000 in cash and (2) 35,000 shares of Swisher Hygiene common stock at a value of $6.64 per share. | |
• | On May 9, 2011, we completed the acquisition of substantially all the assets of Mt. Hood Solutions Company (“Mt. Hood”) an independent hygiene and chemical provider in the Northwest. Mt. Hood has been in business since 1902 and serves over 4,000 commercial and industrial customers in Oregon, Washington, Northern California, Idaho, Utah and Colorado through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice, hospitality and healthcare industries, including ware washing, general cleaning, laundry and housekeeping services, as well as a line of products for manufacturing companies including industrial and water treatment products. We completed the acquisition of substantially all the assets of Mt. Hood for consideration consisting of (1) $22,000,000 in cash, (2) 1,857,143 shares of Swisher Hygiene common stock at a value of $7.00 per share, and (3) contingent consideration of approximately $812,000. | |
• | On May 19, 2011, we completed the acquisition of substantially all the assets of Wingspan Service Corporation (“Wingspan”), the sole remaining California Swisher Hygiene franchisee. Wingspan has been a Swisher Hygiene franchisee since 1996. Wingspan’s franchise territory encompasses the greater San Francisco, Marin, Napa, and Sacramento markets, extending from San Francisco to the Nevada border. We completed the acquisition of the hygiene and chemical business of Wingspan for consideration consisting of (1) $750,000 in cash and (2) 220,834 shares of Swisher Hygiene common stock at a value of $6.18 per share. | |
• | On May 19, 2011, we completed the acquisition of substantially all the assets of Chemical Sanitizing Systems, LTD. (“Chemical Sanitizing Systems”), an Iowa-based hygiene and chemicals company. Chemical Sanitizing Systems has been in business since 1990 and serves Iowa, Nebraska, North Dakota, South Dakota, and Minnesota along with parts of eastern and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Chemical Sanitizing Systems for consideration consisting of (1) $100,000 in cash and (2) 98,381 shares of Swisher Hygiene common stock at a value of $6.18 per share. | |
• | On May 26, 2011, we completed the acquisition of substantially all the assets of Bussey Dishwater Service, Inc. (“Bussey”), a Wisconsin-based hygiene and chemicals company. Bussey serves the Wisconsin and Northern Illinois markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. We completed the acquisition of substantially all the assets of Bussey for consideration consisting of (1) $250,000 in cash, (2) 126,283 shares of Swisher Hygiene common stock at a value of $5.95 per share, and (3) assumed debt of approximately $95,000. | |
• | On May 30, 2011, we completed the acquisition of substantially all the assets of Pro-Chem Industrial, Inc. (“Pro-Chem”), a Wyoming-based hygiene and chemicals company. Pro-Chem serves the Wyoming, Montana, North Dakota, and South Dakota m markets and provides specialty chemical and warewash service programs to the foodservice and hospitality industries. Pro-Chem is one of the largest chemical service companies in the region and extends the coverage area of Swisher Hygiene’s acquisition of Mt. Hood, described above. We completed the acquisition of substantially all the assets of Pro-Chem for |
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consideration consisting of (1) $1,300,000 in cash, (2) 340,958 shares of Swisher Hygiene common stock at a value of $6.60 per share, and (3) assumed debt of approximately $150,000. |
• | On June 15, 2011 we completed the acquisition of substantially all the assets of Prinova Company, Inc. (“Prinova”), a Northern California-based hygiene and chemicals company. Prinova covers the Northern and Central California markets and provides specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing and laundry services. We completed the acquisition of substantially all the assets of Prinova for consideration consisting of (1) $725,000 in cash and (2) 35,003 shares of Swisher Hygiene common stock at a value of $5.97 per share. | |
• | On June 29, 2011 we completed the acquisition of substantially all the assets of ProClean Systems, Inc. (“ProClean Systems”) a southeast Pennsylvania-based hygiene and chemicals company. Proclean Systems covers the greater Philadelphia and adjacent markets and provides specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing and laundry services. We completed the acquisition of substantially all the assets of ProClean Systems for consideration consisting of (1) $700,000 in cash and (2) 291,891 shares of Swisher Hygiene common stock at a value of $5.15 per share. | |
• | On July 1, 2011, we completed the acquisition of substantially all the assets of Sanolite (“Sanolite”), the leading independent hygiene and chemical provider in the Northeast. Sanolite was founded in 1949 by Norman Lubin and has grown to serve over 3,000 commercial and industrial customers throughout New York, New Jersey, Connecticut, Maryland, Pennsylvania and Florida by offering a complete suite of specialty chemicals and service programs to the foodservice and hospitality industries, including warewashing, housekeeping and laundry services. We completed the acquisition of substantially all the assets of Sanolite for consideration consisting of (1) $8,000,000 in cash, (2) 815,726 shares of Swisher Hygiene common stock at a value of $5.63 per share, and (3) a $1,500,000 promissory note. |
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Increase in | Increase in | |||||||
Maturity Date | Stock Price | Expense | ||||||
June 30, 2011 | $ | 2.00 | $ | 2,002,000 | ||||
September 30, 2011 | $ | 2.00 | $ | 378,000 |
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CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2011 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2010 (UNAUDITED)
2011 | 2010 | |||||||
Revenue | ||||||||
Products | $ | 15,426,822 | $ | 8,164,028 | ||||
Services | 10,458,452 | 4,378,544 | ||||||
Franchise and other | 1,511,029 | 2,186,361 | ||||||
Total revenue | 27,396,303 | 14,728,933 | ||||||
Costs and expenses | ||||||||
Cost of sales | 9,583,685 | 5,308,948 | ||||||
Route expenses | 7,115,071 | 3,174,176 | ||||||
Selling, general and administrative | 12,324,869 | 6,507,155 | ||||||
Acquisition and merger expenses | 1,315,978 | — | ||||||
Depreciation and amortization | 2,707,952 | 1,042,830 | ||||||
Total costs and expenses | 33,047,555 | 16,033,109 | ||||||
Loss from operations | (5,651,252 | ) | (1,304,176 | ) | ||||
Other expense, net | (2,273,119 | ) | (291,265 | ) | ||||
Net loss before income taxes | (7,924,371 | ) | (1,595,441 | ) | ||||
Income taxes benefit | 4,709,793 | — | ||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | ||
Loss per share basic and diluted | $ | (0.03 | ) | $ | (0.03 | ) | ||
Weighted-average common shares used in the computation of loss per share | ||||||||
Basic and diluted | 122,780,115 | 57,829,630 | ||||||
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% of Total | % of Total | |||||||||||||||
2011 | Revenue | 2010 | Revenue | |||||||||||||
Revenue | ||||||||||||||||
Hygiene products and services | ||||||||||||||||
Chemical | $ | 9,474,019 | 34.6 | % | $ | 3,899,903 | 26.5 | % | ||||||||
Hygiene services | 5,368,126 | 19.6 | 4,378,543 | 29.7 | ||||||||||||
Paper and supplies | 3,685,810 | 13.5 | 2,911,273 | 19.8 | ||||||||||||
Rental and other | 1,553,504 | 5.6 | 1,352,853 | 9.2 | ||||||||||||
Total hygiene product and services | 20,081,459 | 73.3 | 12,542,572 | 85.2 | ||||||||||||
Waste products and services | ||||||||||||||||
Collection | 4,494,040 | 16.4 | — | — | ||||||||||||
Transfer | 713,489 | 2.6 | — | — | ||||||||||||
Recycling and other | 596,286 | 2.2 | — | — | ||||||||||||
Total waste products and services | 5,803,815 | 21.2 | — | — | ||||||||||||
Total products and service | 25,885,274 | 94.5 | 12,542,572 | 85.2 | ||||||||||||
Hygiene franchise and other: | ||||||||||||||||
Product sales | 1,055,627 | 3.9 | 1,422,331 | 9.7 | ||||||||||||
Fees | 455,402 | 1.6 | 764,030 | 5.1 | ||||||||||||
Total | 1,511,029 | 5.5 | 2,186,361 | 14.8 | ||||||||||||
Total revenue | $ | 27,396,303 | 100.0 | % | $ | 14,728,933 | 100.0 | % | ||||||||
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2011 | %(1) | 2010 | %(1) | |||||||||||||
Hygiene | ||||||||||||||||
Company-owned operations | $ | 6,697,484 | 33.4 | % | $ | 4,006,081 | 31.9 | % | ||||||||
Franchisee product sales | 972,685 | 92.1 | 1,302,867 | 91.6 | ||||||||||||
Waste | ||||||||||||||||
Disposal | 1,496,769 | 28.7 | — | — | ||||||||||||
Paper purchases | 416,747 | 31.8 | — | — | ||||||||||||
Total cost of sales | $ | 9,583,685 | 35.0 | % | $ | 5,308,948 | 36.0 | % | ||||||||
(1) | Represents cost as a percentage of the respective segment’s product and service line revenue. |
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2011 | %(1) | 2010 | %(1) | |||||||||||||
Hygiene | ||||||||||||||||
Compensation | $ | 3,899,215 | 19.4 | % | $ | 2,266,966 | 18.1 | % | ||||||||
Vehicle and other expenses | 1,264,583 | 6.3 | 907,211 | 7.2 | ||||||||||||
Waste | ||||||||||||||||
Compensation | 1,119,264 | 19.3 | — | — | ||||||||||||
Vehicle and other expenses | 832,009 | 14.3 | — | — | ||||||||||||
Total route expenses | $ | 7,115,071 | 27.5 | % | $ | 3,174,176 | 25.3 | % | ||||||||
(1) | Represents cost as a percentage of Products and Services revenue for the respective operating segment. |
• | Branch office and field management support costs that are related to field operations. These costs include compensation, occupancy expense and other general and administrative expenses. | |
• | Sales expenses, which include marketing expenses and compensation and commission for branch sales representatives and corporate account executives. | |
• | Corporate office expenses that are related to general support services, which include executive management compensation and related costs, as well as department cost for information technology, human resources, accounting, purchasing and other support functions. |
% of | % of | |||||||||||||||
2011 | Revenue(1) | 2010 | Revenue(1) | |||||||||||||
Hygiene | ||||||||||||||||
Compensation | $ | 8,011,897 | 37.1 | % | $ | 4,474,667 | 30.4 | % | ||||||||
Occupancy | 1,076,222 | 5.0 | 848,484 | 5.7 | ||||||||||||
Other | 1,974,045 | 9.1 | 1,184,004 | 8.1 | ||||||||||||
Waste | ||||||||||||||||
Compensation | 659,421 | 11.4 | — | — | ||||||||||||
Occupancy | 60,685 | 1.1 | — | — | ||||||||||||
Other | 542,599 | 9.3 | — | — | ||||||||||||
Total selling, general, and administrative | $ | 12,324,869 | 45.0 | % | $ | 6,507,155 | 44.2 | % | ||||||||
(1) | Represents cost as a percentage of revenue for the respective segment. |
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% of | % of | |||||||||||||||
Total | Total | |||||||||||||||
2011 | Revenue | 2010 | Revenue | |||||||||||||
Interest income | $ | 15,746 | 0.1 | % | $ | 15,006 | 0.1 | % | ||||||||
Interest expense | (363,168 | ) | (1.3 | ) | (306,271 | ) | (2.1 | ) | ||||||||
Unrealized loss on convertible promissory notes | (1,961,100 | ) | (7.2 | ) | — | — | ||||||||||
Gain on foreign currency | 35,403 | 0.1 | — | — | ||||||||||||
Total other expense, net | $ | (2,273,119 | ) | (8.3 | )% | $ | (291,265 | ) | (2.0 | )% | ||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 2010 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 2009
2010 | %(1) | 2009 | %(1) | |||||||||||||
Revenue | ||||||||||||||||
Products | $ | 37,690,324 | 59.2 | % | $ | 27,316,876 | 48.1 | % | ||||||||
Services | 17,737,440 | 27.9 | 16,573,821 | 29.2 | ||||||||||||
Franchise and other | 8,224,554 | 12.9 | 12,923,327 | 22.7 | ||||||||||||
Total revenue | 63,652,318 | 100.0 | 56,814,024 | 100.0 | ||||||||||||
Costs and expenses | ||||||||||||||||
Cost of sales | 23,597,229 | 37.1 | 22,304,515 | 39.3 | ||||||||||||
Route expenses | 13,930,653 | 25.1 | 12,519,891 | 28.5 | ||||||||||||
Selling, general and administrative | 31,258,368 | 49.1 | 24,094,701 | 42.4 | ||||||||||||
Merger expenses | 5,122,067 | 8.0 | — | — | ||||||||||||
Depreciation and amortization | 4,857,173 | 7.6 | 4,744,052 | 8.4 | ||||||||||||
Total costs and expenses | 78,765,490 | 123.7 | 63,663,159 | 112.1 | ||||||||||||
Loss from operations | (15,113,172 | ) | (23.7 | ) | (6,849,135 | ) | (12.1 | ) | ||||||||
Other expense, net | (756,832 | ) | (1.2 | ) | (409,854 | ) | (0.7 | ) | ||||||||
Net loss before income taxes | (15,870,004 | ) | (24.9 | ) | (7,258,989 | ) | (12.8 | ) | ||||||||
Income taxes | 1,700,000 | 2.7 | — | — | ||||||||||||
Net loss | $ | (17,570,004 | ) | (27.6 | )% | $ | (7,258,989 | ) | (12.8 | )% | ||||||
Loss per share basic and diluted | $ | (0.26 | ) | $ | (0.13 | ) | ||||||||||
2010 | 2009 | |||||||
Company-owned locations | 69 | 60 | ||||||
Franchises | 8 | 15 | ||||||
International Master Licenses | 10 | 10 |
(1) | Calculated as a percentage of total revenue, except for Route expenses which are calculated as a percentage of Products and Services revenue. |
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% of Total | % of Total | |||||||||||||||
2010 | Revenue | 2009 | Revenue | |||||||||||||
Revenue | ||||||||||||||||
Products and service: | ||||||||||||||||
Hygiene services | $ | 17,737,440 | 27.9 | % | $ | 16,573,821 | 29.2 | % | ||||||||
Chemical | 19,062,809 | 29.9 | 10,319,434 | 18.2 | ||||||||||||
Paper | 12,337,886 | 19.4 | 11,549,037 | 20.3 | ||||||||||||
Rental and other | 6,289,629 | 9.9 | 5,448,405 | 9.6 | ||||||||||||
Total product and service | 55,427,764 | 87.1 | 43,890,697 | 77.3 | ||||||||||||
Franchise and other: | ||||||||||||||||
Product sales | 5,395,614 | 8.5 | 8,732,038 | 15.4 | ||||||||||||
Fees | 2,828,940 | 4.4 | 4,191,289 | 7.3 | ||||||||||||
Total franchise and other | 8,224,554 | 12.9 | 12,923,327 | 22.7 | % | |||||||||||
Total revenue | $ | 63,652,318 | 100.0 | % | $ | 56,814,024 | 100.0 | % | ||||||||
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2010 | %(1) | 2009 | %(1) | |||||||||||||
Company-owned operations | $ | 18,542,802 | 33.5 | % | $ | 14,385,596 | 32.8 | % | ||||||||
Franchisee product sales | 5,054,427 | 93.7 | % | 7,918,919 | 90.7 | % | ||||||||||
Total cost of sales | $ | 23,597,229 | 37.1 | % | $ | 22,304,515 | 39.3 | % | ||||||||
(1) | Represents cost as a percentage of the respective product line revenue. |
2010 | %(1) | 2009 | %(1) | |||||||||||||
Compensation | $ | 9,930,118 | 17.9 | % | $ | 9,085,209 | 20.7 | % | ||||||||
Vehicle expenses | 3,660,105 | 6.6 | % | 3,144,603 | 7.2 | |||||||||||
Other | 340,430 | 0.6 | % | 290,079 | 0.7 | |||||||||||
Total route expenses | $ | 13,930,653 | 25.1 | % | $ | 12,519,891 | 28.5 | % | ||||||||
(1) | Represents cost as a percentage of Products and Services revenue. |
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• | Branch office and field management support costs that are related to field operations. These costs include compensation, occupancy expense and other general and administrative expenses. | |
• | Sales expenses, which include marketing expenses and compensation and commission for branch sales representatives and corporate account executives. | |
• | Corporate office expenses that are related to general support services, which include executive management compensation and related costs, as well as department cost for information technology, human resources, accounting, purchasing and other support functions. |
% of Total | % of Total | |||||||||||||||
2010 | Revenue | 2009 | Revenue | |||||||||||||
Compensation | $ | 21,422,692 | 33.7 | % | $ | 16,975,556 | 29.9 | % | ||||||||
Occupancy | 3,487,994 | 5.5 | 3,124,466 | 5.5 | ||||||||||||
Other | 6,347,682 | 10.0 | 3,994,679 | 7.0 | ||||||||||||
Total selling, general, and administrative | $ | 31,258,368 | 49.1 | % | $ | 24,094,701 | 42.4 | % | ||||||||
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% of Total | % of Total | |||||||||||||||
2010 | Revenue | 2009 | Revenue | |||||||||||||
Interest Income | $ | 100,212 | 0.2 | % | $ | 54,797 | 0.1 | % | ||||||||
Interest expense | (1,677,076 | ) | (2.6 | ) | (1,063,411 | ) | (1.9 | ) | ||||||||
Gain on foreign currency | 820,032 | 1.3 | 34,653 | 0.1 | ||||||||||||
Forgiveness of debt | — | — | 500,000 | 0.9 | ||||||||||||
Gain on bargain purchase | — | — | 94,107 | 0.2 | ||||||||||||
Impairment losses | — | — | (30,000 | ) | (0.1 | ) | ||||||||||
Total other expense, net | $ | (756,832 | ) | (1.2 | )% | $ | (409,854 | ) | (0.7 | )% | ||||||
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STATEMENTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 2009 AS COMPARED
TO THE YEAR ENDED DECEMBER 31, 2008
2009 | %(1) | 2008 | %(1) | |||||||||||||
Revenue: | ||||||||||||||||
Products | $ | 27,316,876 | 48.1 | % | $ | 25,935,493 | 40.5 | % | ||||||||
Service | 16,573,821 | 29.2 | 19,895,990 | 31.0 | ||||||||||||
Franchise and other | 12,923,327 | 22.7 | 18,277,408 | 28.5 | ||||||||||||
Total revenue | 56,814,024 | 100.0 | 64,108,891 | 100.0 | ||||||||||||
Costs and Expenses: | ||||||||||||||||
Cost of sales | 22,304,515 | 39.3 | 25,071,410 | 39.1 | ||||||||||||
Route expenses | 12,519,891 | 28.5 | 14,201,243 | 31.0 | ||||||||||||
Selling, general and administrative | 24,094,701 | 42.4 | 30,057,178 | 46.9 | ||||||||||||
Depreciation and amortization | 4,744,052 | 8.4 | 5,206,632 | 8.1 | ||||||||||||
Total costs and expenses | 63,663,159 | 112.1 | 74,536,463 | 116.3 | ||||||||||||
Loss from Operations | (6,849,135 | ) | (12.1 | ) | (10,427,572 | ) | (16.3 | ) | ||||||||
Other expense, net | (409,854 | ) | (0.7 | ) | (1,560,299 | ) | (2.4 | ) | ||||||||
Net Loss | $ | (7,258,989 | ) | (12.8 | )% | $ | (11,987,871 | ) | (18.7 | )% | ||||||
Loss per share basic and diluted | $ | (0.13 | ) | $ | (0.21 | ) |
(1) | Calculated as a percentage of total revenue, except for Route Expenses which is calculated as a percentage of revenue from Products and Services, as route expenses relate solely to revenue from operations for sales of Products and Services. |
2009 | 2008 | |||||||
Company-owned locations | 60 | 44 | ||||||
Franchises | 15 | 35 | ||||||
International Master Licenses | 10 | 11 |
(1) | Calculated as a percentage of total revenue, except for Route Expenses which is calculated as a percentage of revenue from Products and Services, as route expenses relate solely to revenue from operations for sales of Products and Services. |
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% of Total | % of Total | |||||||||||||||
2009 | Revenue | 2008 | Revenue | |||||||||||||
Revenue | ||||||||||||||||
Products and service: | ||||||||||||||||
Hygiene services | $ | 16,573,821 | 29.2 | % | $ | 19,895,990 | 31.0 | % | ||||||||
Chemical | 10,319,434 | 18.2 | 6,914,652 | 10.8 | ||||||||||||
Paper | 11,549,037 | 20.3 | 12,760,759 | 19.9 | ||||||||||||
Rental and other | 5,448,405 | 9.6 | 6,260,082 | 9.8 | ||||||||||||
Total product and service | 43,890,697 | 77.3 | 45,831,483 | 71.5 | ||||||||||||
Franchise and other: | ||||||||||||||||
Product sales | 8,732,038 | 15.4 | 11,904,308 | 18.6 | ||||||||||||
Fees | 4,191,289 | 7.3 | 6,373,100 | 9.9 | ||||||||||||
Total franchise and other | 12,923,327 | 22.7 | 18,277,408 | 28.5 | ||||||||||||
Total revenue | $ | 56,814,024 | 100.0 | % | $ | 64,108,891 | 100.0 | % | ||||||||
2009 | %(1) | 2008 | %(1) | |||||||||||||
Company-owned operations | $ | 14,385,596 | 32.8 | % | $ | 14,329,153 | 31.3 | % | ||||||||
Franchisee product sales | 7,918,919 | 90.7 | 10,742,257 | 90.2 | ||||||||||||
Total cost of sales | $ | 22,304,515 | 39.3 | % | $ | 25,071,410 | 39.1 | % | ||||||||
(1) | Represents cost as a percentage of the respective product line revenue. |
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2009 | %(1) | 2008 | %(1) | |||||||||||||
Compensation | $ | 9,085,209 | 20.7 | % | $ | 9,990,412 | 21.8 | % | ||||||||
Vehicle expenses | 3,144,603 | 7.2 | 3,810,394 | 8.3 | ||||||||||||
Other | 290,079 | 0.7 | 400,437 | 0.9 | ||||||||||||
Total route expenses | $ | 12,519,891 | 28.5 | % | $ | 14,201,243 | 31.0 | % | ||||||||
(1) | Represents cost as a percentage of Products and Services revenue. |
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% of Total | % of Total | |||||||||||||||
2009 | Revenue | 2008 | Revenue | |||||||||||||
Compensation | $ | 16,975,556 | 29.9 | % | $ | 20,356,810 | 31.8 | % | ||||||||
Occupancy | 3,124,466 | 5.5 | 2,934,305 | 4.6 | ||||||||||||
Other | 3,994,679 | 7.0 | 6,766,063 | 10.6 | ||||||||||||
Total selling, general, and administrative | $ | 24,094,701 | 42.4 | % | $ | 30,057,178 | 46.9 | % | ||||||||
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% of Total | % of Total | |||||||||||||||
2009 | Revenue | 2008 | Revenue | |||||||||||||
Interest income | $ | 54,797 | 0.1 | $ | 10,337 | — | ||||||||||
Interest expense | (1,063,411 | ) | (1.9 | ) | (1,292,664 | ) | (2.0 | ) | ||||||||
Gain (loss) on foreign currency | 34,653 | 0.1 | (54,972 | ) | (0.1 | ) | ||||||||||
Forgiveness of debt | 500,000 | 0.9 | — | — | ||||||||||||
Gain on bargain purchase | 94,107 | 0.2 | — | — | ||||||||||||
Impairment losses | (30,000 | ) | (0.1 | ) | (223,000 | ) | (0.3 | ) | ||||||||
Total other expense | $ | (409,854 | ) | (0.7 | )% | $ | (1,560,299 | ) | (2.4 | )% | ||||||
2011 | 2010 | |||||||
Net cash used in operating activities | $ | (2,838,922 | ) | $ | (75,322 | ) | ||
Net cash used in investing activities | (10,144,689 | ) | (1,002,528 | ) | ||||
Net cash provided by financing activities | 79,121,721 | 724,701 | ||||||
Net increase (decrease) in cash and cash equivalents | $ | 66,138,110 | $ | (353,149 | ) | |||
2010 | 2009 | 2008 | ||||||||||
Net cash used in operating activities | $ | (11,519,604 | ) | $ | (5,700,320 | ) | $ | (6,770,438 | ) | |||
Net cash used in investing activities | (14,799,196 | ) | (4,385,655 | ) | (3,654,597 | ) | ||||||
Net cash provided by financing activities | 63,980,211 | 11,014,580 | 9,693,281 | |||||||||
Effect of foreign exchange rates on cash | — | — | (160,611 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | 37,661,411 | $ | 928,605 | $ | (892,365 | ) | |||||
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Less than | 5 or More | |||||||||||||||||||
Total | 1 Year | 1-2 Years | 3-4 Years | Years | ||||||||||||||||
Long term obligations | $ | 43,382,702 | $ | 12,352,850 | $ | 27,318,652 | $ | 1,758,350 | $ | 1,952,850 | ||||||||||
Shareholder loans | $ | 2,000,000 | 2,000,000 | — | — | — | ||||||||||||||
Operating leases | $ | 6,721,480 | 2,031,400 | 1,547,400 | 1,076,490 | 2,066,190 | ||||||||||||||
Interest payments | $ | 1,094,640 | 544,729 | 193,575 | 119,504 | 236,831 | ||||||||||||||
Total long-term contractual cash obligations | $ | 53,198,822 | $ | 16,928,979 | $ | 29,059,627 | $ | 2,954,344 | $ | 4,255,871 | ||||||||||
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2011 | 2010 | |||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | ||
Income tax benefit | (4,709,793 | ) | — | |||||
Depreciation and amortization expense | 2,707,952 | 1,042,830 | ||||||
Interest expense, net | 347,422 | 291,265 | ||||||
Gains on foreign currency | (35,403 | ) | — | |||||
Unrealized loss on convertible debt | 1,961,100 | — | ||||||
Stock based compensation | 664,842 | — | ||||||
Acquisition and merger expenses | 1,315,978 | — | ||||||
Adjusted EBITDA | $ | (962,480 | ) | $ | (261,346 | ) | ||
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• | We have a history of significant operating losses and as such our future revenue and operating profitability are uncertain; | |
• | We may be harmed if we do not penetrate markets and grow our current business operations; | |
• | We may require additional capital in the future and no assurance can be given that such capital will be available on terms acceptable to us, or at all; | |
• | Failure to attract, train, and retain personnel to manage our growth could adversely impact our operating results; | |
• | We may not be able to properly integrate the operations of acquired businesses and achieve anticipated benefits of cost savings or revenue enhancements; | |
• | We may incur unexpected costs, expenses, or liabilities relating to undisclosed liabilities of our acquired businesses; | |
• | We may recognize impairment charges which could adversely affect our results of operations and financial condition; | |
• | Goodwill resulting from acquisitions may adversely affect our results of operations; | |
• | Future issuances of our common stock in connection with acquisitions could have a dilutive effect on your investment; | |
• | Future sales of Swisher Hygiene shares by our stockholders could affect the market price of our shares; | |
• | Our business and growth strategy depends in large part on the success of our franchisees and international licensees, and our brand reputation may be harmed by actions out of our control that are taken by franchisees and international licensees; |
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• | Failure to retain our current customers and renew existing customer contracts could adversely affect our business; | |
• | The pricing, terms, and length of customer service agreements may constrain our ability to recover costs and to make a profit on our contracts; | |
• | Changes in economic conditions that impact the industries in which our end-users primarily operate in could adversely affect our business; | |
• | Our solid waste collection operations are geographically concentrated and are therefore subject to regional economic downturns and other regional factors; | |
• | If we are required to change the pricing models for our products or services to compete successfully, our margins and operating results may be adversely affected; | |
• | Several members of our senior management team are critical to our business and if these individuals do not remain with us in the future, it could have a material adverse impact on our business, financial condition and results of operations; | |
• | The financial condition and operating ability of third parties may adversely affect our business; | |
• | The volatility of our raw material costs may adversely affect our operations; | |
• | Increases in fuel and energy costs could adversely affect our results of operations and financial condition; | |
• | Our products contain hazardous materials and chemicals, which could result in claims against us; | |
• | We are subject to environmental, health and safety regulations, and may be adversely affected by new and changing laws and regulations, that generate ongoing environmental costs and could subject us to liability; | |
• | Future changes in laws or renewal enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results; | |
• | If our products are improperly manufactured, packaged, or labeled or become adulterated, those items may need to be recalled; | |
• | Changes in the types or variety of our service offerings could affect our financial performance; | |
• | We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business; | |
• | If we are unable to protect our information and telecommunication systems against disruptions or failures, our operations could be disrupted; | |
• | Insurance policies may not cover all operating risks and a casualty loss beyond the limits of our coverage could adversely impact our business; | |
• | Our current size and growth strategy could cause our revenue and operating results to fluctuate more than some of our larger, more established competitors or other public companies; | |
• | Certain stockholders may exert significant influence over any corporate action requiring stockholder approval; and | |
• | Provisions of Delaware law and our organizational documents may delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders. |
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Director/ | ||||||||||
Officer | ||||||||||
Name | Age | Position | Since(1) | |||||||
H. Wayne Huizenga | 73 | Chairman | 2010 | |||||||
Steven R. Berrard | 57 | President, Chief Executive Officer and Director | 2004 | |||||||
Thomas Aucamp | 45 | Executive Vice President and Secretary | 2006 | |||||||
Thomas Byrne | 49 | Executive Vice President | 2004 | |||||||
Michael Kipp | 56 | Senior Vice President and Chief Financial Officer | 2010 | |||||||
Hugh H. Cooper | 61 | Senior Vice President and Treasurer | 2005 | |||||||
David Braley | 70 | Director | 2010 | |||||||
John Ellis Bush | 58 | Director | 2010 | |||||||
Harris W. Hudson | 68 | Director | 2011 | |||||||
William D. Pruitt | 70 | Director | 2011 | |||||||
David Prussky | 53 | Director | 2010 | |||||||
Michael Serruya | 47 | Director | 2010 |
(1) | Except for Messrs. Hudson and Pruitt, all directors were appointed on November 1, 2010 in connection with the Merger. Mr. Berrard has served as a director of Swisher International since 2004. Mr. Prussky served an initial term as a director of CoolBrands from 1994 to 1998 and rejoined the CoolBrands board of directors in February 2010. Mr. Serruya served as a director of CoolBrands since 1994. |
Chairman
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Director, President and Chief Executive Officer
Director
Director
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Director
Director
Director
Director
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Executive Vice President and Secretary
Executive Vice President
Senior Vice President and Treasurer
Senior Vice President and Chief Financial Officer
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Nominating and | ||||||||||||
Corporate | ||||||||||||
Audit | Compensation | Governance | ||||||||||
Name | Committee | Committee | Committee | |||||||||
Steven R. Berrard | ||||||||||||
Senator David Braley | * | * | ||||||||||
John Ellis Bush | * | ** | ||||||||||
Harris W. Hudson | ** | |||||||||||
H. Wayne Huizenga | ||||||||||||
William D. Pruitt | ** | * | ||||||||||
David Prussky | * | * | ||||||||||
Michael Serruya |
* | Member | |
** | Chairman |
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Restricted | ||||||||
Stock | Stock | |||||||
Name | Units | Options | ||||||
Steve Berrard | 251,196 | 107,656 | ||||||
Thomas Byrne | 115,550 | 49,522 | ||||||
Thomas Aucamp | 110,526 | 47,368 | ||||||
Hugh Cooper | 122,500 | 52,500 |
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Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||||||||
Stock | Option | Non-Equity | Deferred | All Other | ||||||||||||||||||||||||||||||||
Awards | Awards | Incentive Plan | Compensation | Compensation | ||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | (1)(2) | (1)(2) | Compensation | Earnings | (3) | Total | |||||||||||||||||||||||||||
Steven R. Berrard | 2010 | $ | 192,308 | — | $ | 1,049,999 | $ | 160,946 | — | — | — | $ | 1,403,253 | |||||||||||||||||||||||
President and Chief | 2009 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||||||||||
Hugh H. Cooper | 2010 | $ | 200,000 | — | $ | 512,050 | $ | 78,488 | — | — | — | $ | 790,538 | |||||||||||||||||||||||
Chief Financial | 2009 | $ | 207,692 | — | — | — | — | $ | 154 | — | $ | 207,846 | ||||||||||||||||||||||||
Officer and Treasurer | ||||||||||||||||||||||||||||||||||||
Thomas Aucamp | 2010 | $ | 203,077 | — | $ | 461,999 | $ | 70,815 | — | — | — | $ | 735,891 | |||||||||||||||||||||||
Executive Vice | 2009 | $ | 207,692 | — | — | — | — | — | — | $ | 207,692 | |||||||||||||||||||||||||
President and Secretary | ||||||||||||||||||||||||||||||||||||
Thomas Byrne | 2010 | $ | 204,615 | — | $ | 482,999 | $ | 74,035 | — | — | — | $ | 761,649 | |||||||||||||||||||||||
Executive Vice President | 2009 | $ | 207,692 | — | — | — | — | $ | 615 | — | $ | 208,307 |
(1) | Represents restricted stock units and stock options granted under the Swisher Hygiene Inc. 2010 Stock Incentive Plan (the “Plan”). | |
(2) | This column reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. In determining the grant date fair value for restricted stock units, the Company used $4.18, the closing price of the Company’s common stock on the grant date. In determining the grant date fair value for stock options, the Company used the Black-Scholes option pricing model, and took into account the $4.18 closing price of the Company’s common stock on the grant date, the $4.18 exercise price, the 6.25 year assumed period over which the options will be outstanding, a 30.7% volatility rate, and a 2.63% risk free rate. | |
(3) | No named executive officer received other compensation that exceeded $10,000 during 2009 and 2010. |
All Other | All Other | Grant | ||||||||||||||||||||||||||||||||||||||||||
Stock | Option | Exercise | Date | |||||||||||||||||||||||||||||||||||||||||
Awards: | Awards: | or Base | Fair | |||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts | Estimated Future Payouts | Number of | Number of | Price of | Value of | |||||||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive | Shares of | Securities | Option | Stock and | |||||||||||||||||||||||||||||||||||||||
Grant | Plan Awards | Plan Awards | Stock or | Underlying | Awards | Option | ||||||||||||||||||||||||||||||||||||||
Name | Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Units (#)(1) | Options (#)(2) | ($/Sh) | Awards(3) | |||||||||||||||||||||||||||||||||
Steven R. Berrard | 11/2/10 | — | — | — | — | — | — | 251,196 | 107,656 | $ | 4.18 | $ | 1,210,945 | |||||||||||||||||||||||||||||||
Hugh H. Cooper | 11/2/10 | — | — | — | — | — | — | 122,500 | 52,500 | $ | 4.18 | $ | 590,538 | |||||||||||||||||||||||||||||||
Thomas Aucamp | 11/2/10 | — | — | — | — | — | — | 110,526 | 47,368 | $ | 4.18 | $ | 532,814 | |||||||||||||||||||||||||||||||
Thomas Byrne | 11/2/10 | — | — | — | — | — | — | 115,550 | 49,522 | $ | 4.18 | $ | 557,034 |
(1) | Represents restricted stock units granted under the Plan, which vest in four equal annual installments beginning on the first anniversary of the grant date. Each restricted stock unit represents the right to receive one share of common stock upon vesting. | |
(2) | Represents stock options granted under the Plan, which vest in four equal annual installments beginning on the first anniversary of the grant date. These grants of stock options are subject to stockholder ratification and approval of the Plan. |
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(3) | Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. In determining the grant date fair value for restricted stock units, we used $4.18, the closing price of our common stock on the grant date. In determining the grant date fair value for stock options, we used the Black-Scholes option pricing model, and took into account the $4.18 closing price of our common stock on the grant date, the $4.18 exercise price, the 6.25 year assumed period over which the stock options will be outstanding, a 30.7% volatility rate, and a 2.63% risk free rate. |
Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan | |||||||||||||||||||||||||||||||||||
Incentive | Awards: | |||||||||||||||||||||||||||||||||||
Plan | Market or | |||||||||||||||||||||||||||||||||||
Awards: | Payout | |||||||||||||||||||||||||||||||||||
Market | Number of | Value of | ||||||||||||||||||||||||||||||||||
Value of | Unearned | Unearned | ||||||||||||||||||||||||||||||||||
Shares or | Shares, | Shares, | ||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Units of | Units or | Units or | |||||||||||||||||||||||||||||||
Securities | Securities | Shares or | Stock | Other | Other | |||||||||||||||||||||||||||||||
Underlying | Underlying | Units of | That | Rights | Rights | |||||||||||||||||||||||||||||||
Unexercised | Unexercised | Option | Option | Stock That | Have Not | That Have | That Have | |||||||||||||||||||||||||||||
Options (#) | Options (#) | Exercise | Expiration | Have Not | Vested | Not Vested | Not | |||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Price ($) | Date | Vested (#)(2) | ($)(3) | (#) | Vested ($) | ||||||||||||||||||||||||||||
Steven R. Berrard | — | 107,656 | $ | 4.18 | 11/2/2020 | 251,196 | $ | 1,195,693 | — | — | ||||||||||||||||||||||||||
Hugh H. Cooper | — | 52,500 | $ | 4.18 | 11/2/2020 | 122,500 | $ | 583,100 | — | — | ||||||||||||||||||||||||||
Thomas Aucamp | — | 47,368 | $ | 4.18 | 11/2/2020 | 110,526 | $ | 526,104 | — | — | ||||||||||||||||||||||||||
Thomas Byrne | — | 49,522 | $ | 4.18 | 11/2/2020 | 115,550 | $ | 550,018 | — | — |
(1) | Represents stock options granted under the Plan, which vest in four equal annual installments beginning on November 2, 2011. | |
(2) | Represents restricted stock units granted under the Plan, which vest in four equal annual installments beginning on November 2, 2011. Each restricted stock unit represents the right to receive one share of common stock upon vesting. | |
(3) | Determined by multiplying the closing price of the Company’s common stock on December 31, 2010 ($4.76) by the number of shares of common stock underlying the restricted stock units. |
• | an annual fee of $60,000, paid quarterly on a calendar year basis; | |
• | an annual committee chairman fee of $10,000, paid quarterly on a calendar year basis to the Chairman of each of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee; |
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• | a per Board meeting fee of $1,500, paid quarterly in arrears on a calendar year basis; | |
• | a per committee meeting fee of $1,500, paid quarterly in arrears on a calendar year basis; | |
• | an annual grant of $35,000 in restricted stock units, paid on the first day of the month following our annual meeting of stockholders; and | |
• | a one time grant of $25,000 in restricted stock units, paid to each non-employee director upon their election or appointment to the Board. |
Change in | ||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||
Fees Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name | Cash | Awards(1) | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
H. Wayne Huizenga | $ | 13,000 | $ | 56,915 | — | — | — | — | $ | 69,915 | ||||||||||||||||||
David Braley | $ | 16,000 | $ | 58,416 | — | — | — | — | $ | 74,416 | ||||||||||||||||||
John Ellis Bush | $ | 17,500 | $ | 60,083 | — | — | — | — | $ | 77,583 | ||||||||||||||||||
James E. O’Connor(2) | $ | 16,000 | $ | 60,083 | — | — | — | — | $ | 76,083 | ||||||||||||||||||
David Prussky | $ | 16,000 | $ | 58,416 | — | — | — | — | $ | 74,416 | ||||||||||||||||||
Ramon A. Rodriguez(2) | $ | 17,500 | $ | 61,584 | — | — | — | — | $ | 79,084 | ||||||||||||||||||
Michael Serruya | $ | 13,000 | $ | 56,915 | — | — | — | — | $ | 69,915 |
(1) | Represents restricted stock units granted under the Plan. This columns reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. In determining the grant date fair value for restricted stock units, the Company used $4.18, the closing price of the Company’s common stock on the grant date. The table below sets forth the aggregate number of restricted stock units and stock options of each non-employee director outstanding as of December 31, 2010. The table below does not include non-compensatory warrants to purchase 5,500,000 shares of common stock held by Mr. Serruya, which were issued to him prior to the Merger. |
Restricted | Stock | |||||||
Name | Stock Units | Options | ||||||
H. Wayne Huizenga | 13,616 | — | ||||||
David Braley | 13,975 | — | ||||||
John Ellis Bush | 14,374 | — | ||||||
James E. O’Connor(2) | 14,374 | — | ||||||
David Prussky | 13,975 | 20,000 | ||||||
Ramon A. Rodriguez(2) | 14,733 | — | ||||||
Michael Serruya | 13,616 | — |
(2) | Messrs. O’Connor and Rodriguez resigned as directors on January 28, 2011. |
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Principal | ||||
Date of Note | Amount | |||
05/15/2008 | $ | 2,500,000 | ||
09/16/2008 | 2,500,000 | |||
03/24/2009 | 1,200,000 | |||
06/02/2009 | 2,000,000 | |||
04/13/2009 | 250,000 | |||
07/10/2009 | 595,000 | |||
09/21/2009 | 250,000 | |||
10/14/2009 | 1,500,000 | |||
12/04/2009 | 250,000 | |||
12/09/2009 | 5,800,000 | |||
03/25/2010 | 2,100,000 | |||
5/26/2010 | 2,500,000 | |||
Total | $ | 21,445,000 | ||
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Amount and | ||||||||
Nature of | ||||||||
Beneficial | Percent of | |||||||
Name and Address of Beneficial Owner | Ownership | Class(1) | ||||||
Directors and Executive Officers: | ||||||||
H. Wayne Huizenga | 25,013,101 | (2) | 14.4 | % | ||||
Steven R. Berrard | 25,005,311 | (3) | 14.4 | % | ||||
Thomas Aucamp | 1,300,265 | (3) | * | |||||
David Braley | 5,200,103 | (2) | 3.0 | % | ||||
John Ellis Bush | 7,742 | (2) | * | |||||
Thomas Byrne | 1,300,265 | (3) | * | |||||
Hugh H. Cooper | — | — | ||||||
Harris W. Hudson | 1,042,992 | (4) | * | |||||
Michael Kipp | — | — | ||||||
William D. Pruitt | 23,742 | (5) | * | |||||
David Prussky | 268,303 | (6) | * | |||||
Michael Serruya | 2,447,745 | (7) | 1.4 | % | ||||
Directors and Executive Officers as a group (12 persons) | 61,639,569 | (8) | 35.5 | % | ||||
5% Stockholders: | ||||||||
FMR LLC(9)(10) | 23,729,043 | 13.7 | % |
* | The person beneficially owns less than 1% of Swisher Hygiene’s outstanding common stock. | |
(1) | Based on 173,473,566 shares of our common stock outstanding as of July 15, 2011. | |
(2) | Includes 5,303 shares of common stock underlying fully vested restricted stock units that will only be delivered following the beneficial owner’s departure as a director. | |
(3) | The shares of common stock held by these executive officers have been pledged to H. Wayne Huizenga as security for certain obligations owing pursuant to stock pledge and security agreements by each executive officer for the benefit of Mr. Huizenga. |
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(4) | Includes 9,303 shares of common stock underlying fully vested restricted stock units that will only be delivered following the beneficial owner’s departure as a director. | |
(5) | Consists of 10,000 shares of common stock held by Pruitt Enterprises, LP, 2,000 shares of common stock held by Mr. Pruitt’s spouse, 2,439 shares of common stock held by Mr. Pruitt, and 9,303 shares of common stock underlying fully vested restricted stock units held by Pruitt Enterprises, LP that will only be delivered following the beneficial owner’s departure as a director. Mr. Pruitt is one of five limited partners of Pruitt Enterprises, LP. The general partner of Pruitt Enterprises, LP is Pruitt Ventures, Inc. Mr. Pruitt is the President and sole director of Pruitt Ventures, Inc. Mr. Pruitt and his wife own a majority interest in Pruitt Ventures, Inc. The reporting person disclaims beneficial ownership of the Pruitt Enterprises, LP securities, except to the extent of any pecuniary interest therein and this report shall not be deemed an admission that the reporting person is the beneficial owner of the Pruitt Enterprises, LP securities for any other purpose. | |
(6) | Consists of 210,000 shares of common stock held by Mr. Prussky, 33,000 shares of common stock held by Mr. Prussky’s spouse, and 20,000 shares of common stock underlying exercisable options. Also, includes 5,303 shares of common stock underlying fully vested restricted stock units that will only be delivered following the beneficial owner’s departure as a director. | |
(7) | Consists of 433,291 shares of common stock held by Mr. Serruya, 2,039,151 shares of common stock held by 1082272 Ontario Inc., and 5,303 shares of common stock underlying fully vested restricted stock units that will only be delivered following the beneficial owner’s departure as a director. 1082272 Ontario Inc., an entity owned 50% by Michael Serruya and 50% by his brother, Aaron Serruya, owns 4,078,301 shares of common stock. Michael Serruya is a director and President of 1082272 Ontario Inc., and exercises voting and dispositive power over half the shares of common stock held by 1082272 Ontario Inc. Aaron Serruya exercises voting and dispositive power over the other shares of Swisher Hygiene held by 1082272 Ontario Inc. | |
(8) | Includes 20,000 shares of common stock underlying exercisable options and 45,121 shares of common stock underlying fully vested restricted stock units that will only be delivered following the beneficial owners departure as a director. | |
(9) | Based on the Schedule 13G filed by FMR LLC with the SEC on April 8, 2011. Fidelity Management & Research Company (“Fidelity”), 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 13,871,900 shares of Swisher Hygiene Inc. as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940 (the “Funds”). | |
Edward C. Johnson 3d and FMR LLC, through its control of Fidelity and the Funds, each has sole power to dispose of the 13,871,900 shares owned by the Funds. | ||
Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. | ||
Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. | ||
(10) | Also, includes 9,857,143 shares of common stock acquired on April 15, 2011, which are not reflected in Fidelity’s Schedule 13G filed on April 8, 2011, by certain funds for which Fidelity acts as investment advisor pursuant to securities purchase agreements. We completed this transaction on April 19, 2011. |
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SWISHER HYGIENE INC. AND SUBSIDIARIES | ||||
Condensed Consolidated Financial Statements As of March 31, 2011 and 2010 (Unaudited) | ||||
FINANCIAL STATEMENTS | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Consolidated Financial Statements As of December 31, 2010 and 2009 | ||||
F-23 | ||||
FINANCIAL STATEMENTS | ||||
F-25 | ||||
F-26 | ||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
SUPPLEMENTAL SCHEDULES | ||||
F-55 | ||||
CHOICE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES AND AFFILIATE | ||||
Consolidated Financial Statements As of December 31, 2010 and 2009 (Unaudited) | ||||
FINANCIAL STATEMENTS | ||||
F-56 | ||||
F-57 | ||||
F-58 | ||||
F-59 | ||||
F-60 | ||||
SUPPLEMENTAL SCHEDULES | ||||
F-70 | ||||
F-71 | ||||
Consolidated Financial Statements As of September 30, 2010 and 2009 | ||||
F-72 | ||||
FINANCIAL STATEMENTS | ||||
F-73 | ||||
F-74 | ||||
F-75 | ||||
F-76 | ||||
F-77 | ||||
SUPPLEMENTAL SCHEDULES | ||||
F-88 | ||||
F-89 |
F-1
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MT. HOOD SOLUTIONS COMPANY | ||||
Consolidated Financial Statements As of March 31, 2011 and 2010 (Unaudited) | ||||
FINANCIAL STATEMENTS | ||||
F-90 | ||||
F-91 | ||||
F-92 | ||||
F-93 | ||||
F-94 | ||||
Consolidated Financial Statements As of December 31, 2010 | ||||
F-101 | ||||
FINANCIAL STATEMENTS | ||||
F-102 | ||||
F-103 | ||||
F-104 | ||||
F-105 | ||||
F-106 | ||||
PRO-CLEAN OF ARIZONA, INC. | ||||
Financial Statements As of March 31, 2011 and 2010 (Unaudited) | ||||
FINANCIAL STATEMENTS | ||||
F-113 | ||||
F-114 | ||||
F-115 | ||||
F-116 | ||||
F-117 |
Financial Statements As of December 31, 2010 | ||||
F-123 | ||||
FINANCIAL STATEMENTS | ||||
F-124 | ||||
F-125 | ||||
F-126 | ||||
F-127 | ||||
F-128 |
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Table of Contents
CENTRAL CARTING DISPOSAL, INC. AND CCI HAULING, INC. | ||||
Combined Financial Statements As of March 31, 2011 and 2010 (Unaudited) | ||||
FINANCIAL STATEMENTS | ||||
F-134 | ||||
F-135 | ||||
F-136 | ||||
F-137 | ||||
F-138 | ||||
Combined Financial Statements As of December 31, 2010 | ||||
F-145 | ||||
FINANCIAL STATEMENTS | ||||
F-146 | ||||
F-147 | ||||
F-148 | ||||
F-149 | ||||
F-150 |
F-3
Table of Contents
Balance at | ||||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 105,069,848 | $ | 38,931,738 | ||||
Restricted cash | — | 5,193,333 | ||||||
Accounts receivable (net of allowance for doubtful accounts of $1,404,365 at March 31, 2011 and $334,156 at December 31, 2010) | 14,893,924 | 7,068,629 | ||||||
Inventory | 3,765,159 | 2,968,076 | ||||||
Other assets | 2,797,557 | 894,719 | ||||||
Total current assets | 126,526,488 | 55,056,495 | ||||||
Property and equipment, net | 44,202,516 | 11,324,055 | ||||||
Goodwill | 87,877,874 | 29,660,309 | ||||||
Other intangibles, net | 44,076,159 | 7,668,805 | ||||||
Other noncurrent assets | 3,736,793 | 2,524,598 | ||||||
$ | 306,419,830 | $ | 106,234,262 | |||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable, accrued expenses, and other current liabilities | $ | 18,024,044 | $ | 9,335,932 | ||||
Short term obligations | 19,734,219 | 13,378,710 | ||||||
Advances from shareholder | 2,000,000 | 2,000,000 | ||||||
Total current liabilities | 39,758,263 | 24,714,642 | ||||||
Long term obligations | 37,527,478 | 31,028,992 | ||||||
Deferred income tax liabilities | 9,746,713 | 1,700,000 | ||||||
Other long term liabilities | 3,554,802 | 2,763,051 | ||||||
Total noncurrent liabilities | 50,828,993 | 35,492,043 | ||||||
Commitments and contingencies | ||||||||
Equity | ||||||||
Swisher Hygiene Inc. stockholders’ equity | ||||||||
Common stock, par value $0.001, authorized 400,000,000 shares; 148,455,429 and 114,015,063 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively | 148,455 | 114,015 | ||||||
Additional paid-in capital | 227,569,009 | 54,725,897 | ||||||
Accumulated deficit | (12,204,602 | ) | (8,996,759 | ) | ||||
Accumulated other comprehensive income | 216,008 | 73,985 | ||||||
Total Swisher Hygiene Inc. stockholders’ equity | 215,728,870 | 45,917,138 | ||||||
Non-controlling interest | 103,704 | 110,439 | ||||||
Total equity | 215,832,574 | 46,027,577 | ||||||
$ | 306,419,830 | $ | 106,234,262 | |||||
F-4
Table of Contents
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenue | ||||||||
Product | $ | 15,426,822 | $ | 8,164,028 | ||||
Service | 10,458,452 | 4,378,544 | ||||||
Franchise and other | 1,511,029 | 2,186,361 | ||||||
Total revenue | 27,396,303 | 14,728,933 | ||||||
Costs and expenses | ||||||||
Cost of sales | 9,583,685 | 5,308,948 | ||||||
Route expenses | 7,115,071 | 3,174,176 | ||||||
Selling, general, and administrative | 12,324,869 | 6,507,155 | ||||||
Acquisition and merger expenses | 1,315,978 | — | ||||||
Depreciation and amortization | 2,707,952 | 1,042,830 | ||||||
Total costs and expenses | 33,047,555 | 16,033,109 | ||||||
Loss from operations | (5,651,252 | ) | (1,304,176 | ) | ||||
Other expense, net | (2,273,119 | ) | (291,265 | ) | ||||
Net loss before income taxes | (7,924,371 | ) | (1,595,441 | ) | ||||
Income tax benefit | 4,709,793 | — | ||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | ||
Loss per share | ||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.03 | ) | ||
Weighted-average common shares used in the computation of loss per share | ||||||||
Basic and diluted | 122,780,115 | 57,829,630 | ||||||
F-5
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Accumulated | Swisher | |||||||||||||||||||||||||||||||
Additional | Other | Hygiene Inc. | ||||||||||||||||||||||||||||||
Common Stock | Paid-In | Accumulated | Comprehensive | Shareholders’ | Non-controlling | Total | ||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | (Loss) / Income | Equity | Interest | Equity | |||||||||||||||||||||||||
Balance as of December 31, 2010 | 114,015,063 | $ | 114,015 | $ | 54,725,897 | $ | (8,996,759 | ) | $ | 73,985 | $ | 45,917,138 | $ | 110,439 | $ | 46,027,577 | ||||||||||||||||
Shares issued in connection with private placements | 24,262,500 | 24,262 | 115,969,530 | 115,993,792 | 115,993,792 | |||||||||||||||||||||||||||
Shares issued in connection with the acquisition of Choice | 8,281,920 | 8,282 | 48,772,244 | 48,780,526 | 48,780,526 | |||||||||||||||||||||||||||
Shares issued in connection with acquisitions and purchases of property and equipment | 298,082 | 298 | 2,144,621 | 2,144,919 | 2,144,919 | |||||||||||||||||||||||||||
Conversion of promissory note payable | 1,312,864 | 1,313 | 5,076,160 | 5,077,473 | 5,077,473 | |||||||||||||||||||||||||||
Stock based compensation | 664,842 | 664,842 | 664,842 | |||||||||||||||||||||||||||||
Exercise of stock options | 285,000 | 285 | 215,715 | 216,000 | 216,000 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | 142,023 | 142,023 | 142,023 | |||||||||||||||||||||||||||||
Net loss | (3,207,843 | ) | (3,207,843 | ) | (6,735 | ) | (3,214,578 | ) | ||||||||||||||||||||||||
Balance as of March 31, 2011 | 148,455,429 | $ | 148,455 | $ | 227,569,009 | $ | (12,204,602 | ) | $ | 216,008 | $ | 215,728,870 | $ | 103,704 | $ | 215,832,574 | ||||||||||||||||
F-6
Table of Contents
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash used in operating activities | ||||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 2,707,952 | 1,042,830 | ||||||
Stock based compensation | 664,842 | — | ||||||
Unrealized loss on fair value of convertible promissory notes | 1,961,100 | — | ||||||
Deferred income tax liabilities | (3,954,793 | ) | — | |||||
Changes in working capital components: | ||||||||
Accounts receivable | (1,052,100 | ) | (159,035 | ) | ||||
Inventory | (184,723 | ) | (221,921 | ) | ||||
Other assets and noncurrent assets | (945,709 | ) | (602,706 | ) | ||||
Accounts payable, accrued expenses, and other liabilities | 1,179,087 | 1,460,951 | ||||||
Cash used in operating activities | (2,838,922 | ) | (75,322 | ) | ||||
Cash used in investing activities | ||||||||
Purchases of property and equipment | (3,019,248 | ) | (1,002,528 | ) | ||||
Acquisitions, net of cash acquired | (12,318,774 | ) | — | |||||
Restricted cash | 5,193,333 | — | ||||||
Cash used in investing activities | (10,144,689 | ) | (1,002,528 | ) | ||||
Cash provided by financing activities | ||||||||
Proceeds from private placements, net of issuance costs | 116,253,791 | — | ||||||
Principal payments on acquired Choice debt | (39,219,160 | ) | — | |||||
Proceeds from line of credit, net of issuance costs | 27,639,355 | — | ||||||
Payoff of lines of credit | (24,946,932 | ) | — | |||||
Principal payments on debt | (821,333 | ) | (575,299 | ) | ||||
Proceeds from exercise of stock options | 216,000 | — | ||||||
Payment of shareholder advance | — | (800,000 | ) | |||||
Proceeds from advances from shareholders | — | 2,100,000 | ||||||
Cash provided by financing activities | 79,121,721 | 724,701 | ||||||
Net increase (decrease) in cash and cash equivalents | 66,138,110 | (353,149 | ) | |||||
Cash and cash equivalents at the beginning of the period | 38,931,738 | 1,270,327 | ||||||
Cash and cash equivalents at the end of the period | $ | 105,069,848 | $ | 917,178 | ||||
F-7
Table of Contents
NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-8
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F-9
Table of Contents
NOTE 3 — | ACQUISITIONS |
Consideration: | ||||
Issuance of shares at stock price of $5.89 | $ | 48,780,526 | ||
Debt | 40,941,484 | |||
Cash paid | 7,553,784 | |||
$ | 97,275,794 | |||
F-10
Table of Contents
Net tangible assets acquired: | ||||
Cash and cash equivalents | $ | 340,870 | ||
Receivables | 6,095,801 | |||
Inventory | 150,833 | |||
Property and equipment | 29,618,377 | |||
Customer contracts | 27,840,000 | |||
Non-compete agreements | 2,880,000 | |||
Deferred income tax assets and other assets | 2,234,452 | |||
Accounts payable and accrued expenses | (6,220,986 | ) | ||
Capital lease obligations | (3,523,615 | ) | ||
Deferred income tax liabilities | (12,001,506 | ) | ||
Total tangible assets acquired | 47,414,226 | |||
Goodwill | 49,861,568 | |||
Total purchase price | 97,275,794 | |||
Less: Debt assumed | (40,941,484 | ) | ||
Less: Issuance of shares | (48,780,526 | ) | ||
Cash paid (including prepayment penalty of $1,853,784) | $ | 7,553,784 | ||
F-11
Table of Contents
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Revenue | $ | 26,419,303 | $ | 26,219,395 | ||||
Costs and expenses | 32,731,772 | 26,718,910 | ||||||
Loss from operations | (6,312,469 | ) | (499,515 | ) | ||||
Other expense, net | (2,028,786 | ) | (308,955 | ) | ||||
Net loss before income taxes | (8,341,255 | ) | (808,470 | ) | ||||
Income tax benefit | 4,853,261 | — | ||||||
Net loss | $ | (3,487,994 | ) | $ | (808,470 | ) | ||
Loss per share | ||||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.01 | ) | ||
Weighted-average common shares used in the computation of loss per share | ||||||||
Basic and diluted | 122,780,115 | 57,829,630 | ||||||
F-12
Table of Contents
Three Months Ended | ||||
March 31, 2011 | ||||
Number of businesses acquired | 13 | |||
Net tangible assets acquired | ||||
Accounts receivable and other assets | $ | 653,850 | ||
Inventory | 457,090 | |||
Property and equipment | 861,820 | |||
Accounts payable and accrued expenses | (526,970 | ) | ||
Total | 1,445,790 | |||
Identifiable intangible assets: | ||||
Customer relationships | 5,446,400 | |||
Non-compete agreements | 1,331,900 | |||
Total | 6,778,300 | |||
Goodwill | 8,273,100 | |||
Aggregate purchase price | 16,497,190 | |||
Less: Stock issued | 1,943,500 | |||
Less: Earn outs | 1,190,000 | |||
Less: Notes issued or assumed on acquisition | 8,598,700 | |||
Cash paid on acquisitions | $ | 4,764,990 | ||
NOTE 4 — | GOODWILL AND OTHER INTANGIBLE ASSETS |
F-13
Table of Contents
Hygiene | Waste | |||||||
Goodwill | ||||||||
Balance — December 31 | ||||||||
Gross goodwill | $ | 30,530,309 | $ | — | ||||
Accumulated impairment losses | (870,000 | ) | — | |||||
$ | 29,660,309 | $ | — | |||||
Goodwill acquired | 8,273,100 | $ | 49,861,568 | |||||
Foreign exchange translation | 82,897 | — | ||||||
Balance — March 31 | ||||||||
Gross goodwill | 38,886,306 | 49,861,568 | ||||||
Accumulated impairment losses | (870,000 | ) | — | |||||
$ | 38,016,306 | 49,861,568 | ||||||
Customer Relationships | ||||||||
Balance — December 31 | $ | 5,779,980 | $ | — | ||||
Customers acquired | 5,446,400 | 27,840,000 | ||||||
Amortization | (547,524 | ) | (331,429 | ) | ||||
Foreign exchange translation | 75,330 | — | ||||||
Balance — March 31 | $ | 10,754,186 | $ | 27,508,571 | ||||
Non-compete Agreements | ||||||||
Balance — December 31 | $ | 1,888,825 | $ | — | ||||
Agreements | 1,331,900 | 2,880,000 | ||||||
Amortization | (212,455 | ) | (96,000 | ) | ||||
Foreign exchange translation | 21,132 | — | ||||||
Balance — March 31 | $ | 3,029,402 | $ | 2,784,000 | ||||
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Table of Contents
NOTE 5 — | EQUITY |
Balance at December 31, 2010 | $ | 46,027,577 | ||
Issuance of shares in connection with Choice acquisition (See Note 3) | 48,780,526 | |||
Issuance of shares in connection with private placements | 115,993,792 | |||
Issuance of shares in connection with acquisitions (See Note 3) | 1,943,500 | |||
Issuance of shares in connection with purchases of property and equipment | 201,419 | |||
Stock based compensation | 880,842 | |||
Conversion of convertible promissory note payable (See Note 6) | 5,077,473 | |||
Foreign currency translation | 142,023 | |||
Net loss | (3,214,578 | ) | ||
Balance at March 31, 2011 | $ | 215,832,574 | ||
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Table of Contents
NOTE 6 — | LONG TERM OBLIGATIONS |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Line of credit agreement dated March 2008. Interest is payable monthly at one month LIBOR plus 2.85% at December 31, 2010. Interest rate of 3.11% at December 31, 2010 | $ | — | $ | 9,946,932 | ||||
Line of credit agreement dated June 2008. Interest is payable monthly at one month LIBOR plus 1.50% at December 31, 2010. Interest rate of 1.76% at December 31, 2010 | — | 15,000,000 | ||||||
Line of credit agreement dated March 2011 and matures in July 2013. Interest rate of 3.2% at March 31, 2011 | 27,779,355 | — | ||||||
Acquisition notes payables | 9,041,013 | 7,891,209 | ||||||
Capitalized lease obligations with related parties | 3,496,848 | — | ||||||
Capitalized lease obligations | 784,153 | 549,504 | ||||||
Notes payable under Master Loan and Security Agreement, due in monthly installments and maturing in 2012. Interest is payable monthly at a weighted average interest rate of 8% at March 31, 2011 and December 31, 2010 | 104,048 | 248,577 | ||||||
Convertible promissory notes: | ||||||||
6% Note due June 30, 2011 | — | 5,000,000 | ||||||
4% Notes at various dates through December 15, 2011 | 16,056,280 | 5,771,480 | ||||||
57,261,697 | 44,407,702 | |||||||
Short term obligations | (19,734,219 | ) | (13,378,710 | ) | ||||
Long term obligations | $ | 37,527,478 | $ | 31,028,992 | ||||
F-16
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F-17
Table of Contents
NOTE 7 — | FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS |
Balance as of December 31, 2010 | $ | 5,771,480 | ||
Issuance of convertible promissory notes | 8,323,700 | |||
Unrealized losses included in earnings | 1,961,100 | |||
Balance as of March 31, 2011 | $ | 16,056,280 | ||
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Table of Contents
NOTE 8 — | OTHER EXPENSE, NET |
2011 | 2010 | |||||||
Interest expense | $ | (363,168 | ) | $ | (306,271 | ) | ||
Unrealized loss on convertible promissory notes payable (see Note 6 and 7) | (1,961,100 | ) | — | |||||
Interest income | 15,746 | 15,006 | ||||||
Foreign currency gain | 35,403 | — | ||||||
$ | (2,273,119 | ) | $ | (291,265 | ) | |||
NOTE 9 — | COMPREHENSIVE LOSS |
2011 | 2010 | |||||||
Net loss | $ | (3,214,578 | ) | $ | (1,595,441 | ) | ||
Foreign currency translation | 142,023 | — | ||||||
Comprehensive loss | $ | (3,072,555 | ) | $ | (1,595,441 | ) | ||
NOTE 10 — | SUPPLEMENTAL CASH FLOW INFORMATION |
2011 | 2010 | |||||||
Cash received for interest | $ | 15,746 | $ | — | ||||
Cash paid for interest | $ | 265,664 | $ | 209,076 | ||||
Notes payable issued or assumed on acquisition | $ | 49,540,184 | $ | — | ||||
Conversion of promissory note | $ | 5,077,473 | $ | — | ||||
Issuance of shares for acquisitions | $ | 1,943,500 | $ | — | ||||
Issuance of shares for purchases of property and equipment | $ | 201,419 | $ | — | ||||
Debt and private placement issuance costs financed | $ | 283,000 | $ | — | ||||
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Table of Contents
NOTE 11 — | LOSS PER SHARE |
• | Warrants to purchase 5,500,000 shares of common stock at $0.50 per share were outstanding and expire in November 2011. | |
• | Stock options and restricted units to purchase 5,055,428 shares of common stock. | |
• | Convertible promissory notes that if-converted would result in 2,602,811 shares of common stock. |
NOTE 12 — | INCOME TAXES |
NOTE 13 — | SEGMENTS |
Hygiene | Waste | Consolidated | ||||||||||
Revenue | $ | 21,592,488 | $ | 5,803,815 | $ | 27,396,303 | ||||||
Depreciation and amortization | 1,898,780 | 809,172 | 2,707,952 | |||||||||
Loss from operations | (5,290,894 | ) | (360,358 | ) | (5,651,252 | ) | ||||||
Interest expense and other, net | (2,265,416 | ) | (7,703 | ) | (2,273,119 | ) | ||||||
Net loss before income taxes | (7,556,310 | ) | (368,061 | ) | (7,924,371 | ) | ||||||
Capital expenditures | $ | 2,724,758 | $ | 294,490 | $ | 3,019,248 | ||||||
Total assets | $ | 187,138,016 | $ | 119,281,814 | $ | 306,419,830 | ||||||
F-20
Table of Contents
NOTE 14 — | COMMITMENTS AND CONTINGENCIES |
NOTE 15 — | SUBSEQUENT EVENTS |
• | ProClean of Arizona, Inc. (“ProClean”), an independent hygiene and chemical provider in the Southwest. ProClean has been in business since 1976 and serves over 4,000 commercial customers in Arizona, Southern California, Southern Nevada, New Mexico and West Texas through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice and hospitality industries, including ware washing, general cleaning, laundry and housekeeping services. | |
• | Mt. Hood Solutions (“Mt. Hood”) an independent hygiene and chemical provider in the Northwest. Mt. Hood has been in business since 1902 and serves over 4,000 commercial and industrial customers in Oregon, Washington, Northern California, Idaho, Utah and Colorado through its more than 100 employees by offering a complete range of specialty chemicals and service programs to the foodservice, hospitality and healthcare industries, including ware washing, general cleaning, |
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laundry and housekeeping services, as well as a line of products for manufacturing companies including industrial and water treatment products. |
• | Lawson Sanitation, LLC (“Lawson”), a Miami-based solid waste services provider. Lawson has been in business since 2003 and serves commercial and multi-family commercial customers in South Florida by offering a complete range of solid waste and recycling collection, transportation, processing and disposal services. |
F-22
Table of Contents
Charlotte, North Carolina
March 31, 2011
F-23
Table of Contents
F-24
Table of Contents
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 38,931,738 | $ | 1,270,327 | ||||
Restricted cash | 5,193,333 | — | ||||||
Accounts receivable, net | 7,068,629 | 4,954,010 | ||||||
Inventory, net | 2,968,076 | 1,295,784 | ||||||
Other assets | 894,719 | 242,093 | ||||||
Total current assets | 55,056,495 | 7,762,214 | ||||||
Property and equipment, net | 11,324,055 | 7,859,482 | ||||||
Other assets | ||||||||
Goodwill | 29,660,309 | 18,353,489 | ||||||
Other intangibles, net | 7,668,805 | 3,580,458 | ||||||
Other noncurrent assets | 2,524,598 | 1,362,296 | ||||||
Total other assets | 39,853,712 | 23,296,243 | ||||||
$ | 106,234,262 | $ | 38,917,939 | |||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 5,615,467 | $ | 3,604,266 | ||||
Accrued expenses and other current liabilities | 3,720,465 | 2,584,852 | ||||||
Short term obligations | 13,378,710 | 2,295,290 | ||||||
Advances from shareholder | 2,000,000 | 800,000 | ||||||
Total current liabilities | 24,714,642 | 9,284,408 | ||||||
Long term obligations | 31,028,992 | 32,029,841 | ||||||
Advances from shareholder | — | 16,845,000 | ||||||
Deferred income tax liabilities | 1,700,000 | — | ||||||
Other long term liabilities | 2,763,051 | 112,000 | ||||||
Total noncurrent liabilities | 35,492,043 | 48,986,841 | ||||||
Commitments and contingencies | — | — | ||||||
Equity | ||||||||
Swisher Hygiene Inc. stockholders’ equity | ||||||||
Common stock, par value $0.001, authorized 400,000,000 shares; 114,015,063 and 57,789,630 shares issued and outstanding at December 31, 2010 and 2009, respectively | 114,015 | 57,790 | ||||||
Additional paid-in capital | 54,725,897 | 27,487,740 | ||||||
Accumulated deficit | (8,996,759 | ) | (47,000,736 | ) | ||||
Accumulated other comprehensive income | 73,985 | — | ||||||
Total Swisher Hygiene Inc. stockholders’ equity | 45,917,138 | (19,455,206 | ) | |||||
Non-controlling interest | 110,439 | 101,896 | ||||||
Total equity | 46,027,577 | (19,353,310 | ) | |||||
$ | 106,234,262 | $ | 38,917,939 | |||||
F-25
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Revenue | ||||||||||||
Product | $ | 37,690,324 | $ | 27,316,876 | $ | 25,935,493 | ||||||
Service | 17,737,440 | 16,573,821 | 19,895,990 | |||||||||
Franchise and other | 8,224,554 | 12,923,327 | 18,277,408 | |||||||||
Total revenue | 63,652,318 | 56,814,024 | 64,108,891 | |||||||||
Costs and expenses | ||||||||||||
Cost of sales | 23,597,229 | 22,304,515 | 25,071,410 | |||||||||
Route expenses | 13,930,653 | 12,519,891 | 14,201,243 | |||||||||
Selling, general, and administrative | 31,258,368 | 24,094,701 | 30,057,178 | |||||||||
Merger expenses | 5,122,067 | — | — | |||||||||
Depreciation and amortization | 4,857,173 | 4,744,052 | 5,206,632 | |||||||||
Total costs and expenses | 78,765,490 | 63,663,159 | 74,536,463 | |||||||||
Loss from operations | (15,113,172 | ) | (6,849,135 | ) | (10,427,572 | ) | ||||||
Other income (expense) | ||||||||||||
Interest income | 100,212 | 54,797 | 10,337 | |||||||||
Interest expense | (1,677,076 | ) | (1,063,411 | ) | (1,292,664 | ) | ||||||
Gain (loss) on foreign currency | 820,032 | 34,653 | (54,972 | ) | ||||||||
Forgiveness of debt | — | 500,000 | — | |||||||||
Gain from bargain purchases | — | 94,107 | — | |||||||||
Impairment loss | — | (30,000 | ) | (223,000 | ) | |||||||
Total other expense, net | (756,832 | ) | (409,854 | ) | (1,560,299 | ) | ||||||
Net loss before income taxes | (15,870,004 | ) | (7,258,989 | ) | (11,987,871 | ) | ||||||
Income tax expense | 1,700,000 | — | — | |||||||||
Net loss | (17,570,004 | ) | (7,258,989 | ) | (11,987,871 | ) | ||||||
Net (income) loss attributable to noncontrolling interest | (8,543 | ) | (1,896 | ) | 17,014 | |||||||
Net loss attributable to Swisher Hygiene Inc. | (17,578,547 | ) | (7,260,885 | ) | (11,970,857 | ) | ||||||
Comprehensive loss | ||||||||||||
Employee benefit pension plan | 73,985 | — | — | |||||||||
Liquidation of a foreign subsidiary | — | 221,466 | — | |||||||||
Foreign currency translation adjustment | — | — | (195,446 | ) | ||||||||
Comprehensive loss | $ | (17,504,562 | ) | $ | (7,039,419 | ) | $ | (12,166,303 | ) | |||
Loss per share | ||||||||||||
Basic and diluted | $ | (0.26 | ) | $ | (0.13 | ) | $ | (0.21 | ) | |||
Weighted-average common shares used in the computation of loss per share | ||||||||||||
Basic and diluted | 66,956,371 | 57,789,630 | 57,789,630 | |||||||||
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Accumulated | Swisher | |||||||||||||||||||||||||||||||
Additional | Other | Hygiene Inc. | ||||||||||||||||||||||||||||||
Common Stock | Paid-In | Accumulated | Comprehensive | Shareholder’s | Noncontrolling | Total | ||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | (Loss) / Income | Equity | Interest | Equity | |||||||||||||||||||||||||
Balance as of January 1, 2008 | 57,789,630 | $ | 57,790 | $ | 27,880,778 | $ | (27,768,994 | ) | $ | (26,020 | ) | $ | 143,554 | $ | 28,856 | $ | 172,410 | |||||||||||||||
Foreign currency translation | — | — | — | — | (195,446 | ) | (195,446 | ) | — | (195,446 | ) | |||||||||||||||||||||
Contributions | — | — | 461,962 | — | — | 461,962 | — | 461,962 | ||||||||||||||||||||||||
Distributions | — | — | (740,000 | ) | — | — | (740,000 | ) | (11,842 | ) | (751,842 | ) | ||||||||||||||||||||
Net loss | — | — | — | (11,970,857 | ) | — | (11,970,857 | ) | (17,014 | ) | (11,987,871 | ) | ||||||||||||||||||||
Balance as of December 31, 2008 | 57,789,630 | 57,790 | 27,602,740 | (39,739,851 | ) | (221,466 | ) | (12,300,787 | ) | — | (12,300,787 | ) | ||||||||||||||||||||
Liquidation of foreign subsidiary | — | — | — | — | 221,466 | 221,466 | — | 221,466 | ||||||||||||||||||||||||
Distributions | — | — | (115,000 | ) | — | — | (115,000 | ) | — | (115,000 | ) | |||||||||||||||||||||
Contribution of equity on acquisition | — | — | — | — | — | — | 100,000 | 100,000 | ||||||||||||||||||||||||
Net (loss) income | — | — | — | (7,260,885 | ) | — | (7,260,885 | ) | 1,896 | (7,258,989 | ) | |||||||||||||||||||||
Balance as of December 31, 2009 | 57,789,630 | $ | 57,790 | $ | 27,487,740 | $ | (47,000,736 | ) | $ | — | $ | (19,455,206 | ) | $ | 101,896 | $ | (19,353,310 | ) | ||||||||||||||
Net loss through November 1, 2010 | — | — | — | (8,581,788 | ) | — | (8,581,788 | ) | — | (8,581,788 | ) | |||||||||||||||||||||
Contribution of capital as a result of the termination of the S Corp election | — | — | (55,582,524 | ) | 55,582,524 | — | — | — | — | |||||||||||||||||||||||
Shares issued in Merger with CoolBrands Inc. | 56,225,433 | 56,225 | 58,977,112 | — | — | 59,033,337 | — | 59,033,337 | ||||||||||||||||||||||||
Shareholders’ advances converted to equity | — | — | 22,198,194 | — | — | 22,198,194 | — | 22,198,194 | ||||||||||||||||||||||||
Share based compensation | — | — | 398,155 | — | — | 398,155 | — | 398,155 | ||||||||||||||||||||||||
Conversion feature on promissory note payable | — | — | 1,247,220 | — | — | 1,247,220 | — | 1,247,220 | ||||||||||||||||||||||||
Employee benefit plan adjustment | — | — | — | — | 73,985 | 73,985 | — | 73,985 | ||||||||||||||||||||||||
Net (loss) income | — | — | — | (8,996,759 | ) | — | (8,996,759 | ) | 8,543 | (8,988,216 | ) | |||||||||||||||||||||
Balance as of December 31, 2010 | 114,015,063 | $ | 114,015 | $ | 54,725,897 | $ | (8,996,759 | ) | $ | 73,985 | $ | 45,917,138 | $ | 110,439 | $ | 46,027,577 | ||||||||||||||||
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2010 | 2009 | 2008 | ||||||||||
Cash used in operating activities | ||||||||||||
Net loss | $ | (17,570,004 | ) | $ | (7,258,989 | ) | $ | (11,987,871 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 4,857,173 | 4,744,052 | 5,206,632 | |||||||||
Impairment loss | — | 30,000 | 223,000 | |||||||||
Gain from bargain purchases | — | (94,107 | ) | — | ||||||||
Provision for doubtful accounts | 282,593 | 284,385 | 605,186 | |||||||||
Stock based compensation | 398,155 | — | — | |||||||||
Unrealized loss on fair value of convertible promissory notes | 277,000 | — | — | |||||||||
Deferred tax liabilities | 1,700,000 | — | — | |||||||||
Changes in working capital components: | ||||||||||||
Accounts receivable | (1,191,276 | ) | 1,278,418 | 603,260 | ||||||||
Inventory | (1,066,672 | ) | 9,553 | (52,590 | ) | |||||||
Other assets and noncurrent assets | (702,727 | ) | (366,383 | ) | 455,657 | |||||||
Accounts payable, accrued expenses, and other long term liabilities | 1,496,154 | (4,327,249 | ) | (1,823,712 | ) | |||||||
Cash used in operating activities | (11,519,604 | ) | (5,700,320 | ) | (6,770,438 | ) | ||||||
Cash used in investing activities | ||||||||||||
Purchases of property and equipment | (5,178,717 | ) | (3,565,979 | ) | (3,391,036 | ) | ||||||
Payments received on notes receivable | 473,854 | 19,347 | 27,439 | |||||||||
Acquisitions | (4,901,000 | ) | (839,023 | ) | (291,000 | ) | ||||||
Restricted cash | (5,193,333 | ) | — | — | ||||||||
Cash used in investing activities | (14,799,196 | ) | (4,385,655 | ) | (3,654,597 | ) | ||||||
Cash provided by financing activities | ||||||||||||
Cash received in Merger | 61,850,226 | — | — | |||||||||
Distributions to shareholders | (2,070,000 | ) | (115,000 | ) | (704,000 | ) | ||||||
Distributions to non-controlling shareholder | — | — | (11,842 | ) | ||||||||
Proceeds from advances from shareholder | 7,870,000 | 12,645,000 | 5,000,000 | |||||||||
Proceeds from line of credit | — | — | 6,296,118 | |||||||||
Principal payments on debt | (3,670,015 | ) | (1,515,420 | ) | (886,995 | ) | ||||||
Cash provided by financing activities | 63,980,211 | 11,014,580 | 9,693,281 | |||||||||
Effect of exchange rates on cash | — | — | (160,611 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 37,661,411 | 928,605 | (892,365 | ) | ||||||||
Cash and cash equivalents at beginning of year | 1,270,327 | 341,722 | 1,234,087 | |||||||||
Cash and cash equivalents at end of year | $ | 38,931,738 | $ | 1,270,327 | $ | 341,722 | ||||||
Supplemental Cash Flow Information | ||||||||||||
Cash received during the year for interest | $ | 89,804 | $ | 54,797 | $ | 10,337 | ||||||
Cash paid during the year for interest | $ | 925,750 | $ | 761,107 | $ | 1,310,821 | ||||||
Notes payable issued or assumed on acquisition | $ | 12,883,089 | $ | 7,954,305 | $ | 240,000 | ||||||
Shareholder advances converted to equity | $ | 22,198,194 | $ | — | $ | 461,962 | ||||||
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NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Items in service | 2 to 5 years | |
Equipment and furniture | 3 to 10 years | |
Vehicles | 3 years | |
Computer equipment | 3 years | |
Computer software | 3 to 7 years | |
Leasehold improvements | 3 to 10 years |
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NOTE 3 — | ACQUISITIONS |
2010 | 2009 | 2008 | ||||||||||
Number of businesses acquired | 9 | 19 | 1 | |||||||||
Net tangible assets acquired | ||||||||||||
Accounts receivable and other assets | $ | 1,275,694 | $ | 935,943 | $ | 61,000 | ||||||
Inventory | 605,621 | 219,910 | 1,000 | |||||||||
Property and equipment | 883,837 | 676,548 | 18,879 | |||||||||
Accounts payable and accrued expenses | (1,856,483 | ) | (808,111 | ) | — | |||||||
Total | 908,669 | 1,024,290 | 80,879 | |||||||||
Identifiable intangible assets: | ||||||||||||
Customer relationships | 4,121,300 | 2,210,000 | 128,000 | |||||||||
Non-compete agreements | 1,447,300 | 750,000 | — | |||||||||
Total | 5,568,600 | 2,960,000 | 128,000 | |||||||||
Goodwill | 11,306,820 | 4,909,038 | 322,121 | |||||||||
Aggregate purchase price | 17,784,089 | 8,893,328 | 531,000 | |||||||||
Less: Noncontrolling interest | — | 100,000 | — | |||||||||
Less: Notes issued or assumed on acquisition | 12,883,089 | 7,954,305 | 240,000 | |||||||||
Cash paid on acquisitions | $ | 4,901,000 | $ | 839,023 | $ | 291,000 | ||||||
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NOTE 4 — | GOODWILL AND OTHER INTANGIBLE ASSETS |
2010 | 2009 | |||||||
Goodwill | ||||||||
Balance — January 1 | ||||||||
Gross goodwill | $ | 19,223,489 | $ | 14,538,316 | ||||
Accumulated impairment losses | (870,000 | ) | (870,000 | ) | ||||
18,353,489 | 13,668,316 | |||||||
Goodwill acquired | 11,306,820 | 5,003,145 | ||||||
Sale of UK subsidiary | — | (317,972 | ) | |||||
Balance — December 31 | ||||||||
Gross goodwill | 30,530,309 | 19,223,489 | ||||||
Accumulated impairment losses | (870,000 | ) | (870,000 | ) | ||||
$ | 29,660,309 | $ | 18,353,489 | |||||
Customer Relationships | ||||||||
Balance — January 1 | $ | 2,766,016 | $ | 1,744,981 | ||||
Customers acquired | 4,121,300 | 2,210,000 | ||||||
Amortization | (1,107,336 | ) | (1,158,965 | ) | ||||
Impairment | — | (30,000 | ) | |||||
Balance — December 31 | $ | 5,779,980 | $ | 2,766,016 | ||||
Non-compete Agreements | ||||||||
Balance — January 1 | $ | 814,442 | $ | 631,070 | ||||
Agreements | 1,447,300 | 750,000 | ||||||
Amortization | (372,917 | ) | (566,628 | ) | ||||
Balance — December 31 | $ | 1,888,825 | $ | 814,442 | ||||
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Amortization | Carrying | Accumulated | ||||||||||||||
Period (years) | Amount | Amortization | Net | |||||||||||||
As of December 31, 2010 | ||||||||||||||||
Customer relationships | 5 | $ | 11,716,300 | $ | (5,936,320 | ) | $ | 5,779,980 | ||||||||
Non-compete agreements | 4 | 2,752,300 | (863,475 | ) | 1,888,825 | |||||||||||
$ | 14,468,600 | $ | (6,799,795 | ) | $ | 7,668,805 | ||||||||||
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Weighted | ||||||||||||||||
Average | ||||||||||||||||
Amortization | Carrying | Accumulated | ||||||||||||||
Period (years) | Amount | Amortization | Net | |||||||||||||
As of December 31, 2009 | ||||||||||||||||
Customer relationships | 5 | $ | 7,595,000 | $ | (4,828,984 | ) | $ | 2,766,016 | ||||||||
Non-compete agreements | 4 | 1,640,000 | (825,558 | ) | 814,442 | |||||||||||
$ | 9,235,000 | $ | (5,654,542 | ) | $ | 3,580,458 | ||||||||||
2011 | $ | 2,038,700 | ||
2012 | 1,860,300 | |||
2013 | 1,728,200 | |||
2014 | 1,361,900 | |||
2015 | 680,705 | |||
$ | 7,668,805 | |||
NOTE 5 — | PROPERTY AND EQUIPMENT, NET |
2010 | 2009 | |||||||
Items in service | $ | 16,280,177 | $ | 10,264,929 | ||||
Equipment and furniture | 2,244,289 | 2,084,957 | ||||||
Vehicles | 517,987 | 466,986 | ||||||
Computer equipment | 973,524 | 895,171 | ||||||
Computer software | 6,407,547 | 5,891,775 | ||||||
Leasehold improvements | 344,494 | 322,707 | ||||||
26,768,018 | 19,926,525 | |||||||
Less: accumulated depreciation and amortization | (15,443,963 | ) | (12,067,043 | ) | ||||
$ | 11,324,055 | $ | 7,859,482 | |||||
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2011 | $ | 744,685 | ||
2012 | 740,616 | |||
2013 | 738,394 | |||
2014 | 690,726 | |||
2015 | 124,478 | |||
$ | 3,038,899 | |||
NOTE 6 — | DEBT |
2010 | 2009 | |||||||
Line of credit agreement dated March 2008. Interest is payable monthly at one month LIBOR plus 2.85% at December 31, 2010, and one month LIBOR plus 2.35% at December 31, 2009, maturing in January 2012. Interest rate of 3.11% and 2.58% at December 31, 2010 and 2009, respectively | $ | 9,946,932 | $ | 9,946,932 | ||||
Line of credit agreement dated June 2008. Interest is payable monthly at one month LIBOR plus 1.50% at December 31, 2010, and one month LIBOR plus 1.50% at December 31, 2009, maturing in January 2012. Interest rate of 1.76% and 1.73% at December 31, 2010 and 2009, respectively | 15,000,000 | 15,000,000 | ||||||
Notes payable under Master Loan and Security Agreement, due in monthly installments at December 31, 2010 of $62,776, maturing in 2012. Interest is payable monthly at a weighted average interest rate of 8% and 6.64% at December 31, 2010 and 2009, respectively | 248,577 | 899,977 | ||||||
Acquisition’s notes payables | 7,891,209 | 8,197,091 | ||||||
Convertible notes: | ||||||||
6% Note due June 30, 2011 | 5,000,000 | — | ||||||
4% Note due June 30, 2011 | 4,774,480 | — | ||||||
4% Note due September 30, 2011 | 997,000 | — | ||||||
Capitalized lease obligations | 549,504 | 281,131 | ||||||
44,407,702 | 34,325,131 | |||||||
Short term obligations | (13,378,710 | ) | (2,295,290 | ) | ||||
Long term obligations | $ | 31,028,992 | $ | 32,029,841 | ||||
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2011 | $ | 12,353,710 | ||
2012 | 27,289,104 | |||
2013 | 1,758,350 | |||
2014 | 726,790 | |||
2015 | 291,960 | |||
Thereafter | 962,788 | |||
$ | 43,382,702 | |||
Convertible promissory notes conversion feature included in short term obligations | 1,025,000 | |||
$ | 44,407,702 | |||
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Balance as of January 1, 2010 | $ | — | ||
Issuance of 4% convertible promissory notes | 5,494,480 | |||
Unrealized losses included in earnings | 277,000 | |||
Balance as of December 31, 2010 | $ | 5,771,480 | ||
NOTE 7 — | ADVANCES FROM SHAREHOLDERS |
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NOTE 8 — | RELATED PARTY TRANSACTIONS |
NOTE 9 — | INCOME TAXES |
Domestic | $ | (15,845,516 | ) | |
Foreign | (24,488 | ) | ||
Net loss before tax | $ | (15,870,004 | ) | |
Current Federal, State, and Foreign | $ | — | ||
Deferred | ||||
Federal and state | 1,537,000 | |||
Foreign | 163,000 | |||
Total provision for income taxes | $ | 1,700,000 | ||
U.S. Federal statutory rate | 35 | % | ||
State and local taxes, net of Federal benefit | 4 | |||
Period not subject to income taxes | (22 | ) | ||
Non deductible merger expenses | (9 | ) | ||
Establishment of deferred tax liabilities upon conversion to taxable status | (10 | ) | ||
Change in deferred tax asset valuation | (9 | ) | ||
Effective income tax rate | (11 | )% | ||
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Deferred tax assets | ||||
Net operating loss carryforward | $ | 1,109,000 | ||
Basis difference in other intangible assets | 2,124,000 | |||
Stock based compensation | 150,000 | |||
Allowance for uncollectible receivables | 249,000 | |||
Other | 320,000 | |||
Total deferred income tax assets | 3,952,000 | |||
Valuation allowance | (2,368,000 | ) | ||
Net deferred tax assets | 1,584,000 | |||
Deferred tax liabilities | ||||
Basis difference in property and equipment | 1,584,000 | |||
Basis difference in goodwill | 1,700,000 | |||
Total deferred tax liabilities | 3,284,000 | |||
Total net deferred income tax liabilities | $ | 1,700,000 | ||
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NOTE 10 — | SHARE BASED COMPENSATION |
Expected dividend yield | — | |||
Risk-free interest rate | 2.63% | |||
Expected volatility | 30.70% | |||
Expected life | 6.25 years |
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NOTE 11 — | RETIREMENT PLAN |
Benefit obligation | ||||
Balance — November 2, 2010 | $ | 2,511,725 | ||
Interest cost | 21,398 | |||
Actuarial loss | (7,745 | ) | ||
Benefit payments | (16,254 | ) | ||
Balance — December 31, 2010 | $ | 2,509,124 | ||
Plan assets | ||||
Balance — November 2, 2010 | $ | 1,950,794 | ||
Actual return on plan assets | 89,290 | |||
Benefit payments | (16,254 | ) | ||
Balance — December 31, 2010 | $ | 2,023,830 | ||
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Interest cost | $ | 21,398 | ||
Expected return on plan assets | (23,050 | ) | ||
Net periodic benefit income | $ | (1,625 | ) | |
Pension | ||||
Benefits | ||||
Fiscal year | ||||
2011 | $ | 101,209 | ||
2012 | 104,972 | |||
2013 | 117,472 | |||
2014 | 119,972 | |||
2015 | 117,004 | |||
2016 — 2020 | 691,862 |
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Fair Value as of | Percentage | |||||||||||||||
December 31, | of Plan | |||||||||||||||
Target Allocation | 2010 | Assets | ||||||||||||||
2011 | 2010 | Level 1 | 2010 | |||||||||||||
Equities: | ||||||||||||||||
U.S. | 50 | % | 50 | % | $ | 1,058,421 | 52 | % | ||||||||
International | 18 | 18 | 661,207 | 33 | ||||||||||||
Fixed income | 26 | 26 | 188,155 | 9 | ||||||||||||
Cash, cash equivalents and other | 6 | 6 | 116,047 | 6 | ||||||||||||
100 | % | 100 | % | $ | 2,023,830 | 100 | % | |||||||||
NOTE 12 — | LOSS PER SHARE |
• | Warrants to purchase 5,500,000 shares of common stock at $0.50 per share were outstanding and expire in November 2011. | |
• | Stock options to purchase 880,000 shares of common stock. | |
• | Stock options and restricted units to purchase 3,376,168 shares of common stock. | |
• | Convertible promissory notes that if-converted would result in 2,520,460 shares of common stock. |
NOTE 13 — | GEOGRAPHIC INFORMATION |
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2010 | 2009 | 2008 | ||||||||||
Revenue | ||||||||||||
United States | $ | 61,327,128 | $ | 55,008,262 | $ | 60,702,053 | ||||||
Other foreign countries | 2,325,190 | 1,805,762 | 3,406,838 | |||||||||
Total Revenue | $ | 63,652,318 | $ | 56,814,024 | $ | 64,108,891 | ||||||
Long Lived Assets | ||||
Property, plant, and equipment | $ | 115,561 | ||
Goodwill | $ | 2,422,729 | ||
Other intangibles, net | $ | 4,231,303 |
NOTE 14 — | COMMITMENTS AND CONTINGENCIES |
2011 | $ | 2,031,400 | ||
2012 | 1,547,400 | |||
2013 | 1,076,490 | |||
2014 | 785,280 | |||
2015 and Thereafter | 1,280,910 | |||
$ | 6,721,480 | |||
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NOTE 15 — | QUARTERLY FINANCIAL DATA (UNAUDITED) |
First | Second | Third | Fourth | |||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
2010 | ||||||||||||||||||||
Revenue | $ | 14,728,933 | $ | 15,163,556 | $ | 16,061,079 | $ | 17,698,750 | $ | 63,652,318 | ||||||||||
Gross profit(1) | $ | 9,419,985 | $ | 9,709,994 | $ | 9,953,393 | $ | 10,971,715 | $ | 40,055,089 | ||||||||||
Loss from operations | $ | (1,304,176 | ) | $ | (1,415,164 | ) | $ | (3,765,228 | ) | $ | (8,628,604 | ) | $ | (15,113,172 | ) | |||||
Net loss | $ | (1,595,441 | ) | $ | (1,769,638 | ) | $ | (4,135,080 | ) | $ | (10,069,845 | ) | $ | (17,570,004 | ) | |||||
Basic and diluted EPS | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.26 | ) |
First | Second | Third | Fourth | |||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
2009 | ||||||||||||||||||||
Revenue | $ | 13,625,909 | $ | 13,616,045 | $ | 14,431,266 | $ | 15,140,804 | $ | 56,814,024 | ||||||||||
Gross profit(1) | $ | 8,491,366 | $ | 8,267,063 | $ | 8,620,990 | $ | 9,130,090 | $ | 34,509,509 | ||||||||||
Loss from operations | $ | (870,182 | ) | $ | (1,637,898 | ) | $ | (2,138,787 | ) | $ | (2,202,268 | ) | $ | (6,849,135 | ) | |||||
Net loss | $ | (1,202,493 | ) | $ | (1,658,781 | ) | $ | (2,262,612 | ) | $ | (2,135,103 | ) | $ | (7,258,989 | ) | |||||
Basic and diluted EPS | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.13 | ) |
(1) | Total revenue less cost of sales |
NOTE 16 — | SUBSEQUENT EVENTS |
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Consideration: | ||||
Issuance of shares at stock price of $5.89 | $ | 48,781 | ||
Debt assumed | 42,798 | |||
Cash paid | 5,700 | |||
$ | 97,279 | |||
Net tangible assets acquired: | ||||
Cash and cash equivalents | $ | 341 | ||
Receivables, net | 6,096 | |||
Inventory | 151 | |||
Property and equipment | 29,743 | |||
Franchise agreements | 27,840 | |||
Non compete agreements | 2,880 | |||
Deferred income tax assets and other assets | 1,536 | |||
Accounts payable and expenses | (6,221 | ) | ||
Capital lease obligations | (3,995 | ) | ||
Deferred income tax liabilities | (11,605 | ) | ||
Total tangible assets acquired | 46,766 | |||
Goodwill | 50,513 | |||
Total purchase price | 97,279 | |||
Less: Debt assumed | 40,944 | |||
Less: Issuance of shares | 48,781 | |||
Cash paid (including prepayment penalty) | $ | 7,554 | ||
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Historical 2010 Fiscal Year | ||||||||||||||||||
Swisher | Choice | |||||||||||||||||
Hygiene | Environmental | Pro Forma | Combined | |||||||||||||||
Inc. | Services, Inc.(1) | Adjustments | Notes | Pro Forma | ||||||||||||||
Revenue | $ | 63,652 | $ | 44,894 | $ | $ | 108,546 | |||||||||||
Costs and expenses | 78,765 | 40,788 | 4,100 | a, b, c | 123,653 | |||||||||||||
Income (loss) from operations | (15,113 | ) | 4,106 | (4,100 | ) | (15,107 | ) | |||||||||||
Other income (expense) | (757 | ) | (3,164 | ) | 1,466 | d | (2,455 | ) | ||||||||||
Net loss (income) before tax | (15, 870 | ) | 942 | (2,634 | ) | (17,562 | ) | |||||||||||
Income tax | 1,700 | 577 | (577 | ) | e | 1,700 | ||||||||||||
Net loss (income) | $ | (17,570 | ) | $ | 365 | $ | (2,057 | ) | $ | (19,262 | ) | |||||||
Loss per Share | ||||||||||||||||||
Basic and diluted | $ | (0.26 | ) | $ | (0.22 | ) | ||||||||||||
Weighted-Average Common Shares Used in the Computation of Loss per Share | ||||||||||||||||||
Basic and diluted | 66,956,371 | 87,500,794 | ||||||||||||||||
(1) | Financial information for Choice is for the year ended September 30, 2010. The difference between Choice fiscal year end and our calendar year end would not be significant to revenue or earnings presented. |
F-53
Table of Contents
F-54
Table of Contents
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 2010
Balance at | Charged to | Deductions | Balance at | |||||||||||||
the Beginning | Costs and | from | the End | |||||||||||||
of the Year | Expenses | Allowance | of the Year | |||||||||||||
December 31, 2010 | ||||||||||||||||
Allowances for doubtful accounts receivable | $ | 334,156 | $ | 182,593 | $ | 152,515 | $ | 364,234 | ||||||||
Other allowances | — | 100,000 | — | 100,000 | ||||||||||||
$ | 334,156 | $ | 282,593 | $ | 152,515 | $ | 464,234 | |||||||||
December 31, 2009 | ||||||||||||||||
Allowances for doubtful accounts receivable | $ | 564,635 | $ | 284,385 | $ | 514,864 | $ | 334,156 | ||||||||
December 31, 2008 | ||||||||||||||||
Allowances for doubtful accounts receivable | $ | 517,838 | $ | 605,186 | $ | 558,389 | $ | 564,635 | ||||||||
F-55
Table of Contents
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 428,264 | $ | 415,422 | ||||
Accounts receivable, net | 6,141,132 | 4,732,050 | ||||||
Inventories | 247,570 | 302,165 | ||||||
Prepaid expenses | 782,772 | 576,475 | ||||||
Deposits | 144,697 | 270,108 | ||||||
Deferred tax asset | 181,222 | 203,808 | ||||||
Total current assets | 7,925,657 | 6,500,028 | ||||||
Property and equipment, net | 28,568,958 | 20,188,469 | ||||||
Goodwill | 13,957,814 | 13,475,314 | ||||||
Intangible assets, net | 3,250,677 | 3,545,689 | ||||||
Notes receivable, related party | 352,159 | — | ||||||
Deferred financing costs, net | 1,490,716 | 190,000 | ||||||
$ | 55,545,981 | $ | 43,899,500 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Line of credit | $ | 5,747,726 | $ | 13,582,330 | ||||
Current portion of long-term debt | 3,875,125 | 16,944,194 | ||||||
Current portion of notes payable to related parties | 77,542 | 68,814 | ||||||
Current portion of capital lease obligations | 25,552 | 23,616 | ||||||
Accounts payable and accrued expenses | 4,970,278 | 3,315,152 | ||||||
Total current liabilities | 14,696,223 | 33,934,106 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, net of current portion | 32,568,355 | 1,559,606 | ||||||
Notes payable to related parties, net of current portion | 1,227,219 | 1,304,268 | ||||||
Capital lease obligations, net of current portion | 8,964 | 34,518 | ||||||
Deferred tax liability | 1,065,720 | 511,722 | ||||||
34,870,258 | 3,410,114 | |||||||
Stockholders’ equity | 5,979,500 | 6,555,280 | ||||||
$ | 55,545,981 | $ | 43,899,500 | |||||
F-56
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Operations
Three Months Ended December 31, 2010 and 2009
2010 | 2009 | |||||||
Revenue | $ | 15,654,862 | $ | 11,227,644 | ||||
Cost of sales | 11,387,460 | 8,555,081 | ||||||
Gross profit | 4,267,402 | 2,672,563 | ||||||
Operating expenses | 2,860,077 | 1,542,284 | ||||||
Income from operations | 1,407,325 | 1,130,279 | ||||||
Other expenses: | ||||||||
Interest and other, net | 930,738 | 381,717 | ||||||
Net income | 476,587 | 748,562 | ||||||
Net loss attributable to noncontrolling interest in VIE | 5,234 | — | ||||||
Net income attributable to Choice Environmental Services, Inc. and Subsidiaries | $ | 481,821 | $ | 748,562 | ||||
F-57
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Changes in Stockholders’ Equity
Three Months Ended December 31, 2010 and 2009
Series A | Series B | Additional | Noncontrolling | |||||||||||||||||||||||||
Common | Preferred | Preferred | Paid-In | Retained | Interest | |||||||||||||||||||||||
Stock | Stock | Stock | Capital | Earnings | in VIE | Total | ||||||||||||||||||||||
Balance, September 30, 2009 | $ | 2,092 | $ | 1 | $ | 2,191 | $ | 5,383,378 | $ | 419,056 | $ | — | $ | 5,806,718 | ||||||||||||||
Net income | — | — | — | — | 748,562 | — | 748,562 | |||||||||||||||||||||
Balance, December 31, 2009 | 2,092 | 1 | 2,191 | 5,383,378 | 1,167,618 | — | 6,555,280 | |||||||||||||||||||||
Balance, September 30, 2010 | 900 | 1 | 2,191 | 5,176,147 | 1,519,290 | (2,803 | ) | 6,695,726 | ||||||||||||||||||||
Net income | — | — | — | — | 481,821 | (5,234 | ) | 476,587 | ||||||||||||||||||||
Recapitalization of shares | (900 | ) | 227 | (68 | ) | 741 | — | — | — | |||||||||||||||||||
Distributions | — | — | — | — | (1,192,813 | ) | — | (1,192,813 | ) | |||||||||||||||||||
Balance, December 31, 2010 | $ | — | $ | 228 | $ | 2,123 | $ | 5,176,888 | $ | 808,298 | $ | (8,037 | ) | $ | 5,979,500 | |||||||||||||
F-58
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Cash Flows
Three Months Ended December 31, 2010 and 2009
2010 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 476,587 | $ | 748,562 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operations: | ||||||||
Depreciation and amortization | 1,151,779 | 885,255 | ||||||
Allowance for doubtful accounts | 111,502 | 15,188 | ||||||
Increase in: | ||||||||
Accounts receivable | (2,543,700 | ) | (656,153 | ) | ||||
Inventories | (8,221 | ) | (106,264 | ) | ||||
Prepaid expenses | (324,758 | ) | (234,023 | ) | ||||
Deposits | (3,714 | ) | (81,387 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable and accrued expenses | (860,652 | ) | 369,321 | |||||
Net cash provided by (used in) operating activities | (2,001,177 | ) | 940,499 | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (807,069 | ) | (3,726,434 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt and capital lease obligations | (888,497 | ) | (14,178,837 | ) | ||||
Proceeds from long-term debt | — | 16,383,724 | ||||||
Net proceeds from line of credit | 5,180,283 | 1,127,680 | ||||||
Repayments of notes payable to related parties | (17,852 | ) | (15,844 | ) | ||||
Payment of deferred financing costs | — | (190,000 | ) | |||||
Issuance of notes receivable, related party | (352,159 | ) | — | |||||
Distributions | (1,192,813 | ) | — | |||||
Net cash provided by financing activities | 2,728,962 | 3,126,723 | ||||||
Net increase (decrease) in cash | (79,284 | ) | 340,788 | |||||
Cash, beginning of year | 507,548 | 74,634 | ||||||
Cash, end of year | $ | 428,264 | $ | 415,422 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the year for interest | $ | 949,588 | $ | 391,503 | ||||
F-59
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
(1) | Nature of Business |
(2) | Principles of Consolidation |
(3) | Summary of Significant Accounting Policies |
F-60
Table of Contents
2010 | 2009 | |||||||
Non-compete agreements | $ | 1,634,705 | $ | 1,492,906 | ||||
Customer routes | 4,015,000 | 3,925,000 | ||||||
5,649,705 | 5,417,906 | |||||||
Accumulated amortization | (2,399,028 | ) | (1,872,217 | ) | ||||
$ | 3,250,677 | $ | 3,545,689 | |||||
Year Ending | ||||
December 31, | Amount | |||
2011 | $ | 899,214 | ||
2012 | $ | 878,380 | ||
2013 | $ | 804,366 | ||
2014 | $ | 562,860 | ||
2015 | $ | 77,262 |
F-61
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Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data. |
December 31, 2010 | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Acquisition of business: | ||||||||||||||||
Intangible assets | $ | 150,000 | $ | — | $ | — | $ | 150,000 | ||||||||
F-62
Table of Contents
(4) | Property and Equipment |
Estimated | ||||||||||||
2010 | 2009 | Useful Lives | ||||||||||
Choice Environmental Services, Inc. and Subsidiaries: | ||||||||||||
Land | $ | — | $ | 1,128,119 | N/A | |||||||
Building | — | 1,788,867 | 40 years | |||||||||
Machinery and equipment | 9,643,331 | 8,876,668 | 2 - 10 years | |||||||||
Vehicles | 23,909,488 | 15,820,810 | 3 - 10 years | |||||||||
Leasehold improvements | 776,553 | 661,195 | 3 - 10 years | |||||||||
Office equipment | 108,162 | 75,726 | 3 - 5 years | |||||||||
Choice Realty: | ||||||||||||
Land | 1,128,119 | — | N/A | |||||||||
Building | 1,788,867 | — | 40 years | |||||||||
37,354,520 | 28,351,385 | |||||||||||
Accumulated depreciation | (8,785,562 | ) | (8,162,917 | ) | ||||||||
$ | 28,568,958 | $ | 20,188,468 | |||||||||
F-63
Table of Contents
(5) | Revolving Credit and Term Loans |
(6) | Long-Term Debt |
2010 | 2009 | |||||||
Choice Environmental Services, Inc. and Subsidiaries and Affiliate: | ||||||||
Notes payable — finance companies, collateralized by specific equipment, payable in monthly installments aggregating $702, including interest, expiring in August 2013. These notes bear interest at 9.69%. | $ | 19,557 | $ | 30,876 | ||||
Notes payable — banks, collateralized by specific equipment, payable in monthly installments aggregating $31,971, including interest, expiring at various dates through July 2013. These notes bear interest at various rates up to 6.75%. | 619,982 | 950,801 | ||||||
Notes payable — to companies as part of financing of acquisitions. These notes are payable to the sellers in monthly and yearly installments of $29,550 and $110,000 respectively, including interest, expiring at various dates through August 2017. These notes bear interest at various rates up to 12.00%. | 1,615,407 | 2,053,102 |
F-64
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2010 | 2009 | |||||||
Choice Environmental Services, Inc. and Subsidiaries and Affiliate: | ||||||||
Notes payable — Comerica Bank per the agreement discussed in Note 5. These notes are payable in monthly installments aggregating $273,176, including interest, expiring in August 2013. The notes are recorded net of the unamortized discount in 2009. These notes bear interest at various rates up to 6.75%. | 17,797,627 | 15,469,021 | ||||||
Note payable — Penfund per the agreement discussed in Note 7. The subordinated note is recorded net of the unamortized discount. | 14,940,900 | — | ||||||
Choice Realty: | ||||||||
Note payable — Comerica Bank. The mortgage is payable in monthly installments of $10,832, including interest, matures in April 2015 with a balloon payment of remaining principal and accrued interest. The mortgage bears interest at 6% and is secured by commercial real estate and personal guarantees of the stockholders. | 1,450,007 | — | ||||||
36,443,480 | 18,503,800 | |||||||
Current maturities | (3,875,125 | ) | (16,944,194 | ) | ||||
$ | 32,568,355 | $ | 1,559,606 | |||||
Year Ending December 31, | Amount | |||
2011 | $ | 3,875,125 | ||
2012 | 3,801,834 | |||
2013 | 5,445,090 | |||
2014 | 3,248,503 | |||
2015 | 19,707,063 | |||
Thereafter | 653,175 | |||
$ | 36,730,790 | |||
(7) | Subordinated Credit |
F-65
Table of Contents
(8) | Related Party Transactions |
(9) | Stockholders’ Equity |
F-66
Table of Contents
(10) | Income Taxes |
F-67
Table of Contents
(11) | Commitments and Contingencies |
Year Ending | ||||
December 31, | Amount | |||
2011 | $ | 25,552 | ||
2012 | 8,984 | |||
34,536 | ||||
Current maturities | (25,552 | ) | ||
$ | 8,984 | |||
2010 | 2009 | |||||||
Machinery and equipment | $ | 112,736 | $ | 112,736 | ||||
Accumulated depreciation | (59,052 | ) | (42,947 | ) | ||||
$ | 53,684 | $ | 69,789 | |||||
Year Ending | ||||
December 31, | Amount | |||
2011 | $ | 1,091,036 | ||
2012 | $ | 894,804 | ||
2013 | $ | 749,480 | ||
2014 | $ | 662,204 | ||
2015 | $ | 699,110 | ||
. |
F-68
Table of Contents
(12) | Subsequent Event |
F-69
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Supplementary Information
Consolidating Balance Sheet
December 31, 2010
Choice | Realty | Elimination | Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | 424,491 | $ | 3,773 | $ | — | $ | 428,264 | ||||||||
Accounts receivable, net | 6,141,132 | — | — | 6,141,132 | ||||||||||||
Inventories | 247,570 | — | — | 247,570 | ||||||||||||
Prepaid expenses | 782,772 | — | — | 782,772 | ||||||||||||
Deposits | 144,697 | — | — | 144,697 | ||||||||||||
Deferred tax asset | 181,222 | — | — | 181,222 | ||||||||||||
Total current assets | 7,921,884 | 3,773 | — | 7,925,657 | ||||||||||||
Property and equipment, net | 25,787,229 | 1,827,000 | 954,729 | 28,568,958 | ||||||||||||
Goodwill | 13,957,814 | — | — | 13,957,814 | ||||||||||||
Intangible assets, net | 3,250,677 | — | — | 3,250,677 | ||||||||||||
Notes receivable | 725,584 | — | (373,425 | ) | 352,159 | |||||||||||
Deferred financing costs, net | 1,490,716 | — | — | 1,490,716 | ||||||||||||
$ | 53,133,904 | $ | 1,830,773 | $ | 581,304 | $ | 55,545,981 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Line of credit | $ | 5,747,726 | $ | — | $ | — | $ | 5,747,726 | ||||||||
Current portion of long-term debt | 3,830,933 | 44,192 | — | 3,875,125 | ||||||||||||
Current portion of notes payable to related parties | 77,542 | — | — | 77,542 | ||||||||||||
Current portion of capital lease obligations | 25,552 | — | — | 25,552 | ||||||||||||
Accounts payable and accrued expenses | 4,954,900 | 15,378 | — | 4,970,278 | ||||||||||||
Total current liabilities | 14,636,653 | 59,570 | — | 14,696,223 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Long-term debt, net of current portion | 31,162,540 | 1,405,815 | — | 32,568,355 | ||||||||||||
Notes payable to related parties, net of current portion | 1,227,219 | 373,425 | (373,425 | ) | 1,227,219 | |||||||||||
Capital lease obligations, net of current portion | 8,964 | — | — | 8,964 | ||||||||||||
Deferred tax liability | 1,065,720 | — | — | 1,065,720 | ||||||||||||
33,464,443 | 1,779,240 | (373,425 | ) | 34,870,258 | ||||||||||||
Stockholders’ equity (deficit) | 5,032,808 | (8,037 | ) | 954,729 | 5,979,500 | |||||||||||
$ | 53,133,904 | $ | 1,830,773 | $ | 581,304 | $ | 55,545,981 | |||||||||
F-70
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Supplementary Information
Consolidating Statement of Operations
Three Months Ended December 31, 2010
Choice | Realty | Elimination | Consolidated | |||||||||||||
Revenue | $ | 15,654,862 | $ | 44,520 | $ | (44,520 | ) | $ | 15,654,862 | |||||||
Cost of sales | 11,387,460 | — | — | 11,387,460 | ||||||||||||
Gross profit | 4,267,402 | 44,520 | (44,520 | ) | 4,267,402 | |||||||||||
Operating expenses | 2,876,702 | 27,895 | (44,520 | ) | 2,860,077 | |||||||||||
Income from operations | 1,390,700 | 16,625 | — | 1,407,325 | ||||||||||||
Other income expenses: | ||||||||||||||||
Interest and other, net | 908,879 | 21,859 | — | 930,738 | ||||||||||||
Net income (loss) | $ | 481,821 | $ | (5,234 | ) | $ | — | $ | 476,587 | |||||||
F-71
Table of Contents
F-72
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Balance Sheets
Years Ended September 30, 2010 and 2009
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 507,548 | $ | 74,634 | ||||
Accounts receivable, net | 3,708,934 | 4,091,085 | ||||||
Inventories | 239,349 | 195,901 | ||||||
Prepaid expenses | 458,014 | 342,452 | ||||||
Deferred tax asset | 181,222 | 203,808 | ||||||
Total current assets | 5,095,067 | 4,907,880 | ||||||
Property and equipment, net | 28,587,565 | 17,132,628 | ||||||
Goodwill | 13,957,814 | 13,475,314 | ||||||
Intangible assets, net | 3,346,920 | 3,756,552 | ||||||
Deferred financing costs, net | 1,570,576 | — | ||||||
Deposits | 140,983 | 188,721 | ||||||
$ | 52,698,925 | $ | 39,461,095 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Line of credit | $ | 567,443 | $ | 12,454,650 | ||||
Current portion of long-term debt | 3,916,441 | 2,550,574 | ||||||
Current portion of notes payable to related parties | 75,261 | 1,266,791 | ||||||
Current portion of capital lease obligations | 25,053 | 23,156 | ||||||
Accounts payable and accrued expenses | 5,830,930 | 2,945,831 | ||||||
Total current liabilities | 10,415,128 | 19,241,002 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, net of current portion | 33,259,456 | 13,738,920 | ||||||
Notes payable to related parties, net of current portion | 1,247,352 | 122,135 | ||||||
Capital lease obligations, net of current portion | 15,543 | 40,598 | ||||||
Deferred tax liability | 1,065,720 | 511,722 | ||||||
35,588,071 | 14,413,375 | |||||||
Stockholders’ equity | 6,695,726 | 5,806,718 | ||||||
$ | 52,698,925 | $ | 39,461,095 | |||||
F-73
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Operations
Years Ended September 30, 2010 and 2009
2010 | 2009 | |||||||
Revenue | $ | 44,893,686 | $ | 37,533,524 | ||||
Cost of sales | 33,657,272 | 27,549,105 | ||||||
Gross profit | 11,236,414 | 9,984,419 | ||||||
Operating expenses | 7,099,813 | 5,958,991 | ||||||
Income from operations | 4,136,601 | 4,025,428 | ||||||
Other income (expenses): | ||||||||
Gain (loss) from the sale of property and equipment | (330,173 | ) | 34,568 | |||||
Interest and other, net | (1,913,213 | ) | (1,626,319 | ) | ||||
Income before provision for income taxes | 1,893,215 | 2,433,677 | ||||||
Provision for income taxes | (576,584 | ) | (307,914 | ) | ||||
Net income | 1,316,631 | 2,125,763 | ||||||
Net loss attributable to noncontrolling interest in VIE | 2,803 | — | ||||||
Net income attributable to Choice Environmental Services, Inc. and Subsidiaries | $ | 1,319,434 | $ | 2,125,763 | ||||
F-74
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended September 30, 2010 and 2009
Series A | Series B | Additional | ||||||||||||||||||||||||||
Common | Preferred | Preferred | Paid-In | Retained | Noncontrolling | |||||||||||||||||||||||
Stock | Stock | Stock | Capital | Earnings | Interest in VIE | Total | ||||||||||||||||||||||
Balance, September 30, 2008 | $ | 2,092 | $ | 1 | $ | 2,191 | $ | 5,383,378 | $ | (1,112,607 | ) | $ | — | $ | 4,275,055 | |||||||||||||
Net income | — | — | — | — | 2,125,763 | — | 2,125,763 | |||||||||||||||||||||
Distributions | — | — | — | — | (594,100 | ) | — | (594,100 | ) | |||||||||||||||||||
Balance, September 30, 2009 | 2,092 | 1 | 2,191 | 5,383,378 | 419,056 | — | 5,806,718 | |||||||||||||||||||||
Reverse stock split and repurchase of fractional shares | (1,192 | ) | — | — | (221,799 | ) | — | — | (222,991 | ) | ||||||||||||||||||
Cancellation of outstanding warrants (Note 10) | — | — | — | (272,742 | ) | — | — | (272,742 | ) | |||||||||||||||||||
Issuance of warrants (Note 10) | — | — | — | 287,310 | — | — | 287,310 | |||||||||||||||||||||
Net income (loss) | — | — | — | — | 1,319,434 | (2,803 | ) | 1,316,631 | ||||||||||||||||||||
Distributions | — | — | — | — | (219,200 | ) | — | (219,200 | ) | |||||||||||||||||||
Balance, September 30, 2010 | $ | 900 | $ | 1 | $ | 2,191 | $ | 5,176,147 | $ | 1,519,290 | $ | (2,803 | ) | $ | 6,695,726 | |||||||||||||
F-75
Table of Contents
AND SUBSIDIARIES AND AFFILIATE
Consolidated Statements of Cash Flows
Years Ended September 30, 2010 and 2009
2010 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 1,316,631 | $ | 2,125,763 | ||||
Adjustments to reconcile net income to net cash provided by operations: | ||||||||
Depreciation and amortization | 3,805,103 | 3,277,320 | ||||||
Allowance for doubtful accounts | (57,913 | ) | (16,237 | ) | ||||
(Gain) loss on sale of property and equipment | 330,173 | (34,568 | ) | |||||
Amortization of debt discount | 39,735 | 39,735 | ||||||
Deferred taxes | 576,584 | 307,914 | ||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 440,064 | (218,345 | ) | |||||
Inventories | (43,448 | ) | (127,676 | ) | ||||
Prepaid expenses | (115,562 | ) | (127,173 | ) | ||||
Deposits | 47,738 | (67,326 | ) | |||||
Increase in: | ||||||||
Accounts payable and accrued expenses | 2,885,099 | 663,870 | ||||||
Net cash provided by operating activities | 9,224,204 | 5,823,277 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (14,640,923 | ) | (3,281,924 | ) | ||||
Acquisition of business | (662,500 | ) | (1,092,300 | ) | ||||
Payments for non-compete agreements | (379,608 | ) | — | |||||
Proceeds from sale of assets | 46,570 | 56,235 | ||||||
Net cash used in investing activities | (15,636,461 | ) | (4,317,989 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt and capital lease obligations | (3,207,980 | ) | (2,684,384 | ) | ||||
Proceeds from long-term debt | 24,046,058 | — | ||||||
Net proceeds from (repayments of) line of credit | (11,887,207 | ) | 1,892,182 | |||||
Repurchase of fractional shares | (222,991 | ) | — | |||||
Deferred financing costs | (1,597,196 | ) | — | |||||
Repayments of notes payable to related parties | (66,313 | ) | (58,849 | ) | ||||
Distributions | (219,200 | ) | (594,100 | ) | ||||
Net cash provided by (used in) financing activities | 6,845,171 | (1,445,151 | ) | |||||
Net increase in cash | 432,914 | 60,137 | ||||||
Cash, beginning of year | 74,634 | 14,497 | ||||||
Cash, end of year | $ | 507,548 | $ | 74,634 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the year for interest | $ | 1,786,805 | $ | 1,530,515 | ||||
Supplemental schedules of noncash investing and financing activities: | ||||||||
Purchase of property and equipment, intangibles, and goodwill through the issuance of debt and common stock | $ | — | $ | 1,590,000 | ||||
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AND SUBSIDIARIES AND AFFILIATE
September 30, 2010 and 2009
(1) | Nature of Business |
(2) | Principles of Consolidation |
(3) | Acquisitions |
Property and equipment | $ | 90,000 | ||
Intangible assets | 90,000 | |||
180,000 | ||||
Excess of cost over fair value | 482,500 | |||
Cash paid | $ | 662,500 | ||
(4) | Summary of Significant Accounting Policies |
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2010 | 2009 | |||||||
Non-compete agreements | $ | 1,484,705 | $ | 1,489,106 | ||||
Customer routes | 4,015,000 | 3,925,000 | ||||||
5,499,705 | 5,414,106 | |||||||
Accumulated amortization | (2,152,785 | ) | (1,657,554 | ) | ||||
$ | 3,346,920 | $ | 3,756,552 | |||||
Year Ending | ||||
September 30, | Amount | |||
2011 | $ | 912,826 | ||
2012 | $ | 858,382 | ||
2013 | $ | 701,159 | ||
2014 | $ | 615,326 | ||
2015 | $ | 195,341 |
September 30, 2010 | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Acquisition of business: | ||||||||||||||||
Property and equipment | $ | 90,000 | $ | — | $ | — | $ | 90,000 | ||||||||
Intangible assets | 90,000 | — | — | 90,000 | ||||||||||||
Excess of cost over fair value | 482,500 | — | — | 482,500 | ||||||||||||
$ | 662,500 | $ | — | $ | — | $ | 662,500 | |||||||||
Stock warrant | $ | 287,310 | $ | — | $ | — | $ | 287,310 | ||||||||
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AND SUBSIDIARIES AND AFFILIATE
September 30, 2009 | ||||||||||||||||
Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Acquisition of business: | ||||||||||||||||
Property and equipment | $ | 733,238 | $ | — | $ | — | $ | 733,238 | ||||||||
Intangible assets | 1,050,000 | — | — | 1,050,000 | ||||||||||||
Excess of cost over fair value | 1,632,300 | — | — | 1,632,300 | ||||||||||||
$ | 3,415,538 | $ | — | $ | — | $ | 3,415,538 | |||||||||
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AND SUBSIDIARIES AND AFFILIATE
Estimated | ||||||||||
2010 | 2009 | Useful Lives | ||||||||
Choice Environmental Services, Inc. and Subsidiaries: | ||||||||||
Land | $ | — | $ | 1,128,119 | N/A | |||||
Building | — | 1,788,867 | 40 years | |||||||
Machinery and equipment | 9,301,812 | 8,471,009 | 2 - 10 years | |||||||
Vehicles | 23,708,300 | 12,506,836 | 3 - 10 years | |||||||
Leasehold improvements | 516,179 | 654,395 | 3 - 10 years | |||||||
Office equipment | 104,174 | 75,726 | 3 - 5 years | |||||||
Choice Realty: | ||||||||||
Land | 1,128,119 | — | N/A | |||||||
Building | 1,788,867 | — | 40 years | |||||||
36,547,451 | 24,624,952 | |||||||||
Accumulated depreciation | (7,959,886 | ) | (7,492,324 | ) | ||||||
$ | 28,587,565 | $ | 17,132,628 | |||||||
(6) | Revolving Credit and Term Loans |
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AND SUBSIDIARIES AND AFFILIATE
(7) | Long-Term Debt |
2010 | 2009 | |||||||
Choice Environmental Services, Inc. and Subsidiaries and Affiliate: | ||||||||
Notes payable — finance companies, collateralized by specific equipment, payable in monthly installments aggregating $702, including interest, expiring in August 2013. These notes bear interest at 9.69%. | $ | 21,163 | $ | 34,524 | ||||
Notes payable — banks, collateralized by specific equipment, payable in monthly installments aggregating $31,971, including interest, expiring at various dates through July 2013. These notes bear interest at various rates up to 6.75%. | 704,751 | 1,030,140 | ||||||
Notes payable — to companies as part of financing of acquisitions. These notes are payable to the sellers in monthly and yearly installments of $39,146 and $110,000 respectively, including interest, expiring at various dates through August 2017. These notes bear interest at various rates up to 12.00%. | 1,612,657 | 2,183,840 | ||||||
Notes payable — Comerica Bank per the agreement discussed in Note 6. These notes are payable in monthly installments aggregating $273,176, including interest, expiring in August 2013. The note is recorded net of the unamortized discount in 2009. These notes bear interest at various rates up to 6.75%. | 18,577,469 | 13,040,990 | ||||||
Note payable — Penfund per the agreement discussed in Note 8. The subordinated note is recorded net of the unamortized discount. | 14,788,393 | — | ||||||
Choice Realty: | ||||||||
Note payable — Comerica Bank. The mortgage is payable in monthly installments of $10,832, including interest, matures in April 2015 with a balloon payment of remaining principal and accrued interest. The mortgage bears interest at 6% and is secured by commercial real estate and personal guarantees of the stockholders. | 1,471,464 | — | ||||||
37,175,897 | 16,289,494 | |||||||
Current maturities | (3,916,441 | ) | (2,550,574 | ) | ||||
$ | 33,259,456 | $ | 13,738,920 | |||||
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AND SUBSIDIARIES AND AFFILIATE
Year Ending | ||||
September 30, | Amount | |||
2011 | $ | 3,916,441 | ||
2012 | 3,770,001 | |||
2013 | 5,484,961 | |||
2014 | 3,252,814 | |||
2015 | 19,564,580 | |||
Thereafter | 1,474,410 | |||
$ | 37,463,207 | |||
(8) | Subordinated Credit |
(9) | Related Party Transactions |
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AND SUBSIDIARIES AND AFFILIATE
Warrants | Expiration | |||||||
Exercise Price | Outstanding | Date | ||||||
$0.010 | 1,472,000 | 2/19/14 | ||||||
$0.070 | 21,429 | 2/19/14 | ||||||
$7.000 | 2,936 | 3/30/14 | ||||||
$0.070 | 500,000 | 10/15/14 | ||||||
$0.130 | 25,000 | 1/1/15 | ||||||
$0.250 | 1,000,000 | 6/1/15 | ||||||
$0.250 | 500,000 | 10/1/16 | ||||||
$0.250 | 1,500,000 | 10/15/17 | ||||||
$0.355 | 382,370 | 11/30/17 | ||||||
$1.000 | 150,000 | 12/1/17 | ||||||
5,553,735 | ||||||||
(11) | Income Taxes |
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AND SUBSIDIARIES AND AFFILIATE
(12) | Commitments and Contingencies |
Year Ending | ||||||||
September 30, | Amount | |||||||
2011 | $ | 27,368 | ||||||
2012 | 15,965 | |||||||
43,333 | ||||||||
Amount representing interest | (2,737 | ) | ||||||
Present value of net minimum lease payments | 40,596 | |||||||
Current maturities | (25,053 | ) | ||||||
$ | 15,543 | |||||||
2010 | 2009 | |||||||
Machinery and equipment | $ | 112,736 | $ | 112,736 | ||||
Accumulated depreciation | (55,026 | ) | (38,921 | ) | ||||
$ | 57,710 | $ | 73,815 | |||||
Year Ending | ||||
September 30, | Amount | |||
2011 | $ | 1,019,138 | ||
2012 | $ | 1,004,888 | ||
2013 | $ | 817,068 | ||
2014 | $ | 691,375 | ||
2015 | $ | 710,427 |
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AND SUBSIDIARIES AND AFFILIATE
(13) | Subsequent Event |
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AND SUBSIDIARIES AND AFFILIATE
Supplementary Information
Year Ended September 30, 2010
Choice | Realty | Elimination | Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | 503,387 | $ | 4,161 | $ | — | $ | 507,548 | ||||||||
Accounts receivable, net | 3,708,934 | — | — | 3,708,934 | ||||||||||||
Inventories | 239,349 | — | — | 239,349 | ||||||||||||
Prepaid expenses | 458,014 | — | — | 458,014 | ||||||||||||
Deferred tax asset | 181,222 | — | — | 181,222 | ||||||||||||
Total current assets | 5,090,906 | 4,161 | — | 5,095,067 | ||||||||||||
Property and equipment, net | 25,782,211 | 1,850,625 | 954,729 | 28,587,565 | ||||||||||||
Goodwill | 13,957,814 | — | — | 13,957,814 | ||||||||||||
Intangible assets, net | 3,346,920 | — | — | 3,346,920 | ||||||||||||
Notes receivable | 376,049 | — | (376,049 | ) | — | |||||||||||
Deferred financing costs, net | 1,570,576 | — | — | 1,570,576 | ||||||||||||
Deposits | 140,983 | — | — | 140,983 | ||||||||||||
$ | 50,265,459 | $ | 1,854,786 | $ | 578,680 | $ | 52,698,925 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Line of credit | $ | 567,443 | $ | — | $ | — | $ | 567,443 | ||||||||
Current portion of long-term debt | 3,873,572 | 42,869 | — | 3,916,441 | ||||||||||||
Current portion of notes payable to related parties | 75,261 | — | — | 75,261 | ||||||||||||
Current portion of capital lease obligations | 25,053 | — | — | 25,053 | ||||||||||||
Accounts payable and accrued expenses | 5,820,854 | 10,076 | — | 5,830,930 | ||||||||||||
Total current liabilities | 10,362,183 | 52,945 | — | 10,415,128 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Long-term debt, net of current portion | 31,830,861 | 1,428,595 | — | 33,259,456 | ||||||||||||
Notes payable to related parties, net of current portion | 1,247,352 | 376,049 | (376,049 | ) | 1,247,352 | |||||||||||
Capital lease obligations, net of current portion | 15,543 | — | — | 15,543 | ||||||||||||
Deferred tax liability | 1,065,720 | — | — | 1,065,720 | ||||||||||||
34,159,476 | 1,804,644 | (376,049 | ) | 35,588,071 | ||||||||||||
Stockholders’ equity (deficit) | 5,743,800 | (2,803 | ) | 954,729 | 6,695,726 | |||||||||||
$ | 50,265,459 | $ | 1,854,786 | $ | 578,680 | $ | 52,698,925 | |||||||||
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Choice | Realty | Elimination | Consolidated | |||||||||||||
Revenue | $ | 44,893,686 | $ | 74,206 | $ | (74,206 | ) | $ | 44,893,686 | |||||||
Cost of sales | 33,657,272 | — | — | 33,657,272 | ||||||||||||
Gross profit | 11,236,414 | 74,206 | (74,206 | ) | 11,236,414 | |||||||||||
Operating expenses | 7,131,111 | 42,908 | (74,206 | ) | 7,099,813 | |||||||||||
Income from operations | 4,105,303 | 31,298 | — | 4,136,601 | ||||||||||||
Other income (expenses): | ||||||||||||||||
Loss from the sale of property and equipment | (1,284,902 | ) | — | 954,729 | (330,173 | ) | ||||||||||
Interest and other, net | (1,879,112 | ) | (34,101 | ) | — | (1,913,213 | ) | |||||||||
Income (loss) before provision for income taxes | 941,289 | (2,803 | ) | 954,729 | 1,893,215 | |||||||||||
Provision for income taxes | (576,584 | ) | — | — | (576,584 | ) | ||||||||||
Net income (loss) | $ | 364,705 | $ | (2,803 | ) | $ | 954,729 | $ | 1,316,631 | |||||||
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(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 129,041 | $ | 243,032 | ||||
Marketable securities — Note 3 | 28,798 | 28,884 | ||||||
Accounts and note receivable, net of allowance — Note 2 | 2,457,314 | 2,223,540 | ||||||
Employee receivables | 27,084 | 27,353 | ||||||
Due from related party | 10,000 | 10,000 | ||||||
Inventory | 1,728,363 | 1,710,449 | ||||||
Prepaid expenses and other current assets | 180,355 | 213,318 | ||||||
Total current assets | 4,560,955 | 4,456,576 | ||||||
Property and equipment, net —Note 4 | 4,440,051 | 4,474,925 | ||||||
Other assets | ||||||||
Intangible assets, net — Note 5 | 22,387 | 25,072 | ||||||
$ | 9,023,393 | $ | 8,956,573 | |||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Current liabilities | ||||||||
Line of credit — Note 6 | $ | 625,155 | $ | 738,210 | ||||
Accounts payable | 1,332,782 | 1,126,875 | ||||||
Deferred compensation — Note 10 | 783,896 | 783,896 | ||||||
Accrued expenses and other current liabilities — Note 10 | 798,081 | 1,001,537 | ||||||
Income taxes payable | 19,559 | 14,640 | ||||||
Total current liabilities | 3,559,473 | 3,665,158 | ||||||
Commitments and contingencies —Note 7 | — | — | ||||||
Stockholder’s equity | ||||||||
Common stock, no par value, authorized 1,000 shares, 37 shares issued and outstanding at March 31, 2011 and December 31, 2010 | 95,738 | 95,738 | ||||||
Retained earnings | 5,348,558 | 5,175,378 | ||||||
Accumulated other comprehensive loss | (8,029 | ) | (1,726 | ) | ||||
5,436,267 | 5,269,390 | |||||||
Non-controlling interest | 27,653 | 22,025 | ||||||
$ | 9,023,393 | $ | 8,956,573 | |||||
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Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Revenue | ||||||||
Products and services | $ | 5,683,679 | $ | 5,322,447 | ||||
Costs and Expenses | ||||||||
Cost of sales | 2,639,911 | 2,363,937 | ||||||
Selling, general and administrative | 2,572,829 | 2,537,362 | ||||||
Depreciation and amortization | 190,395 | 186,675 | ||||||
Total costs and expenses | 5,403,135 | 5,087,974 | ||||||
Income from Operations | 280,544 | 234,473 | ||||||
Other Income (Expense) | ||||||||
Interest expense | (3,318 | ) | (1,577 | ) | ||||
Rental income | 21,542 | 21,028 | ||||||
(Loss) gain on sale of property and equipment | (7,592 | ) | 800 | |||||
Other | 8,784 | 5,774 | ||||||
Total other income (expense) | 19,416 | 26,025 | ||||||
Net Income Before Income Taxes | 299,960 | 260,498 | ||||||
Income Taxes | (5,718 | ) | (4,010 | ) | ||||
Net Income | 294,242 | 256,488 | ||||||
Net Income (Loss) Attributable to Non-Controlling Equity Interest | 5,628 | (975 | ) | |||||
Net Income Attributable to Mt. Hood Solutions Company | 299,870 | 255,513 | ||||||
Other Comprehensive Income | ||||||||
Unrealized (loss) gain on marketable securities | (6,303 | ) | 1,624 | |||||
Comprehensive Income | $ | 293,567 | $ | 257,137 | ||||
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Accumulated | ||||||||||||||||||||||||
Common Stock | Other | Retained | Non-controlling | |||||||||||||||||||||
Shares | Amount | Comprehensive Loss | Earnings | Interest | Total | |||||||||||||||||||
Balance as of December 31, 2009 | 37 | $ | 95,738 | $ | (11,067 | ) | $ | 5,016,732 | $ | 36,027 | $ | 5,137,430 | ||||||||||||
Distributions | (118,936 | ) | (118,936 | ) | ||||||||||||||||||||
Net income | 255,513 | 975 | 256,488 | |||||||||||||||||||||
Unrealized gain on marketable securities | 1,624 | 1,624 | ||||||||||||||||||||||
Balance as of March 31, 2010 | 37 | 95,738 | (9,443 | ) | 5,153,309 | 37,002 | 5,276,606 | |||||||||||||||||
Distributions | (904,851 | ) | (19,374 | ) | (924,225 | ) | ||||||||||||||||||
Net income | 926,920 | 4,397 | 931,317 | |||||||||||||||||||||
Unrealized gain on marketable securities | 7,717 | 7,717 | ||||||||||||||||||||||
Balance as of December 31, 2010 | 37 | 95,738 | (1,726 | ) | 5,175,378 | 22,025 | 5,291,415 | |||||||||||||||||
Distributions | (121,062 | ) | (121,062 | ) | ||||||||||||||||||||
Net income | 294,242 | 5,628 | 299,870 | |||||||||||||||||||||
Unrealized loss on marketable securities | (6,303 | ) | (6,303 | ) | ||||||||||||||||||||
Balance as of March 31, 2011 | 37 | $ | 95,738 | $ | (8,029 | ) | $ | 5,348,558 | $ | 27,653 | $ | 5,463,920 | ||||||||||||
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Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Cash provided by operating activities | ||||||||
Net income | $ | 299,870 | $ | 256,488 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 190,395 | 178,741 | ||||||
Provision for doubtful accounts | 12,000 | 12,000 | ||||||
Loss on sale of property and equipment | 7,592 | — | ||||||
Changes in working capital components: | ||||||||
Accounts receivable | (245,774 | ) | (80,248 | ) | ||||
Investments | — | (81 | ) | |||||
Employee receivable | 270 | 2,869 | ||||||
Inventory | (17,914 | ) | 126,206 | |||||
Prepaid expenses and other assets | 32,962 | 47,263 | ||||||
Accounts payable and accrued expenses | 2,451 | (520,204 | ) | |||||
Accrued income taxes | 4,918 | 4,010 | ||||||
Deferred compensation | — | 7,839 | ||||||
Cash provided by operating activities | 286,770 | 34,883 | ||||||
Cash used in investing activities | ||||||||
Purchases of property and equipment | (160,426 | ) | (106,501 | ) | ||||
Purchase of marketable securities | (6,217 | ) | — | |||||
Cash used in investing activities | (166,643 | ) | (106,501 | ) | ||||
Cash (used in) provided by financing activities | ||||||||
Distributions to stockholder | (121,062 | ) | (118,936 | ) | ||||
Net advances from line of credit | (113,056 | ) | 212,670 | |||||
Cash (used in) provided by financing activities | (234,118 | ) | 93,734 | |||||
Net change in cash and cash equivalents | (113,991 | ) | 22,116 | |||||
Cash and cash equivalents at beginning of period | 243,032 | 57,403 | ||||||
Cash and cash equivalents at end of period | $ | 129,041 | $ | 79,519 | ||||
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NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Building Improvements | 15 years | |||
Dish Machines | 5 years | |||
Office Equipment and Furniture | 5 years | |||
Machinery and Equipment | 5 years | |||
Vehicles | 5 years |
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NOTE 3 — | FAIR VALUE MEASUREMENTS |
Quoted Price in | Significant | (unaudited) | ||||||||||||||
Active Markets for | Significant Other | Unobservable | Balance as of | |||||||||||||
Identical Assets | Observable Inputs | Inputs | March 31, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2011 | |||||||||||||
Marketable securities actively traded | $ | 28,798 | $ | — | $ | — | $ | 28,798 | ||||||||
$ | 28,798 | $ | — | $ | — | $ | 28,798 | |||||||||
Quoted Price in | Significant | (audited) | ||||||||||||||
Active Markets for | Significant Other | Unobservable | Balance as of | |||||||||||||
Identical Assets | Observable Inputs | Inputs | December 31, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2010 | |||||||||||||
Marketable securities actively traded | $ | 28,884 | $ | — | $ | — | $ | 28,884 | ||||||||
$ | 28,884 | $ | — | $ | — | $ | 28,884 | |||||||||
NOTE 4 — | PROPERTY AND EQUIPMENT |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Building improvements | $ | 3,615,615 | $ | 3,615,615 | ||||
Dish machines | 2,341,156 | 2,233,047 | ||||||
Office equipment and furniture | 87,955 | 87,955 | ||||||
Machinery and equipment | 818,283 | 812,966 | ||||||
Vehicles | 1,205,870 | 1,180,747 | ||||||
8,068,879 | 7,930,330 | |||||||
Less: accumulated depreciation | (3,628,828 | ) | (3,455,405 | ) | ||||
$ | 4,440,051 | $ | 4,474,925 | |||||
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NOTE 5 — | INTANGIBLE ASSETS |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Customer list | $ | 53,726 | $ | 53,726 | ||||
Less: accumulated amortization | (31,339 | ) | (28,654 | ) | ||||
$ | 22,387 | $ | 25,072 | |||||
Twelve months ending March 31, | ||||
2012 | $ | 8,060 | ||
2013 | 10,745 | |||
2014 | 3,582 | |||
$ | 22,387 | |||
NOTE 6 — | LINE OF CREDIT |
NOTE 7 — | COMMITMENTS AND CONTINGENCIES |
Twelve months ending March 31, | ||||
2012 | $ | 675,984 | ||
2013 | 675,984 | |||
2014 | 675,984 | |||
2015 | 675,984 | |||
2016 | 675,984 | |||
Thereafter | 4,743,804 | |||
$ | 8,123,724 | |||
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NOTE 8 — | RELATED-PARTY TRANSACTIONS |
NOTE 9 — | EMPLOYEE BENEFIT PLAN |
NOTE 10 — | SUPPLEMENTAL FINANCIAL INFORMATION |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Sales tax payable | $ | 89,546 | $ | 85,806 | ||||
Accrued commissions | 151,231 | 136,620 | ||||||
Accrued payroll and payroll taxes | 39,000 | 39,412 | ||||||
Profit sharing | 59,859 | 230,000 | ||||||
Other accrued expenses | 458,445 | 509,699 | ||||||
$ | 798,081 | $ | 1,001,537 | |||||
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(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Cash paid for: | ||||||||
Interest | $ | 3,318 | $ | 7,375 | ||||
Income taxes | $ | 5,718 | $ | 25,741 | ||||
Shareholder loan converted to equity | $ | — | $ | 585,481 | ||||
NOTE 11 — | SUBSEQUENT EVENTS |
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ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 243,032 | ||
Marketable securities — Note 3 | 28,884 | |||
Accounts receivable, net of allowance — Note 2 | 2,223,540 | |||
Employee receivables | 27,353 | |||
Due from related party | 10,000 | |||
Inventory — Note 4 | 1,710,449 | |||
Prepaid expenses and other current assets | 213,318 | |||
Total current assets | $ | 4,456,576 | ||
Property and equipment, net —Note 5 | 4,474,925 | |||
Other assets | ||||
Intangible assets, net — Note 6 | 25,072 | |||
$ | 8,956,573 | |||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Current liabilities | ||||
Line of credit — Note 7 | $ | 738,210 | ||
Accounts payable | 1,126,875 | |||
Deferred compensation — Note 11 | 783,896 | |||
Accrued expenses and other current liabilities — Note 11 | 1,001,537 | |||
Income taxes payable | 14,640 | |||
Total current liabilities | $ | 3,665,158 | ||
Commitments and contingencies —Note 8 | — | |||
Stockholder’s equity | ||||
Common stock, no par value, authorized 1,000 shares, 37 shares issued and outstanding at December 31, 2010 | 95,738 | |||
Retained earnings | 5,175,378 | |||
Accumulated other comprehensive loss | (1,726 | ) | ||
Total Mt Hood Solutions Company stockholder’s equity | 5,269,390 | |||
Non-controlling interest | 22,025 | |||
$ | 8,956,573 | |||
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Revenue | ||||
Products and services | $ | 23,650,280 | ||
Costs and Expenses | ||||
Cost of sales | $ | 10,549,561 | ||
Selling, general and administrative | 11,291,306 | |||
Depreciation and amortization | 747,048 | |||
Total costs and expenses | 22,587,915 | |||
Income from Operations | 1,062,365 | |||
Other Income (Expense) | ||||
Interest expense | (7,375 | ) | ||
Rental income | 85,227 | |||
Gain on sale of property and equipment | 57,513 | |||
Loss on marketable securities | (16,213 | ) | ||
Other | 19,239 | |||
Total other income (expense) | 138,391 | |||
Net Income Before Income Taxes | 1,200,756 | |||
Income Taxes | (12,951 | ) | ||
Net Income | 1,187,805 | |||
Net Income Attributable to Non-Controlling Equity Interest | (5,372 | ) | ||
Net Income Attributable to Mt Hood Solutions Company | 1,182,433 | |||
Other Comprehensive Income | ||||
Unrealized gain on marketable securities | 9,341 | |||
Comprehensive Income | $ | 1,191,774 | ||
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Accumulated | ||||||||||||||||||||||||
Other | Non- | |||||||||||||||||||||||
Common Stock | Comprehensive | Retained | controlling | |||||||||||||||||||||
Shares | Amount | Loss | Earnings | Interest | Total | |||||||||||||||||||
Balance as of December 31, 2009 | 37 | $ | 95,738 | $ | (11,067 | ) | $ | 5,016,732 | $ | 36,027 | $ | 5,137,430 | ||||||||||||
Distributions | (1,023,787 | ) | (19,374 | ) | (1,043,161 | ) | ||||||||||||||||||
Net income | 1,182,433 | 5,372 | 1,187,805 | |||||||||||||||||||||
Unrealized gain on marketable securities | 9,341 | 9,341 | ||||||||||||||||||||||
Balance as of December 31, 2010 | 37 | $ | 95,738 | $ | (1,726 | ) | $ | 5,175,378 | $ | 22,025 | $ | 5,291,415 | ||||||||||||
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Cash provided by operating activities | ||||
Net income | $ | 1,187,805 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 747,048 | |||
Provision for doubtful accounts | 138,904 | |||
Realized loss on marketable securities | 16,213 | |||
Gain on sale of property and equipment | (57,513 | ) | ||
Changes in working capital components: | ||||
Accounts receivable | (246,403 | ) | ||
Employee receivable | (12,497 | ) | ||
Due from related party | 10,000 | |||
Investment | (9,336 | ) | ||
Inventory | (59,448 | ) | ||
Prepaid expenses and other assets | (22,826 | ) | ||
Accounts payable and accrued expenses | (118,815 | ) | ||
Deferred compensation | 31,356 | |||
Accrued income taxes | (10,586 | ) | ||
Cash provided by operating activities | $ | 1,593,902 | ||
Cash used in investing activities | ||||
Purchases of property and equipment | (556,639 | ) | ||
Proceeds from sale of property and equipment | 85,848 | |||
Proceeds from sale of marketable securities | 827 | |||
Cash used in investing activities | (469,964 | ) | ||
Cash used in financing activities | ||||
Distributions to stockholder | (1,609,269 | ) | ||
Distributions to non-controlling equity interest | (19,374 | ) | ||
Net advances from line of credit | 690,335 | |||
Cash used in financing activities | (938,308 | ) | ||
Net change in cash and cash equivalents | 185,630 | |||
Cash and cash equivalents at beginning of year | 57,402 | |||
Cash and cash equivalents at end of year | $ | 243,032 | ||
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NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Building Improvements | 15 years | |||
Dish Machines | 5 years | |||
Office Equipment and Furniture | 5 years | |||
Machinery and Equipment | 5 years | |||
Vehicles | 5 years |
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NOTE 3 — | FAIR VALUE MEASUREMENTS |
Quoted Price in | ||||||||||||||||
Active Markets for | Significant Other | Significant | Balance as of | |||||||||||||
Identical Assets | Observable Inputs | Unobservable Inputs | December 31, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2010 | |||||||||||||
Marketable securities actively traded | $ | 28,884 | $ | — | $ | — | $ | 28,884 | ||||||||
$ | 28,884 | $ | — | $ | — | $ | 28,884 | |||||||||
NOTE 4 — | INVENTORY |
Raw materials | $ | 923,211 | ||
Finished goods | 880,565 | |||
Purchased goods | 192,617 | |||
Supplies | 65,224 | |||
LIFO reserve | (351,168 | ) | ||
$ | 1,710,449 | |||
NOTE 5 — | PROPERTY AND EQUIPMENT |
Building improvements | $ | 3,615,615 | ||
Dish machines | 2,233,047 | |||
Office equipment and furniture | 87,955 | |||
Machinery and equipment | 812,966 | |||
Vehicles | 1,180,747 | |||
7,930,330 | ||||
Less: accumulated depreciation | (3,455,405 | ) | ||
$ | 4,474,925 | |||
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NOTE 6 — | INTANGIBLE ASSETS |
Customer list | $ | 53,726 | ||
Less: accumulated amortization | (28,654 | ) | ||
$ | 25,072 | |||
2011 | $ | 10,745 | ||
2012 | 10,745 | |||
2013 | 3,582 | |||
$ | 25,072 | |||
NOTE 7 — | LINE OF CREDIT |
NOTE 8 — | COMMITMENTS AND CONTINGENCIES |
Twelve months ended | ||||
December 31, 2011 | $ | 675,984 | ||
December 31, 2012 | 675,984 | |||
December 31, 2013 | 675,984 | |||
December 31, 2014 | 675,984 | |||
December 31, 2015 | 672,588 | |||
Thereafter | 4,747,200 | |||
$ | 8,123,724 | |||
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NOTE 9 — | RELATED-PARTY TRANSACTIONS |
NOTE 10 — | EMPLOYEE BENEFIT PLAN |
NOTE 11 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Sales tax payable | $ | 85,806 | ||
Accrued commissions | 136,620 | |||
Accrued payroll and payroll taxes | 39,412 | |||
Profit sharing | 230,000 | |||
Other accrued expenses | 509,699 | |||
$ | 1,001,537 | |||
Cash paid for: | ||||
Interest | $ | 7,375 | ||
Income taxes | $ | 25,741 | ||
Shareholder loan converted to equity | $ | 585,481 | ||
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NOTE 12 — | SUBSEQUENT EVENTS |
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(Unaudited) | (Audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 400 | $ | 400 | ||||
Accounts receivable, net of allowance — Note 2 | 1,641,194 | 1,270,057 | ||||||
Inventory | 1,247,212 | 1,203,319 | ||||||
Prepaid expenses and other current assets | 74,659 | 98,866 | ||||||
Total current assets | 2,963,465 | 2,572,642 | ||||||
Property and equipment, net —Note 3 | 1,389,750 | 1,184,112 | ||||||
Other assets | ||||||||
Goodwill — Note 4 | 413,295 | 413,295 | ||||||
Intangible assets — net of amortization — Note 4 | 120,000 | 132,000 | ||||||
$ | 4,886,510 | $ | 4,302,049 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 1,536,679 | $ | 1,219,639 | ||||
Accrued expenses and other current liabilities | 200,765 | 151,982 | ||||||
Stockholder loan — Note 6 | 739,050 | 746,965 | ||||||
Long-term debt, current portion — Note 5 | 858,099 | 737,236 | ||||||
Total current liabilities | 3,334,593 | 2,855,822 | ||||||
Long-term debt, less current portion — Note 5 | 609,659 | 589,834 | ||||||
Commitments and contingencies —Note 7 | — | — | ||||||
Stockholders’ equity | ||||||||
Common stock, $1.00 par value, authorized 1,000,000 shares, 25,500 shares issued and outstanding at March 31, 2011 | 25,500 | 25,500 | ||||||
Retained earnings | 916,758 | 830,893 | ||||||
942,258 | 856,393 | |||||||
$ | 4,886,510 | $ | 4,302,049 | |||||
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Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Revenue | ||||||||
Products and services | $ | 4,975,275 | $ | 4,716,614 | ||||
Costs and Expenses | ||||||||
Cost of sales | 2,311,315 | 2,158,101 | ||||||
Selling, general and administrative | 2,432,710 | 2,306,373 | ||||||
Depreciation and amortization | 119,187 | 85,468 | ||||||
Total costs and expenses | 4,863,212 | 4,549,942 | ||||||
Income from Operations | 112,063 | 166,672 | ||||||
Other Income (Expense) | ||||||||
Interest expense | (26,271 | ) | (28,122 | ) | ||||
Other income | 73 | 8,400 | ||||||
Total other income (expense) | (26,198 | ) | (19,722 | ) | ||||
Net Income | $ | 85,865 | $ | 146,950 | ||||
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Common Stock | Retained | |||||||||||||||
Shares | Amount | Earnings | Total | |||||||||||||
Balance as of December 31, 2009 | 25,500 | $ | 25,500 | $ | 632,103 | $ | 657,603 | |||||||||
Net income | 146,950 | 146,950 | ||||||||||||||
Balance as of March 31, 2010 | 25,500 | 25,500 | 779,053 | 804,553 | ||||||||||||
Distributions | (100,000 | ) | (100,000 | ) | ||||||||||||
Net income | 151,840 | 151,840 | ||||||||||||||
Balance as of December 31, 2010 | 25,500 | 25,500 | 830,893 | 856,393 | ||||||||||||
Net income | 85,865 | 85,865 | ||||||||||||||
Balance as of March 31, 2011 | 25,500 | $ | 25,500 | $ | 916,758 | $ | 942,258 | |||||||||
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Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, 2011 | March 31, 2010 | |||||||
Cash provided by operating activities | ||||||||
Net income | $ | 85,865 | $ | 146,950 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 124,682 | 90,963 | ||||||
Loss on disposal of property and equipment | 3,425 | 9,170 | ||||||
Provision for doubtful accounts | 10,472 | 7,539 | ||||||
Changes in working capital components: | ||||||||
Accounts receivable | (381,609 | ) | 31,604 | |||||
Inventory | (43,893 | ) | (123,595 | ) | ||||
Prepaid expenses and other assets | 24,207 | 4,593 | ||||||
Accounts payable and accrued expenses | 365,824 | 216,971 | ||||||
Cash provided by operating activities | 188,973 | 384,195 | ||||||
Cash used in investing activities | ||||||||
Purchases of property and equipment | (321,745 | ) | (95,681 | ) | ||||
Cash used in investing activities | (321,745 | ) | (95,681 | ) | ||||
Cash provided by (used in) financing activities | ||||||||
Net (repayments) borrowings to stockholder | (7,915 | ) | 43,348 | |||||
Net borrowings (repayments) on long-term debt | 140,687 | (163,434 | ) | |||||
Cash provided by (used in) financing activities | 132,772 | (120,086 | ) | |||||
Net change in cash and cash equivalents | — | 168,428 | ||||||
Cash and cash equivalents at beginning of period | 400 | 68,413 | ||||||
Cash and cash equivalents at end of period | $ | 400 | $ | 236,841 | ||||
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NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Office Equipment and Furniture | 5 years | |||
Machinery and Equipment | 5 – 10 years | |||
Leasehold Improvements | Life of lease | |||
Vehicles | 5 years |
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NOTE 3 — | PROPERTY AND EQUIPMENT |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Office equipment and furniture | $ | 250,411 | $ | 221,857 | ||||
Machinery and equipment | 2,747,118 | 2,584,775 | ||||||
Leasehold improvements | 39,735 | 39,735 | ||||||
Vehicles | 454,583 | 328,717 | ||||||
3,491,847 | 3,175,084 | |||||||
Less: accumulated depreciation | (2,102,097 | ) | (1,990,972 | ) | ||||
$ | 1,389,750 | $ | 1,184,112 | |||||
NOTE 4 — | GOODWILL AND OTHER INTANGIBLE ASSETS |
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(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Customer relationships | $ | 120,000 | $ | 120,000 | ||||
Non-competition agreements | 120,000 | 120,000 | ||||||
240,000 | 240,000 | |||||||
Less: accumulated amortization | (120,000 | ) | (108,000 | ) | ||||
$ | 120,000 | $ | 132,000 | |||||
Twelve Months Ending | ||||
March 31, 2012 | $ | 48,000 | ||
March 31, 2013 | 48,000 | |||
March 31, 2014 | 24,000 | |||
$ | 120,000 | |||
NOTE 5 — | LONG-TERM DEBT |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Line of credit agreement, as amended, dated September 16, 2010. Interest is payable monthly with the principal amount due in November 2011. Interest rate of 5.00 percent at March 31, 2011 | $ | 475,000 | $ | 400,000 | ||||
Notes payable on company vehicles and equipment dated 2009 through 2011, due in monthly installments totaling $13,049 including weighted average interest of 6.56 percent, maturing through 2013, collateralized by vehicles and equipment costing $474,826 | 368,278 | 242,128 | ||||||
Notes payable to a financial institution under various promissory note agreements, due in monthly installments at March 31, 2011 in aggregate of $9,035, maturing at various times through March 2013. Interest is payable monthly at a weighted average interest rate of 7.33 percent at March 31, 2011 | 176,682 | 200,249 | ||||||
Note payable to owners of a company acquired, dated September 30, 2008, maturing October 1, 2013 with monthly payments of $12,377. Interest rate imputed at 5.16 percent | 360,132 | 390,745 | ||||||
Note payable to former stockholder related to sale of shares dated July 27, 2004, maturing June 27, 2014, with monthly payments of $2,401. Interest rate at 4.00 percent | 87,666 | 93,948 | ||||||
1,467,758 | 1,327,070 | |||||||
Current portion | (858,099 | ) | (737,236 | ) | ||||
Long-term portion | $ | 609,659 | $ | 589,834 | ||||
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Twelve Months Ending | ||||
March 31, 2012 | $ | 858,099 | ||
March 31, 2013 | 404,459 | |||
March 31, 2014 | 194,441 | |||
March 31, 2015 | 10,759 | |||
Thereafter | — | |||
$ | 1,467,758 | |||
�� |
NOTE 6 — | STOCKHOLDER LOAN |
NOTE 7 — | COMMITMENTS AND CONTINGENCIES |
Twelve Months Ending | ||||
March 31, 2012 | $ | 484,050 | ||
March 31, 2013 | 169,176 | |||
March 31, 2014 | 74,216 | |||
March 31, 2015 | 12,797 | |||
Thereafter | — | |||
$ | 740,239 | |||
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NOTE 8 — | EMPLOYEE BENEFIT PLAN |
NOTE 9 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Cash paid for: | ||||||||
Interest | $ | 28,314 | $ | 25,296 | ||||
NOTE 10 — | SUBSEQUENT EVENTS |
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ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 400 | ||
Accounts receivable, net of allowance — Note 2 | 1,270,057 | |||
Inventory | 1,203,319 | |||
Prepaid expenses and other current assets | 98,866 | |||
Total current assets | $ | 2,572,642 | ||
Property and equipment, net —Note 3 | 1,184,112 | |||
Other assets | ||||
Goodwill — Note 4 | 413,295 | |||
Intangible assets — net of amortization — Note 4 | 132,000 | |||
$ | 4,302,049 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 1,219,639 | ||
Accrued expenses and other current liabilities — Note 9 | 151,982 | |||
Stockholder loan — Note 6 | 746,965 | |||
Long-term debt, current portion — Note 5 | 737,236 | |||
Total current liabilities | $ | 2,855,822 | ||
Long-term debt, less current portion — Note 5 | 589,834 | |||
Commitments and contingencies —Note 7 | — | |||
Stockholders’ equity | ||||
Common stock, $1.00 par value, authorized 1,000,000 shares, 25,500 shares issued and outstanding at December 31, 2010 | 25,500 | |||
Retained earnings | 830,893 | |||
856,393 | ||||
$ | 4,302,049 | |||
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Revenue | ||||
Products and services | $ | 19,232,347 | ||
Costs and Expenses | ||||
Cost of sales | $ | 9,063,869 | ||
Selling, general and administrative | 9,363,773 | |||
Depreciation and amortization | 394,383 | |||
Total costs and expenses | 18,822,025 | |||
Income from Operations | 410,322 | |||
Other Income (Expense) | ||||
Interest expense | (117,406 | ) | ||
Other income | 5,874 | |||
Total other income (expense) | (111,532 | ) | ||
Net Income | $ | 298,790 | ||
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Common Stock | ||||||||||||||||
Shares | Amount | Retained Earnings | Total | |||||||||||||
Balance as of December 31, 2009 | 25,500 | $ | 25,500 | $ | 632,103 | $ | 657,603 | |||||||||
Distributions | (100,000 | ) | (100,000 | ) | ||||||||||||
Net income | 298,790 | 298,790 | ||||||||||||||
Balance as of December 31, 2010 | 25,500 | $ | 25,500 | $ | 830,893 | $ | 856,393 | |||||||||
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Cash provided by operating activities | ||||
Net income | $ | 298,790 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 416,365 | |||
Loss on disposal of property and equipment | 5,874 | |||
Provision for doubtful accounts | 8,539 | |||
Changes in working capital components: | ||||
Accounts receivable | 177,281 | |||
Inventory | (173,661 | ) | ||
Prepaid expenses and other assets | (57,133 | ) | ||
Accounts payable and accrued expenses | 168,617 | |||
Cash provided by operating activities | $ | 844,672 | ||
Cash used in investing activities | ||||
Purchases of property and equipment | (629,998 | ) | ||
Cash used in investing activities | (629,998 | ) | ||
Cash used in financing activities | ||||
Distributions to stockholders | (100,000 | ) | ||
Net borrowings from stockholder | 15,594 | |||
Proceeds from long-term debt | 234,164 | |||
Payments on long-term debt | (432,445 | ) | ||
Cash used in financing activities | (282,687 | ) | ||
Net decrease in cash and cash equivalents | (68,013 | ) | ||
Cash and cash equivalents at beginning of year | 68,413 | |||
Cash and cash equivalents at end of year | $ | 400 | ||
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NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Office Equipment and Furniture | 5 years | |||
Machinery and Equipment | 5 – 10 years | |||
Leasehold Improvements | Life of lease | |||
Vehicles | 5 years |
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NOTE 3 — | PROPERTY AND EQUIPMENT |
Office equipment and furniture | $ | 221,857 | ||
Machinery and equipment | 2,584,775 | |||
Leasehold improvements | 39,735 | |||
Vehicles | 328,717 | |||
3,175,084 | ||||
Less: accumulated depreciation | (1,990,972 | ) | ||
$ | 1,184,112 | |||
NOTE 4 — | GOODWILL AND OTHER INTANGIBLE ASSETS |
Customer relationships | $ | 120,000 | ||
Non-competition agreements | 120,000 | |||
240,000 | ||||
Less: accumulated amortization | (108,000 | ) | ||
$ | 132,000 | |||
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Twelve Months Ended | ||||
December 31, 2011 | $ | 48,000 | ||
December 31, 2012 | 48,000 | |||
December 31, 2013 | 36,000 | |||
$ | 132,000 | |||
NOTE 5 — | LONG-TERM DEBT |
Line of credit agreement, as amended, dated September 16, 2010. Interest is payable monthly with the principal amount due in November 2011. Interest rate of 5.00 percent at December 31, 2010 | $ | 400,000 | ||
Notes payable on company vehicles dated 2009 and 2010, due in monthly installments totaling $8,277 including weighted average interest of 6.74 percent, maturing through 2013, collateralized by vehicles costing $318,691 | 242,128 | |||
Notes payable to a financial institution under various promissory note agreements, due in monthly installments at December 31, 2010 in aggregate of $9,035, maturing at various times through March 2013. Interest is payable monthly at a weighted average interest rate of 7.33 percent at December 31, 2010 | 200,249 | |||
Note payable to owners of a company acquired, dated September 30, 2008, maturing October 1, 2013, with monthly payments of $12,377. Interest rate imputed at 5.16 percent | 390,745 | |||
Note payable to former stockholder related to sale of shares dated July 27, 2004, maturing June 27, 2014, payments of $2,401 Interest rate at 4.00 percent | 93,948 | |||
1,327,070 | ||||
Current portion | (737,236 | ) | ||
Long-term portion | $ | 589,834 | ||
Twelve Months Ended | ||||
December 31, 2011 | $ | 737,236 | ||
December 31, 2012 | 338,687 | |||
December 31, 2013 | 229,586 | |||
December 31, 2014 | 21,561 | |||
$ | 1,327,070 | |||
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NOTE 6 — | STOCKHOLDER LOAN |
NOTE 7 — | COMMITMENTS AND CONTINGENCIES |
Twelve months ended | ||||
December 31, 2011 | $ | 546,078 | ||
December 31, 2012 | 231,282 | |||
December 31, 2013 | 90,955 | |||
December 31, 2014 | 26,552 | |||
Thereafter | — | |||
$ | 894,867 | |||
NOTE 8 — | EMPLOYEE BENEFIT PLAN |
NOTE 9 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Sales tax payable | $ | 56,470 | ||
Accrued interest | 6,441 | |||
Accrued payroll and payroll taxes | 26,987 | |||
Other accrued expenses | 62,084 | |||
$ | 151,982 | |||
Cash paid for: | ||||
Interest | $ | 117,797 | ||
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NOTE 10 — | SUBSEQUENT EVENTS |
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CCI HAULING, INC.
COMBINED BALANCE SHEETS
MARCH 31, 2011 AND DECEMBER 31, 2010
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 875,416 | $ | 730,649 | ||||
Accounts receivable, net of allowance — Note 2 | 224,209 | 250,730 | ||||||
Prepaid expenses and other current assets | 31,733 | 58,424 | ||||||
Total current assets | 1,131,358 | 1,039,803 | ||||||
Property and equipment, net —Note 3 | 2,046,317 | 1,880,020 | ||||||
Other assets | ||||||||
Intangible assets— Note 4 | 103,320 | 111,595 | ||||||
$ | 3,280,995 | $ | 3,031,418 | |||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 142,420 | $ | 145,431 | ||||
Deferred revenue — Note 2 | 313,601 | 350,487 | ||||||
Long-term debt, current portion — Note 5 | 353,538 | 370,808 | ||||||
Total current liabilities | 809,559 | 866,726 | ||||||
Long-term debt, less current portion — Note 5 | 473,562 | 350,136 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholder’s equity | ||||||||
Common stock of Central Carting Disposal, Inc., $1 par value, authorized 10,000 shares, 10,000 shares issued and outstanding at March 31, 2011 | 10,000 | 10,000 | ||||||
Common stock of CCI Hauling, Inc., $.10 par value, authorized 1,000 shares, 1,000 shares issued and outstanding at March 31, 2011 | 100 | 100 | ||||||
Additional paid-in capital | 191,200 | 191,200 | ||||||
Retained earnings | 1,796,574 | 1,613,256 | ||||||
1,997,874 | 1,814,556 | |||||||
$ | 3,280,995 | $ | 3,031,418 | |||||
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CCI HAULING, INC.
COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Revenue | ||||||||
Services | $ | 1,530,891 | $ | 1,470,724 | ||||
Costs and Expenses | ||||||||
Cost of sales | 401,994 | 317,245 | ||||||
Selling, general and administrative | 492,495 | 496,703 | ||||||
Depreciation and amortization | 141,277 | 130,007 | ||||||
Total costs and expenses | 1,035,766 | 943,955 | ||||||
Income from Operations | 495,125 | 526,769 | ||||||
Other Income (Expense) | ||||||||
Interest expense | (17,001 | ) | (24,425 | ) | ||||
Other income | 2,700 | — | ||||||
Total other income (expense) | (14,301 | ) | (24,425 | ) | ||||
Net Income | $ | 480,824 | $ | 502,344 | ||||
F-135
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CCI HAULING, INC.
COMBINED STATEMENTS OF STOCKHOLDER’S EQUITY
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
Common Stock | Additional | Retained | ||||||||||||||||||
Shares | Amount | Paid-in Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2009 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,405,829 | $ | 1,607,129 | |||||||||||
Distributions | (557,007 | ) | (557,007 | ) | ||||||||||||||||
Net income | 502,344 | 502,344 | ||||||||||||||||||
Balance as of March 31, 2010 | 11,000 | 10,100 | 191,200 | 1,351,166 | 1,552,466 | |||||||||||||||
Distributions | (794,430 | ) | (794,430 | ) | ||||||||||||||||
Net income | 1,056,520 | 1,056,520 | ||||||||||||||||||
Balance as of December 31, 2010 | 11,000 | 10,100 | 191,200 | 1,613,256 | 1,814,556 | |||||||||||||||
Distributions | (297,506 | ) | (297,506 | ) | ||||||||||||||||
Net income | 480,824 | 480,824 | ||||||||||||||||||
Balance as of March 31, 2011 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,796,574 | $ | 1,997,874 | |||||||||||
F-136
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CCI HAULING, INC.
COMBINED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Cash provided by operating activities | ||||||||
Net income | $ | 480,824 | $ | 502,344 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 141,277 | 130,057 | ||||||
Provision for bad debt | — | 25,000 | ||||||
Gain on the sale of property and equipment | (2,700 | ) | — | |||||
Changes in working capital components: | ||||||||
Accounts receivable | 26,521 | (116,287 | ) | |||||
Prepaid expenses and other assets | 26,692 | — | ||||||
Accounts payable and accrued expenses | (39,898 | ) | 142,986 | |||||
Cash provided by operating activities | 632,716 | 684,100 | ||||||
Cash used in investing activities | ||||||||
Proceeds from sale of property and equipment | 2,700 | — | ||||||
Purchases of property and equipment | (299,299 | ) | — | |||||
Cash used in investing activities | (296,599 | ) | — | |||||
Cash used in financing activities | ||||||||
Distributions to stockholder | (297,506 | ) | (557,007 | ) | ||||
Proceeds from long-term debt | 225,580 | — | ||||||
Payments on long-term debt | (119,424 | ) | (117,155 | ) | ||||
Cash used in financing activities | (191,350 | ) | (674,162 | ) | ||||
Net change in cash and cash equivalents | 144,767 | 9,938 | ||||||
Cash and cash equivalents at beginning of period | 730,649 | 361,806 | ||||||
Cash and cash equivalents at end of period | $ | 875,416 | $ | 371,744 | ||||
F-137
Table of Contents
NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-138
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
Office Equipment and Furniture | 5 - 7 years | |||
Containers | 10 years | |||
Leasehold Improvements | 10 years | |||
Vehicles | 5 - 7 years |
F-139
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 3 — | PROPERTY AND EQUIPMENT |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Office equipment and furniture | $ | 69,074 | $ | 58,121 | ||||
Containers | 1,043,898 | 1,043,898 | ||||||
Leasehold improvements | 88,290 | 88,290 | ||||||
Vehicles | 3,715,480 | 3,427,134 | ||||||
4,916,742 | 4,617,443 | |||||||
Less: accumulated depreciation | (2,870,425 | ) | (2,737,423 | ) | ||||
$ | 2,046,317 | $ | 1,880,020 | |||||
F-140
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 4 — | INTANGIBLE ASSETS |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Customer lists | $ | 98,050 | $ | 98,050 | ||||
Non-compete agreements | 67,450 | 67,450 | ||||||
165,500 | 165,500 | |||||||
Less: accumulated amortization | (62,180 | ) | (53,905 | ) | ||||
$ | 103,320 | $ | 111,595 | |||||
Twelve months ending March 31, | ||||
2012 | $ | 33,100 | ||
2013 | 32,413 | |||
2014 | 26,524 | |||
2015 | 11,283 | |||
Thereafter | — | |||
$ | 103,320 | |||
F-141
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 5 — | LONG-TERM DEBT |
(unaudited) | (audited) | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Note payable on a company vehicle dated October 2006, due in monthly installments of $4,186, including interest of 10.24%, maturing September 2011, collateralized by vehicle costing $197,502 | $ | 20,505 | $ | 32,238 | ||||
Note payable on company vehicles dated December 2009, due in monthly installments of $6,762 including interest of 9.55%, maturing October 2011, collateralized by vehicles costing $326,680 | 46,012 | 64,752 | ||||||
Note payable on a company vehicle dated June 2007, due in monthly installments of $3,699 including interest of 8.46%, maturing April 2012, collateralized by vehicle costing $184,131 | 42,490 | 52,477 | ||||||
Note payable on company vehicles dated March 2008, due in monthly installments of $4,070 including interest of 8.50%, maturing December 2013, collateralized by vehicles costing $203,764 | 79,233 | 89,541 | ||||||
Note payable on company vehicles dated September 2008, due in monthly installments of $4,030 including interest of 5.18%, maturing September 2013, collateralized by vehicles costing $212,629 | 113,218 | 123,706 | ||||||
Note payable on a company vehicle dated April 2009, due in monthly installments of $4,979, including interest of 9.73%, maturing February 2014, collateralized by vehicle costing $240,506 | 155,490 | 166,379 | ||||||
Note payable on a company vehicle dated July 2009, due in monthly installments of $3,146, including interest of 10.34%, maturing May 2014, collateralized by vehicle costing $225,580 | 99,708 | 106,396 | ||||||
Note payable on a company vehicle dated February 2011, due in monthly installments of $4,763, including imputed interest of 9.73%, maturing February 2016, collateralized by vehicle costing $150,000 | 222,646 | — | ||||||
Note payable to a former shareholder dated October 2002, due in monthly installments of $2,125 including interest of 5.00%, maturing October 2012, unsecured | 36,802 | 42,643 | ||||||
Note payable for insurance financing agreement dated July 2010, due in monthly installments of $10,868, including interest of 7.35%, maturing April 2011, unsecured | 10,996 | 42,812 | ||||||
827,100 | 720,944 | |||||||
Current portion | (353,538 | ) | (370,808 | ) | ||||
Long-term portion | $ | 473,562 | $ | 350,136 | ||||
F-142
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CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
Twelve months ending March 31, | ||||
2012 | $ | 353,538 | ||
2013 | 209,627 | |||
2014 | 160,273 | |||
2015 | 53,732 | |||
2016 | 49,930 | |||
Thereafter | — | |||
$ | 827,100 | |||
NOTE 6 — | RELATED PARTY TRANSACTIONS |
NOTE 7 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Cash paid for: | ||||||||
Interest | $ | 17,002 | $ | 24,425 | ||||
F-143
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 8 — | SUBSEQUENT EVENTS |
F-144
Table of Contents
F-145
Table of Contents
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 730,649 | ||
Accounts receivable, net of allowance — Note 2 | 250,730 | |||
Prepaid expenses and other current assets | 58,424 | |||
Total current assets | $ | 1,039,803 | ||
Property and equipment, net —Note 3 | 1,880,020 | |||
Other assets | ||||
Intangible assets— Note 4 | 111,595 | |||
$ | 3,031,418 | |||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 145,431 | ||
Deferred revenue — Note 2 | 350,487 | |||
Long-term debt, current portion — Note 5 | 370,808 | |||
Total current liabilities | $ | 866,726 | ||
Long-term debt, less current portion — Note 5 | 350,136 | |||
Commitments and contingencies | — | |||
Stockholder’s equity | ||||
Common stock of Central Carting Disposal, Inc., $1 par value, authorized 10,000 shares, 10,000 shares issued and outstanding at December 31, 2010 | 10,000 | |||
Common stock of CCI Hauling, Inc., $.10 par value, authorized 1,000 shares, 1,000 shares issued and outstanding at December 31, 2010 | 100 | |||
Additional paid-in capital | 191,200 | |||
Retained earnings | 1,613,256 | |||
1,814,556 | ||||
$ | 3,031,418 | |||
F-146
Table of Contents
CCI HAULING, INC.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
Revenue | ||||
Services | $ | 6,150,479 | ||
Costs and Expenses | ||||
Cost of sales | $ | 1,433,762 | ||
Selling, general and administrative | 2,450,480 | |||
Depreciation and amortization | 523,440 | |||
Total costs and expenses | 4,407,682 | |||
Income from Operations | 1,742,797 | |||
Other Income (Expense) | ||||
Interest expense | (81,256 | ) | ||
Total other income (expense) | (81,256 | ) | ||
Net Income | $ | 1,661,541 | ||
F-147
Table of Contents
CCI HAULING, INC.
COMBINED STATEMENT OF STOCKHOLDER’S EQUITY
YEAR ENDED DECEMBER 31, 2010
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2009 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,405,829 | $ | 1,607,129 | |||||||||||
Distributions | (1,454,114 | ) | (1,454,114 | ) | ||||||||||||||||
Net income | 1,661,541 | 1,661,541 | ||||||||||||||||||
Balance as of December 31, 2010 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,613,256 | $ | 1,814,556 | |||||||||||
F-148
Table of Contents
CCI HAULING, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
Cash provided by operating activities | ||||
Net income | $ | 1,661,541 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 523,490 | |||
Provision for doubtful accounts | 80,000 | |||
Changes in working capital components: | ||||
Accounts receivable | (79,822 | ) | ||
Prepaid expenses and other assets | 5,264 | |||
Accounts payable and accrued expenses | 328,239 | |||
Cash provided by operating activities | $ | 2,518,712 | ||
Cash used in investing activities | ||||
Purchases of property and equipment | (363,540 | ) | ||
Cash used in investing activities | (363,540 | ) | ||
Cash used in financing activities | ||||
Distributions to stockholders | (1,454,114 | ) | ||
Proceeds from long-term debt | 94,879 | |||
Payments on long-term debt | (427,094 | ) | ||
Cash used in financing activities | (1,786,329 | ) | ||
Net change in cash and cash equivalents | 368,843 | |||
Cash and cash equivalents at beginning of year | 361,806 | |||
Cash and cash equivalents at end of year | $ | 730,649 | ||
F-149
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 — | BUSINESS DESCRIPTION |
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Office Equipment and Furniture | 5 - 7 years | |||
Containers | 10 years | |||
Leasehold Improvements | 10 years | |||
Vehicles | 5 - 7 years |
F-150
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
F-151
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 3 — | PROPERTY AND EQUIPMENT |
Office equipment and furniture | $ | 58,121 | ||
Containers | 1,043,898 | |||
Leasehold improvements | 88,290 | |||
Vehicles | 3,427,134 | |||
4,617,443 | ||||
Less: accumulated depreciation | (2,737,423 | ) | ||
$ | 1,880,020 | |||
NOTE 4 — | INTANGIBLE ASSETS |
Customer lists | $ | 98,050 | ||
Non-compete agreements | 67,450 | |||
165,500 | ||||
Less: accumulated amortization | (53,905 | ) | ||
$ | 111,595 | |||
2011 | $ | 33,100 | ||
2012 | 33,100 | |||
2013 | 30,350 | |||
2014 | 15,045 | |||
Thereafter | — | |||
$ | 111,595 | |||
F-152
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 5 — | LONG-TERM DEBT |
Note payable on a company vehicle dated October 2006, due in monthly installments of $4,186, including interest of 10.24%, maturing September 2011, collateralized by vehicle costing $197,502 | $ | 32,238 | ||
Note payable on company vehicles dated December 2009, due in monthly installments of $6,762 including interest of 9.55%, maturing October 2011, collateralized by vehicles costing $326,680 | 64,752 | |||
Note payable on a company vehicle dated June 2007, due in monthly installments of $3,699 including interest of 8.46%, maturing April 2012, collateralized by vehicle costing $184,131 | 52,477 | |||
Note payable on company vehicles dated March 2008, due in monthly installments of $4,070 including interest of 8.50%, maturing December 2013, collateralized by vehicles costing $203,764 | 89,541 | |||
Note payable on company vehicles dated September 2008, due in monthly installments of $4,030 including interest of 5.18%, maturing September 2013, collateralized by vehicles costing $212,629 | 123,706 | |||
Note payable on a company vehicle dated April 2009, due in monthly installments of $4,979, including interest of 9.73%, maturing February 2014, collateralized by vehicle costing $240,506 | 166,379 | |||
Note payable on a company vehicle dated July 2009, due in monthly installments of $3,146, including interest of 10.34%, maturing May 2014, collateralized by vehicle costing $150,000 | 106,396 | |||
Note payable to a former shareholder dated October 2002, due in monthly installments of $2,125 including interest of 5.00%, maturing October 2012, unsecured | 42,643 | |||
Note payable for insurance financing agreement dated July 2010, due in monthly installments of $10,868, including interest of 7.35%, maturing April 2011, unsecured | 42,812 | |||
720,944 | ||||
Current portion | (370,808 | ) | ||
Long-term portion | $ | 350,136 | ||
2011 | $ | 370,808 | ||
2012 | 199,295 | |||
2013 | 125,664 | |||
2014 | 25,177 | |||
Thereafter | — | |||
$ | 720,944 | |||
F-153
Table of Contents
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 6 — | RELATED PARTY TRANSACTIONS |
NOTE 7 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Cash paid for: | ||||
Interest | $ | 81,256 | ||
NOTE 8 — | SUBSEQUENT EVENTS |
F-154
Table of Contents
INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
PF-4 | ||||
PF-5 | ||||
PF-6 |
PF-1
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
PF-2
Table of Contents
PF-3
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 2010
(expressed in thousands)
Historical | ||||||||||||||||||||||||||||
Swisher | Choice | Condensed | ||||||||||||||||||||||||||
Hygiene | Environmental | Pro Forma | Pro Forma | Combined | ||||||||||||||||||||||||
Inc. | Services, Inc. | Adjustments | Notes | Adjustments | Notes | Pro Forma | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash, cash equivalents, and restricted cash | $ | 44,125 | $ | 424 | $ | 58,860 | a | $ | (47,832 | ) | b | $ | 55,577 | |||||||||||||||
Accounts receivable, net | 7,068 | 6,141 | — | — | 13,209 | |||||||||||||||||||||||
Inventory | 2,968 | 248 | — | — | 3,216 | |||||||||||||||||||||||
Deferred income taxes and other assets | 895 | 1,108 | — | (181 | ) | c | 1,822 | |||||||||||||||||||||
Total current assets | 55,056 | 7,921 | 58,860 | (48,013 | ) | 73,824 | ||||||||||||||||||||||
Property and equipment, net | 11,324 | 25,787 | — | 3,956 | d | 41,067 | ||||||||||||||||||||||
Other assets | — | |||||||||||||||||||||||||||
Goodwill | 29,660 | 13,958 | — | 35,902 | e | 79,520 | ||||||||||||||||||||||
Other intangible assets, net | 7,669 | 3,251 | — | 27,469 | e | 38,389 | ||||||||||||||||||||||
Other noncurrent assets | 2,525 | 2,217 | — | (1,491 | ) | f | 3,251 | |||||||||||||||||||||
Total other assets | 39,854 | 19,426 | — | 61,880 | 121,160 | |||||||||||||||||||||||
$ | 106,234 | $ | 53,134 | $ | 58,860 | $ | 17,823 | $ | 236,051 | |||||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Accounts payable, accrued expenses and other current liabilities | $ | 9,335 | $ | 4,955 | $ | — | $ | — | $ | 14,290 | ||||||||||||||||||
Short term obligations | 15,379 | 9,682 | — | (8,660 | ) | b, f | 16,401 | |||||||||||||||||||||
Total current liabilities | 24,714 | 14,637 | — | (8,660 | ) | 30,691 | ||||||||||||||||||||||
Long term obligations | 31,029 | 32,398 | — | (27,804 | ) | b, f | 35,623 | |||||||||||||||||||||
Deferred income tax liabilities | 1,700 | 1,066 | — | 10,539 | c | 13,305 | ||||||||||||||||||||||
Other long term liabilities | 2,763 | — | — | — | 2,763 | |||||||||||||||||||||||
Total noncurrent liabilities | 35,492 | 33,464 | — | (17,265 | ) | 51,691 | ||||||||||||||||||||||
Commitments and contingencies | — | — | — | — | — | |||||||||||||||||||||||
Equity | 46,028 | 5,033 | 58,860 | a | 43,748 | h | 153,669 | |||||||||||||||||||||
$ | 106,234 | $ | 53,134 | $ | 58,860 | $ | 17,823 | $ | 236,051 | |||||||||||||||||||
PF-4
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(expressed in thousands, except share and per share data)
Historical Year Ended | ||||||||||||||||||||
December 31, | September 30, | |||||||||||||||||||
2010 | 2010 | |||||||||||||||||||
Swisher | Choice | |||||||||||||||||||
Hygiene | Environmental | Pro Forma | Pro Forma | |||||||||||||||||
Inc. | Services, Inc. | Adjustments | Notes | Combined | ||||||||||||||||
Revenue | ||||||||||||||||||||
Product | $ | 37,690 | $ | 4,998 | $ | — | $ | 42,688 | ||||||||||||
Services | 17,737 | 39,896 | — | 57,633 | ||||||||||||||||
Franchise and other | 8,225 | — | — | 8,225 | ||||||||||||||||
Total revenue | 63,652 | 44,894 | — | 108,546 | ||||||||||||||||
Costs and Expenses | ||||||||||||||||||||
Cost of sales | 23,597 | 14,576 | — | 38,173 | ||||||||||||||||
Route expenses | 13,931 | 14,429 | — | 28,360 | ||||||||||||||||
Selling, general and administrative | 31,258 | 8,112 | (534 | ) | d | 38,836 | ||||||||||||||
Merger expenses | 5,122 | — | — | 5,122 | ||||||||||||||||
Depreciation and amortization | 4,857 | 3,671 | 4,634 | h | 13,162 | |||||||||||||||
Total costs and expenses | 78,765 | 40,788 | 4,100 | 123,653 | ||||||||||||||||
(Loss) Income from Operations | (15,113 | ) | 4,106 | (4,100 | ) | (15,107 | ) | |||||||||||||
Other Income (Expense), net | (757 | ) | (3,164 | ) | 1,466 | i | (2,455 | ) | ||||||||||||
Net (Loss) Income Before Income Tax | (15,870 | ) | 942 | (2,634 | ) | (17,562 | ) | |||||||||||||
Income Tax Expense (Benefit) | 1,700 | 577 | (577 | ) | c | 1,700 | ||||||||||||||
Net (Loss) Income | $ | (17,570 | ) | $ | 365 | $ | (2,057 | ) | $ | (19,262 | ) | |||||||||
Loss per ShareBasic and diluted | $ | (0.26 | ) | $ | (0.22 | ) | ||||||||||||||
Weighted-Average Common Shares Used in the Computation of Loss per Share | ||||||||||||||||||||
Basic and diluted | 66,956,371 | 87,500,794 | ||||||||||||||||||
PF-5
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(expressed in thousands, except share and per share amounts)
1. | Basis of Pro Forma Presentation |
PF-6
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
(expressed in thousands, except share and per share amounts)
2. | Preliminary Estimated Purchase Price Allocation |
Consideration: | ||||
Issuance of shares at stock price of $5.89 | $ | 48,781 | ||
Debt assumed | 42,798 | |||
Cash paid | 5,700 | |||
Total purchase price | $ | 97,279 | ||
Net tangible assets acquired: | ||||
Cash and cash equivalents | $ | 341 | ||
Receivables, net | 6,096 | |||
Inventory | 151 | |||
Property and equipment | 29,743 | |||
Franchise agreements | 27,840 | |||
Non compete agreements | 2,880 | |||
Other assets | 1,536 | |||
Accounts payable and expenses | (6,221 | ) | ||
Capital leases | (3,995 | ) | ||
Deferred income tax liabilities | (11,605 | ) | ||
46,766 | ||||
Goodwill | 50,513 | |||
Total purchase price | 97,279 | |||
Less: Debt assumed | 40,944 | |||
Less: Issuance of shares | 48,781 | |||
Cash paid (including prepayment penalty) | $ | 7,554 | ||
PF-7
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
(expressed in thousands, except share and per share amounts)
3. | Pro forma adjustments (a, b, c, d, e, f, g, h, and i as referenced in the unaudited pro forma condensed combined financial statements) |
(a) | Proceeds from the Offering and issuance of Swisher common stock (in thousands, except per share data) |
(b) | Cash (in thousands) |
(c) | Deferred taxes |
Net | ||||
increase | ||||
(decrease) | ||||
Deferred tax assets | $ | (181 | ) | |
Deferred tax liabilities | 10,539 | |||
$ | 10,358 | |||
PF-8
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
(expressed in thousands, except share and per share amounts)
(d) | Property and equipment |
Historical | Estimated | |||||||
cost, net | fair value | |||||||
Machinery and equipment | $ | 6,368 | $ | 6,224 | ||||
Vehicles | 18,690 | 19,748 | ||||||
Capital leases | — | 3,049 | ||||||
Leasehold improvements | 659 | 659 | ||||||
Office equipment | 70 | 70 | ||||||
$ | 25,787 | $ | 29,743 | |||||
Increase in depreciation expense. See pro forma adjustment(h) | $ | 384 | ||||||
(e) | Goodwill and other intangibles(in thousands) |
Estimated | Weighted | Amortization | ||||||||||
fair value | average life | expense | ||||||||||
Franchise agreements | $ | 27,840 | 7 | $ | 3,977 | |||||||
Non compete agreements | 2,880 | 2.5 | 1,152 | |||||||||
$ | 30,720 | 6.6 | $ | 5,129 | ||||||||
PF-9
Table of Contents
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
(expressed in thousands, except share and per share amounts)
(f) | Debt, including capital leases(in thousands) |
Debt paid down | $ | (40,278 | ) | |
Capital leases entered into in connection with the acquisition of Choice | 3,995 | |||
Fair value adjustment for the remaining Choice debt | (181 | ) | ||
Total pro forma adjustments to debt, including capital leases | $ | (36,464 | ) | |
Debt paid down in the acquisition of Choice | $ | 40,278 | ||
Prepayment penalty | 1,854 | |||
$ | 42,132 | |||
(g) | Capital adjustments |
Equity | ||||
Shares issued in connection with the private placement | $ | 58,860 | ||
Elimination of historical equity accounts of Choice | (5,033 | ) | ||
Shares issued in connection with the acquisition of Choice | 48,781 | |||
$ | 43,748 | |||
(h) | Depreciation and amortization |
Adjustment for difference in amortization of acquired other intangibles acquired in the Choice acquisition ($5,129-$879). See pro forma adjustment(e) | $ | 4,250 | ||
Adjustment for depreciation of property leased under capital leases. See pro forma adjustment(d) | 313 | |||
Adjustment for difference in depreciation of fixed assets, other than capital leases, based on fair value. See pro forma adjustment(d) | 71 | |||
$ | 4,634 | |||
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NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
(expressed in thousands, except share and per share amounts)
(i) | Interest expense |
Elimination of interest expense for debt paid down. See pro forma adjustment(f) | $ | (1,630 | ) | |
Interest expense related to capital lease obligations. See pro forma adjustment(f) | 230 | |||
Elimination of interest expense for amortization of debt discounts and debt financing costs related to debt paid down. See pro forma adjustment(f) | (66 | ) | ||
$ | (1,466 | ) | ||
4. | Pro forma Earnings Per Share |
Basic and Diluted | ||||
Weighted-average common shares outstanding, as reported | 66,956,371 | |||
Shares issued in connection with the acquisition of Choice | 8,281,923 | |||
Shares issued in connection with the private placement | 12,262,500 | |||
Weighted-average common shares outstanding, pro forma | 87,500,794 | |||
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Item 13. | Other Expenses of Issuance and Distribution |
Amount | ||||
Securities and Exchange Commission Registration Fee | $ | 5,373 | ||
Legal Fees and Expenses | 25,000 | |||
Accounting Fees and Expenses | 5,000 | |||
Miscellaneous Expenses | 12,000 | |||
Total | $ | 47,373 | ||
Item 14. | Indemnification of Directors and Officers |
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Item 15. | Recent Sales of Unregistered Securities |
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Item 16. | Exhibits |
Exhibit | ||||
Number | Description | |||
2 | .1 | Agreement and Plan of Merger, among CoolBrands International Inc., CoolBrands International (Nevada), Inc., Swisher International, Inc. and Steven R. Berrard, dated as of August 17, 2010.(1) | ||
2 | .2 | Plan of Arrangement, dated November 1, 2010.(1) | ||
3 | .1 | Certificate of Corporate Domestication of CoolBrands International Inc., dated November 1, 2010.(1) | ||
3 | .2 | Amended and Restated Certificate of Incorporation(2) | ||
3 | .3 | Bylaws of Swisher Hygiene Inc.(1) | ||
5 | .1 | Opinion of Akerman Senterfitt. | ||
10 | .1 | Credit Agreement by and between Swisher International, Inc. and Wachovia Bank, National Association, dated November 14, 2005.(3) | ||
10 | .2 | Security Agreement by and among Swisher International, Inc. and certain subsidiaries of Swisher International, Inc., dated as of November 14, 2005.(1) | ||
10 | .3 | First Amendment to Credit Agreement by and between Swisher International, Inc. and Wachovia Bank, National Association, dated as of April 26, 2006.(1) | ||
10 | .4 | Second Amendment and Waiver to Credit Agreement by and between Swisher International, Inc. and Wachovia Bank, National Association, dated as of September 8, 2006.(1) | ||
10 | .5 | Third Amendment and Waiver to Credit Agreement by and between Swisher International, Inc. and Wachovia Bank, National Association, dated as of March 21, 2008.(1) | ||
10 | .6 | Fourth Amendment and Waiver to Credit Agreement by and between Swisher International, Inc. and Wachovia Bank, National Association, dated June 25, 2008.(1) | ||
10 | .7 | Fifth Amendment and Waiver to Credit Agreement by and between Swisher International, Inc., Wachovia Bank, National Association, and other persons party thereto, dated June 30, 2009.(1) | ||
10 | .8 | Sixth Amendment to Credit Agreement by and between Swisher International, Inc., Wachovia Bank, National Association and other persons party thereto, dated November 18, 2009.(1) | ||
10 | .9 | Credit Agreement by and between HB Service, LLC and Wachovia Bank, National Association, dated as of June 25, 2008.(1) | ||
10 | .10 | First Amendment and Waiver to Credit Agreement by and between HB Service, LLC, Wachovia Bank, National Association and other persons party thereto, dated as of June 30, 2009.(1) |
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Exhibit | ||||
Number | Description | |||
10 | .11 | Second Amendment to Credit Agreement by and between HB Service, LLC, Wachovia Bank, National Association, and other persons party thereto, dated November 18, 2009.(1) | ||
10 | .12 | Omnibus Amendment Agreement, Limited Consent and Waiver by and between Swisher International, Inc., HB Service, LLC, Wells Fargo Bank, National Association and other persons party thereto, dated August 13, 2010.(1) | ||
10 | .13 | Omnibus Amendment Agreement, Limited Consent and Waiver by and between Swisher International, Inc., HB Service, LLC, Wells Fargo Bank, National Association and other persons party thereto, dated October 28, 2010.(1) | ||
10 | .14 | Unconditional Guaranty by and among Swisher International, Inc., H. Wayne Huizenga and Wachovia Bank, National Association, dated June 25, 2008.(1) | ||
10 | .15 | Unconditional Guaranty by and among HB Service, LLC, H. Wayne Huizenga and Wachovia Bank, National Association, dated June 25, 2008.(1) | ||
10 | .16 | Promissory Note, dated May 26, 2010, as amended, in the principal amount of $21,445,000 to Royal Palm Mortgage Group, LLC.(1) | ||
10 | .17 | Amended and Restated Security Agreement by and between H. Wayne Huizenga and Wachovia Bank, National Association, dated January 2010.(1) | ||
10 | .18 | Capital Contribution Agreement by and among H. Wayne Huizenga, Steven R. Berrard and Swisher International, Inc., dated July 13, 2010.(1) | ||
10 | .19 | Form ofLock-Up Agreement.(1) | ||
10 | .20 | Promissory Note, dated August 9, 2010, in the principal amount of $2,000,000 to Royal Palm Mortgage Group, LLC.(1) | ||
10 | .21 | Promissory Note, dated August 9, 2010, in the principal amount of $1,500,000 to Royal Palm Mortgage Group, LLC.(1) | ||
10 | .22 | Omnibus Amendment Agreement, Limited Consent and Waiver by and between Swisher International, Inc., HB Service, LLC, Wells Fargo Bank, National Association and other persons party thereto, dated November 5, 2010.(1) | ||
10 | .23 | Vendor Agreement, dated July 25, 2008, between Swisher Hygiene Franchise Corp. and Intercon Chemical Company (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.)(3) | ||
10 | .24 | Credit Agreement among Swisher Hygiene, Inc., the lenders named therein and Wells Fargo Bank, National Association, dated March 30, 2011.(4) | ||
10 | .25 | Pledge and Security Agreement by Swisher Hygiene Inc., certain subsidiaries of Swisher Hygiene, Inc. named therein, and Wells Fargo Bank, National Association, dated March 30, 2011 (portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment).(4) | ||
10 | .26 | Guaranty Agreement by certain subsidiaries of Swisher Hygiene Inc. and Guaranteed Parties named therein, dated March 30, 2011.(4) | ||
10 | .27 | Securities Purchase Agreement, dated March 22, 2011. (On March 22, 2011, Swisher Hygiene Inc. entered into an additional 11 securities purchase agreements which are substantially identical in all material respects to this exhibit expect as to the parties thereto and the number of shares of common stock of Swisher Hygiene purchased. Attached to this exhibit is a schedule identifying the parties to the additional 11 securities purchase agreements and the number of shares of common stock of Swisher Hygiene purchased by such parties.)(5) | ||
10 | .28 | Securities Purchase Agreement, dated April 15, 2011. (On April 15, 2011, Swisher Hygiene Inc. entered into an additional 16 securities purchase agreements which are substantially identical in all material respects to this exhibit expect as to the parties thereto and the number of shares of common stock of Swisher Hygiene purchased. Attached to this exhibit is a schedule identifying the parties to the additional 16 securities purchase agreements and the number of shares of common stock Swisher Hygiene purchased by such parties.)(5) | ||
10 | .29 | Amended and Restated Swisher Hygiene Inc. 2010 Stock Incentive Plan(2) |
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Exhibit | ||||
Number | Description | |||
10 | .30 | Swisher Hygiene Inc. Senior Executive Officers Performance Incentive Bonus Plan(6) | ||
10 | .31 | Employment Agreement of Michael Kipp(6) | ||
16 | .1 | Letter of Scharf Pera & Co., PLLC, dated November 16, 2010.(3) | ||
21 | .1 | Subsidiaries of Swisher Hygiene Inc.(7) | ||
23 | .1 | Consent of BDO USA, LLP. | ||
23 | .2 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .3 | Consent of Kreischer Miller. | ||
23 | .4 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .5 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .6 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .7 | Consent of Akerman Senterfitt (included in Exhibit 5.1). | ||
24 | .1 | Power of Attorney (included on signature page II-9). |
(1) | Registration Statement on Form 10, filed with the Securities and Exchange Commission on November 9, 2010. | |
(2) | Registration Statement onForm S-8, filed with the Securities and Exchange Commission on May 9, 2011. | |
(3) | Amendment No. 1 to Registration Statement on Form 10, filed with the Securities and Exchange Commission on December 15, 2010. | |
(4) | Current Report onForm 8-K dated March 30, 2011 and filed with the Securities and Exchange Commission on April 5, 2011, as amended on Amendment No. 1 and Amendment No. 2 toForm 8-K/A, filed with the Securities and Exchange Commission on April 20, 2011. | |
(5) | Pre-Effective Amendment No. 3 to Registration Statement onForm S-4, filed with the Securities and Exchange Commission on April 21, 2011. | |
(6) | Current Report onForm 8-K filed with the Securities and Exchange Commission on May 10, 2011. | |
(7) | Annual Report onForm 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 31, 2011. |
Item 17. | Undertakings |
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By: | /s/ Steven R. Berrard |
Title: | President and Chief Executive Officer |
Signature | Title | Date | ||||
/s/ Steven R. Berrard Steven R. Berrard | President, Chief Executive Officer, and Director (Principal Executive Officer) | August 5, 2011 | ||||
/s/ Michael Kipp Michael Kipp | Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | August 5, 2011 | ||||
/s/ H. Wayne Huizenga H. Wayne Huizenga | Chairman of the Board | August 5, 2011 | ||||
/s/ David Braley David Braley | Director | August 5, 2011 | ||||
/s/ John Ellis Bush John Ellis Bush | Director | August 5, 2011 | ||||
/s/ Harris W. Hudson Harris W. Hudson | Director | August 5, 2011 | ||||
/s/ William D. Pruitt William D. Pruitt | Director | August 5, 2011 | ||||
/s/ David Prussky David Prussky | Director | August 5, 2011 | ||||
Michael Serruya | Director |
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Exhibit | ||||
Number | Description | |||
5 | .1 | Opinion of Akerman Senterfitt | ||
23 | .1 | Consent of BDO USA, LLP. | ||
23 | .2 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .3 | Consent of Kreischer Miller | ||
23 | .4 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .5 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .6 | Consent of Scharf Pera & Co., PLLC. | ||
23 | .7 | Consent of Akerman Senterfitt (included in Exhibit 5.1) | ||
24 | .1 | Power of Attorney (included on signature page II-9). |