Heckmann (NYSE:HEK)

This Form 8-K is being filed to confirm that Heckmann Corporation (the “Company”) has concluded that the financial statements of China Water and Drinks, Inc. (“China Water”), as and for the six months ended June 30, 2008, as provided by China Water’s former management and included in Heckmann Corporation’s Form S-4 Registration Statement No. 333-151670, should not be relied upon by investors.

Although this formal conclusion is made as of the date hereof, the Company notes that it has filed several periodic and other reports with the United States Securities and Exchange Commission (“SEC”) that alerted investors to the lack of reliability relating to the China Water 2008 financial statements. In addition, concurrently with the filing of this Form 8-K, the Company is filing a Form 10-K/A for the period ended December 31, 2009 that includes, among other things, the results of an independent audit of the financial statements of China Water for and as of the ten months ended October 29, 2008, the date when the Company acquired China Water. The audited China Water financial statements included in the 2009 10-K/A reflect substantially different financial results with respect to China Water from the results provided by China Water’s former management as reported in various periodic and other reports filed with the SEC by China Water, certain of which were included in the Company’s Form S-4 dated as recently as October 1, 2008, including the following:

  •   China Water’s revenues for 2008 have been materially reduced from those reported by prior China Water management, to $9.8 million for the audited period from January 1, 2008 to October 29, 2008. Former management of China Water reported revenues for the six months ended June 30, 2008 of approximately $48 million and revenues for the ten month period ended October 29, 2008 of over $85 million.  

  •   China Water’s total operating expenses have been materially increased from those reported by prior China Water Management, to $112.5 million for the audited period from January 1, 2008 to October 29, 2008. Former management of China Water reported total operating expense for the six months ended June 30, 2008 of approximately $32.4 million.  

  •   China Water’s net loss has been materially increased from the net loss reported by prior China Water management, to $(121.0) million for the audited period from January 1, 2008 to October 29, 2008. Former management of China Water reported a net loss for the six months ended June 30, 2008 of approximately $(22.0) million.
 

“China Water and Drinks’ sales for the first quarter of 2009 were soft reflecting not only the seasonally slow first quarter but also the economic slowdown across most sectors in China. We also experienced collection issues and a general lack of liquidity in our non-OEM customer base. Additionally, we discovered what we believe was financial misconduct and the diversion of cash deposits by former management of China Water. We have not only removed them from the organization, but as indicated above, moved to cancel all of their shares in Heckmann Corporation and are pursuing other remedies. With the share cancellations we will have reduced our shares issued in the China Water transaction by 48% and our outstanding share count by 23% overall. Through these determined actions, we feel that we are in a better position than we started from which to effectively manage and grow this business, and overall, our stockholders have captured more value out of their holdings. We remain confident in the prospects for China Water to expand market share in key regions in China over both the near and long term.

Source: Business Wire (May 8, 2009)

On June 3, 2009, Xu Hong Bin, the former Chief Executive Officer of China Water and Drinks Inc. and his affiliated entity, Kotex Development Corp.  served a complaint filed June 1, 2009 in the Court of Chancery for the State of Delaware making various claims against Heckmann Corporation and/or our directors and certain of our executive officers, which claims allegedly arise out of the Company’s alleged cancellation of approximately 5.3 million shares of Company common stock held by Xu and/or Kotex.

Specifically, Xu and Kotex allege that the Company’s purported cancellation of their shares is a breach of the Escrow Resolution and Transition Agreement between them and the Company, which was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008.

Heckmann Corp believes Xu’s and Kotex’s claims are without merit and intend to vigorously contest this litigation. In addition, we intend to expand our claims against Xu and Kotex and seek appropriate remedies for misappropriation of corporate assets, financial misconduct, and misrepresentations concerning the strength of the business of China Water.

Source: SEC Form 8K (June 3, 2009)