Exhibit 99.6
Combined Financial Statements As of December 31, 2010 | ||||
F-1 | ||||
FINANCIAL STATEMENTS | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
Board of Directors
Central Carting Disposal, Inc. and
CCI Hauling, Inc.
Dade City, FL
INDEPENDENT AUDITORS’ REPORT
We have audited the accompanying combined balance sheet of Central Carting Disposal, Inc. and CCI Hauling, Inc. as of December 31, 2010, and the related combined statement of operations, stockholder’s equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Central Carting Disposal, Inc. and CCI Hauling, Inc. as of December 31, 2010, and the results of their operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Charlotte, North Carolina
June 27, 2011
F-1
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ | 730,649 | ||
Accounts receivable, net of allowance — Note 2 | 250,730 | |||
Prepaid expenses and other current assets | 58,424 | |||
Total current assets | $ | 1,039,803 | ||
Property and equipment, net —Note 3 | 1,880,020 | |||
Other assets | ||||
Intangible assets— Note 4 | 111,595 | |||
$ | 3,031,418 | |||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Current liabilities | ||||
Accounts payable | $ | 145,431 | ||
Deferred revenue — Note 2 | 350,487 | |||
Long-term debt, current portion — Note 5 | 370,808 | |||
Total current liabilities | $ | 866,726 | ||
Long-term debt, less current portion — Note 5 | 350,136 | |||
Commitments and contingencies | — | |||
Stockholder’s equity | ||||
Common stock of Central Carting Disposal, Inc., $1 par value, authorized 10,000 shares, 10,000 shares issued and outstanding at December 31, 2010 | 10,000 | |||
Common stock of CCI Hauling, Inc., $.10 par value, authorized 1,000 shares, 1,000 shares issued and outstanding at December 31, 2010 | 100 | |||
Additional paid-in capital | 191,200 | |||
Retained earnings | 1,613,256 | |||
1,814,556 | ||||
$ | 3,031,418 | |||
See Notes to Combined Financial Statements
F-2
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
CCI HAULING, INC.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
Revenue | ||||
Services | $ | 6,150,479 | ||
Costs and Expenses | ||||
Cost of sales | $ | 1,433,762 | ||
Selling, general and administrative | 2,450,480 | |||
Depreciation and amortization | 523,440 | |||
Total costs and expenses | 4,407,682 | |||
Income from Operations | 1,742,797 | |||
Other Income (Expense) | ||||
Interest expense | (81,256 | ) | ||
Total other income (expense) | (81,256 | ) | ||
Net Income | $ | 1,661,541 | ||
See Notes to Combined Financial Statements
F-3
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
COMBINED STATEMENT OF STOCKHOLDER’S EQUITY
YEAR ENDED DECEMBER 31, 2010
CCI HAULING, INC.
COMBINED STATEMENT OF STOCKHOLDER’S EQUITY
YEAR ENDED DECEMBER 31, 2010
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2009 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,405,829 | $ | 1,607,129 | |||||||||||
Distributions | (1,454,114 | ) | (1,454,114 | ) | ||||||||||||||||
Net income | 1,661,541 | 1,661,541 | ||||||||||||||||||
Balance as of December 31, 2010 | 11,000 | $ | 10,100 | $ | 191,200 | $ | 1,613,256 | $ | 1,814,556 | |||||||||||
See Notes to Combined Financial Statements
F-4
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
CCI HAULING, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
Cash provided by operating activities | ||||
Net income | $ | 1,661,541 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 523,490 | |||
Provision for doubtful accounts | 80,000 | |||
Changes in working capital components: | ||||
Accounts receivable | (79,822 | ) | ||
Prepaid expenses and other assets | 5,264 | |||
Accounts payable and accrued expenses | 328,239 | |||
Cash provided by operating activities | $ | 2,518,712 | ||
Cash used in investing activities | ||||
Purchases of property and equipment | (363,540 | ) | ||
Cash used in investing activities | (363,540 | ) | ||
Cash used in financing activities | ||||
Distributions to stockholders | (1,454,114 | ) | ||
Proceeds from long-term debt | 94,879 | |||
Payments on long-term debt | (427,094 | ) | ||
Cash used in financing activities | (1,786,329 | ) | ||
Net change in cash and cash equivalents | 368,843 | |||
Cash and cash equivalents at beginning of year | 361,806 | |||
Cash and cash equivalents at end of year | $ | 730,649 | ||
See Notes to Combined Financial Statements
F-5
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 — | BUSINESS DESCRIPTION |
Nature of Business
Central Carting Disposal, Inc. (CCD), founded in 1996 and headquartered in Dade City, Florida, provides refuse collection and disposal services to its commercial and residential customers located in the Florida counties of Pasco, Citrus, Sumter, Hillsborough and Hernando.
CCI Hauling, Inc. (CCI), founded in 2002 and headquartered in Dade City, Florida, provides roll-off refuse collection and disposal services to commercial customers located in the Florida counties of Pasco, Citrus, Sumter, Hillsborough and Hernando.
Principles of Combination and Consolidation
CCD and CCI (collectively the “Company”) have common ownership and management. The financial statements of these two companies have been combined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation”. All inter-company transactions are eliminated in these combined financial statements.
NOTE 2 — | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates and such differences could affect the results of operations reported in future periods.
Cash and Cash Equivalents
The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of December 31, 2010, the Company did not have any investments with maturities greater than three months.
Accounts Receivable
Accounts receivable consist of amounts due from customers for services. Accounts receivable are reported net of an allowance for doubtful accounts. The allowance is management’s best estimate of uncollectible amounts and is based on a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. As of December 31, 2010, the allowance was $80,000.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of individual assets or classes of assets as follows:
Office Equipment and Furniture | 5 - 7 years | |||
Containers | 10 years | |||
Leasehold Improvements | 10 years | |||
Vehicles | 5 - 7 years |
F-6
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
When an asset is sold or otherwise disposed, the related cost and accumulated depreciation or amortization are removed from the respective accounts and the gain or loss is recognized. Maintenance and repairs are charged to expense when incurred.
Intangible Assets
The Company accounts for intangible assets under FASB ASC Topic 350, “Intangibles-Goodwill and Other” under which intangible assets are recorded at cost. Those assets with a determinable estimated useful life are amortized on a straight-line basis over their estimated lives. Intangible assets with an indefinite life are not subject to amortization. These assets are evaluated at least annually for impairment in accordance with FASB ASC350-30-35-1, “Subsequent Measurement”.
Long-lived Assets
In accordance with FASB ASC360-10-35 “Impairment of Disposal of Long-lived Assets”, losses related to the impairment of long-lived assets are recognized when the carrying amount is not recoverable and exceeds its fair value. When facts and circumstances indicate that the carrying values of long-lived assets may be impaired, management of the Company evaluates recoverability by comparing the carrying value of the assets to projected future cash flows, in addition to other qualitative and quantitative analyses.
Revenue Recognition
Revenue is recognized when the collection and disposal services are performed. Deferred revenue consists of amounts collected from customers as of December 31, 2010 for services to be performed in the future.
Income Taxes
Effective January 1, 1997, CCD’s stockholders and on October 23, 2002, CCI’s stockholders elected that the corporations be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under this provision, the stockholders are taxed on their proportionate share of the Company’s taxable income. As a Subchapter S corporation, the Company bears no liability or expense for income taxes.
FASB ASC740-10, “Income Taxes”, clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the balance sheet. It also provides guidance on derecognition, measurement and classification of amounts related to uncertain tax positions, accounting for and disclosure of interest and penalties, accounting in interim period disclosures and transition relating to the adoption of new accounting standards. Under FASB ASC740-10, the recognition for uncertain tax positions should be based on a more likely than not threshold that the tax position will be sustained upon audit. The tax position is measured as the largest amount of benefit that has a greater than fifty percent probability of being realized upon settlement. Management has determined that adoption of this topic has had no effect on the Company’s balance sheet.
Fair Value of Financial Instruments
At December 31, 2010, the Company did not have any outstanding financial derivative instruments. The carrying amounts of cash and the current portion of accounts receivable approximate fair value due to the short maturity of these instruments. The non-current notes receivable are presented at fair value due to rates generally being at current market rates. The fair value of the Company’s long-term debt, estimated based on the current borrowing rates available to the Company for bank loans with similar terms and maturities, approximates the carrying value of these liabilities.
F-7
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
Segment Information
FASB ASC 280, “Segment Reporting,” establishes standards for reporting information regarding operating segments in annual financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group in making decisions on how to allocate resources and assess performance.
The Company manages, allocates resources and reports in one business segment. The Company’s chief operating decision-maker, as defined under FASB ASC 280, is the Company’s chief executive officer. Based on the information reviewed by its chief executive officer, the Company operates in one business segment.
NOTE 3 — | PROPERTY AND EQUIPMENT |
Property and equipment as of December 31, 2010 consist of the following:
Office equipment and furniture | $ | 58,121 | ||
Containers | 1,043,898 | |||
Leasehold improvements | 88,290 | |||
Vehicles | 3,427,134 | |||
4,617,443 | ||||
Less: accumulated depreciation | (2,737,423 | ) | ||
$ | 1,880,020 | |||
Depreciation expense for the year ended December 31, 2010 is $490,340.
NOTE 4 — | INTANGIBLE ASSETS |
Intangible assets as of December 31, 2010 consist of the following:
Customer lists | $ | 98,050 | ||
Non-compete agreements | 67,450 | |||
165,500 | ||||
Less: accumulated amortization | (53,905 | ) | ||
$ | 111,595 | |||
Amortization expense for the year ended December 31, 2010 is $33,100.
At December 31, 2010, projected aggregate annual amortization expense is as follows:
2011 | $ | 33,100 | ||
2012 | 33,100 | |||
2013 | 30,350 | |||
2014 | 15,045 | |||
Thereafter | — | |||
$ | 111,595 | |||
F-8
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 5 — | LONG-TERM DEBT |
Long-term debt as of December 31, 2010 consists of the following:
Note payable on a company vehicle dated October 2006, due in monthly installments of $4,186, including interest of 10.24%, maturing September 2011, collateralized by vehicle costing $197,502 | $ | 32,238 | ||
Note payable on company vehicles dated December 2009, due in monthly installments of $6,762 including interest of 9.55%, maturing October 2011, collateralized by vehicles costing $326,680 | 64,752 | |||
Note payable on a company vehicle dated June 2007, due in monthly installments of $3,699 including interest of 8.46%, maturing April 2012, collateralized by vehicle costing $184,131 | 52,477 | |||
Note payable on company vehicles dated March 2008, due in monthly installments of $4,070 including interest of 8.50%, maturing December 2013, collateralized by vehicles costing $203,764 | 89,541 | |||
Note payable on company vehicles dated September 2008, due in monthly installments of $4,030 including interest of 5.18%, maturing September 2013, collateralized by vehicles costing $212,629 | 123,706 | |||
Note payable on a company vehicle dated April 2009, due in monthly installments of $4,979, including interest of 9.73%, maturing February 2014, collateralized by vehicle costing $240,506 | 166,379 | |||
Note payable on a company vehicle dated July 2009, due in monthly installments of $3,146, including interest of 10.34%, maturing May 2014, collateralized by vehicle costing $150,000 | 106,396 | |||
Note payable to a former shareholder dated October 2002, due in monthly installments of $2,125 including interest of 5.00%, maturing October 2012, unsecured | 42,643 | |||
Note payable for insurance financing agreement dated July 2010, due in monthly installments of $10,868, including interest of 7.35%, maturing April 2011, unsecured | 42,812 | |||
720,944 | ||||
Current portion | (370,808 | ) | ||
Long-term portion | $ | 350,136 | ||
As of December 31, 2010, principal payments due on long-term debt are as follows:
2011 | $ | 370,808 | ||
2012 | 199,295 | |||
2013 | 125,664 | |||
2014 | 25,177 | |||
Thereafter | — | |||
$ | 720,944 | |||
The Company was making monthly payments of $2,125 to a former shareholder of the Company. This note is payable as a result of the purchase of Company stock from this shareholder in 2002. The balance on this note was paid off subsequent to year end.
F-9
CENTRAL CARTING DISPOSAL, INC. AND
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
CCI HAULING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
NOTE 6 — | RELATED PARTY TRANSACTIONS |
The Company leases its headquarters from the stockholder on a month-to-month basis. During the year ended December 31, 2010, the Company paid this related party $53,028 as rent for the use of this facility.
NOTE 7 — | SUPPLEMENTAL FINANCIAL INFORMATION |
Supplemental Disclosure of Cash Flow Information
Supplemental cash flow information with respect to the year ended December 31, 2010 is as follows:
Cash paid for: | ||||
Interest | $ | 81,256 | ||
Advertising
The company expenses advertising costs as incurred. Advertising expenses for the year ended December 31, 2010 was approximately $11,800.
Environmental Liability
The Company is subject to liability for any environmental damage, including personal injury and property damage arising from off-site environmental contamination caused by pollutants or hazardous substances if the Company arranges to transport, treat or dispose of those materials. Any substantial liability incurred by the Company arising from environmental damage could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company is not presently aware of any situations that it expects would have a material adverse impact on its results of operations or financial condition.
NOTE 8 — | SUBSEQUENT EVENTS |
The Company evaluated all events and transactions through June 27, 2011, the date these financial statements were issued. During this period, there were no material recognizable or non-recognizable subsequent events except for the following:
On June 6, 2011, the Company entered into an agreement under which it sold certain assets and liabilities of the Company to Choice Environmental Services, Inc., a wholly-owned subsidiary of Swisher Hygiene, Inc. Assets sold included substantially all supplies, accounts receivable, property and equipment, rights under contracts, customer lists, and other intangible assets.
F-10