##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number: 001-35067
 SWISHER HYGIENE INC.
  Delaware(State or Other Jurisdiction of 
Incorporation or Organization)
    
    27-3819646(I.R.S. Employer Identification No.)4725 Piedmont Row Drive, Suite 400
Charlotte, North Carolina(Address of Principal Executive Offices)
    
    28210(Zip Code)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



SWISHER HYGIENE INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
 TABLE OF CONTENTS
  PART I. FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4.
    
    CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGSITEM 1A.
    
    RISK FACTORSITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6.
    
    EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
   
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 SWISHER HYGIENE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 Balance atMarch 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assetsCash and cash equivalents
    
    $
    105,069,848
    
    
    $
    38,931,738Restricted cash
    
    
    
    
    
    
    5,193,333Accounts 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
    
    
    
    7,068,629Inventory
    
    
    3,765,159
    
    
    
    2,968,076Other assets
    
    
    2,797,557
    
    
    
    894,719Total current assets
    
    
    126,526,488
    
    
    
    55,056,495Property and equipment, net
    
    
    44,202,516
    
    
    
    11,324,055Goodwill
    
    
    87,877,874
    
    
    
    29,660,309Other intangibles, net
    
    
    44,076,159
    
    
    
    7,668,805Other noncurrent assets
    
    
    3,736,793
    
    
    
    2,524,598$
    306,419,830
    
    
    $
    106,234,262LIABILITIES AND EQUITYCurrent liabilitiesAccounts payable, accrued expenses, and other current liabilities
    
    $
    18,024,044
    
    
    $
    9,335,932Short term obligations
    
    
    19,734,219
    
    
    
    13,378,710Advances from shareholder
    
    
    2,000,000
    
    
    
    2,000,000Total current liabilities
    
    
    39,758,263
    
    
    
    24,714,642Long term obligations
    
    
    37,527,478
    
    
    
    31,028,992Deferred income tax liabilities
    
    
    9,746,713
    
    
    
    1,700,000Other long term liabilities
    
    
    3,554,802
    
    
    
    2,763,051Total noncurrent liabilities
    
    
    50,828,993
    
    
    
    35,492,043Commitments and contingenciesEquitySwisher Hygiene Inc. stockholders equityCommon 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
    
    
    
    114,015Additional paid-in capital
    
    
    227,569,009
    
    
    
    54,725,897Accumulated deficit
    
    
    (12,204,602
    )
    
    
    (8,996,759
    )Accumulated other comprehensive income
    
    
    216,008
    
    
    
    73,985Total Swisher Hygiene Inc. stockholders equity
    
    
    215,728,870
    
    
    
    45,917,138Non-controlling interest
    
    
    103,704
    
    
    
    110,439Total equity
    
    
    215,832,574
    
    
    
    46,027,577$
    306,419,830
    
    
    $
    106,234,262
  3




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SWISHER HYGIENE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 Three Months Ended March 31,2011
    
    
    2010RevenueProduct
    
    $
    15,426,822
    
    
    $
    8,164,028Service
    
    
    10,458,452
    
    
    
    4,378,544Franchise and other
    
    
    1,511,029
    
    
    
    2,186,361Total revenue
    
    
    27,396,303
    
    
    
    14,728,933Costs and expensesCost of sales
    
    
    9,583,685
    
    
    
    5,308,948Route expenses
    
    
    7,115,071
    
    
    
    3,174,176Selling, general, and administrative
    
    
    12,324,869
    
    
    
    6,507,155Acquisition and merger expenses
    
    
    1,315,978
    
    
    
    Depreciation and amortization
    
    
    2,707,952
    
    
    
    1,042,830Total costs and expenses
    
    
    33,047,555
    
    
    
    16,033,109Loss 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 shareBasic and diluted
    
    $
    (0.03
    )
    
    $
    (0.03
    )Weighted-average common shares used in
the computation of loss per shareBasic and diluted
    
    
    122,780,115
    
    
    
    57,829,630
  4




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SWISHER HYGIENE INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2011
 Accumulated
    
    
    SwisherAdditional
    
    
    
    
    
    
    Other
    
    
    Hygiene Inc.Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Shareholders
    
    
    Non-controlling
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss) / Income
    
    
    Equity
    
    
    Interest
    
    
    EquityBalance as of December 31,
2010
    
    
    114,015,063
    
    
    $
    114,015
    
    
    $
    54,725,897
    
    
    $
    (8,996,759
    )
    
    $
    73,985
    
    
    $
    45,917,138
    
    
    $
    110,439
    
    
    $
    46,027,577Shares issued in connection
with private placements
    
    
    24,262,500
    
    
    
    24,262
    
    
    
    115,969,530
    
    
    
    
    
    
    
    
    
    
    
    115,993,792
    
    
    
    
    
    
    
    115,993,792Shares issued in connection
with the acquisition of
Choice
    
    
    8,281,920
    
    
    
    8,282
    
    
    
    48,772,244
    
    
    
    
    
    
    
    
    
    
    
    48,780,526
    
    
    
    
    
    
    
    48,780,526Shares issued in connection
with acquisitions and
purchases of property and
equipment
    
    
    298,082
    
    
    
    298
    
    
    
    2,144,621
    
    
    
    
    
    
    
    
    
    
    
    2,144,919
    
    
    
    
    
    
    
    2,144,919Conversion of promissory
note payable
    
    
    1,312,864
    
    
    
    1,313
    
    
    
    5,076,160
    
    
    
    
    
    
    
    
    
    
    
    5,077,473
    
    
    
    
    
    
    
    5,077,473Stock based compensation
    
    
    
    
    
    
    
    
    
    
    664,842
    
    
    
    
    
    
    
    
    
    
    
    664,842
    
    
    
    
    
    
    
    664,842Exercise of stock options
    
    
    285,000
    
    
    
    285
    
    
    
    215,715
    
    
    
    
    
    
    
    
    
    
    
    216,000
    
    
    
    
    
    
    
    216,000Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,023
    
    
    
    142,023
    
    
    
    
    
    
    
    142,023Net 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
  5




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SWISHER HYGIENE INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Cash used in operating activitiesNet 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
    
    
    
    1,042,830Stock 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
    
    
    
    1,460,951Cash used in operating activities
    
    
    (2,838,922
    )
    
    
    (75,322
    )Cash used in investing activitiesPurchases 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 activitiesProceeds 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
    
    
    
    
    
    
    2,100,000Cash provided by financing activities
    
    
    79,121,721
    
    
    
    724,701Net 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
    
    
    
    1,270,327Cash and cash equivalents at the end of the period
    
    $
    105,069,848
    
    
    $
    917,178
  6




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SWISHER HYGIENE INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 NOTE 1   BUSINESS DESCRIPTION
 Principal Operations
   NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation and Principles of Consolidation
   Use of Estimates
   7




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Acquisition and merger expenses
  Segments
  Adoption of Newly Issued Accounting Pronouncements
 Revenue Recognition:
 Goodwill:
 Business Combinations:
 8




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NOTE 3   ACQUISITIONS
 Choice Acquisition
       Consideration:Issuance of shares at stock price of $5.89
    
    $
    48,780,526Debt
    
    
    40,941,484Cash paid
    
    
    7,553,784$
    97,275,794
 9




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Net tangible assets acquired:Cash and cash equivalents
    
    $
    340,870Receivables
    
    
    6,095,801Inventory
    
    
    150,833Property and equipment
    
    
    29,618,377Customer contracts
    
    
    27,840,000Non-compete agreements
    
    
    2,880,000Deferred income tax assets and other assets
    
    
    2,234,452Accounts payable and accrued expenses
    
    
    (6,220,986
    )Capital lease obligations
    
    
    (3,523,615
    )Deferred income tax liabilities
    
    
    (12,001,506
    )Total tangible assets acquired
    
    
    47,414,226Goodwill
    
    
    49,861,568Total purchase price
    
    
    97,275,794Less: Debt assumed
    
    
    (40,941,484
    )Less: Issuance of shares
    
    
    (48,780,526
    )Cash paid (including prepayment penalty of $1,853,784)
    
    $
    7,553,784
   Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2011
    
    
    March 31, 2010Revenue
    
    $
    26,419,303
    
    
    $
    26,219,395Costs and expenses
    
    
    32,731,772
    
    
    
    26,718,910Loss 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 shareBasic and diluted
    
    $
    (0.03
    )
    
    $
    (0.01
    )Weighted-average common shares used in the computation of loss per shareBasic and diluted
    
    
    122,780,115
    
    
    
    57,829,630
  10




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Other Acquisitions
   Three Months EndedMarch 31, 2011Number of businesses acquired
    
    
    13Net tangible assets acquiredAccounts receivable and other assets
    
    $
    653,850Inventory
    
    
    457,090Property and equipment
    
    
    861,820Accounts payable and accrued expenses
    
    
    (526,970
    )Total
    
    
    1,445,790Identifiable intangible assets:Customer relationships
    
    
    5,446,400Non-compete agreements
    
    
    1,331,900Total
    
    
    6,778,300Goodwill
    
    
    8,273,100Aggregate purchase price
    
    
    16,497,190Less: Stock issued
    
    
    1,943,500Less: Earn outs
    
    
    1,190,000Less: Notes issued or assumed on acquisition
    
    
    8,598,700Cash paid on acquisitions
    
    $
    4,764,990
  11




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NOTE 4   GOODWILL AND OTHER INTANGIBLE ASSETS
  Hygiene
    
    
    WasteGoodwillBalance  December 31Gross goodwill
    
    $
    30,530,309
    
    
    $
    Accumulated impairment losses
    
    
    (870,000
    )
    
    
    $
    29,660,309
    
    
    $
    Goodwill acquired
    
    
    8,273,100
    
    
    $
    49,861,568Foreign exchange translation
    
    
    82,897
    
    
    
    Balance  March 31Gross goodwill
    
    
    38,886,306
    
    
    
    49,861,568Accumulated impairment losses
    
    
    (870,000
    )
    
    
    $
    38,016,306
    
    
    
    49,861,568Customer RelationshipsBalance  December 31
    
    $
    5,779,980
    
    
    $
    Customers acquired
    
    
    5,446,400
    
    
    
    27,840,000Amortization
    
    
    (547,524
    )
    
    
    (331,429
    )Foreign exchange translation
    
    
    75,330
    
    
    
    Balance  March 31
    
    $
    10,754,186
    
    
    $
    27,508,571Non-compete AgreementsBalance  December 31
    
    $
    1,888,825
    
    
    $
    Agreements
    
    
    1,331,900
    
    
    
    2,880,000Amortization
    
    
    (212,455
    )
    
    
    (96,000
    )Foreign exchange translation
    
    
    21,132
    
    
    
    Balance  March 31
    
    $
    3,029,402
    
    
    $
    2,784,000
 Hygiene Segment
  Waste Segment
  12




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NOTE 5   EQUITY
  Balance at December 31, 2010
    
    $
    46,027,577Issuance of shares in connection with Choice acquisition (See Note 3)
    
    
    48,780,526Issuance of shares in connection with private placements
    
    
    115,993,792Issuance of shares in connection with acquisitions (See Note 3)
    
    
    1,943,500Issuance of shares in connection with purchases of property and equipment
    
    
    201,419Stock based compensation
    
    
    880,842Conversion of convertible promissory note payable (See Note 6)
    
    
    5,077,473Foreign currency translation
    
    
    142,023Net loss
    
    
    (3,214,578
    )Balance at March 31, 2011
    
    $
    215,832,574
 Choice
  Private placements
   Acquisitions and asset purchases
  Stock based compensation
  Convertible promissory note
  13




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NOTE 6   LONG TERM OBLIGATIONS
  March 31, 2011
    
    
    December 31, 2010Line 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
    
    $
    
    
    
    $
    9,946,932Line 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
    
    
    
    
    
    
    15,000,000Line 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
    
    
    
    7,891,209Capitalized lease obligations with related parties
    
    
    3,496,848
    
    
    
    Capitalized lease obligations
    
    
    784,153
    
    
    
    549,504Notes 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
    
    
    
    248,577Convertible promissory notes:6% Note due June 30, 2011
    
    
    
    
    
    
    5,000,0004% Notes at various dates through December 15, 2011
    
    
    16,056,280
    
    
    
    5,771,48057,261,697
    
    
    
    44,407,702Short term obligations
    
    
    (19,734,219
    )
    
    
    (13,378,710
    )Long term obligations
    
    $
    37,527,478
    
    
    $
    31,028,992
 Revolving Credit Facilities
    14




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Choice debt assumed and capital lease obligations with related parties
   Convertible notes
    15




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NOTE 7   FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
  Level 1:
 Level 2:
 Level 3:
   Balance as of December 31, 2010
    
    $
    5,771,480Issuance of convertible promissory notes
    
    
    8,323,700Unrealized losses included in earnings
    
    
    1,961,100Balance as of March 31, 2011
    
    $
    16,056,280
 Financial Instruments
  16




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NOTE 8   OTHER EXPENSE, NET
  2011
    
    
    2010Interest expense
    
    $
    (363,168
    )
    
    $
    (306,271
    )Unrealized loss on convertible promissory notes payable (see Note 6 and 7)
    
    
    (1,961,100
    )
    
    
    Interest income
    
    
    15,746
    
    
    
    15,006Foreign currency gain
    
    
    35,403
    
    
    
    $
    (2,273,119
    )
    
    $
    (291,265
    )
 NOTE 9   COMPREHENSIVE LOSS
  2011
    
    
    2010Net 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
    
    
    2010Cash received for interest
    
    $
    15,746
    
    
    $
    Cash paid for interest
    
    $
    265,664
    
    
    $
    209,076Notes 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
    
    
    $
    
 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.
 17




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NOTE 12   INCOME TAXES
   NOTE 13   SEGMENTS
   Hygiene
    
    
    Waste
    
    
    ConsolidatedRevenue
    
    $
    21,592,488
    
    
    $
    5,803,815
    
    
    $
    27,396,303Depreciation and amortization
    
    
    1,898,780
    
    
    
    809,172
    
    
    
    2,707,952Loss 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
    
    
    $
    3,019,248Total assets
    
    $
    187,138,016
    
    
    $
    119,281,814
    
    
    $
    306,419,830
 NOTE 14   COMMITMENTS AND CONTINGENCIES
   18




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##### Table of Contents



NOTE 15   SUBSEQUENT EVENTS
 Private placement
  Acquisitions
   
    
    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,
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.
 Conversion of convertible promissory notes
  19




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 Business Overview and Outlook
    Critical Accounting Policies and Estimates
    Segments
  20




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##### Table of Contents



Acquisition and merger expenses
  Adoption of Newly Issued Accounting Pronouncements
 Revenue Recognition:
 Goodwill:
 Business Combinations:
 RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2011
 Impact of Acquisitions
  Revenue
  21




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##### Table of Contents



% of
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    Total2011
    
    
    Revenue
    
    
    2010
    
    
    RevenueRevenueHygiene products and servicesChemical
    
    $
    9,474,019
    
    
    
    34.6
    %
    
    $
    3,899,903
    
    
    
    26.5
    %Hygiene services
    
    
    5,368,126
    
    
    
    19.6
    
    
    
    4,378,543
    
    
    
    29.7Paper and supplies
    
    
    3,685,810
    
    
    
    13.5
    
    
    
    2,911,273
    
    
    
    19.8Rental and other
    
    
    1,553,504
    
    
    
    5.6
    
    
    
    1,352,853
    
    
    
    9.2Total hygiene product and services
    
    
    20,081,459
    
    
    
    73.3
    
    
    
    12,542,572
    
    
    
    85.2Waste products and servicesCollection
    
    
    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
    
    
    
    85.2Hygiene franchise and other:Product sales
    
    
    1,055,627
    
    
    
    3.9
    
    
    
    1,422,331
    
    
    
    9.7Fees
    
    
    455,402
    
    
    
    1.6
    
    
    
    764,030
    
    
    
    5.1Total
    
    
    1,511,029
    
    
    
    5.5
    
    
    
    2,186,361
    
    
    
    14.8Total revenue
    
    $
    27,396,303
    
    
    
    100.0
    %
    
    $
    14,728,933
    
    
    
    100.0
    %
    22




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##### Table of Contents



Cost of Sales
  2011
    
    
    %(1)
    
    
    2010
    
    
    %(1)HygieneCompany-owned operations
    
    $
    6,697,484
    
    
    
    33.4
    %
    
    $
    4,006,081
    
    
    
    31.9
    %Franchisee product sales
    
    
    972,685
    
    
    
    92.1
    
    
    
    1,302,867
    
    
    
    91.6WasteDisposal
    
    
    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.    23




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##### Table of Contents



Route Expenses
  2011
    
    
    %(1)
    
    
    2010
    
    
    %(1)HygieneCompensation
    
    $
    3,899,215
    
    
    
    19.4
    %
    
    $
    2,266,966
    
    
    
    18.1
    %Vehicle and other expenses
    
    
    1,264,583
    
    
    
    6.3
    
    
    
    907,211
    
    
    
    7.2WasteCompensation
    
    
    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.  Selling, General and Administrative Expenses
  
    
    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
    
    
    
    
    
    
    % of2011
    
    
    Revenue(1)
    
    
    2010
    
    
    Revenue (1)HygieneCompensation
    
    $
    8,011,897
    
    
    
    37.1
    %
    
    $
    4,474,667
    
    
    
    30.4
    %Occupancy
    
    
    1,076,222
    
    
    
    5.0
    
    
    
    848,484
    
    
    
    5.7Other
    
    
    1,974,045
    
    
    
    9.1
    
    
    
    1,184,004
    
    
    
    8.1WasteCompensation
    
    
    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. 24




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##### Table of Contents



Acquisition and merger expenses
  Depreciation and amortization
  25




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##### Table of Contents



Other expense, net
  % of
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    Total2011
    
    
    Revenue
    
    
    2010
    
    
    RevenueInterest 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
    )%
   Cash Flow Summary
  2011
    
    
    2010Net 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
    
    
    
    724,701Net increase (decrease) in cash and cash equivalents
    
    $
    66,138,110
    
    
    $
    (353,149
    )
 Operating Activities
  Investing Activities
  Financing Activities
  26




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##### Table of Contents



Liquidity and Capital Resources
  Revolving credit facilities
     Private Placements
  27




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##### Table of Contents



Acquisitions
   
    
    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, laundry and housekeeping services, as well as a line of products
for manufacturing companies including industrial and water treatment products.
 28




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##### Table of Contents




    
    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.
 Cash Requirements
   Financial Instruments  Convertible Promissory Notes
   Income Taxes
   29




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##### Table of Contents



Litigation and Other Contingencies
  Off-Balance Sheet Arrangements
   Adjusted EBITDA
   2011
    
    
    2010Net loss
    
    $
    (3,214,578
    )
    
    $
    (1,595,441
    )Income tax benefit
    
    
    (4,709,793
    )
    
    
    Depreciation and amortization expense
    
    
    2,707,952
    
    
    
    1,042,830Interest expense, net
    
    
    347,422
    
    
    
    291,265Gains 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
    )
 30




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    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;
    
    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;
 31




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##### Table of Contents




    
    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;
    
    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 results of operations and financial condition;
    
    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 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.
 32




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##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROL AND PROCEDURES.
   
 PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS.
  
 ITEM 1A.
    
    RISK FACTORS.
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  (a)
    
    On January 10, 2011, in connection with the acquisition of certain assets
of En-Viro Solutions, Inc., Swisher Hygiene issued a promissory note to En-Viro
Solutions, Inc., which note is convertible for up to 374,263 shares of common stock;
and(b)
    
    On January 12, 2011, in connection with the acquisition of certain assets
of ASC Hygiene, Inc., Swisher Hygiene issued a promissory note to ASC Hygiene, Inc.,
which note is convertible for up to 553,304 shares of common stock; and(c)
    
    On January 24, 2011, in connection with the acquisition of the outstanding
equity interest in Express Restaurant Equipment Service, Inc., Swisher Hygiene issued
a promissory note to Robert and Tamara Boyd, which note is convertible for up to
412,444 shares of common stock; and
 33




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##### Table of Contents



(d)
    
    On March 7, 2011, in connection with the acquisition of certain assets of
ADCO Services, Inc., Swisher Hygiene issued 25,594 shares of our common stock to ADCO
Services, Inc.; and(e)
    
    On March 8, 2011, in connection with the acquisition of the healthcare and
hospitality division of Solvents and Petroleum Service, Inc., Swisher Hygiene issued
67,712 shares of our common stock to Solvents and Petroleum Service, Inc.; and(f)
    
    On March 9, 2011, in connection with the acquisition of certain assets of
Logico Associates, Inc., Swisher Hygiene issued 149,502 shares of our common stock to
Logico Associates; and(g)
    
    On March 14, 2011, in connection with the acquisition of certain assets of
Nebraska Hygiene, Inc., Swisher Hygiene issued 38,136 shares of our common stock to
Nebraska Hygiene, Inc.; and(h)
    
    On March 28, 2011, in connection with the acquisition of certain assets of
Goldman Associates, Swisher Hygiene issued a promissory note to Goldman Management
Associates, which note is convertible for up to 900,000 shares of our common stock;
and(i)
    
    On March 28, 2011, in connection with the acquisition of certain assets of
En-Viro Solutions HI, Inc., Swisher Hygiene issued 17,138 shares of our common stock;
and(j)
    
    On March 28, 2011, in connection with the acquisition of certain assets of
J.F. Daley International Ltd., Swisher Hygiene issued 32,751 shares of our common
stock to J.F. Daley International Ltd.(k)
    
    On March 30, 2011, in connection with the satisfaction of additional
consideration involved in the acquisition of certain assets of Total Cost Systems,
Inc. Swisher Hygiene issued 218,760 shares of our common stock to Total Cost Systems,
Inc.; and(l)
    
    On March 30, 2011 in connection with the acquisition of certain assets of
Chicagoland Hygiene, Inc., Swisher Hygiene issued 23,552 shares of our common stock
to Chicagoland Hygiene, Inc. and 60,425 shares of common stock to Robert F. Riley;
and(m)
    
    On March 30, 2011, in connection with the acquisition of A-1 Solutions,
LLC, Swisher Hygiene issued 27,304 shares of our common stock to Peter Tooley; and(n)
    
    On March 31, 2011, in connection with the acquisition of certain assets of
Intercon Chemical Company, Swisher Hygiene issued 20,379 shares of our common stock
to Intercon Chemical Company; and
  34




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##### Table of Contents



ITEM 6.
    
    EXHIBITS.
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger, dated February 13,
2011. (incorporated by reference to Exhibit 2.1 to
the Companys Current Report on Form 8-K ,filed on
February 17, 2011).2.2
    
    Amendment to Agreement and Plan of Merger, dated as
of February 28, 2011, by and among Swisher Hygiene
Inc., SWSH Merger Sub, Inc., Choice Environmental
Services, Inc., and the other parties set forth
therein. (incorporated by reference to Exhibit 2.1
to the Companys Current Report on Form 8-K, filed
on March 4, 2011).10.1*
    
    CoolBrands International Inc. 2002 Stock Option
Plan. (incorporated by reference to Exhibit 10.1 to
the Companys Registration Statement on Form S-8,
filed on February 14, 2011).10.2
    
    Agency Agreement, dated February 23, 2011.
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed on
February 24, 2011).10.3
    
    Subscription Receipts Agreement, dated February 23,
2011. (incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K, filed on
February 24, 2011).10.4
    
    Omnibus Amendment Agreement, effective as of
February 28, 2011, by and between Swisher
International, Inc. HB Service, LLC and Wells Fargo
Bank, National Association. (incorporated by
reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K, filed on March 4, 2011).10.5
    
    Assignment of Shares Agreement, dated as of February
28, 2011, between P&C Holdings, L.L.C., Nicholas
Cascione and Swisher Hygiene Inc. (incorporated by
reference to Exhibit 10.2 to the Companys Current
Report on Form 8-K, filed on March 4, 2011).10.6
    
    Form of Securities Purchase Agreement, dated March
22, 2011. (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K, filed
on March 24, 2011).31.1
    
    Section 302 Certification of Chief Executive Officer.31.2
    
    Section 302 Certification of Chief Financial Officer.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  
 (1)
    
    Registration Statement on Form 10, filed with the Securities and Exchange Commission on November 9, 2010.(2)
    
    Amendment No. 1 to Registration Statement on Form 10, filed with the Securities and Exchange Commission
on December 15, 2010.(3)
    
    Amendment No. 3 to Registration Statement on Form 10, filed with the Securities and Exchange Commission
on January 31, 2011.*
    
    Management contracts or compensatory plans, contracts, or
arrangements. 35




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##### Table of Contents



SIGNATURES
  Dated: May 16, 2011
    SWISHER HYGIENE INC.
(Registrant)By:

/s/
STEVEN R. BERRARDSteven R. BerrardPresident, Chief Executive Officer
and Director
(Principal Executive Officer) By:

/s/
MICHAEL J. KIPPMichael J. KippSenior Vice President, Chief
Financial Officer
(Principal Financial and Accounting Officer)  36




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##### Table of Contents



SWISHER HYGIENE INC. AND SUBSIDIARIES
 EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    Section 302 Certification of Chief Executive Officer.31.2
    
    Section 302 Certification of Chief Financial Officer.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 37