SWISHER HYGIENE INC. - 10-Q/A - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(Edgar Glimpses Via Acquire Media NewsEdge) You should read the following discussion and analysis in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q/A as well as our "Selected Financial Data" and our audited Consolidated Financial Statements and the related notes thereto included in Item 6 and Item 8 respectively, of our Annual Report on Form 10-K for the year ended December 31, 2010 (the "2010 Form 10-K"). In addition to historical consolidated financial information, this discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ from these expectations as a result of certain risk factors, including those described under Item 1A "Risk Factors" of our 2010 Form 10-K.

Restatement and Audit Committee Review On March 21, 2012, Swisher's Board of Directors (the "Board") determined that the Company's previously issued interim financial statements for the quarterly periods ended June 30, 2011 and September 30, 2011, and the other financial information in the Company's quarterly reports on Form 10-Q for the periods then ended should no longer be relied upon. Subsequently, on March 27, 2012, the Audit Committee concluded that the Company's previously issued interim financial statements for the quarterly period ended March 31, 2011 should no longer be relied upon. The Board and Audit Committee made these determinations in connection with the Audit Committee's then ongoing review into certain accounting matters. We refer to the interim financial statements and the other financial information described above as the "Prior Financial Information." The Audit Committee initiated its review after an informal inquiry by the Company and its independent auditor regarding a former employee's concerns with the application of certain accounting policies. The Company first initiated the informal inquiry by requesting that both the Audit Committee and the Company's independent auditor look into the matters raised by the former employee.

Following this informal inquiry, the Company's senior management and its independent auditor advised the Chairman of the Company's Audit Committee regarding the matters. Subsequently, the Audit Committee determined that an independent review of the matters presented by the former employee should be conducted. During the course of its independent review, and due in part to the significant number of acquisitions made by the Company, the Audit Committee determined that it would be in the best interest of the Company and its stockholders to review the accounting entries relating to each of the 63 acquisitions made by the Company during the year ended December 31, 2011.

On May 17, 2012, Swisher announced that the Audit Committee had substantially completed the investigative portion of its internal review. In connection with the substantial completion of its internal review, the Audit Committee recommended to the Board that the Company's Chief Financial Officer and two additional senior accounting personnel be separated from the Company as a result of their conduct in connection with the preparation of the Prior Financial Information. Following this recommendation, the Board determined that these three accounting personnel be separated from the Company, effective immediately. In making these employment determinations, the Board did not identify any conduct by these employees intended for or resulting in any personal benefit.

On May 17, 2012, the Company further announced that it had commenced a search process for a new Chief Financial Officer and that Steven Berrard, then the Company's President and Chief Executive Officer, would also serve as the Company's interim Chief Financial Officer.

On February 19 and 20, 2013, the Company filed amended quarterly reports on Form 10-Q/A for the quarterly periods ended March 3, 2011and June 30, 2011(the "Affected Periods"), including restated financial statements for the Affected Periods, to reflect adjustments to previously reported financial information, as discussed in Note 2, "Restatement of Condensed Consolidated Financial Statements" to the accompanying Notes to Condensed Consolidated Financial Statements. The adjustments reflect changes to the previously reported information identified as a result of the audit process conducted by our independent registered public accounting firm, the independent Audit Committee review, senior management's evaluation of the prior accounting for the related findings and concerns raised by a former employee, and certain other matters.

For the reader's convenience, we refer to these collectively as the "Audit and Review Process." As part of the Audit and Review Process, additional adjustments to the Prior Financial Information were identified. We refer to the adjustments identified in the Audit and Review Process as the "Restatement Adjustments." The term Restatement Adjustments refers to adjustments to correct errors in the Company's prior accounting and an adjustment to reflect the impact of a change in accounting estimate resulting from the Company's reassessment of the remaining useful lives of its property and equipment.

30 -------------------------------------------------------------------------------- June 30, 2011 Restatement As Reported Adjustments As Restated (In thousands) Total assets $ 426,838 $ (389 ) $ 426,449 Total liabilities $ 79,614 $ 3,277 $ 82,891 Total stockholders' equity $ 347,224 $ (3,666 ) $ 343,558 Three Months Ended June 30, 2011 Restatement As Reported Adjustments As Restated (In thousands except per share amounts) Revenue $ 51,676 $ 239 $ 51,915 Net loss $ (7,127 ) $ (966 ) $ (8,093 ) Loss per share $ (0.04 ) $ (0.01 ) $ (0.05 ) Six Months Ended June 30, 2011 Restatement As Reported Adjustments As Restated (In thousands except per share amounts) Revenue $ 79,073 $ 127 $ 79,200 Net loss $ (10,342 ) $ (3,747 ) $ (14,089 ) Loss per share $ (0.07 ) $ (0.03 ) $ (0.10 ) Details of the Restatement Adjustments are included in Note 2, "Restatement of Condensed Consolidated Financial Statements" of the Notes to Condensed Consolidated Financial Statements. Throughout the remainder of Management's Discussion and Analysis of Financial Condition and Results of Operations, all referenced amounts give effect to the restatement.

31 --------------------------------------------------------------------------------Business Overview and Outlook We provide essential hygiene and sanitation solutions to customers throughout much of North America and internationally through our global network of company owned operations, franchises and master licensees. These solutions include essential products and services that are designed to promote superior cleanliness and sanitation in commercial environments, while enhancing the safety, satisfaction and well-being of employees and patrons. These solutions are typically delivered by employees on a regularly scheduled basis and involve providing our customers with: (i) consumable products such as soap, paper, cleaning chemicals, detergents, and supplies, together with the rental and servicing of dish machines and other equipment for the dispensing of those products; (ii) the rental of facility service items requiring regular maintenance and cleaning, such as floor mats, mops, bar towels and linens; (iii) manual cleaning of their facilities; and (iv) solid waste collection services. We serve customers in a wide range of end-markets, with a particular emphasis on the foodservice, hospitality, retail, industrial, and healthcare industries. In addition, our solid waste collection services provide services primarily to commercial and residential customers through contracts with commercial customers, municipalities, or other agencies. See "Sale of Waste Segment" below and Note 17, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements for information concerning the sale of the Waste segment.

Prospectively, we intend to grow in both existing and new geographic markets through a combination of organic and acquisition growth. However, we will continue to focus our investments towards those opportunities which will most benefit our core businesses, chemical and linen processing services. Subsequent to the sale of our Waste segment in November 2012, we will offer our solid waste services through outsourced waste and recycling services delivered by third-party providers.

As of June 30, 2011, the Company has 83 Company-owned operations and 6 franchise operations located throughout the United States and Canada and has entered into 9 Master License Agreements covering the United Kingdom, Portugal, the Netherlands, Singapore, the Philippines, Taiwan, Korea, Hong Kong/Macau/China, and Mexico.

Segments On March 1, 2011, we completed our acquisition of Choice Environmental Services, Inc. ("Choice"), a Florida based company that provides a complete range of solid waste and recycling collection, transportation, processing and disposal services. As a result of the acquisition of Choice, we now have two segments (1) Hygiene and (2) Waste. The Company's hygiene segment primarily provides commercial hygiene services and products throughout much of the United States, and additionally operates a worldwide franchise and license system to provide the same products and services in markets where Company owned operations do not exist. The Company's waste segment primarily consists of the operations of Choice and acquisitions of solid waste collection businesses. Prior to the acquisition of Choice, the Company managed, allocated resources, and reported in one segment, Hygiene. See Note 15 in the Notes to the Condensed Consolidated Financial Statements. The results of operations for the three and six months ended June 30, 2011 have been presented in the Company's segments. Also, see Note 17, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements for information concerning the sale of the Waste segment.

Acquisition and merger expenses Acquisition and merger expenses include costs directly related to the acquisition of three of our franchises and fifteen independent businesses during the three months ended June 30, 2011 and the acquisition of seven of our franchises and twenty-five independent businesses during the six months ended June 30, 2011. Acquisition and merger expenses also include costs directly related to the merger with CoolBrands International, Inc. as discussed in Note 1 of our 2010 Annual Report. These costs include third party due diligence, legal, accounting and professional service expenses.

32 --------------------------------------------------------------------------------Critical Accounting Policies and Estimates The preparation of condensed consolidated financial statements in conformity with United States generally accepted accounting principles involves the use of estimates and assumptions that affect the recorded amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As such, management is required to make certain estimates, judgments and assumptions that are believed to be reasonable based on the information available. These estimates and assumptions affect the reported amount of assets and liabilities, revenue and expenses, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, the most important and pervasive accounting policies used and areas most sensitive to material changes from external factors. See Note 2 in the 2010 Annual Report for additional discussion of the application of these and other accounting policies. Any significant changes to those policies or new significant policies are described below.

In conjunction with the Company's final assessment of the fair value of assets acquired and liabilities assumed in 2011, the Company reviewed its estimates of the remaining useful lives of its property and equipment and separately identifiable intangible assets. This analysis indicated that overall these assets will continue to be used in the business for different periods than originally anticipated. As a result, the Company revised the useful lives of property and equipment and separately identifiable intangible assets as follows: Useful Life in Months Previous Revised Linen 36 24 Dust control 3 36 Dish machines 60 84 Dispensers 24 to 36 24 to 60 Mops and bar towels 3 to 36 expensed Vehicles - Hygiene 36 60 Office furniture and fixtures 36 60 The change in the useful life for these assets reflects the Company's current estimate of future periods to be benefited. The effect of this change in estimate for the six months ended June 30, 2011 was a reduction in depreciation expense of $0.8 million. Had the change been made for the six months ended June 30, 2010, depreciation would have been reduced by $0.3 million. See Note 3, "Summary of Significant Accounting Policies" of the Notes to Condensed Consolidated Financial Statements.

33 --------------------------------------------------------------------------------Adoption of Newly Issued Accounting Pronouncements Revenue Recognition: In October 2009, the Financial Accounting Standards Board ("FASB") issued new standards for multiple-deliverable revenue arrangements.

These new standards affect the determination of when individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. In addition, these new standards modify the manner in which the transaction consideration is allocated across separately identified deliverables, eliminate the use of the residual value method of allocating arrangement consideration and require expanded disclosure. These new standards will become effective for multiple-element arrangements entered into or materially modified on or after January 1, 2011. Earlier application is permitted with required transition disclosures based on the period of adoption.

We adopted these standards for multiple-element arrangements entered into or materially modified on or after January 1, 2011. The adoption of this accounting standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

Goodwill: In December 2010, the FASB issued new standards defining when step two of the goodwill impairment test for reporting units with zero or negative carrying amounts should be performed and modifies step one of the goodwill impairment test for reporting units with zero or negative carrying amounts. For reporting units with zero or negative carrying amounts an entity is required to perform step two of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The standards are effective for fiscal years and interim periods within those years, beginning December 15, 2010 and were effective for the Company on January 1, 2011. The adoption of this accounting standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

Business Combinations: In December 2010, the FASB issued new standards that clarify that if comparative financial statements are presented the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The update also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The standards are effective prospectively for material (either on an individual or aggregate basis) business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted.

The Company has included the required disclosures in Note 3 to the Condensed Consolidated Financial Statements.

Newly Issued Accounting Pronouncements Comprehensive Income: In June 2011, the FASB issued new standards to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. This standard eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. These standards are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early application is permitted. We are currently evaluating the effect of these standards on our Condensed Consolidated Financial Statements.

Fair Value Measurements: In May 2011, the FASB issued new standards clarifying the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements and expands fair value disclosures. These standards are to be applied prospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early application is not permitted. We are currently evaluating the effect of these standards on our Condensed Consolidated Financial Statements.

34-------------------------------------------------------------------------------- RESULTS OF OPERATIONS Impact of Acquisitions During the year ended December 31, 2010, we acquired four franchises and five independent businesses. During the three months ended June 30, 2011, we acquired three franchises and fifteen independent businesses, and seven franchises and twenty-five independent businesses during the six months ended June 30, 2011.

The term "Hygiene Acquisitions" refers to the three franchises and twelve independent hygiene and chemical businesses acquired during the three months ended June 30, 2011 or the seven franchises and twenty-two hygiene and chemical independent businesses acquired during the six months ended June 30, 2011. The waste segment includes Choice, acquired in March 2011, and two additional acquisitions of solid waste and collection companies during the three and six months ended June 30, 2011. We refer to these acquisitions as "Waste Acquisitions." The term "Acquisitions" refers to both the Hygiene Acquisitions and Waste Acquisitions during the respective periods.

FOR THE THREE MONTHS ENDED JUNE 30, 2011 AND 2010 Revenue Total revenue and the revenue derived from each revenue type by segment for the three months ended June 30, 2011 and 2010 is as follows: 2011 (Restated) % 2010 % Revenue (In thousands) Hygiene Company-owned operations: Chemical products $ 19,968 38.5 % $ 4,022 26.5 % Hygiene services 6,618 12.7 4,478 29.5 Paper and supplies 4,312 8.3 3,104 20.5 Rental and other 2,070 4.0 1,421 9.4 Total Company-owned operations 32,968 63.5 13,025 85.9 Franchise products and fees 1,276 2.5 2,139 14.1 Total hygiene 34,244 66.0 15,164 100.0 Waste - services and products 17,671 34.0 - - Total revenue $ 51,915 100 % $ 15,164 100.0 % 35-------------------------------------------------------------------------------- Consolidated revenue increased $36.8 million or 242.4% to $51.9 million for the three months ended June 30, 2011 as compared to $15.2 million for the same period in 2010. This increase includes $17.7 million or 34.0% of consolidated revenue related to Waste Acquisitions and an increase of $16.4 million or 31.5% of consolidated revenues from Hygiene Acquisitions. Excluding the impact of Acquisitions, consolidated revenue increased $2.7 million or 17.9% to $17.9 million for the three months ended June 30, 2011. This increase is comprised of an increase of $3.6 million in hygiene products and services revenue and a decrease of $0.9 million in hygiene franchise revenue.

Hygiene products and services revenue increased $20.0 million or 153.1% to $33.0 million during the three months ended June 30, 2011 as compared to $13.0 million for the same period in 2010. This increase includes $16.4 million related to Hygiene Acquisitions. Excluding the impact from Hygiene Acquisitions, hygiene products and services revenue increased $3.6 million or 27.4% to $16.6 million.

This increase is comprised primarily of $3.5 million or 85.8% increase in chemical revenue. During 2011, our sales mix has continued to shift towards our core chemical product sales from our legacy hygiene business. Three principal factors contribute to this trend: (i) we have placed particular emphasis on the development of our core markets including our chemical offering, particularly as it relates to ware washing and laundry solutions and a lesser focus on our legacy hygiene service offerings; (ii) we have aggressively managed customer profitability terminating less favorable arrangements; and (iii) from time to time, we are impacted by the challenging economic conditions that result in customer attrition, lower consumption levels of products and services, and a reduction or elimination in spending for hygiene-related products and services by our customers.

Hygiene franchise revenue decreased $0.9 million or 40.3% to $1.3 million for the three months ended June 30, 2011 as compared to $2.1 million in the same period in 2010. This decrease includes $0.9 million from Hygiene Acquisitions partially offset by growth in the remaining franchisees. Acquisitions of our franchisees during the period result in less revenue from franchisee revenue, which is offset by an increase in hygiene product and service revenue.

Cost of Revenue Hygiene cost of revenue consists primarily of paper, air freshener, chemical and other consumable products sold to our customers, franchisees and international licensees. Waste costs of revenue include costs related to the disposal of collections and cost of recycled paper purchases. Cost of revenue for the three months ended June 30, 2011 and 2010 are as follows: 2011 (Restated) % (1) 2010 % (1) Cost of Revenue (In thousands) Hygiene Company-owned operations $ 12,590 38.2 % $ 4,254 32.7 % Franchise products and fees 597 46.8 1,200 56.1 Total hygiene 13,187 38.5 5,454 36.0 Waste - services and products 5,150 29.1 - - Total cost of revenue $ 18,337 35.3 % $ 5,454 36.0 % (1) Represents cost as a percentage of the respective segment's product and service line revenue.

36 -------------------------------------------------------------------------------- Consolidated cost of sales increased $12.9 million or 236.2% to $18.3 million for the three months ended June 30, 2011 as compared to $5.5 million in the same period in 2010. This increase includes $5.2 million related to Waste Acquisitions and $6.7 million from Hygiene Acquisitions in the three months ended June 30, 2011 as compared to the same period of 2010. Excluding the impact from Acquisitions, consolidated cost of sales increased $1.1 million or 19.7% to $6.5 million for the three months ended June 30, 2011 as compared to the same period in 2010.

Hygiene company owned operations cost of sales increased $8.3 million or 196.0% to $12.6 million for the three months ended June 30, 2011 as compared to $4.3 million in the same period in 2010 and includes $6.7 million related to Hygiene Acquisitions. Excluding the impact of Hygiene Acquisitions, hygiene company-owned operations cost of sales increased $1.7 million or 39.4% to $5.9 million or 35.7% of related revenue for the three months ended June 30, 2011 as compared to 32.7% for the same period in 2010. This increase is primarily due to a $1.2 million or 27.4% impact from the continued change in sales mix from lower cost hygiene services to higher cost chemical product sales as well as a $0.5 million or 12.0% impact from increased volume.

Hygiene cost of sales to franchisees decreased $0.6 million or 50.3% to $0.6 million for the three months ended June 30, 2011 as compared to $1.2 million in the same period in 2010 in part due to Hygiene Acquisitions. We charge franchises a percentage of our costs, and, therefore, we earn a lower margin on product sales to franchises.

Route Expenses Route expenses consist primarily of the costs incurred by the Company for the delivery of products and providing services to customers. The details of route expenses for the three months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) % (1) 2010 % (1) Route Expenses (In thousands) Hygiene Company-owned operations: Compensation $ 5,697 17.3 % $ 2,261 17.4 % Vehicle and other expenses 1,973 6.0 913 7.0 Total Company-owned operations 7,670 23.3 3,174 24.4 Waste 5,901 33.4 - - Total route expenses $ 13,571 26.1 % $ 3,174 20.9 % (1) Represents cost as a percentage of Products and Services revenue for the respective operating segment.

37 -------------------------------------------------------------------------------- Consolidated route expenses increased $10.4 million or 327.6% to $13.6 million for the three months ended June 30, 2011 as compared to $3.2 million in the same period in 2010. This increase includes $5.9 million related to Waste Acquisitions, which is 33.4% of waste service revenue, and $3.1 million related to Hygiene Acquisitions. Excluding the impact of Acquisitions, route expenses increased $1.4 million or 45.5% to $4.6 million or 27.8% of total hygiene products and services related revenue for the three months ended June 30, 2011 as compared to 24.4% for the same period in 2010. The increase of $1.4 million consists primarily of $1.1 million or 115.2% in vehicle and other route expenses. These increases are primarily the result of headcount and vehicles added as part of a distribution agreement entered into in December 2010 as well as increasing fuel costs.

Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of the costs incurred for: Regional, 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 field sales representatives and corporate account and distribution sales personnel.

Corporate office expenses that are related to general support services, which include executive management compensation and related costs, as well as department costs for information technology, human resources, accounting, purchasing and other support functions.

The details of selling, general, and administrative expenses for the three months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) % (1) 2010 % (1) Selling, General & Administrative Expenses (In thousands) Hygiene Compensation $ 10,335 31.3 % $ 4,900 37.6 % Occupancy 1,077 3.1 642 4.2 Other 4,686 13.7 1,325 8.7 Waste 4,109 23.3 - - Total selling, general & administrative expenses $ 20,207 38.9 % $ 6,867 45.3 % (1) Represents cost as a percentage of revenue for the respective segment.

38 -------------------------------------------------------------------------------- Consolidated selling, general, and administrative expenses increased $13.3 million or 194.3% to $20.2 million for the three months ended June 30, 2011 as compared to $6.9 million in the same period of 2010. This increase includes $4.1 million related to Waste acquisitions and $4.3 million related to Hygiene acquisitions. Excluding the impact of acquisitions, selling, general, and administrative expenses increased $5.0 million or 72.6%.

Hygiene compensation increased $5.4 million or 110.9% to $10.3 million for the three months ended June 30, 2011 as compared to $4.9 million in the same period of 2010 and includes an increase of $2.6 million related to Hygiene acquisitions. Excluding the impact of acquisitions, hygiene compensation expense increased $2.8 million or 57.5% to $7.7 million for the three months ended June 30, 2011 as compared to the same period in 2010. This increase was primarily the result of an increase of approximately $1.6 million in costs and expenses related to our expansion of our corporate, field and distribution sales organizations to accelerate the growth in the core chemical program and an increase of approximately $1.2 million of salaries and other costs largely associated with our transition from a private company to a public company, which includes $1.0 million of stock based compensation.

Occupancy expenses increased $0.4 million or 67.8% to $1.1 million for the three months ended June 30, 2011 as compared to $0.6 million in the same period of 2010, which includes an increase of $0.4 million related to Acquisitions.

Other expenses increased $3.4 million or 253.7% to $4.7 million for the three months ended June 30, 2011 as compared to $1.3 million in the same period in 2010 and includes an increase of $1.3 million related to Hygiene acquisitions.

Excluding the impact of acquisitions, other expenses increased $2.1 million or 157.1% to $3.4 million for the three months ended June 30, 2011 as compared to the same period of 2010. This increase was primarily the result of increases of approximately $0.5 million in costs associated with the cost of public filings and securities, as well as increases to bad debt expense of $1.2 million.

Acquisition and merger expenses Acquisition and merger expenses of $2.7 million for the three months ended June 30, 2011 include costs of $1.8 million directly related to the acquisition of our three franchisees and fifteen independent companies during the three months ended June 30, 2011. In addition $1.0 million of these costs is related to the merger with CoolBrands International, Inc. These costs include costs for third party due diligence, legal, accounting and professional service expenses.

Depreciation and amortization Depreciation and amortization consists of depreciation of property and equipment and the amortization of intangible assets. Depreciation and amortization increased $4.3 million or 390.9% to $5.4 million for the three months ended June 30, 2011 as compared to $1.1 million during the same period of 2010. This increase includes $3.7 million for Acquisitions.

The increase for Acquisitions is primarily the result of amortization for acquired other intangible assets including customer relationships and non-compete agreements obtained in connection with these acquisitions. The remaining increase is primarily related to depreciation on capital expenditures of $0.6 million made since June 30, 2010.

Other expense, net Other expense, net for the three months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) 2010 Other Expense, Net (In thousands) Interest expense $ (414 ) $ (377 ) Net loss on debt related fair value measurements (3,625 ) - Foreign currency loss 128 - Interest income 80 22 Other 70 - Total other expense, net $ (3,761 ) $ (355 ) Interest expense represents interest on borrowings under our credit facilities, notes incurred in connection with acquisitions, including convertible promissory notes, advances from shareholders and the purchase of equipment and software For the three months ended June 30, 2011, the unrealized loss, net consists primarily of $3.6 million related to the required adjustment for each reporting period for the fair value of the convertible promissory notes. The fair value of these convertible promissory notes is impacted by the market price of our stock.

See Note 7 of the Condensed Consolidated Financial Statements.

39 --------------------------------------------------------------------------------FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 Revenue Total revenue and the revenue derived from each revenue type by segment for the six months ended June 30, 2011 and 2010 is as follows: 2011 (Restated) % 2010 % Revenue (In thousands) Hygiene Company-owned operations: Chemical products $ 29,442 37.2 % $ 7,978 26.7 % Hygiene services 11,986 15.1 8,801 29.4 Paper and supplies 7,998 10.1 6,015 20.1 Rental and other 3,623 4.6 2,774 9.3 Total Company-owned operations 53,049 67.0 25,568 85.5 Franchise products and fees 2,669 3.4 4,325 14.5 Total hygiene 55,718 70.4 29,893 100.0 Waste - services and products 23,482 29.6 - - Total revenue $ 79,200 100 % $ 29,893 100.0 % Consolidated revenue increased $49.3 million or 165.0% to $79.2 million for the six months ended June 30, 2011 as compared to $29.9 million in the same period in 2010. This increase includes increases of $23.5 million or 29.6% of consolidated revenue related to Waste Acquisitions and $21.8 million or 27.5% of consolidated revenue from Hygiene Acquisitions. Excluding the impact of Acquisitions, consolidated revenue increased $4.0 million or 13.6% to $33.9 million for the six months ended June 30, 2011. This increase is comprised of an increase of $5.7 million in hygiene products and services revenue and a decrease of $1.7 million in hygiene franchise revenue, which are due to the continued change in sales mix from lower priced hygiene services to higher priced chemical product sales.

Hygiene products and services revenue increased $27.4 million or 107.5% to $53.0 million during the six months ended June 30, 2011 as compared to $25.6 million in the same period in 2010. This increase includes $21.8 million related to Hygiene Acquisitions. Excluding the impact from Hygiene Acquisitions, hygiene products and services revenue increased $5.7 million or 22.3% and is due to increases in chemical revenue of $6.1 or 76.1%, partially offset by a decrease in hygiene services, paper and supplies, and rental and other.

During the first six months of 2011, our sales mix has continued to shift toward our core chemical product sales from our legacy hygiene business. Three principal factors have contributed to this trend: (i) we have placed particular emphasis on the development of our core markets including our chemical offering, particularly as it relates to ware washing and laundry solutions and a lesser focus on our legacy hygiene service offerings; (ii) we have aggressively managed customer profitability terminating less favorable arrangements; and (iii) from time to time, we are impacted by the challenging economic conditions that result in customer attrition, lower consumption levels of products and services, and a reduction or elimination in spending for hygiene-related products and services by our customers.

Hygiene franchise revenue decreased $1.6 million, or 38.3% to $2.7 million for the six months ended June 30, 2011 as compared to $4.3 million in the same periods in 2010. This decrease is the result of $1.8 million from Hygiene Acquisitions for the six months ended June 30, 2011 as compared to the comparable period in 2010. Acquisitions of our franchisees during the period result in less revenue from franchisee revenue, which is offset by an increase in hygiene product and service revenue.

40 --------------------------------------------------------------------------------Cost of Revenue Cost of revenue for the six months ended June 30, 2011 and 2010 are as follows: 2011 (Restated) %(1) 2010 %(1) Cost of Revenue (In thousands) Hygiene Company-owned operations $ 19,835 37.4 % $ 8,260 32.3 % Franchise products and fees 1,594 59.7 2,503 57.9 Total hygiene 21,429 38.5 10,763 36.0 Waste - services and products 6,916 29.5 - - Total cost of revenue $ 28,345 35.8 % $ 10,763 36.0 % (1) Represents cost as a percentage of the respective segment's product and service line revenue.

Consolidated cost of revenue increased $17.6 million or 163.4% to $28.3 million for the six months ended June 30, 2011 as compared to $10.8 million in the same period in 2010. This increase includes $6.9 million related to Waste Acquisitions and $8.2 million from Hygiene Acquisitions in the six months ended June 30, 2011 as compared to the same period of 2010. Excluding the impact from Acquisitions, consolidated cost of revenue increased $2.4 million or 22.7% to $13.2 million for the six months ended June 30, 2011 as compared to the same period in 2010.

Hygiene company owned operations cost of revenue increased $11.5 million or 138.6% to $19.8 million for the six months ended June 30, 2011 as compared to $8.3 million in the same period in 2010 and includes $8.2 million related to Hygiene Acquisitions. Excluding the impact of Hygiene Acquisitions, cost of revenue for company owned operations increased $3.2 million or 39.0% to $11.5 million or 36.7% of related revenue for the six months ended June 30, 2011 as compared to 32.3% for the same period in 2010, primarily due to the continued change in sales mix from lower cost hygiene services to higher cost chemical product sales, and consisted primarily of approximately $1.8 million or 22.3% in sales mix change from lower cost hygiene services to higher cost chemical product sales, and approximately $1.4 million or 16.7% due to the current periods higher product sales volume.

Hygiene cost of revenue to franchisees decreased $0.9 million or 36.4% to $1.6 million for the six months ended June 30, 2011 as compared to $2.5 million in the same period in 2010 in part due to Hygiene Acquisitions. We charge franchises a percentage of our costs and, therefore, we earn a lower margin on product sales to franchises, which was 9.3% and 10.7% for the six months ended June 30, 2011 and 2010, respectively.

41 --------------------------------------------------------------------------------Route expenses The details of route expenses for the six months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) %(1) 2010 %(1) Route Expenses (In thousands) Hygiene Company-owned operations: Compensation $ 9,584 29.1 % $ 4,527 34.8 % Vehicle and other expenses 3,241 9.8 1,821 14.0 Total Company-owned operations 12,825 38.9 6,348 48.7 Waste 7,844 44.4 - - Total route expenses $ 20,669 39.8 % $ 6,348 41.9 % (1) Represents cost as a percentage of Products and Services revenue for the respective operating segment.

Consolidated route expenses increased $14.3 million or 225.6% to $20.7 million for the six months ended June 30, 2011 as compared to $6.3 million in the same period in 2010. This increase includes $7.8 million related to Waste Acquisitions, which is 33.4% of total waste revenue, and $4.4 million related to Hygiene Acquisitions. Excluding the impact of Acquisitions, route expenses increased $2.1 million or 33.2% to $8.4 million or 27.0% of related revenue for the six months ended June 30, 2011 as compared to 24.8% for the same period in 2010. The increase of $2.1 million consisted of $1.2 million or 68.1% in vehicle and other route expenses and $0.9 million or 19.2% in compensation. These increases are primarily the result of headcount and vehicles added as part of a distribution agreement entered into in December 2010 and increasing fuel costs.

Selling, general, and administrative The details of selling, general, and administrative expenses for the six months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) %(1) 2010 %(1) Selling, General & Administrative Expenses (In thousands) Hygiene Compensation $ 18,533 33.3 % $ 9,375 31.4 % Occupancy 2,203 4.0 1,627 5.4 Other 8,846 15.9 2,372 7.9 Waste 5,285 22.5 - - Total selling, general & administrative expenses $ 34,867 44.0 % $ 13,374 44.7 % (1) Represents cost as a percentage of revenue for the respective segment.

Consolidated selling, general, and administrative expenses increased $21.5 million or 160.7% to $34.9 million for the six months ended June 30, 2011 as compared to $13.4 million in the same period of 2010. This increase includes $5.3 million related to Waste Acquisitions and $5.5 million related to Hygiene Acquisitions. Excluding the impact of Acquisitions, selling, general, and administrative expenses increased $10.7 million or 80.0% to $24.0 million.

Hygiene compensation increased $9.2 million or 97.7% to $18.5 million for the six months ended June 30, 2011 as compared to $9.4 million in the same period of 2010 and includes an increase of $3.5 million related to Hygiene Acquisitions.

Excluding the impact of Hygiene Acquisitions, hygiene compensation expense increased $5.6 million or 60.2% to $15.0 million for the six months ended June 30, 2011 as compared to the same period in 2010. This increase was primarily the result of an increase of approximately $3.7 million in costs and expenses related to our expansion of our corporate, field and distribution sales organizations to accelerate growth in the core chemical program, and an increase of approximately $1.8 million of salaries and other costs largely associated with our transition from a private company to a public company, which includes $1.7 million for stock based compensation.

42 -------------------------------------------------------------------------------- Occupancy expenses increased $0.6 million or 35.4% to $2.2 million for the six months ended June 30, 2011 as compared to $1.6 million in the same period of 2010, which includes an increase of $0.5 million related to Acquisitions.

Other expenses increased $6.4 million or 272.9% to $8.8 million for the six months ended June 30, 2011 as compared to $2.4 million in the same period in 2010 and includes an increase of $1.4 million for Hygiene Acquisitions.

Excluding the impact of these acquisitions, other expenses increased $5.0 million or 211.0% to $7.4 million for the six months ended June 30, 2011 as compared to the same period of 2010. This increase was primarily due to increases in professional fees associated with being a public company totaling $1.3 million as well as increases to expenses related to the expansion of our business and included increases in insurance, travel costs and marketing expenses totaling $1.1. In addition, bad debt expense adjustments totaled $1.5 million.

Acquisition and merger expenses Acquisition and merger expenses of $4.0 million for the six months ended June 30, 2011 include costs of $2.1 million directly-related to the acquisition of our seven franchisees and twenty-five independent companies during the six months ended June 30, 2011. In addition $1.9 million of these costs is related to the merger with CoolBrands International, Inc. These costs include costs for third party due diligence, legal, accounting and professional service expenses.

Loss on Extinguishment of Debt On March 1, 2011, we closed the acquisition of Choice and issued 8,281,920 shares of our common stock to the former shareholders of Choice, assumed $1.7 million of debt, and paid off $39.2 million of Choice debt. In paying the balance on this Choice debt, we incurred a prepayment penalty of $1.5 million which is included in loss on extinguishment of debt in the Condensed Consolidated Statement of Operations.

Depreciation and amortization Depreciation and amortization increased $6.1 million or 287.8% to $8.2 million for the six months ended June 30, 2011 as compared to $2.1 million during the same period of 2010. This increase includes $0.3 million due to the change in estimate of useful lives more fully described in Note 3, "Summary of Significant Accounting Policies" of the Condensed Consolidated Financial Statements. This increase also includes $4.9 million for Acquisitions.

The increase for Acquisitions is primarily the result of amortization for acquired other intangible assets including customer relationships and non-compete agreements obtained in connection with these acquisitions. The remaining increase is primarily related to depreciation on capital expenditures of $0.9 million made since June 30, 2010.

43 --------------------------------------------------------------------------------Other expense, net Other expense, net for the six months ended June 30, 2011 and 2010 are as follows: 2011 (As Restated) 2010 (In thousands) Other Expense, Net Interest expense $ (759 ) $ (682 ) Net loss on debt related fair value (5,586 ) - measurements 163 - Foreign currency loss 97 36 Interest income 70 - Other Total other expense, net $ (6,015 ) $ (646 ) Interest expense represents interest on borrowings under our credit facilities, notes incurred in connection with acquisitions including convertible promissory notes, advances from shareholders and the purchase of equipment and software.

For the six months ended June 30, 2011, the unrealized loss, net consists primarily of $5.6 million related to the required adjustment for each reporting period for the fair value of the convertible promissory notes. The fair value of these convertible promissory notes is impacted by the market price of our stock.

See Note 7 of the Condensed Consolidated Financial Statements.

Cash Flow Summary The following table summarizes cash flows for the six months ended June 30, 2011 and 2010: 2011 (As Restated) 2010 (In thousands) Cash Flows Summary Net cash used in operating activities $ (12,517 ) $ (260 ) Net cash used in investing activities (106,994 ) (2,815 ) Net cash provided by financing activities 193,047 2,428 Net increase (decrease) in cash and cash equivalents $ 73,536 $ (647 ) Operating Activities Net cash used in operating activities increased $12.3 million to $12.5 million for the six months ended June 30, 2011, compared with net cash used in operating activities of $0.2 million for the same period of 2010. The increase is due to increases in the net loss of $10.7 million, (which includes $4.0 million of acquisition and merger expenses) and a $3.5 million increase in the use of working capital, partially offset by an increase in depreciation and amortization of $6.1 million, increase in stock based compensation of $1.8 million, unrealized loss on convertible notes of $5.6 million and a change in deferred tax liabilities totaling $2.2 million for the six months ended June 30, 2011 as compared to the same period in 2010.

44 --------------------------------------------------------------------------------Investing Activities Net cash used in investing activities increased $104.2 million to $107.0 million for the six months ended June 30, 2011, compared with net cash used in investing activities of $2.8 million for the same period of 2010. This increase is due to increases in cash paid for acquisitions, partially offset by the increase in restricted cash, totaling $5.2 million.

Financing Activities Net cash provided by financing activities increased $190.6 million to $193.0 million for the six months ended June 30, 2011, compared with net cash provided by financing activities of $2.4 million during the same period in 2010. Net cash provided from financing activities consists primarily of: (i) cash received from private placements and lines of credit, net of issuance costs; (ii) proceeds from advances to shareholders; and (iii) proceeds from stock option and warrant exercises, partially offset by (iv) principal payments of debt and (v) net borrowing under credit facilities.

During the six months ended June 30, 2011, we received $191.2 million, net of issuance costs, from the issuance of 34,119,643 shares of our common stock; and received $3.4 million from the exercise of stock options and warrants. During the six months ended June 30, 2011 as compared to the same period in 2010, principal payments on debt increased by $40.6 million, while in the six months ended June 30, 2011, there were no net proceeds and payments of shareholder advances, while there were proceeds of shareholder advances $4.6 million during the same period in 2010.

Liquidity and Capital Resources We fund the development and growth of our business with cash generated from operations, shareholder advances, bank credit facilities, the sale of equity, third party financing for acquisitions, and capital leases for equipment.

Revolving credit facilities In March 2011, we entered into a $100.0 million senior secured revolving credit facility (the "credit facility"). Borrowings under the credit facility are secured by a first priority lien on substantially all of our existing and hereafter acquired assets, including $25.0 million of cash on borrowings in excess of $75.0 million. Furthermore, borrowings under the facility are guaranteed by all of our domestic subsidiaries and secured by substantially all the assets and stock of our domestic subsidiaries and substantially all of the stock of our foreign subsidiaries. Interest on borrowings under the credit facility will typically accrue at London Interbank Offered Rate ("LIBOR") plus 2.5% to 4.0%, depending on the ratio of senior debt to consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") (as such term is defined in the credit facility, which includes specified adjustments and allowances authorized by the lender, as provided for in such definition). We also have the option to request swingline loans and borrowings using a base rate. Interest is payable monthly or quarterly on all outstanding borrowings.

The credit facility matures in July 2013.

Borrowings and availability under the credit facility are subject to compliance with financial covenants, including achieving specified consolidated EBITDA levels, which will depend on the success of our acquisition strategy, and maintaining leverage and coverage ratios and a minimum liquidity requirement.

The consolidated EBITDA covenant, the leverage and coverage ratios, and the minimum liquidity requirements should not be considered indicative of the Company's expectations regarding future performance. The credit facility also places restrictions on our ability to incur additional indebtedness, make certain acquisitions, create liens or other encumbrances, sell or otherwise dispose of assets, and merge or consolidate with other entities or enter into a change of control transaction. Failure to achieve or maintain the financial covenants in the credit facility or failure to comply with one or more of the operational covenants could adversely affect our ability to borrow monies and could result in a default under the credit facility. The credit facility is subject to other standard default provisions. We were in compliance with such covenants as of June 30, 2011.

The credit facility replaces our prior $25.0 million aggregated credit facilities, which are discussed in the 2010 Annual Report.

See Note 17, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements which discusses the sale of the Company's Waste segment in the fourth quarter of 2012 and the payoff of this credit facility.

In August 2011, the Company entered into agreements to provide borrowings of up to $37.5 million that would be collateralized by the Waste segment's vehicles and containers and the Company's technology and related equipment. In connection with these financing agreements, the Company entered into an amendment that modifies the covenants contained in the credit facility, including an increase in permitted indebtedness to $40.0 million. In addition the Company obtained additional financing of up to $25 million for new and replacement vehicles for its fleet.

45--------------------------------------------------------------------------------Private Placements In connection with the merger with Choice, on February 23, 2011, we entered into an agency agreement, which the agents agreed to market, on a best efforts basis 12,262,500 subscription receipts ("Subscription Receipts") at a price of $4.80 per Subscription Receipt for gross proceeds of up to $58,859,594. Each Subscription Receipt entitled the holder to acquire one share of our common stock, without payment of any additional consideration, upon completion of our acquisition of Choice.

On March 1, 2011, we closed the acquisition of Choice and issued 8,281,920 shares of our common stock to the former shareholders of Choice and assumed $ 1.7 million of debt. In addition, cash was paid to Choice debt holders of $40.7 million, including a prepayment penalty of $1.5 million, and certain shareholders of Choice received $5,700,000 in cash and warrants to purchase an additional 918,076 shares at an exercise price of $6.21, which expired on March 31, 2011 and were not exercised. The prepayment penalty of $1.5 million was treated as a period expense in other expense on the Company's income statement.

On March 1, 2011, in connection with the closing of the acquisition of Choice, the 12,262,500 Subscription Receipts were exchanged for 12,262,500 shares of our common stock. We agreed to use commercially reasonable efforts to file a resale registration statement with the SEC relating to the shares of common stock underlying the Subscription Receipts. If the registration statement was not filed or declared effective within specified time periods, or if the registration statement ceased to be effective for a period of time exceeding certain grace periods, the initial subscribers of Subscription Receipts would be entitled to receive an additional 0.1 share of common stock for each share of common stock underlying Subscription Receipts held by any such initial subscriber at that time. The Company filed a resale registration statement with the SEC relating to the 8,291,920 shares issued to the former shareholders of Choice and the 12,262,500 shares issued in connection with the private placement. The registration statement was effective as of the date of this filing of the Original 10-Q. The registration statement, including post-effective amendments to the registration statement, remained effective through April 12, 2012. As a result of not timely filing our Annual Report on Form 10-K for the year ended December 31, 2011, the registration statements relating to shares issued in exchange for the Subscription Receipts is not effective.

On March 22, 2011, we entered into a series of arm's length securities purchase agreements to sell 12,000,000 shares of our common stock at a price of $5.00 per share, for aggregate proceeds of $60,000,000 to certain funds of a global financial institution (the "March Private Placement"). On March 23, 2011, we closed the March Private Placement and issued 12,000,000 shares of our common stock. Pursuant to the securities purchase agreements, the shares of common stock issued in the March Private Placement could not be transferred on or before June 24, 2011 without our consent. We agreed to use our commercially reasonable efforts to file a resale registration statement with the SEC relating to the shares of common stock sold in the March Private Placement. If the registration statement was not filed or declared effective within specified time periods the investors would have been, or if the registration statement ceases to remain effective for a period of time exceeding a sixty day period, the investors will be entitled to receive monthly liquidated damages in cash equal to one percent of the original offering price for each share purchased in the private placement that at such time remain subject to resale restrictions, with an interest rate of one percent per month accruing daily for liquidated damages not paid in full within ten business days. On April 21, 2011, the SEC declared effective a resale registration statement relating to the 12,000,000 shares issued in the March Private Placement. The registration statement, including post-effective amendments to the registration statement, remained effective through April 12, 2012. As a result of not timely filing our Annual Report on Form 10-K for the year ended December 31, 2011, the registration statement relating to shares issued in the March Private Placement is not effective, and as a result, we may be subject to liability under the penalty provision.

On April 15, 2011, we entered into a series of arm's length securities purchase agreements to sell 9,857,143 shares of our common stock at a price of $7.70 per share, for aggregate proceeds of $75.9 million to certain funds of a global financial institution (the "April Private Placement"). On April 19, 2011, we closed the April Private Placement and issued 9,857,143 shares of our common stock. Pursuant to the securities purchase agreements, the shares of common stock issued in the April Private Placement could not be transferred on or before June 24, 2011 without our consent. We agreed to use commercially reasonable efforts to file a resale registration statement with the SEC relating to the shares of common stock sold in the April Private Placement. If the registration statement was not filed or declared effective within the specified time periods the investors would have been, or if the registration statement ceases to remain effective for a period of time exceeding certain grace periods, the investors will be, entitled to receive monthly liquidated damages in cash equal to one percent of the original offering price for each share purchased in the April Private Placement that at such time remain subject to resale restrictions, with an interest rate of one percent per month accruing daily for liquidated damages not paid in full within ten business days. On August 12, 2011, the SEC declared effective a resale registration statement relating to the 9,857,143 shares issued in the April Private Placement. The registration statement, including post-effective amendments to the registration statement, remained effective through April 12, 2012. As a result of not timely filing our Annual Report on Form 10-K for the year ended December 31, 2011, the registration statement relating to shares issued in the April Private Placement is not effective, and as a result, we may be subject to liability under the penalty provision.

46 --------------------------------------------------------------------------------Acquisitions and Sales During the three month period ended June 30, 2011, we paid cash of $55,739,581 for acquisitions. During the six month period ended June 30, 2011, we paid cash of $67,717,485 for acquisitions, which $7,212,914 was for the acquisition of Choice. In addition subsequent to June 30, 2011, we acquired several businesses.

While the terms, price, and conditions of each of these acquisitions were negotiated individually, consideration to the sellers typically consists of a combination of cash, our common stock, and debt issued. Aggregate consideration paid for these acquired businesses was approximately $21.0 million consisting of approximately $14.3 million in cash, 815,726 shares of our common stock, and issuance of promissory notes of approximately $2.1 million.

On November 15, 2012, we completed a stock sale of Choice and other acquired businesses in the Waste segment to Waste Services of Florida, Inc. for $123.3 million in cash.

See Note 17, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements.

Cash Requirements Our cash requirements for the next twelve months consist primarily of: (i) capital expenditures associated with dispensing equipment, dish machines and other items in service at customer locations, equipment, vehicles, and software; (ii) financing for acquisitions; (iii) working capital; and (iv) payment of principal and interest on borrowings under our credit facility, debt obligations and convertible promissory notes incurred or assumed in connection with acquisitions, and other notes payable for equipment and software.

As a result of the Private Placements discussed above our cash and cash equivalents increased by $191.2 million and were $112.5 million at June 30, 2011, respectively. We expect that our cash on hand and the cash flow provided by operating activities will be sufficient to fund working capital, general corporate needs and planned capital expenditure for the next twelve months.

However, there is no assurance that these sources of liquidity will be sufficient to fund our internal growth initiatives or the investments and acquisition activities that we may wish to pursue. If we pursue significant internal growth initiatives or if we wish to acquire additional businesses in transactions that include cash payments as part of the purchase price, we may pursue additional debt or equity sources to finance such transactions and activities, depending on market conditions.

As discussed above, we sold the Waste segment, which consisted principally of Choice, for $123.3 million in cash on November 15, 2012. In conjunction with the closing of the transaction, Swisher paid off a credit facility of $17.2 million, equipment leases associated with the operations of Choice totaling $13.2 million and an outstanding note in the amount of $2.0 million.

See Note 17, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements.

Financial Instruments - Convertible Promissory Notes We determine the fair value of certain convertible debt instruments issued as part of business combinations based on assumptions that market participants would use in pricing the liabilities. We have used a Black Scholes pricing model to estimate fair value of our convertible promissory notes, which requires the use of certain assumptions such as expected term and volatility of our common stock. The expected volatility was based on an analysis of industry peer's historical stock price over the term of the notes as we currently do not have our own stock price history. The expected volatility was estimated at approximately 25%. Changes in the fair value of convertible debt instruments are recorded in Other expense, net on the Condensed Consolidated Statement of Operations. We would record approximately $575,000 of expense or income for every $1.00 increase or decrease in our stock price. Increases or decreases in the market value of our stock price could affect the fair value of these instruments and our earnings.

47 --------------------------------------------------------------------------------Income Taxes As a result of the merger with CoolBrands International, Inc. in November 2010, as discussed in Note 1, "Business Description" of the Notes to Consolidated Financial Statements in our 2010 Annual Report, the Company converted from a corporation taxed under the provisions of Subchapter S of the Internal Revenue Code to a tax-paying entity and accounts for income taxes under the asset and liability method. Therefore, for the three and six months ended June 30, 2011, the Company has recorded an estimate for income taxes based on the Company's tax operating results for the year ending December 31, 2011 and an effective income tax rate of 42.3%. The amount of income tax expense or benefit to be recorded in future periods is based on the full year's net income.

In addition, during 2011, the Company reversed the valuation allowance of $2.4 million recorded as of December 31, 2010 as a result of the Company's net deferred tax liability balance of $9.7 million at June 30, 2011.The majority of these deferred tax liabilities were recorded as part of the acquisition of Choice on March 1, 2011 as discussed in Note 4, "Acquisitions" of the Notes to Condensed Consolidated Financial Statements.

Litigation and Other Contingencies The Company may be involved in litigation matters from time to time in the ordinary course of its business. We do not believe at this time that other litigation matters will have a material adverse effect on our business, financial condition and results of operations. The ultimate resolution of a litigation matter cannot be predicted with certainty and, therefore, we cannot assure you that the outcome of any of our litigation matters will not have a material adverse effect on our business, financial condition and results of operations.

For a discussion of additional legal proceedings related to our restatements to which we have become a party after June 30, 2011, please read "Explanatory Note - Securities Litigation." Off-Balance Sheet Arrangements Other than operating leases, there are no off-balance sheet financing arrangements or relationships with unconsolidated entities or financial partnerships, which are often referred to as "special purpose entities." Therefore, there is no exposure to any financing, liquidity, market or credit risk that could arise, had we engaged in such relationships.

In connection with a distribution agreement entered into in December 2010, we provided a guarantee that the distributor's operating cash flows associated with the agreement would not fall below certain agreed-to minimums, subject to certain pre-defined conditions, over the ten year term of the distribution agreement. If the distributor's annual operating cash flow does fall below the agreed-to annual minimums, we will reimburse the distributor for any such short fall up to a pre-designated amount. No value was assigned to the fair value of the guarantee at June 30, 2011 and December 31, 2010 based on a probability assessment of the projected cash flows. Management currently does not believe that it is probable that any amounts will be paid under this agreement and thus there is no amount accrued for the guarantee in the Condensed Consolidated Financial Statements.

48 --------------------------------------------------------------------------------Adjusted EBITDA In addition to net income determined in accordance with GAAP, we use certain non-GAAP measures, such as "Adjusted EBITDA", in assessing our operating performance. We believe the non-GAAP measure serves as an appropriate measure to be used in evaluating the performance of our business. We define Adjusted EBITDA as net loss excluding the impact of income taxes, depreciation and amortization expense, interest expense and income, gains on foreign currency, unrealized loss, net, stock based compensation, and third party costs directly related to merger and acquisitions. We present Adjusted EBITDA because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of our results. Management uses this non-GAAP financial measure frequently in our decision-making because it provides supplemental information that facilitates internal comparisons to the historical operating performance of prior periods and gives a better indication of our core operating performance. We include this non-GAAP financial measure in our earnings announcement and guidance in order to provide transparency to our investors and enable investors to better compare our operating performance with the operating performance of our competitors. Adjusted EBITDA should not be considered in isolation from, and is not intended to represent an alternative measure of, operating results or of cash flows from operating activities, as determined in accordance with GAAP. Additionally, our definition of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Under SEC rules, we are required to provide a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Accordingly, the following is a reconciliation of Adjusted EBITDA to our net losses for the three and six month periods ended June 30, 2011 and 2010: Three Months Ended June 30, Six Months Ended June 30, 2011 2011 (As Restated) 2010 (As Restated) 2010 (In thousands) Net loss $ (8,093 ) $ (1,770 ) $ (14,089 ) $ (3,365 ) Income tax benefit (3,955 ) - (10,354 ) - Depreciation and amortization expense 5,353 1,084 8,248 2,127 Interest expense, net 334 355 (662 ) 646 Gains on foreign currency 128 - 163 - Unrealized loss on convertible debt 3,625 - 5,586 - Stock based compensation 1,044 - 1,846 - Loss on extinguishment of debt - - 1,500 - Acquisition and merger expenses 2,734 - 3,998 - Adjusted EBITDA $ 1,170 $ (331 ) $ (2,412 ) $ (592 ) 49-------------------------------------------------------------------------------- FORWARD-LOOKING STATEMENTS Our business, financial condition, results of operations, cash flows and prospects, and the prevailing market price and performance of our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Form 10-Q, as well as other written or oral statements made from time to time by us or by our authorized executive officers on our behalf, constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement and these risk factors in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Form 10-Q or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations, plans, intentions and projections reflected in our forward-looking statements are reasonable, such statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The risks, uncertainties and other factors that our stockholders and prospective investors should consider include the following: We have a history of significant operating losses and as such our future revenue and operating profitability are uncertain; Matters relating to or arising from our recent restatement could have a material adverse effect on our business, operating results and financial condition; We may fail to maintain our listing on The NASDAQ Stock Market and the Toronto Stock Exchange; 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; Changes in economic conditions that impact the industries in which our end-users primarily operate in could adversely affect our business; Our solid waste collection operations are geographically concentrated and are therefore subject to regional economic downturns and other regional factors; If we are required to change the pricing models for our products or services to compete successfully, our margins and operating results may be adversely affected; Several members of our senior management team are critical to our business and if these individuals do not remain with us in the future, it could have a material adverse impact on our business, financial condition and results of operations; The financial condition and operating ability of third parties may adversely affect our business; The volatility of our raw material costs may adversely affect our operations; 50 -------------------------------------------------------------------------------- Q2 version 6 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.

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