Attached files
file | filename |
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8-K - FORM 8-K - Swisher Hygiene Inc. | g27950e8vk.htm |
EX-10.7 - EX-10.7 - Swisher Hygiene Inc. | g27950exv10w7.htm |
EX-99.3 - EX-99.3 - Swisher Hygiene Inc. | g27950exv99w3.htm |
EX-23.1 - EX-23.1 - Swisher Hygiene Inc. | g27950exv23w1.htm |
EX-10.3 - EX-10.3 - Swisher Hygiene Inc. | g27950exv10w3.htm |
EX-99.6 - 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 99.4
Financial Statements As of December 31, 2010
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F-1 | ||||
FINANCIAL STATEMENTS
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
Board of Directors
Pro-Clean of Arizona, Inc.
Phoenix, AZ
INDEPENDENT
AUDITORS REPORT
We have audited the accompanying balance sheet of Pro-Clean of
Arizona, Inc. as of December 31, 2010, and the related
statements of operations, stockholders equity and cash
flows for the year then ended. These financial statements are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Pro-Clean of Arizona, Inc. as of December 31, 2010, and
the results of their operations and cash flows for the year then
ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Scharf Pera & Co. PLLC
Charlotte, North Carolina
July 6, 2011
F-1
PRO-CLEAN
OF ARIZONA, INC.
DECEMBER
31, 2010
ASSETS
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Current assets
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Cash and cash equivalents
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$ | 400 | ||
Accounts receivable, net of allowance Note 2
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1,270,057 | |||
Inventory
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1,203,319 | |||
Prepaid expenses and other current assets
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98,866 | |||
Total current assets
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$ | 2,572,642 | ||
Property and equipment, net Note 3
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1,184,112 | |||
Other assets
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Goodwill Note 4
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413,295 | |||
Intangible assets net of amortization
Note 4
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132,000 | |||
$ | 4,302,049 | |||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||
Current liabilities
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Accounts payable
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$ | 1,219,639 | ||
Accrued expenses and other current liabilities
Note 9
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151,982 | |||
Stockholder loan Note 6
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746,965 | |||
Long-term debt, current portion Note 5
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737,236 | |||
Total current liabilities
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$ | 2,855,822 | ||
Long-term debt, less current portion Note 5
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589,834 | |||
Commitments and contingencies Note 7
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| |||
Stockholders equity
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Common stock, $1.00 par value, authorized
1,000,000 shares, 25,500 shares issued and outstanding
at December 31, 2010
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25,500 | |||
Retained earnings
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830,893 | |||
856,393 | ||||
$ | 4,302,049 | |||
See Notes to Financial Statements
F-2
PRO-CLEAN
OF ARIZONA, INC.
YEAR
ENDED DECEMBER 31, 2010
Revenue
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Products and services
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$ | 19,232,347 | ||
Costs and Expenses
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Cost of sales
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$ | 9,063,869 | ||
Selling, general and administrative
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9,363,773 | |||
Depreciation and amortization
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394,383 | |||
Total costs and expenses
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18,822,025 | |||
Income from Operations
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410,322 | |||
Other Income (Expense)
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Interest expense
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(117,406 | ) | ||
Other income
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5,874 | |||
Total other income (expense)
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(111,532 | ) | ||
Net Income
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$ | 298,790 | ||
See Notes to Financial Statements
F-3
PRO-CLEAN
OF ARIZONA, INC.
YEAR
ENDED DECEMBER 31, 2010
Common Stock | ||||||||||||||||
Shares | Amount | Retained Earnings | Total | |||||||||||||
Balance as of December 31, 2009
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25,500 | $ | 25,500 | $ | 632,103 | $ | 657,603 | |||||||||
Distributions
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(100,000 | ) | (100,000 | ) | ||||||||||||
Net income
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298,790 | 298,790 | ||||||||||||||
Balance as of December 31, 2010
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25,500 | $ | 25,500 | $ | 830,893 | $ | 856,393 | |||||||||
See Notes to
Financial Statements
F-4
PRO-CLEAN
OF ARIZONA, INC.
YEAR
ENDED DECEMBER 31, 2010
Cash provided by operating activities
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Net income
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$ | 298,790 | ||
Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization
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416,365 | |||
Loss on disposal of property and equipment
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5,874 | |||
Provision for doubtful accounts
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8,539 | |||
Changes in working capital components:
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Accounts receivable
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177,281 | |||
Inventory
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(173,661 | ) | ||
Prepaid expenses and other assets
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(57,133 | ) | ||
Accounts payable and accrued expenses
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168,617 | |||
Cash provided by operating activities
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$ | 844,672 | ||
Cash used in investing activities
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Purchases of property and equipment
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(629,998 | ) | ||
Cash used in investing activities
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(629,998 | ) | ||
Cash used in financing activities
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Distributions to stockholders
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(100,000 | ) | ||
Net borrowings from stockholder
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15,594 | |||
Proceeds from long-term debt
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234,164 | |||
Payments on long-term debt
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(432,445 | ) | ||
Cash used in financing activities
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(282,687 | ) | ||
Net decrease in cash and cash equivalents
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(68,013 | ) | ||
Cash and cash equivalents at beginning of year
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68,413 | |||
Cash and cash equivalents at end of year
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$ | 400 | ||
See Notes to Financial Statements
F-5
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
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 $13,959 at December 31, 2010.
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
December 31, 2010, the allowance was $57,000.
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
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5 years | |||
Machinery and Equipment
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5 10 years | |||
Leasehold Improvements
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Life of lease | |||
Vehicles
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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 identifiable net assets
acquired is recorded as goodwill. The fair value of the
identifiable intangible assets
F-6
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO FINANCIAL
STATEMENTS (Continued)
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 of 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 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 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.
F-7
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO FINANCIAL
STATEMENTS (Continued)
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 December 31, 2010 consists of
the following:
Office equipment and furniture
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$ | 221,857 | ||
Machinery and equipment
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2,584,775 | |||
Leasehold improvements
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39,735 | |||
Vehicles
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328,717 | |||
3,175,084 | ||||
Less: accumulated depreciation
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(1,990,972 | ) | ||
$ | 1,184,112 | |||
Depreciation expense for the year ended December 31, 2010
is $368,365, of which $21,981 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 $413,295 was recorded as goodwill. No impairment
losses were recognized through December 31, 2010.
Separately identifiable intangible assets related to this
acquisition included customer relationships and a
non-competition agreement, both with estimated lives of five
years. Intangible assets as of December 31, 2010 consist of
the following:
Customer relationships
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$ | 120,000 | ||
Non-competition agreements
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120,000 | |||
240,000 | ||||
Less: accumulated amortization
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(108,000 | ) | ||
$ | 132,000 | |||
Amortization expense for the year ended December 31, 2010
is $48,000.
F-8
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO FINANCIAL
STATEMENTS (Continued)
At December 31, 2010, projected aggregate annual
amortization expense is as follows:
Twelve Months Ended
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December 31, 2011
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$ | 48,000 | ||
December 31, 2012
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48,000 | |||
December 31, 2013
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36,000 | |||
$ | 132,000 | |||
NOTE 5 | LONG-TERM DEBT |
Long-term debt as of December 31, 2010 consists of the
following:
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
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$ | 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
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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
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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
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390,745 | |||
Note payable to former stockholder related to sale of shares
dated July 27, 2004, maturing June 27, 2014, payments
of $2,401 Interest rate at 4.00 percent
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93,948 | |||
1,327,070 | ||||
Current portion
|
(737,236 | ) | ||
Long-term portion
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$ | 589,834 | ||
As of December 31, 2010, principal payments due on
long-term debt are as follows:
Twelve Months Ended
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December 31, 2011
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$ | 737,236 | ||
December 31, 2012
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338,687 | |||
December 31, 2013
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229,586 | |||
December 31, 2014
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21,561 | |||
$ | 1,327,070 | |||
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 December 31, 2010 is
$400,000.
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
F-9
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO FINANCIAL
STATEMENTS (Continued)
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 December 31, 2010 is $390,745.
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 December 31, 2010 is $746,965. The loan was
subsequently repaid in full in May 2011.
NOTE 7 | COMMITMENTS AND CONTINGENCIES |
The Company leases its headquarters and other facilities,
equipment, and vehicles under operating leases that expire at
varying times through 2014. Future minimum lease payments for
operating leases that had initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2010
are as follows:
Twelve months ended
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December 31, 2011
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$ | 546,078 | ||
December 31, 2012
|
231,282 | |||
December 31, 2013
|
90,955 | |||
December 31, 2014
|
26,552 | |||
Thereafter
|
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$ | 894,867 | |||
Total rent expense for operating leases, including those with
terms of less than one year is $788,722 for the year ended
December 31, 2010.
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
year ended December 31, 2010.
NOTE 9 | SUPPLEMENTAL FINANCIAL INFORMATION |
Accrued
Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of
December 31, 2010 consists of the following:
Sales tax payable
|
$ | 56,470 | ||
Accrued interest
|
6,441 | |||
Accrued payroll and payroll taxes
|
26,987 | |||
Other accrued expenses
|
62,084 | |||
$ | 151,982 | |||
Supplemental
Disclosure of Cash Flow Information
Cash paid for:
|
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Interest
|
$ | 117,797 | ||
F-10
PRO-CLEAN
OF ARIZONA, INC.
NOTES TO FINANCIAL
STATEMENTS (Continued)
Advertising
The company expenses advertising costs as incurred. Advertising
expenses for the year ended December 31, 2010 are
approximately $195,512.
NOTE 10 | SUBSEQUENT EVENTS |
The Company evaluated all events and transactions through
June 30, 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-11