Attached files
file | filename |
---|---|
8-K - FORM 8-K - Swisher Hygiene Inc. | g27950e8vk.htm |
EX-10.7 - EX-10.7 - Swisher Hygiene Inc. | g27950exv10w7.htm |
EX-23.1 - EX-23.1 - Swisher Hygiene Inc. | g27950exv23w1.htm |
EX-10.3 - EX-10.3 - Swisher Hygiene Inc. | g27950exv10w3.htm |
EX-99.4 - EX-99.4 - Swisher Hygiene Inc. | g27950exv99w4.htm |
EX-99.6 - EX-99.6 - Swisher Hygiene Inc. | g27950exv99w6.htm |
EX-99.1 - EX-99.1 - Swisher Hygiene Inc. | g27950exv99w1.htm |
EX-10.1 - EX-10.1 - Swisher Hygiene Inc. | g27950exv10w1.htm |
EX-23.3 - EX-23.3 - Swisher Hygiene Inc. | g27950exv23w3.htm |
EX-10.4 - EX-10.4 - Swisher Hygiene Inc. | g27950exv10w4.htm |
EX-10.2 - EX-10.2 - Swisher Hygiene Inc. | g27950exv10w2.htm |
EX-99.2 - EX-99.2 - Swisher Hygiene Inc. | g27950exv99w2.htm |
EX-10.6 - EX-10.6 - Swisher Hygiene Inc. | g27950exv10w6.htm |
EX-99.5 - EX-99.5 - Swisher Hygiene Inc. | g27950exv99w5.htm |
EX-23.2 - EX-23.2 - Swisher Hygiene Inc. | g27950exv23w2.htm |
EX-10.5 - EX-10.5 - Swisher Hygiene Inc. | g27950exv10w5.htm |
Exhibit 99.3
PRO-CLEAN OF ARIZONA, INC. | ||||
Financial Statements As of March 31, 2011 and 2010
(Unaudited)
|
||||
FINANCIAL STATEMENTS
|
||||
F-1 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 |
PRO-CLEAN
OF ARIZONA, INC.
MARCH 31,
2011 AND DECEMBER 31, 2010
(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 | |||||
See Notes to Financial Statements
F-1
PRO-CLEAN
OF ARIZONA, INC.
THREE
MONTHS ENDED MARCH 31, 2011 AND 2010
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 | ||||
See Notes to Financial Statements
F-2
PRO-CLEAN
OF ARIZONA, INC.
THREE
MONTHS ENDED MARCH 31, 2011
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 | |||||||||
See Notes to Financial Statements
F-3
PRO-CLEAN
OF ARIZONA, INC.
THREE
MONTHS ENDED MARCH 31, 2011 AND 2010
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 | ||||
See Notes to Financial Statements
F-4
PRO-CLEAN
OF ARIZONA, INC.
NOTE 1 | BUSINESS DESCRIPTION |
Pro-Clean of Arizona, Inc. (the Company),
established in 1976 and headquartered in Phoenix, Arizona,
provides cleaning and sanitizing solutions to its customers
located in Arizona, California, Nevada, New Mexico and Texas.
These services primarily include warewashing, housekeeping,
laundry and general cleaning, as well as leasing dish machines
to customers. The Company manufactures many of its cleaning
products in its Phoenix plant and serves its customers in a wide
range of end-markets, with a particular emphasis on the
foodservice and hospitality industries.
NOTE 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Cash and
Cash Equivalents
The Company considers all cash accounts and all highly liquid
short-term investments purchased with an original maturity of
three months or less to be cash or cash equivalents. As of
March 31, 2011 and December 31, 2010, the Company did
not have any investments with maturities greater than three
months. As a result of the Companys cash management
system, checks issued but not presented to the bank for payment
may create negative book cash balances. Such negative balances
are included in trade accounts payable and totaled $150,167 and
$13,959 at March 31, 2011 and December 31, 2010,
respectively.
Accounts
Receivable
Accounts receivable consist of amounts due from customers for
product sales and services. Accounts receivable are reported net
of an allowance for doubtful accounts. The allowance is
managements best estimate of uncollectible amounts and is
based on a number of factors, including overall credit quality,
age of outstanding balances, historical write-off experience and
specific account analysis that projects the ultimate
collectability of the outstanding balances. As of March 31,
2011 and December 31, 2010, the allowance was $48,000.
Inventory
Inventories consisting of manufactured goods, raw materials,
purchased goods, and parts are stated at the lower of cost or
market determined using the first in-first out (FIFO) cost
method.
Property
and Equipment
Property and equipment is stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization is
provided using the straight-line method over the estimated
useful lives of individual assets or classes of assets as
follows:
Office Equipment and Furniture
|
5 years | |||
Machinery and Equipment
|
5 10 years | |||
Leasehold Improvements
|
Life of lease | |||
Vehicles
|
5 years |
When an asset is sold or otherwise disposed, the related cost
and accumulated depreciation or amortization are removed from
the respective accounts and the gain or loss is recognized.
Maintenance and repairs are charged to expense when incurred.
Goodwill
and Other Intangible Assets
The Company accounts for goodwill and other intangible assets
under Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 350,
Intangibles-Goodwill and Other under which
intangible assets are recorded at cost. The cost of acquisitions
in excess of the fair value of the
F-5
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
identifiable net assets acquired is recorded as goodwill. The
fair value of the identifiable intangible assets consisting of
non-competition agreements and customer relationships are
estimated based upon discounted future cash flow projections.
Those identifiable intangible assets with a determinable
estimated life are amortized on a straight-line basis over their
estimated lives. Intangible assets with an indefinite life are
not subject to amortization. Non-competition and customer
relationship intangibles are being amortized over five years.
These assets are evaluated at least annually for impairment in
accordance with FASB ASC
350-30-35-1
Subsequent Measurement.
Long-lived
Assets
In accordance with FASB ASC
360-10-35
Impairment or Disposal of Long-lived Assets, losses
related to the impairment of long-lived assets are recognized
when the carrying amount is not recoverable and exceeds its fair
value. When facts and circumstances indicate that the carrying
values of long-lived assets may be impaired, management of the
Company evaluates recoverability by comparing the carrying value
of the assets to projected future cash flows, in addition to
other qualitative and quantitative analyses.
Revenue
Recognition
Revenue from product sales and services is recognized when the
services are performed or the products are delivered to the
customer, provided that persuasive evidence of a sales
arrangement exists, both title and risk of loss have passed to
the customer, and collection is reasonably assured.
Income
Taxes
Effective July 1, 2003, the Companys stockholders
elected that the corporation be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under this provision,
the stockholders are taxed on their proportionate share of the
Companys taxable income. As a Subchapter
S corporation, the Company bears no liability or expense
for income taxes.
FASB ASC
740-10,
Income Taxes, clarifies the accounting for income
taxes, by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the
balance sheet. It also provides guidance on derecognition,
measurement and classification of amounts related to uncertain
tax positions, accounting for and disclosure of interest and
penalties, accounting in interim period disclosures and
transition relating to the adoption of new accounting standards.
Under FASB ASC
740-10, the
recognition for uncertain tax positions should be based on a
more likely than not threshold that the tax position will be
sustained upon audit. The tax position is measured as the
largest amount of benefit that has a greater than fifty percent
probability of being realized upon settlement. Management has
determined that adoption of this topic has had no effect on the
Companys balance sheet.
Fair
Value of Financial Instruments
At March 31, 2011 and December 31, 2010, the Company
did not have any outstanding financial derivative instruments.
The carrying amounts of cash and accounts receivable approximate
fair value due to the short maturity of these instruments. The
fair value of the Companys long-term debt, estimated based
on the current borrowing rates available to the Company for bank
loans with similar terms and maturities, approximates the
carrying value of these liabilities.
Segment
Information
FASB ASC 280, Segment Reporting, establishes
standards for reporting information regarding operating segments
in annual financial statements. Operating segments are
identified as components of an enterprise for
F-6
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
which separate discrete financial information is available for
evaluation by the chief operating decision-maker, or
decision-making group in making decisions on how to allocate
resources and assess performance.
The Company manages, allocates resources and reports in one
business segment. The Companys chief operating
decision-maker, as defined under FASB ASC 280, is the
Companys President. Based on the information reviewed by
its president, the Company operates in one business segment.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue
and expenses and disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results could
differ from those estimates and such differences could affect
the results of operations reported in future periods.
NOTE 3 | PROPERTY AND EQUIPMENT |
Property and equipment as of March 31, 2011 and
December 31, 2010 consist of the following:
(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 | |||||
Depreciation expense for the three months ended March 31,
2011 and 2010 is $112,682 and $73,468 respectively, of which
$5,494 is included in cost of sales.
NOTE 4 | GOODWILL AND OTHER INTANGIBLE ASSETS |
Goodwill and other intangible assets were recorded on the
September 2008 purchase of substantially all the assets of a
corporation specializing in food service sanitation and related
products and supplies. The transaction was recorded under FASB
Statement of Financial Accounting Standards No. 141
Business Combinations. Purchase consideration
exceeding the fair market value of tangible and intangible
assets by $413,295 was recorded as goodwill. No impairment
losses were recognized through March 31, 2011. Separately
identifiable intangible assets related to this acquisition
included customer relationships and a non-
F-7
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
competition agreement, both with estimated lives of five years.
Intangible assets as of March 31, 2011 and
December 31, 2010 consist of the following:
(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 | |||||
Amortization expense for the three months ended March 31,
2011 and 2010 was $12,000.
At March 31, 2011, projected aggregate annual amortization
expense is as follows:
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 |
Long-term debt as of March 31, 2011 and December 31,
2010 consists of the following:
(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 | ||||
F-8
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
As of March 31, 2011, principal payments due on long-term
debt are as follows:
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 | |||
In September 2010, the Company amended its revolving line of
credit with a financial institution to raise its maximum
borrowing up to $475,000 and extend the line through
November 10, 2011. Interest is payable monthly at the
greater of Prime plus one percent or five percent. The line of
credit is collateralized by substantially all assets of the
Company and is guaranteed by stockholders of the Company. The
principal balance outstanding as of March 31, 2011 and
December 31, 2010 is $475,000 and $400,000, respectively.
In September 2008, the Company purchased substantially all the
assets of a corporation (see Note 4). Included in the
purchase consideration are monthly payments of $7,799 through
October 2013 under a consulting agreement to the former owner as
well as payments of $4,578 per month through October 2013
representing the excess amount of rent payments over fair market
value being paid to the former owner. The initial principal
value of these notes at September 30, 2008 was $653,295.
Interest was imputed at the Companys borrowing rate at the
time of 5.16 percent. The principal balance remaining on
these notes as of March 31, 2011 and December 31, 2010
is $360,132 and $390,745, respectively.
NOTE 6 | STOCKHOLDER LOAN |
The stockholder loan consists of various cash advances by a
stockholder to the Company. Interest is compounded monthly at a
rate of 5.50 percent. The principal balance due on this
loan at March 31, 2011 and December 31, 2010 is
$739,050 and $746,965, respectively. The loan was subsequently
repaid in full in May 2011.
NOTE 7 | COMMITMENTS AND CONTINGENCIES |
The Company leases its headquarters and other facilities,
equipment, and vehicles under operating leases that expire at
varying times through 2014. Future minimum lease payments for
operating leases that had initial or remaining non-cancelable
lease terms in excess of one year as of March 31, 2011 are
as follows:
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 | |||
Total rent expense for operating leases, including those with
terms of less than one year is $176,653 and $200,376 for the
three months ended March 31, 2011 and 2010, respectively.
F-9
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
NOTE 8 | EMPLOYEE BENEFIT PLAN |
The Company has a 401(k) plan which covers substantially all
employees. Plan participants can make voluntary contributions of
up to $16,500 of compensation for 2010, subject to certain
limitations. Under this plan, the Company may make matching,
profit sharing or safe harbor contributions into the Plan at the
discretion of management. No contributions were made for the
period ended March 31, 2011 and 2010.
NOTE 9 | SUPPLEMENTAL FINANCIAL INFORMATION |
Supplemental
Disclosure of Cash Flow Information
Supplemental cash flow information with respect to the year
ended March 31, 2011 and 2010 is as follows:
Cash paid for:
|
||||||||
Interest
|
$ | 28,314 | $ | 25,296 | ||||
Advertising
The company expenses advertising costs as incurred. Advertising
expenses for the period ended March 31, 2011 and 2010 are
approximately $74,758 and $64,194, respectively.
NOTE 10 | SUBSEQUENT EVENTS |
The Company evaluated all events and transactions through
July 12, 2011, the date these financial statements were
issued. During this period, there were no material recognizable
or non-recognizable subsequent events except for the following:
Effective April 30, 2011, the Company entered into an asset
purchase agreement under which it sold certain assets and
liabilities of the Company to Swisher Hygiene Inc. Assets sold
included substantially all inventory and supplies, accounts
receivable, property and equipment, rights under contracts,
deposits and prepaid expenses, customer lists, and other
intangible assets. Liabilities assumed by the purchaser included
accounts payable, accrued expenses, obligations under customer
contracts, and certain notes payable.
F-10