You should read the following discussion and analysis in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes thereto included in Item 1 of this Quarterly Report on Form 10-Q 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, 2011 (the "2011 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 2011 Form 10-K.

Business Overview and Outlook

Swisher Hygiene Inc. provides essential hygiene and sanitizing solutions to customers throughout much of North America and internationally through its 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 operations provide services primarily to commercial and residential customers through contracts with municipalities or other agencies.

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 outsourced waste and recycling services only through third-party providers.

See Note 16, "Subsequent Events" in the Notes to Condensed Consolidated Financial Statements for significant developments subsequent to March 31, 2012.

Segments

On March 1, 2011, the Company completed its acquisition of 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, the Company operated in two segments: Hygiene and Waste. During the quarter ended June 30, 2012, the Company's Board of Directors determined to sell its Waste segment. On November 15, 2012, the Company completed a stock sale of Choice and other acquired businesses, including Lawson Sanitation LLC, Central Carting Disposal, Inc., and FSR Transporting & Crane Services, Inc. that comprise the Waste segment, to Waste Services of Florida, Inc. for $123.3 million. As discussed in Note 2 to the Condensed Consolidated Financial Statements, the Company has applied discontinued operations accounting treatment and disclosures for this transaction on a retroactive basis. See Note 2, "Discontinued Operations" and Note 16, "Subsequent Events" of the Notes to the Condensed Consolidated Financial Statements for further information. As a result of the sale of Choice and all of its operations in the Waste segment, the Company's continuing operations are classified in one business segment, Hygiene, for fiscal year 2012.

Acquisitions

During the three months ended March 31, 2012, the Company acquired four independent businesses and the remaining non-controlling interest in one of its subsidiaries. Aggregate consideration included cash of $4.3 million, the issuance of common stock at a fair value of $37,000 and assumed debt of $1.1 million.

During the three months ended March 31, 2011, the Company acquired four of its franchisees and nine independent businesses, excluding Choice. Aggregate consideration included cash of $3.9 million, the issuance of common stock at a fair value of $1.9 million and assumed debt of $8.6 million.

Sale of Waste Segment

On November 15, 2012, the Company completed a stock sale of Choice and other acquired businesses that comprise the Waste segment, to Waste Services of Florida, Inc. for $123.3 million. The stock purchase agreement contains earn-out provisions that could provide additional sale proceeds to the Company of $1.8 million upon achievement of a predetermined revenue target and is also subject to customary purchase price adjustments, including revenue and EBITDA metrics. Ten percent of the purchase price is subject to a holdback and adjustment upon delivery of audited financial statements to the buyer.

As a result of the sale of Choice and all of its operations in the Waste segment, the Company operates in one business segment, Hygiene, for fiscal year 2012 filings. In connection with the acquisition of Choice on March 1, 2011, the Company recorded deferred tax liabilities that allowed the Company to make a determination that the valuation allowance for the deferred tax asset of $2.4 million recorded at December 31, 2010 was no longer necessary at March 31, 2011. Upon the sale of Choice in the fourth quarter of 2012 and with our history of operating losses, a valuation allowance is projected to be necessary in 2012.

Acquisition and Merger Expenses

Acquisition and merger expenses include costs directly related to the acquisition of four independent companies and one non-controlling interest in a subsidiary during the three months ended March 31, 2012. These costs include costs directly related to acquisitions and the merger and include third party due diligence, legal, accounting and professional service expenses.

Acquisition and merger expenses include costs directly related to the acquisition of our four franchisees and nine independent companies during the three months ended March 31, 2011, excluding Waste segment acquisitions, and costs directly related to our merger with CoolBrands International, Inc. These costs include costs directly-related to acquisitions and the merger and include third party due diligence, legal, accounting and professional service expenses.

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. These critical accounting policies have not changed since the filing of our annual report on Form 10-K for the year ended December 31, 2011.

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.

Adoption of Newly Issued Accounting Pronouncements

Fair Value: In May 2011, the FASB issued updated accounting guidance on fair value measurements The updated guidance resulted in common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. The Company adopted this guidance effective January 1, 2012. The adoption did not have a material impact on the disclosures of the Company's consolidated financial information.

Comprehensive Income: In June 2011 and subsequently amended in December 2011, the FASB issued final guidance on the presentation of comprehensive income. Under the newly issued guidance, net income and comprehensive income may only be presented either as one continuous statement or in two separate but consecutive statements. The Company adopted this guidance effective January 1, 2012, with net loss and comprehensive loss shown as one continuous statement.

RESULTS OF CONTINUING OPERATIONS - THREE MONTHS ENDED MARCH 31, 2012

Impact of Acquisitions

During the year ended December 31, 2011, we acquired nine franchisees and 54 independent businesses, including four in our Waste segment. During the first three months of 2012, we acquired four independent businesses. The term "Acquisitions" refers to the nine franchisees and 54 independent businesses acquired during the year ended December 31, 2011 and the four independent businesses acquired during the three months ended March 31, 2012, including the growth in existing customer revenue at the time of acquisition as well as revenue from new customer relationships created by the acquired business. See Note 16, "Subsequent Events" of the Notes to Condensed Consolidated Financial Statements for information concerning the acquisition and sale of businesses subsequent to March 31, 2012.

Revenue

We derive our revenue from the delivery of a wide variety of hygiene and sanitation products and services. We deliver these products and services on a regularly scheduled basis which include 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; and (iii) manual cleaning of their facilities. We serve customers in a wide range of end-markets with a particular emphasis on the foodservice, hospitality, retail, industrial, and healthcare industries.

Total revenue and the revenue derived from each revenue type for the three months ended March 31, 2012 and 2011 are as follows:

                                   2012          %          2011          %
Revenue                                         (In thousands)
Company-owned operations:
Chemical products                $ 40,028        68.8 %   $  9,474        44.1 %
Hygiene product and services       11,732        20.2        9,054        42.2
Rental and other                    6,098        10.5        1,554         7.2
Total Company-owned operations     57,858        99.5       20,082        93.5
Franchise products and fees           294         0.5        1,393         6.5

Total revenue                    $ 58,152       100.0 %   $ 21,475       100.0 %

Consolidated revenue increased $36.7 million to $58.2 million for the three month period ending March 31, 2012 as compared to $21.5 million for the same period in 2011. The components of the revenue growth were a $37.8 million increase in revenue from Company-owned operations offset by a $1.1 million reduction in revenue from franchise products and fees. These amounts represented revenue changes of 170.8% for total revenue, 188.1% for Company-owned operations, and (78.9 %) for franchise revenue.

Within Company-owned operations for the first three months of 2012, the $37.8 million in revenue growth from the same period in 2011 was comprised of growth in chemical products of $30.6 million from $9.5 million in 2011, hygiene services and products of $2.7 million from $9.1 million in 2011, and rental and other of $4.5 million from $1.6 million in 2011. The amounts represent increase of 322.5%, 29.6%, and 292.5%, respectively. Throughout these product lines, increases in revenue were primarily attributable to Acquisitions made by the Company in late 2010, 2011 and the first three months of 2012.

Excluding the impact of Acquisitions, revenue from Company-owned operations increased by 19.1% and total revenue increased 17.8%. The lower percentage increase in total revenue is attributable to the decline in franchise products and fees due to the purchase of Swisher franchisees.

The change in revenue mix as well as the growth of the Company-owned operations was primarily attributable to i) acquisition efforts focused on chemical product and service companies to round out our North American operating footprint, ii) our emphasis on the expansion of our core ware-washing and laundry chemical offerings both through direct sales efforts and via distributors, with a reduction in focus on our legacy hygiene services offering, and iii) strategic expansion in the linen rental marketplace.

Cost of Sales

Cost of sales consists primarily of paper, air freshener, chemical and other
consumable products sold to our customers, franchisees and international
licensees. Cost of sales for the three months ended March 31, 2012 and 2011 are
as follows:

                                2012        %(1)       2011        %(1)
Cost of Sales                               (In thousands)
Company-owned operations      $ 25,015       43.2 %   $ 7,143       35.6 %
Franchise products and fees        232       78.9       1,099       78.9

Total cost of sales           $ 25,247       43.4 %   $ 8,242       38.4 %

(1) Represents cost as a percentage of the respective product line revenue.

Cost of sales increased $17.0 million or 206.3% for the three months ended March 31, 2012 as compared to the same period in 2011, which includes $14.5 million of total cost of sales related to Acquisitions. Excluding the impact of Acquisitions, cost of sales increased $2.5 million or 30.1% for the three months ended March 31, 2012 as compared to the same period in 2011.

Company-owned operations cost of sales increased $17.9 million or 250.2% to $25.0 million for the three months ended March 31, 2012 as compared to the same period in 2011 and includes $15.4 million related to Acquisitions. Excluding the impact of Acquisitions, Company-owned cost of sales increased $2.5 million to $9.6 million or 40.6% of related revenue for the three months ended March 31, 2012 as compared to $6.3 million or 33.7% of related revenue for the same period in 2011. The increase in the amount and the percentage of Company-owned cost of sales for the three months ended March 31, 2012, is a result of the increased revenue from chemical products, including direct and wholesale chemical sales, which have a higher cost to produce versus other Company-owned products.

Route Expenses

Route expenses consist of 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 March 31, 2012 and 2011 are as follows:

                               2012         %(1)       2011        %(1)
Route Expenses                             (In thousands)
Company-owned operations:
Compensation                 $  7,509       13.0 %   $ 3,899       19.4 %

Vehicle and other expenses      3,085        5.3       1,256        6.3

Total route expenses         $ 10,594       18.3 %   $ 5,155       25.7 %

(1) Represents route expenses as a percentage of total revenue from Company-owned operations.

Route expenses increased $5.4 million or 105.5% to $10.6 million for the three months ended March 31, 2012 as compared to $5.2 million in the same period in 2011, including $4.8 million or 45.3% of total route expenses related to Acquisitions. Excluding the impact of Acquisitions, route expenses increased $0.6 million or 12.4% for the three months ended March 31, 2012 and 2011 compared to the same period in 2011 as a result of an increase in vehicle costs in the amount of $1.9 million and $3.6 million, respectively, related to the increase in revenue. As a percentage of revenue, route expenses decreased 7.4% to 18.3% due to the Company's ability to leverage its revenue growth in Company-owned operations.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of the costs incurred for:

? 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.

? Selling expenses, which include marketing expenses and compensation and commission for branch sales representatives and corporate account executives.

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

The details of selling, general and administrative expenses for the three months ended March 31, 2012 and 2011 are as follows:

                                             2012           %(1)          2011          %(1)
Selling, General & Administrative
Expenses                                                     (In thousands)
Compensation                               $  17,625          30.2 %   $   8,206          38.2 %
Occupancy                                      2,418           4.2         1,187           5.5
Other                                          9,926          17.1         4,142          19.3


Total selling, general & administrative
expenses                                   $  29,969          51.5 %   $  13,535          63.0 %

(1) Represents expenses as a percentage of the related revenue.

Selling, general, and administrative expenses increased $16.5 million or 121.4% to $30.0 million for the three months ended March 31, 2012 as compared to $13.5 million in the same period of 2011 and includes $12.3 million from Acquisitions. Excluding the impact from Acquisitions, selling, general, and administrative expenses increased $4.2 million or 31.0%.

Compensation expenses increased $9.4 million or 114.8% to $17.6 million for the three months ended March 31, 2012 as compared to $8.2 million in the same period of 2011 and includes $8.0 million related to Acquisitions. Excluding the impact from Acquisitions, hygiene compensation expense increased $1.4 million or 18.3% to $9.7 million for the three months ended March 31, 2012 as compared to the same period in 2011. This increase is primarily the result of costs related to the expansion of our corporate, field and distribution sales organizations that began in 2009 and has continued into 2012 to accelerate the growth in our core chemical program.

Occupancy expenses increased $1.2 million or 103.7% to $2.4 million for the three months ended March 31, 2012 as compared to $1.2 million in the same period of 2011 and is primarily a result of Acquisitions.

Other selling, general and administrative expenses increased $5.8 million or 139.6% to $9.9 million for the three months ended March 31, 2012 as compared to $4.1 million in the same period in 2011 and includes $2.5 million for Acquisitions. Excluding the impact from Acquisitions, other expenses increased $3.3 million or 79.7% to $7.4 million primarily due to the expansion of our business that included increases in expenses for professional fees, including $1.8 million in review-related professional fees, reserve for allowance for bad debt, utilities, office equipment, and other office and administrative expenses, many of which relate to our transition from a private company to a public company.

Acquisition and Merger Expenses

Acquisition and merger expenses of $0.1 million related to the acquisition of four independent companies during the three months ended March 31, 2012. These expenses include costs for third party due diligence, legal, accounting and other professional services fees.

Depreciation and Amortization

Depreciation and amortization consists of depreciation of property and equipment and the amortization of intangible assets. Depreciation and amortization increased $2.9 million or 134.5% to $5.0 million for the three months ended March 31, 2012 as compared to $2.1 million during the same period of 2011. This increase includes $2.7 million for Acquisitions and is primarily the result of amortization for acquired other intangible assets including customer contracts and relationships and non-compete agreements obtained as part of these acquisitions. The remaining increase is primarily related to depreciation on capital expenditures unrelated to business combinations of $25.6 million made since March 31, 2011.

Other Expense, Net

Details of other expense, net for the three months ended March 31, 2012 and 2011
follows:

                                                                 2012          2011
Interest income                                                $       -     $      16
Interest expenses                                                   (581 )        (350 )
Realized and unrealized net gain (loss) on fair value of
convertible notes                                                     29        (1,961 )
Foreign currency                                                       3            35
Other                                                                123             -

Total other expense, net                                       $    (426 )   $  (2,260 )

The net loss on debt related fair value measurements for the three months ended March 31, 2012 is the result of the required adjustment to fair value of the convertible promissory notes that were issued during the second half of 2011 and first quarter of 2012. The fair value of these convertible promissory notes is impacted by the market price of our stock. See Note 8, "Long-term Debt and Obligations" of the Notes to Condensed Consolidated Financial Statements.