Exhibit 99.1
 
SWISHER HYGIENE INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS INDICATED BELOW
 
TABLE OF CONTENTS
 
 
Page 
 
 
Consolidated Financial Statements Explanatory Note
1
 
 
Report of Independent Registered Public Accounting Firm
2
 
 
Consolidated Statements of Net Assets in Liquidation at December 31, 2018 and 2017 (Liquidation Basis)
3
 
 
Consolidated Statements of Changes in Net Assets in Liquidation for the Years Ended December 31, 2018 and 2017 (Liquidation Basis)
4
 
 
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017
5
 
 
Notes to Consolidated Financial Statements
6
 
 
 
 
 
 
 
 
SWISHER HYGIENE INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTE
 
AT THE ANNUAL MEETING OF STOCKHOLDERS OF SWISHER HYGIENE INC., HELD ON OCTOBER 15, 2015, STOCKHOLDERS APPROVED (i) THE SALE OF SWISHER HYGIENE INC.’S REMAINING OPERATING BUSINESS AND (ii) A PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION (THE “PLAN OF DISSOLUTION”). ON NOVEMBER 2, 2015, THE SALE OF THE REMAINING OPERATING BUSINESS WAS COMPLETED AND ON APRIL 8, 2016, THE BOARD OF DIRECTORS OF SWISHER HYGIENE INC. UNANIMOUSLY APPROVED FILING THE CERTIFICATE OF DISSOLUTION ON MAY 27, 2016.
 
ON MAY 27, 2016, SWISHER HYGIENE INC. FILED ITS CERTIFICATE OF DISSOLUTION WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE PURSUANT TO THE PLAN OF DISSOLUTION. THE EFFECTIVE TIME OF THE CERTIFICATE OF DISSOLUTION WAS 6:00 PM EDT ON MAY 27, 2016 (THE “EFFECTIVE TIME”). AT THE EFFECTIVE TIME, SWISHER HYGIENE INC.’S STOCK TRANSFER BOOKS WERE CLOSED, AND AFTER THE EFFECTIVE TIME, SWISHER HYGIENE INC. WILL NOT RECORD ANY FURTHER TRANSFERS OF ITS COMMON STOCK, EXCEPT PURSUANT TO THE PROVISIONS OF A DECEASED STOCKHOLDER'S WILL, INTESTATE SUCCESSION OR OPERATION OF LAW AND SWISHER HYGIENE INC. WILL NOT ISSUE ANY NEW STOCK CERTIFICATES, OTHER THAN REPLACEMENT CERTIFICATES. ALSO, AT THE EFFECTIVE TIME, SWISHER HYGIENE INC.’S COMMON STOCK CEASED TRADING ON OTCQB.
 
EFFECTIVE APRIL 1, 2016, SWISHER HYGIENE INC. ADOPTED AND PROSPECTIVELY APPLIED ACCOUNTING STANDARDS UPDATE 2013-07, “LIQUIDATION BASIS OF ACCOUNTING,” WHICH REQUIRES THAT MANAGEMENT (i) MAKE ESTIMATES OF NET CASH FLOWS DURING THE PERIOD FROM THE DATE OF ADOPTION THROUGH THE DATE THAT FINAL SHAREHOLDER DISTRIBUTIONS ARE MADE (THE “LIQUIDATION PERIOD”) AND (ii) RECOGNIZE SUCH NET CASH FLOW ESTIMATES IN ITS POST-ADOPTION FINANCIAL STATEMENTS.
 
THE COMPANY CURRENTLY ESTIMATES THAT IT INTENDS TO COMPLETE THE WIND DOWN OF ITS BUSINESS AFFAIRS AND MAKE A STOCKHOLDER DISTRIBUTION ON OR AROUND AUGUST 31, 2019. HOWEVER, THE ESTIMATED WIND DOWN PERIOD COULD BE LONGER AS A RESULT OF OTHER INTERVENING MATTERS, INCLUDING FINAL RESOLUTIONS OF REMAINING UNRESOLVED CLAIMS, AND OTHER MATTERS, NOT CURRENTLY KNOWN AT THE PRESENT TIME. IN ADDITION, ANY STOCKHOLDER DISTRIBUTION WOULD BE SUBJECT TO APPROVAL BY THE COURT OF CHANCERY OF THE STATE OF DELAWARE AND THERE CAN BE NO GUARANTEE THAT THE COURT OF CHANCERY WILL APPROVE THE FULL AMOUNT OF ANY ANTICIPATED STOCKHOLDER DISTRIBUTION, IF AT ALL, AND THERE CAN BE NO GUARANTEE THAT THE COURT OF CHANCERY WILL GRANT ANY SUCH APPROVAL ON THE TIME FRAME ESTIMATED BY THE COMPANY, IF AT ALL.
 
SEE THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS CURRENT REPORT FOR A MORE COMPLETE DISCUSSION OF SWISHER HYGIENE INC.’S PLAN OF DISSOLUTION AND ITS ADOPTION OF THE LIQUIDATION BASIS OF ACCOUNTING.
 
 
1
 
 
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and the Board of Directors
Swisher Hygiene Inc.
Fort Lauderdale, Florida:
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated statements of net assets in liquidation (liquidation basis) of Swisher Hygiene Inc. (the "Company"), as of December 31, 2018 and 2017 and the related consolidated statements of changes in net assets in liquidation (liquidation basis) and cash flows for the years then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation (liquidation basis) of the Company at December 31, 2018 and 2017, and the changes in net assets in liquidation (liquidation basis) for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
Emphasis of a Matter
 
As discussed in Note 1 to the financial statements, on April 8, 2016 the board of directors of the Company approved filing a Certificate of Dissolution on May 27, 2016 and the Company determined liquidation is imminent. As a result, the Company changed its basis of accounting on April 1, 2016 from the going concern basis to a liquidation basis. Our opinion is not modified as a result of the Company adopting the liquidation basis of accounting.
 
 
 
/s/ HACKER, JOHNSON & SMITH PA
We have served as the Company's auditor since 2016.
Fort Lauderdale, Florida
April 2, 2019
 
 
2
 
 
SWISHER HYGIENE INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET ASSETS
IN LIQUIDATION AT DECEMBER 31, 2018 AND 2017 (LIQUIDATION BASIS)
(In thousands)
 
 
 
At December 31,
 
 
 
2018
 
 
2017
 
Assets:
 
(Liquidation Basis)
 
 
 (Liquidation Basis)
 
Cash and cash equivalents
 $1,112 
 $595 
Restricted time deposits
  140 
  139 
Investments held to maturity (Fair value of $18,786 and $20,287)
  18,740 
  20,207 
Interest income receivable
  142 
  100 
Accrued estimated future interest income during liquidation
  360 
  584 
 Other assets
  97 
  195 
Total assets
 $20,591 
 $21,820 
 
    
    
Liabilities
    
    
Accounts payable
  175 
  148 
Accrued expense and other liabilities
  1,817 
  1,951 
Liability for estimated future costs during liquidation
  1,732 
  2,691 
Total liabilities
 $3,724 
 $4,790 
 
    
    
 Net assets in liquidation
 $16,867 
 $17,030 
 
See Notes to Consolidated Financial Statements
 
 
3
 
SWISHER HYGIENE INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
IN LIQUIDATION FOR THE YEARS ENDED DECEMBER 31, 2018 AND
DECEMBER 31, 2017 (LIQUIDATION BASIS)
(In thousands)
 
 
 
Year Ended December 31
 
 
 
2018
 
 
2017
 
 
 
(Liquidation Basis)
 
 
(Liquidation Basis)
 
Net assets in liquidation beginning of year
 $17,030 
 $18,268 
Changes in net assets in liquidation
    
    
Change in cash and cash equivalents
  517 
  (7)
Change in restricted cash
  1 
  (180)
Change in investments
  (1,467)
  (850)
Change in interest income receivable
  42 
  16 
Change in accrued estimated future interest income during liquidation
  (224)
  (249)
Change in other assets
  (98)
  113 
Change in accounts payable
  (27)
  5 
Change in accrued expense and other liabilities
  134 
  79 
Change in liability for estimated future costs during liquidation
  959 
  (165)
Net decrease in net assets in liquidation
 $(163)
 $(1,238)
Net assets in liquidation, end of year
 $16,867 
 $17,030 
 
See Notes to Consolidated Financial Statements
 
 
4
 
 
 
SWISHER HYGIENE INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In thousands)
 
 
 
Year Ended December 31
 
 
 
2018
 
 
2017
 
Cash flows from operating activities:
 
 
 
 
 
 
Interest income received
 $725 
 $470 
Other cash receipts
  109 
   
General and administrative expense payments
  (1,461)
  (1,380)
Pension plan distribution payments
   
  (95)
Net cash used in operating activities
  (627)
  (1,005)
 
    
    
Cash flows from investing activities:
    
    
Investments in held-to-maturity securities
  (16,814)
  (3,033)
Investments in restricted time deposits
  (139)
  (326)
Proceeds from maturity of held-to-maturity securities
  17,957 
  3,850 
Proceeds from maturity of restricted time deposits
  140 
  507 
Net cash provided by investing activities
  1,144 
  998 
 
    
    
Net increase (decrease) in cash and cash equivalents
  517 
  (7)
Cash and cash equivalents at beginning of year
 $595 
 $602 
Cash and cash equivalents at end of year
 $1,112 
 $595 
 
See Notes to Consolidated Financial Statements
 
 
5
 
 
SWISHER HYGIENE INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
 
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
 
 
Description of Business Operations
 
Swisher Hygiene Inc. and its wholly-owned subsidiaries provided essential hygiene and sanitizing solutions that included cleaning and sanitizing chemicals, restroom hygiene programs and a full range of related products and services. We sold consumable products such as detergents, cleaning chemicals, soap, paper, water filters and supplies, together with the rental and servicing of dish machines and other equipment for the dispensing of those products as well as additional services such as the cleaning of facilities. We served customers in a wide range of end-markets, with a particular emphasis on the food service, hospitality, retail and healthcare industries.
 
At the annual meeting of stockholders of Swisher Hygiene Inc., held on October 15, 2015, stockholders approved (i) the sale of Swisher Hygiene Inc.’s last remaining operating business (the “Sale Transaction”) and (ii) a plan of complete liquidation and dissolution (the “Plan of Dissolution”). On November 2, 2015, the sale of the remaining operating business was completed and immediately thereafter Swisher Hygiene Inc. became a shell company (as defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as amended) with no remaining operating assets and no revenue producing business or operations. The Consolidated Financial Statements included herein include the consolidated accounts of Swisher Hygiene Inc. (parent company) and Integrated Brands, Inc., its wholly-owned subsidiary (see Note 6, “Commitments and Contingencies”). References to “the Company”, “we”, “us”, and “our” herein means Swisher Hygiene Inc. and Integrated Brands, Inc., its consolidated subsidiary.
 
Plan of Distribution
 
On April 8, 2016, the board of directors of Swisher Hygiene Inc. unanimously approved the filing of a Certificate of Dissolution (the “Certificate”) that was subsequently filed on Friday, May 27, 2016 (the “Final Record Date”) with the Secretary of State of the State of Delaware. The filing of the Certificate was made pursuant to a Plan of Dissolution approved by stockholders at the Company’s annual meeting held on October 15, 2015.
 
The Company previously notified OTCQB that the Certificate would be filed on the Final Record Date. As a result of the filing of the Certificate, as of 6:00 pm Eastern Time on the Final Record Date, the Company’s shares ceased to be traded on OTCQB. Also, after the Final Record Date, the Company’s stock transfer books were closed and the Company will not record any further transfers of its common stock, except pursuant to the provisions of a deceased stockholder’s will, intestate succession, or operation of law, and the Company will not issue any new stock certificates other than replacement certificates.
 
Pursuant to the Plan of Dissolution, and under Delaware law, the dissolution of the Company was effective as of 6:00 pm Eastern Time on the Final Record Date. Under Delaware law, the dissolved corporation is continued for three (3) years from the date on which the Certificate of Dissolution was filed with the Secretary of State of the State of Delaware, unless extended by direction of the Court of Chancery, to enable the Company’s directors to wind up the affairs of the corporation, including to discharge the Company’s liabilities and to distribute to the stockholders any remaining assets. No assurances can be made as to if or when any such distribution will be made, or the amount of any such distribution, if one is made. Any distribution, however, would be made to the Company’s stockholders of record as of the Final Record Date.
 
Relief from Certain SEC Reporting Obligations
 
The Securities and Exchange Commission (“SEC”) granted the Company’s request for no-action relief from filing future periodic reports under Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 beginning with its quarterly report on Form 10-Q for the quarter ended June 30, 2016 (as reported in the Company’s Current Report on Form 8-K filed on August 12, 2016). In accordance with the terms of the no-action relief, the Company will disclose material developments relating to its (i) liquidation, including the amounts of any liquidation distributions, payments and expenses, (ii) dissolution, (iii) financial condition, and (iv) other material developments including material developments relating to the Paul Berger v Swisher Hygiene Inc., et al. litigation and Honeycrest Holdings, Ltd. v Integrated Brands, Inc. litigation (both of which are discussed in Note 6, “Commitments and Contingencies” in this Current Report on Form 8-K). Additionally, the Company will file a final Current Report on Form 8-K and a Form 15 to deregister its common stock when the dissolution is complete.
 
 
6
 
 
The Company elected to provide the Financial Statements that would have otherwise been required to be filed in Part I, Item 1. of its June 30, 2016 Form 10-Q in a Current Report on Form 8-K filed with the SEC on August 19, 2016. Such Financial Statements included the Company’s initial implementation of (Accounting Standards Update No. 2013-07), “Liquidation Basis of Accounting,” (“ASU 2013-07”) which was adopted by the Company effective April 1, 2016. In addition, liquidation basis consolidated financial statements of the Company for the nine months ended December 31, 2016 and the year ended December 31, 2017 were filed with the SEC as Current Reports on Form 8-K on April 12, 2017 and April 22, 2018, respectively.
 
Basis of Presentation
 
These Consolidated Financial Statements include the financial statements required under the liquidation basis of accounting: a Statement of Net Assets in Liquidation and a Statement of Changes in Net Assets in Liquidation. Additionally, we have also presented a Statement of Cash Flows, as we believe its inclusion provides additional useful financial information relevant to the Company’s liquidation period financial activities.
 
The Company has prepared the accompanying consolidated financial statements discussed above on the liquidation basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Intercompany balances and transactions have been eliminated in consolidation. Financial statement and tabular information, other than share or per share data, is presented in thousands of dollars. The Company’s fiscal year begins on January 1 and ends on December 31.
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets in liquidation and changes in net assets in liquidation and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual amounts could differ from those estimates. Material estimates that are particularly susceptible of significant change during the liquidation period relate to liability for estimated future litigation costs during liquidation and the timing and amount of shareholder distribution, if at all.
 
Significant Accounting Policies
 
Liquidation Basis of Accounting
 
As a result of the stockholder approval of the Plan of Dissolution and subsequent resolution approving the filing of a Certificate of Dissolution, the Company determined that liquidation was imminent and therefore adopted the liquidation basis of accounting as of April 1, 2016 and for all periods subsequent to April 1, 2016 in accordance with U.S. GAAP. Accordingly, on April 1, 2016, assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company will receive and disburse as it carries out its plan of liquidation. The liquidation value of the Company’s assets is presented on an undiscounted basis. Liabilities are carried at their contractual amounts due or estimated settlement amounts.
 
The Company accrued costs and income that it expects to incur and earn during the liquidation period to the extent it has a reasonable basis for estimation. Actual costs and income may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. Net assets in liquidation represent the estimated liquidation value available to holders of common shares upon liquidation.
 
Cash and Cash Equivalents
 
Cash and cash equivalents consist of amounts held in bank accounts or money market funds.
 
Restricted Time Deposits
 
Restricted time deposits consist of a certificate of deposit held by a bank to secure a worker’s compensation insurance letter of credit, the need for which is expected to terminate in 2019.
 
 
7
 
 
 Investments and Interest Income
 
The Company maintains a documented investment policy with a goal of capital preservation with income enhancement. In accordance with this policy, the Company makes investments in (i) corporate bonds rated by Moody’s as Aaa through Baa1 or by Standard and Poor’s as AAA through BBB+ and (ii) corporate commercial paper rated by Moody’s as P-2 or higher or by Standard and Poor’s as A-2 or higher. All such investments meet the U.S. GAAP definition of a held-to-maturity security because the Company has the positive intent and ability to hold these securities until their maturity dates. In accounting for these investments, we have primarily followed the guidance in ASU No. 2013-07, “Liquidation Basis of Accounting.” Accordingly, the asset value related to our total corporate debt investments at December 31, 2018 and 2017 is equal to the sum of (a) the principal amounts of cash to be received upon the maturity of each corporate debt security (“par” or “carrying” value) and (b) the total amount of cash to be received for interest payments on each corporate debt security (assuming re-investments) from the end of each accounting period until the maturity date of such security. Under the Company’s accounting treatment, all bond premiums paid and bond discounts received have been written off during the period of origination and therefore have not been included in the net assets in liquidation balances at December 31, 2018 and 2017.
 
The Company reviews the fair value of each of its held-to-maturity securities on a quarterly basis to determine whether decreases to the carrying value of such securities are required. Market prices for such securities are readily available in the active markets in which those securities are traded.
 
Other Assets
 
Other assets consist primarily of retainers held by certain of the Company’s attorneys to insure the payment of legal invoices and refunds due from other parties.
 
Liabilities for Estimated Costs during Liquidation
 
In accordance with ASU No. 2013-07, the Company accrues costs that it expects to incur during the liquidation period to the extent that it has a reasonable basis for estimation. Actual costs incurred but unpaid as of December 31, 2018 and 2017, respectively, are included in Accounts payable and Accrued expense and other liabilities. Future costs expected to be incurred and paid subsequent to December 31, 2018 and 2017 through the end of the liquidation period, respectively, are included in the line captioned “Liability for estimated future costs during liquidation” in the Consolidated Statements of Net Assets in Liquidation.
 
Income Taxes
 
Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that deferred tax assets will not be realized.
 
The Company’s policy is to evaluate uncertain tax positions under ASC 740-10, Income Taxes. As of December 31, 2018 and 2017, the Company has not identified any uncertain tax positions requiring recognition in the accompanying consolidated financial statements.
 
NOTE 2 – NET ASSETS IN LIQUIDATION
 
Net assets in liquidation represent the estimated liquidation value available to holders of common stock shares upon liquidation. As of both December 31, 2018 and 2017, there were 17,675,220 shares of the Company’s common stock issued and outstanding. The Company estimates that it will incur net costs in excess of income during the liquidation period. At the present time, the Company estimates that total stockholder distributions will total approximately $16,867,000 (or $0.95 per common share) as reflected in our Consolidated Statement of Net Assets in Liquidation at December 31, 2018, as compared to $17,030,000 (or $0.96 per common share) as reflected in our Consolidated Statement of Net Assets in Liquidation at December 31, 2017. The net assets decrease of $163,000 during the year ended December 31, 2018 was due primarily to higher legal costs than expected to address existing litigation and claims made against the Company and its Directors and Officer Insurance carriers.
 
 
8
 
 
The Company currently estimates that it intends to complete the wind down of its business affairs and make stockholder distributions on or around August 31, 2019, which is beyond the Delaware statutory 3-year continuation period that currently expires May 27, 2019. To complete the orderly dissolution of the Company, the Court of Chancery in the State of Delaware, which has jurisdiction over the Company’s dissolution, must approve the continuation of the Company beyond May 27, 2019. At the present time, we expect to receive such approval. Accordingly, all costs and receipts have been estimated and accrued through the estimated liquidation end date of August 31, 2019. These amounts can vary significantly due to, among other things, the actual amount of corporate and administrative costs incurred to wind down the Company, the actual amounts paid to resolve legal matters/litigation and all other liabilities, including those unknown to the Company at the present time and which arise during the liquidation period, and the length of time required to settle all liabilities and complete the liquidation process (see Note 6, “Commitments and Contingencies”). All estimated cash receipts and costs are anticipated to be received and paid out over the remainder of the liquidation period.
 
See Note 3, “Investments” and Note 4 “Liabilities” for disclosures about the amount of cash that the Company expects to collect and amounts that the Company is obligated or expects to be obligated to pay during the course of the liquidation, as presented in our Statements of Net Assets in Liquidation as of December 31, 2018 and 2017.
 
NOTE 3 – INVESTMENTS
 
This Note should be read in conjunction with the Significant Accounting Policies – Investments and Interest Income section of Note 1.
 
During 2018 and 2017, the Company made investments in certain held—to-maturity securities. These investments consisted of corporate bonds and corporate commercial paper. Analyses of investment activity for the years ended December 31, 2018 and 2017 are presented in the tables below (in thousands):
 
 
 
Year Ended December 31, 2018
 
 
 
Principal to be received upon maturity (par value)
 
 
 
Bond Premium (discount), net
 
 
 
Interest Income Receivable (earned)
 
  
 
Accrued estimated future interest income during liquidation (to be earned)
 
 
Total Asset Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 $20,207 
 $- 
 $100 
 $584 
 $20,891 
Cash activity – Year Ended December 31, 2018:
    
    
    
    
    
Cash paid for investments
  16,490 
  148 
  176 
  
 
  16,814 
Cash received for matured investments
  (17,957)
  
 
  
 
  
 
  (17,957)
Cash received for interest
  
 
  
 
  (725)
  
 
  (725)
Net cash activity – Year Ended December 31, 2018
  (1,467)
  148 
  (549)
   
  (1,868)
 
    
    
    
    
    
Accruals and adjustments— Year Ended December 31, 2018:
    
    
    
    
    
Write—off bond premium (discount), net
  
 
  (148)
  
 
  
 
  (148)
Accrued interest earned
  
 
  
 
  591 
  
 
  591 
Adjust accrual for accrued estimated future interest income during liquidation
  
 
  
 
  
 
  (224)
  (224)
Net accruals and adjustments— Year Ended December 31, 2018
  
 
  (148)
  591 
  (224)
  219 
 
    
    
    
    
    
Balance at December 31, 2018
 $18,740 
 $- 
 $142 
 $360 
 $19,242 
 
 
 
9
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
Principal to be received upon maturity (par value)
 
 
 
 
 
Bond Premium (discount), net
 
 
 
 
Interest Income Receivable (earned)
 
 
 
Accrued estimated future interest income during liquidation (to be earned)
 
 
 
 
Total Asset Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 $21,057 
 $- 
 $84 
 $833 
 $21,974 
Cash activity – Year Ended December 31, 2017:
    
    
    
    
    
Cash paid for investments
  3,000 
  17 
  16 
  - 
  3,033 
Cash received for matured investments
  (3,850)
    
    
    
  (3,850)
Cash received for interest
  - 
    
  (470)
  - 
  (470)
Net cash activity – Year Ended December 31, 2017
  (850)
  17 
  (454)
  - 
  (1,287)
 
    
    
    
    
    
Accruals and adjustments- Year Ended December 31, 2017:
    
    
    
    
    
Write—off bond premium (discount), net
  - 
  (17)
  - 
  - 
  (17)
Accrued interest earned
  - 
  - 
  470 
  - 
  470 
Adjust accrual for accrued estimated future interest income during liquidation
  - 
  - 
  - 
  (249)
  (249)
Net accruals and adjustments— Year Ended December 31, 2017
  - 
  (17)
  470 
  (249)
  204 
 
    
    
    
    
    
Balance at December 31, 2017
  20,207 
 $- 
 $100 
 $584 
 $20,891 
 
Interest income receivable of $142,000 and $100,000 at December 31, 2018 and 2017, respectively, represents interest earned and accrued on the Company’s corporate debt investments through December 31, 2018 and 2017, respectively. Accrued estimated future interest income during liquidation of $360,000 and $584,000 at December 31, 2018 and 2017, respectively, represents interest estimated to be earned and paid to the Company during the remainder of the estimated liquidation period (January 1, 2019 to August 31, 2019 and January 1, 2018 to August 31, 2019, respectively), and consists of the following (in thousands):
 
 
 
At December 31,
 
 
 
2018
 
 
2017
 
Interest on corporate debt investments owned by the Company
 $315 
 $317 
 
    
    
Interest on the expected re—investment of matured corporate debt investments through the end of the liquidation period
  45 
  267 
 
    
    
Total accrued estimated future interest income during liquidation
 $360 
 $584 
 
The carrying values (at par) and fair values of the Company’s held—to—maturity investments by contractual maturity at December 31, 2018 and 2017 are presented in the tables below (in thousands):
 
 
 
At December 31, 2018
 
 
 
Carrying Value
 
 
Fair Value
 
 
 
Fixed rate corporate bonds
 
 
Floating rate corporate bonds
 
 
Total Corporate Debt Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Due in one year or less
 $18,740 
 $- 
 $18,740 
 $18,786 
Total corporate debt investments
 $18,740 
 $- 
 $18,740 
 $18,786 
 
 
 
10
 
 
 
 
 
At December 31, 2017
 
 
 
Carrying Value
 
 
Fair Value
 
 
 
Fixed rate corporate bonds
 
 
Floating rate corporate bonds
 
 
Total Corporate Debt Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Due in one year or less
 $8,500 
 $9,207 
 $17,707 
 $17,784 
Due after one year through February 13, 2019
  2,500 
  - 
  2,500 
  2,503 
Total corporate debt investments
 $11,000 
 $9,207 
 $20,207 
 $20,287 
 
The fair values of the Company’s held—to-maturity investments are based upon quoted market prices for identical securities. Based upon generally accepted accounting principles, no fair market adjustments related to the excess of fair value over carrying value of these investments at December 31, 2018 and 2017 were recognized in our Consolidated Financial Statements for such periods. No individual security within the Company’s corporate debt portfolio exceeded 15% of total assets at either December 31, 2018 or 2017.
 
NOTE 4 – LIABILITIES
 
The Company accrues costs in the normal course of business through the end of each accounting period. Costs expected to be paid in the subsequent accounting period are classified within accounts payable and totaled $175,000 and $148,000 at December 31, 2018 and 2017, respectively. Accrued expense and other liabilities are recorded in separate liability accounts and consisted of the following (in thousands):
 
 
 
At December 31,
 
 
 
2018
 
 
2017
 
Honeycrest Holdings, Ltd., litigation accrual$
  1,667 
 $1,667 
Accrued worker’s compensation claims
  150 
  194 
Accrued legal and audit
  - 
  90 
 
  1,817 
 $1,951 
 
In connection with the Honeycrest Holdings, Ltd. litigation, as discussed further in Note 6, “Commitments and Contingencies” – Other Matters, the Company recorded a litigation accrual. Such accrual was originally recorded in the consolidated accounts of CoolBrands International, Inc. prior to its domestication to the State of Delaware as Swisher Hygiene Inc. in 2010. Due to uncertainties related to the resolution of this matter, this accrual has remained as a liability on our books since that time in 2010 and is included in our Statement of Net Assets in Liquidation at December 31, 2018 and 2017.
 
Additionally, the Liquidation Basis of Accounting requires the Company to estimate and accrue all costs associated with implementing and completing the plan of liquidation. Accordingly, over and above the liabilities discussed above, the Company has accrued additional liabilities totaling $1,732,000 and $2,691,000 for estimated future costs expected to be incurred during the remainder of the liquidation periods at December 31, 2018 and 2017, respectively, as summarized below (in thousands):
 
 
 
At December 31,
 
 
 
2018
 
 
2017
 
Legal costs
 $1,244 
 $1,580 
Accounting and audit costs
  110 
  260 
Corporate management and administrative costs
  378 
  851 
Liability for estimated future costs during liquidation
 $1,732 
 $2,691 
 
 
11
 
 
NOTE 5 – INCOME TAXES
 
There was no current tax benefit or provision for the years ended December 31, 2018 or 2017 due to cumulative capital and net operating losses, and no income taxes have been paid by the Company during these periods. There also was no deferred income tax benefit or provision for these periods as a result of a full valuation allowances against net deferred tax assets at the beginning and end of such periods.
 
Deferred taxes in the accompanying Statements of Net Assets in Liquidation are comprised of the following components (in thousands):
 
 
 
At December 31,
 
 
 
2018
 
 
2017
 
Deferred tax assets
 
 
 
 
 
 
Capital loss carryforwards
 $32,503 
 $32,503 
Net operating loss carryforwards
  12,730 
  12,488 
Accruals for estimated future net liquidation costs
  348 
  534 
Other
  61 
  73 
Total deferred income tax assets
  45,642 
  45,598 
Valuation allowance
  (45,642)
  (45,598)
Net deferred tax assets
  - 
  - 
Deferred tax liabilities
    
    
Total deferred tax liabilities
  - 
  - 
Total net deferred income tax liabilities
 $- 
 $- 
 
At December 31, 2018, the Company has capital loss and net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $128,200,000 and $50,216,000, respectively. The capital loss carryforward will expire in 2020 and federal and state NOL carryforwards will begin to expire in 2029.
 
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly known as the Tax Cuts and Jobs Acts (“Tax Act”). The Tax Act included a broad range of complex provisions. Generally, accounting for the impacts of newly enacted tax legislation is required to be completed in the period of enactment. The reduction of our deferred income tax assets and valuation allowance of approximately $23,400,000 during 2017 relates primarily to revaluing U.S. deferred tax assets using the new U.S. corporate tax rate of 21% at December 31, 2017.
 
We have no unrecorded tax positions. The tax years ended December 31, 2015 through December 31, 2018 are considered to be open under statute and therefore may be subject to examination by the Internal Revenue Service and various state jurisdictions. Due to the significant capital loss and NOL carryforwards discussed earlier, no income tax liabilities have been accrued at December 31, 2018 and 2017.
 
NOTE 6 — COMMITMENTS AND CONTINGENCIES
 
LEGAL MATTERS
 
The Company’s existing litigation matters are discussed in the Securities Litigation and Other Matters sections below. Additionally, we may be involved in other litigation matters in the future. The results of these matters cannot be predicted with certainty and no assurance can be given that the ultimate resolution of any legal or administrative proceedings or disputes will not have a material adverse effect on our consolidated statements of net assets in liquidation and changes in net assets in liquidation.
 
 
12
 
 
Securities Litigation 
  
On September 8, 2015, a lawsuit seeking to be certified as a class action (Paul Berger v. Swisher Hygiene Inc., et al., Case No. 2015 CH 13325 (Ill. Cir. Ct. Cook Co.)) (the “Illinois Action”), was filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division by Paul Berger, on behalf of himself and all others similarly situated, against Swisher Hygiene Inc., the members of Swisher Hygiene Inc.’s board of directors, individually, and Ecolab, Inc. (“Ecolab”), in connection with the Company’s intended sale of its remaining operating business to Ecolab, Inc. (the “Sale Transaction”). The plaintiff has alleged that (i) faced with an ongoing investigation by the SEC and the United States Attorney’s Office for the Western District of North Carolina (“USAO”), the individual defendants embarked upon a self-interested scheme to sell off the Company’s operating business and to liquidate Swisher Hygiene Inc., (ii) the individual defendants, through an alleged insufficient process, caused Swisher Hygiene Inc. to agree to sell substantially all of its assets for insufficient consideration, (iii) each member of Swisher Hygiene Inc.’s. Board of Directors is interested in the Sale Transaction and the Plan of Dissolution, and (iv) the proxy statement was materially misleading and/or incomplete. The causes of action set forth in the complaint are (i) a claim for breaches of the fiduciary duties of good faith, loyalty, fair dealing and due care, (ii) a claim for failure to disclose, and (iii) a claim against Ecolab for aiding and abetting breaches of fiduciary duty. The plaintiff sought to enjoin the consummation of the Sale Transaction unless and until defendants provide all material facts in the proxy statement, and the plaintiff also seeks compensatory and/or rescissory damages as allowed by law for the plaintiff. This summary is qualified by reference to the full text of the complaint as filed with the Court. 
 
On October 6, 2015, Defendants filed a motion to dismiss in the Illinois Action on the grounds that a similar lawsuit filed in North Carolina Malka Raul v. Swisher Hygiene Inc. et al., Case No. 15-CVS-16703 (Superior Court, Mecklenburg County, North Carolina) (the “North Carolina Action”), should proceed in lieu of the instant action because the North Carolina Action presented substantively identical allegations and claims and that North Carolina was a better forum for the claims to be heard. On December 7, 2015, the parties to the Illinois Action filed a joint motion to hold the case in abeyance until the resolution of the North Carolina Action. The Court granted the joint motion on December 15, 2015. On February 26, 2016, the Court entered an order to continue to hold in abeyance the motion to dismiss. The North Carolina Action was subsequently voluntarily dismissed on May 3, 2016, and on May 13, 2016, Defendants’ motion to dismiss under Illinois Code of Civil Procedure Section 5/2-619 was voluntarily withdrawn. On May 27, 2016, Defendants filed motions to dismiss the Illinois Action under sections 5/2-615 and 5/2-619, and the Individual Defendants also moved to dismiss under 735 ILCS 2/301. On November 17, 2016, the Court granted the Defendants’ motions to dismiss, however, the Court also granted Plaintiff leave to amend with respect to claims against Ecolab.
 
On December 15, 2016, Plaintiff in the Illinois Action filed an amended complaint against Ecolab and the Company as Nominal Defendant. The amended complaint is captioned Paul Berger on behalf of himself and all others similarly situated v. Ecolab Inc., as Defendant, and Swisher Hygiene Inc., as Nominal Defendant (Case No. 2015 CH 13325). Plaintiff asserts a direct claim against Ecolab, stating that it aided and abetted the Swisher Hygiene Inc. directors in breaching their fiduciary duties by approving the sale of Swisher Hygiene Inc.’s assets to Ecolab and by issuing a misleading proxy statement. In addition, Plaintiff asserts a derivative claim against Ecolab, purportedly on behalf of the Company as Nominal Defendant, for alleged fraudulent transfer of assets, arising out of the same facts. Plaintiff seeks a determination that the action is a class action; a declaration that Swisher Hygiene Inc.’s directors breached their fiduciary duties and that Ecolab aided and abetted the Swisher Hygiene Inc. Directors’ purported breaches of fiduciary duty; recission of the transfer of assets; avoiding the transfer of assets pursuant to the Fraudulent Transfers Action; awarding Plaintiff damages, interest, attorneys’ fees, expert fees and costs; entering judgment against Ecolab in favor of Nominal Defendant Swisher Hygiene Inc.; and granting other relief as the Court may find just and proper. On February 10, 2017, Defendant Ecolab and Nominal Defendant Swisher Hygiene Inc., filed motions to dismiss, and on March 24, 2017 Plaintiff filed its memorandum in opposition to Defendants’ motions to dismiss. On September 1, 2017, the Court entered an order dismissing with prejudice Plaintiff’s Amended Complaint. On October 2, 2017, plaintiff filed a Notice of Appeal to the Appellate Court of Illinois, appealing the Court’s earlier dismissal of Swisher Hygiene Inc.’s board of directors as defendants, and the Court’s more recent dismissal of Plaintiff’s action against Ecolab and Swisher Hygiene Inc. In connection with Plaintiff’s appeal, Nominal Defendant Swisher Hygiene Inc. filed a cross appeal, appealing the Court’s determination not to take judicial notice of certain publicly filed documents, thereby not taking those documents into consideration when ruling on Nominal Defendant’s motion to dismiss. On December 3, 2018, the Appellate Court of Illinois affirmed the lower court’s judgement dismissing Plaintiff’s action against Nominal Defendant Swisher Hygiene Inc. and the lower court’s earlier dismissal of Swisher Hygiene Inc.’s directors as individual defendants. In addition, the Appellate Court of Illinois dismissed Plaintiff’s claim against Ecolab, but remanded that portion of the case to the lower court with instructions that Plaintiff be allowed to re-plead his complaint against Ecolab. The time to appeal or seek a rehearing of the Appellate Court of Illinois dismissal of claims against Swisher Hygiene Inc. and its directors has expired with no further action by Plaintiff.
 
 
13
 
 
Other Matters
 
Honeycrest Holdings, Ltd.
 
The Honeycrest Holdings, Ltd. v. Integrated Brands, Inc. matter relates to an extremely longstanding dispute between Honeycrest Holdings, Ltd. (“Honeycrest”) and Integrated Brands, Inc. (“Integrated”) f/k/a Steve’s Homemade Ice Cream, Inc., involving a license granted by Integrated to Honeycrest in 1990, which licensed to Honeycrest the right to manufacture and sell certain ice cream products in the United Kingdom.  In 1998, Honeycrest filed an action against Integrated (Honeycrest Holdings, Ltd. v. Integrated Brands, Inc., New York Supreme Court, Queens County (Index No. 5204/1998)) alleging a breach of the licensing agreement; Integrated responded by denying the material allegations and alleging Honeycrest had breached the license agreement.  Subsequently, Integrated merged with a subsidiary of Coolbrands International Inc. (“Coolbrands”) and in 2001, Honeycrest filed a similar action against Coolbrands and Integrated (Honeycrest Holdings, Ltd. v. Coolbrands International, Inc., et al., New York Supreme Court, Queens County (Index No. 29666/01)).  The actions against Integrated and Coolbrands have been combined (although not consolidated) for joint trial.  In 2010, Coolbrands (formerly a Canadian corporation) was domesticated in the State of Delaware as Swisher Hygiene Inc. and thereafter acquired Swisher International, Inc.  In the Sale Transaction, Swisher Hygiene Inc. sold all of the stock of Swisher International, Inc. to Ecolab, but retained indirect ownership of Integrated.  
 
In January 2016, Honeycrest filed a motion to amend the Coolbrands complaint to add Swisher Hygiene Inc. as a defendant in that case.  Honeycrest’s motion was granted on October 5, 2016.
 
On May 11, 2017, Honeycrest filed a third complaint against Swisher Hygiene Inc., Integrated Brands, Inc., 7624026 Canada Inc. (“762”), and John and Jane Does #1 through #99 in the Supreme Court of the State of New York, Queens County (the “2017 Complaint”). On September 1, 2017, the 2017 Complaint was amended (the “2017 Amended Complaint”).
 
In addition to defendants named in the earlier litigation, the 2017 Amended Complaint adds 762, a subsidiary of the Company, and unnamed individuals. This case asserts causes of action against all defendants for alleged conveyance by insolvents, for alleged intentional fraudulent conveyance of assets from Integrated to Coolbrands, and the unjust enrichment of the defendants as a result of the alleged fraudulent conveyances. Plaintiff seeks judgment against Integrated, the Company, 762 and any subsequent transferee for, inter alia, “money damages to the extent its claims against Integrated and the Company are not satisfied” and for attorneys’ fees and costs. On November 3, 2017 defendants filed a motion to dismiss Plaintiff’s Amended Complaint. On July 12, 2018, the New York Supreme Court, Queens County, granted Defendants’ motion on the grounds of forum non conveniens and dismissed the 2017 Amended Complaint against all Defendants. Following the dismissal, Plaintiff filed a notice of appeal with the New York Supreme Court, Appellate Division. Plaintiff’s supporting briefs and Defendants’ opposing brief have been filed, and the parties await oral argument and then the Appellate Division’s decision.
 
The litigation involving Honeycrest and Integrated and/or Coolbrands spans nearly 21 years, has been episodically dormant with periods of extended discovery, motion practice, mediation, attempted settlements and other activities.   The Company and its subsidiary defendants believe that the three cases filed by Plaintiff are without merit and will vigorously defend against these matters.  The costs of defending these matters, and an adverse judgement, if any, against the company defendants, will reduce assets that could otherwise be available for distribution to the Company’s stockholders. At the present time, the Company believes that there is no basis for adjusting the liability amount previously accrued for this matter (see Note 4, Liabilities) due to, among other factors, the filing and dismissal of the 2017 Amended Complaint. The foregoing summary is qualified in its entirety by the pleadings and decisions that have been filed in the foregoing cases.
 
United States Attorney’s Office (“USAO”) and Securities and Exchange Commission and related matters
 
On October 7, 2015, the Company entered into a Deferred Prosecution Agreement (the “DPA”) with the USAO relating to the USAO’s investigation of the Company’s accounting practices.  Under the terms of the DPA, the USAO filed, but deferred prosecution of, a Bill of Information charging Swisher Hygiene Inc. with conspiracy to commit securities fraud and other charges relating to the Company’s accounting and financial reporting practices reflected in the Company's originally filed Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, June 30, 2011, and September 30, 2011.  Pursuant to the DPA, the Company agreed to pay a $2 million fine to the USAO payable in four annual installments of $500,000 each if the Company is financially able to do so.  Pursuant to the terms of the DPA, the fine became immediately due and payable in full upon a change in control of the Company.  As a result, the fine was paid in full upon the closing of the Sale Transaction. Pursuant to the terms of the DPA, the Bill of Information was dismissed with prejudice on October 13, 2016.
 
 
14
 
 
On May 24, 2016, the SEC issued a settled order regarding the Company in connection with the Company's restatement of its 2011 quarterly financial statements for the periods ended March 31, 2011, June 30, 2011 and September 30, 2011 and related matters. In that settlement, the Company consented to the entry of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 (the "Securities Act") and Section 21C of the Securities Exchange Act of 1934 (the "Exchange Act"), Making Findings, and Imposing a Cease-and-Desist Order. Pursuant to that order, the Company is required to cease and desist from committing or causing any violation of Section 17(a) of the Securities Act, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and certain of the rules and regulations thereunder. No penalty was ordered by the SEC in that action.
 
Related to the USAO and the SEC investigations and resulting resolution of the Company’s accounting and financial reporting practices noted above, the United States initiated criminal proceedings against three former employees of the Company (two of whom were officers of the Company, including the Company’s former chief financial officer) (United States v. Kipp and Viard, Case No. 15-cr-00244 (U.S. District Court for the Western District of North Carolina) and United States v. Pierrard, Case No. 3:15-cr-00238 (U.S. District Court for the Western District of North Carolina)) and the SEC brought a civil action (SEC v. Kipp and Viard, Case No. 3:16-cv-00258 (U.S. District Court for the Western District of North Carolina)) against two former employees of the Company (both of whom were officers of the Company, including the Company’s former chief financial officer). The defendant in United States v. Pierrard entered a plea agreement on October 7, 2015, and pleaded guilty to one count of fraud on October 20, 2015. The criminal trial against the two former officers of the Company (United States v. Kipp and Viard) concluded during the week of March 4, 2017, and on June 20, 2017, Mr. Kipp and Ms. Viard were each found guilty of one count of conspiracy, which included conspiracy to commit securities fraud, conspiracy to make false and misleading statements to the Company’s auditors and accountants, and conspiracy to falsify the Company’s books, records and accounts. Also, on June 20, 2017, Mr. Kipp was found guilty of three additional counts; one for wire fraud, one for securities fraud, and one for bank fraud. Sentencing of the Defendants occurred on April 10, 2018, and Mr. Kipp received a prison sentence of 54 months, Ms. Viard received a prison sentence of 24 months and Mr. Pierrard received a sentence of 8 months house arrest. Both Mr. Kipp and Ms. Viard have appealed their convictions and sentencing and their appeals are pending. On February 11, 2019, final judgements were entered against Mr. Kipp and Ms. Viard in the civil action brought against them by the SEC. In the final judgement, which was consented to by the defendants, Mr. Kipp and Ms. Viard were barred from serving as officers or directors of public companies and enjoined from violating certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
 
Dissolution of the Company
 
On September 15, 2016, Swisher Hygiene Inc. mailed a “Notice of Dissolution to All Claimants of Swisher Hygiene Inc.” (the “Notice”) to potential claimants of the Company, pursuant to Section 280(a)(1) and 280(b)(1) of the General Corporation Law of the State of Delaware. In response to this mailing the Company received communications from certain of these potential claimants. Most responses resulted from confusion over similarly named legal entities which are no longer owned by the Company, and some responses related to outstanding invoices for services that have been paid by the Company in the ordinary course of business. However, the claims received also included claims related to outstanding litigation (described above and herein) and the indemnification and advancement of expense provisions in the Company’s Bylaws.
 
On November 10, 2016, the Company received correspondence from a law firm representing Honeycrest in the ongoing litigation with Integrated Brands, described above. Honeycrest’s counsel alleges its client has suffered damages of not less than $17,750,000, exclusive of prejudgment interest at the annual rate of nine percent (9%). Additionally, Honeycrest’s counsel estimates an additional $10,000,000 in damages for other unspecified claims it may have. As noted in the description of the Honeycrest litigation above, this litigation involves a commercial dispute centered on a licensing arrangement that was entered into 28 years ago, between the company that was later renamed Integrated Brands, Inc. and Honeycrest. The litigation has been ongoing for nearly 21 years, and has been episodically dormant, with periods of extended discovery, motion practice, mediation, attempted settlements and other activities. The Company believes any possible claim by Honeycrest against Swisher Hygiene Inc. or any of its subsidiaries is without merit and Swisher Hygiene Inc. intends to vigorously defend against any such claims.
 
Also in response to the Company’s Notice, the Company has received correspondence from certain attorneys representing various former officers, directors or employees of the Company asserting claims for advancement and/or indemnification from the Company in connection with the criminal proceedings involving Mr. Kipp, Ms. Viard and Mr. Pierrard (collectively, the “Defendants”), and the civil proceedings against Mr. Kipp and Ms. Viard, discussed above. Article Six of the Company’s Bylaws provides certain indemnification and advancement rights to the Company’s former directors, officers and employees. To date, in satisfaction of claims for advancement made by certain of the Company’s former officers and directors, the Company’s directors and officers insurance has paid substantial amounts to cover their reasonable attorneys’s fees and expenses.
 
 
15
 
 
The Company’s insurance carriers conducted an independent review of bills submitted to them by the respective defense teams for the Defendants, and where appropriate, rejected portions of those bills, categorizing and describing the reasons for their rejection. Mr. Kipp’s attorneys had disputed the rejection of approximately $2,900,000 of their approximately $13,700,000 billed and have demanded payment of the rejected amount from the Company’s insurance carriers and/or the Company. Other law firms and third party vendors had disputed rejections of approximately $471,000. The Company believes that through its carriers it has provided and continues to provide the Defendants with appropriate and significant resources for their continued defense and appeals and the Company disputes that Mr. Kipp’s attorneys and other law firms and vendors are entitled to recover the disputed attorneys’ fees and expenses that the insurance carriers rejected.
 
In an effort to resolve disputes over Mr. Kipp’s attorneys’ bills and future defense costs, three of the Company’s insurance carriers, counsel for Mr. Kipp and Ms. Viard and the Company participated in a mediation held in the Spring of 2018. Through ongoing discussions and negotiations, the Company, its insurers, and several law firms reached a Confidential Settlement Agreement and Claim Release agreement on September 27, 2018 (the “Confidential Settlement”). As part of the settlement process, the Company also entered into a number of supplemental letter agreements throughout the Fall of 2018 (the “Letter Agreements”) with litigation support firms and additional law firms and their clients, who as former employees of the Company were seeking indemnification for legal costs incurred. Collectively, the Confidential Settlement and Letter Agreements cover 14 settling parties and resolve substantially all claims relating to the Company’s indemnification obligations arising out of or otherwise connected with the prosecution of the Defendants, including claims against the Company and certain of its carriers. The Confidential Settlement and Letter Agreements comprise various claims, require payments typical of negotiated confidential settlements, and contain broad releases, including the release of existing and future claims related to certain specified insurance policies, and specified government investigations, criminal actions and SEC civil actions. For its part, the Company will be the beneficiary of the broad releases, but will be required to pay certain law firms and vendors an amount not to exceed $770,000, which amount the Company believes will be substantially less than the costs it otherwise would be likely to incur in defending against the settled claims. To become effective, the Confidential Settlement and Letter Agreements require approval from the Court of Chancery of the State of Delaware which has jurisdiction over the Company’s dissolution. Accordingly, on October 24, 2018, the Company filed in the Court of Chancery for the State of Delaware, a Motion for Approval of Proposed Process and To Effectuate Settlement Payments (the “Motion for Approval”). Hearing on the Motion for Approval has been scheduled for April 17, 2019. Although the Motion for Approval, if granted, would resolve a substantial number of claims against the Company, certain other claims remain outstanding, including those related to the Honeycrest litigation.
 
Based on the Company’s expectation that the Confidential Settlement and Letter Agreements will be approved by the Chancery Court of the State of Delaware, the Company has accrued and included liabilities for estimated future costs during liquidation in an amount sufficient to satisfy its obligations in the Confidential Settlement and Letter Agreements in its Consolidated Statement of Net Assets in Liquidation at December 31, 2018.
 
Although considered remote, in the event that the Confidential Settlement and Letter Agreements are not approved by the Chancery Court of the State of Delaware, it is reasonably possible that billings for which the attorneys would seek reimbursement could be significantly beyond the limits of the Company’s available insurance, in which case such fees could become the responsibility of the Company, without support from any insurance carrier. However, at this time the Company is not able to make a reasonable estimate of the possible range of any defense costs that it could be required to pay in this event. Moreover, one of the Company’s insurance carriers has indicated that if any insured individual is convicted of a deliberate criminal or deliberate fraudulent act, established by a final, non-appealable adjudication, it may seek reimbursement for amounts paid on such person’s behalf, from the Company (not from the individual for whom the payments were paid), a position that the Company vigorously opposes because it is contrary to the language and intent of the relevant insurance policy, it is inconsistent with the carrier’s prior business practice, and it is a position first expressed to the Company nearly five years after payments by the Company’s carriers commenced. Such a position, if advanced, could exhaust all of the Company’s remaining assets. Accordingly, if the Motion for Approval is not granted and if this position – which the Company believes is without merit -- is pursued, the Company will consider all options available to vigorously oppose and defeat it.
 
Litigation is subject to uncertainties, and the Company cannot predict the outcome or reasonably estimate the costs of individual matters with assurance. Because of the unpredictable and uncertain nature of legal matters, it is possible that such matters could require additional expenditures in amounts that could have a material effect on the Company’s consolidated financial condition. Additionally, although the Company maintains insurance policies, including directors and officers liability insurance, in such amounts and with such coverage and deductibles that the Company believes to be reasonable and prudent, the Company’s insurance coverage may not be adequate to protect it from all liabilities and expenses that may arise. If the Company is found liable for a claim not covered by its existing insurance, the Company may need to pay the claim from its own funds, which may or may not be sufficient to satisfy such claim and which could have a material adverse effect on the Company’s consolidated statements of net assets in liquidation and changes in net assets in liquidation.
 
 
16
 
 
On February 6, 2018, Swisher Hygiene Inc. filed a Verified Petition for Dissolution (the “Petition”) in the Court of Chancery of the State of Delaware styled In re Swisher Hygiene Inc. C.A. No. 2018-0080-SG (Del.Ch.). The Petition was filed pursuant to the dissolution and claims process outlined in Section 280 of the General Corporation Law of the State of Delaware and is a further step in the Company’s dissolution and liquidation. Section 280 of the General Corporation Law of the State of Delaware and an order of the Court of Chancery in a now-dismissed action styled Viard v. Swisher Hygiene Inc., C.A. No. 2017-0431-SG, require the Company to reserve the entire amount of its net assets in dissolution and seek court approval prior to any distribution to creditors or stockholders.
 
Under Delaware General Corporation Law, all corporations that have been dissolved shall be continued for a term of 3 years from the time of dissolution, or for such longer period as the Court of Chancery shall in its discretion direct, for the purpose of winding up the corporation. The Company filed its Certificate of Dissolution with the Secretary of State of the State of Delaware on May 27, 2016. Accordingly, the 3-year period of continuance will expire, if not extended by direction of the Court of Chancery, on May 27, 2019 (the “Continuance Date”). As noted above, the Court of Chancery has scheduled a hearing for April 17, 2019 at which it will Consider the Company’s Motion for Approval. Following the April 17, 2019 hearing the Company intends to file a separate motion with the Court of Chancery requesting approval of (i) an extension to the Continuance Date, and (ii) the Company’s plan to distribute approximately $16,867,000 to its stockholders on or around August 31, 2019. Such planned distribution must be approved by the Court of Chancery, and would only be made after the Company gives required final notice to all remaining claimants and has paid all valid liquidation claims as approved by the Court of Chancery.
 
At the present time, we expect the Court of Chancery to approve the Company’s requested extension to the Continuance Date. However, there can be no assurance that the Court of Chancery will approve the full or any amount of the Company’s requested stockholder distribution, and there can be no assurance that the Court of Chancery will approve the Company’s stockholder distribution within the time frame requested by the Company (see Note 2, “Net Assets in Liquidation”).
 
NOTE 7 — SUBSEQUENT EVENTS
 
The Company’s management evaluated subsequent events through April 2, 2019. The Company’s management is not aware of any significant events that occurred subsequent to the balance sheet date but prior to April 2, 2019 that have not otherwise been disclosed herein in these consolidated financial statements, that would have a material impact on its consolidated financial statements.
 
 
 
 
 
 
 
 
17

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