1403853--3/11/2010--Heckmann

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Risks Related to Our Company We are involved in litigation with Xu Hong Bin, China Water s former president and chairman, related to our intended cancellation of approximately 5.3 million shares of our common stock held by Xu, the outcome of which cannot be predicted with certainty. A business strategy of making acquisitions subjects us to all of the risks inherent in identifying, acquiring and operating newly acquired businesses. Future charges due to possible impairments of acquired assets may have a material adverse effect on our financial condition and results of operations. Fallout from the global financial crisis could have a negative impact on our results of operations. We do not believe that the estimates provided to us by China Water in connection with our acquisition will be achieved in 2010. We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain. Our ability to succeed will largely depend upon the efforts of our directors and officers, and in particular our chief executive officer, Mr. Richard J. Heckmann. The loss of Mr. Heckmann could affect our ability to operate. There are material weaknesses in our internal control over financial reporting that could cause investors to lose confidence in our reported financial information and thereby cause a decline in our stock price. The results of China Water during the 10 month pre-acquisition period ended October 30, 2008 have not been audited. Changes to the fair market or carrying value of our investments in China Bottles, Inc. and UGSI could affect the value of our investment and any potential recordable income from the investments, which could result in a substantial write down. Risks Related to our Domestic Segment s Business Operations We have operated our recently acquired water disposal and pipeline business for just two quarters, and we may not achieve all the benefits anticipated. Our new pipeline operations and expansion plans could be delayed. Our initial anticipated revenue from new pipeline operations is currently from three principal customers. A portion of our domestic business will be operated through a joint venture in which our rights to control business decisions are limited. Our joint venture has not commenced operations. Any interruption in our services due to pipeline breakdowns or necessary maintenance could impair our financial performance and negatively affect our brand. Our domestic segment s operations may fluctuate due to seasonality and commodity fluctuations. Changes to the existing environmental laws and regulations governing the transport and disposal of produced water may cause us to incur additional costs that could have an adverse impact on our financial position, and we may not be able to comply with such laws and regulations. Risks Related to Our International Segment s Business Operations We face risks associated with recent acquisitions by China Water and if we fail to successfully integrate these acquired businesses our operating results will be negatively affected. Part of our strategy for China Water involves the development of new products and if we fail to timely develop new products or incorrectly gauge the potential market for new products, our financial results may suffer. The revenues of our China business are highly concentrated in a single customer, Coca-Cola China, and we would be harmed if Coca-Cola China reduces its orders. We face increasing competition which may negatively impact our market share and profit margins. Any interruption in our production could impair our financial performance and negatively affect our brand. Limitations on or the unavailability of natural resources or energy resources needed to operate our business in China would impair our profitability. Increases in raw material prices that we are unable to pass on to our customers would reduce profit margins. Any difficulties or delays in delivery or poor handling by distributors and third party transport operators may affect our sales and damage our reputation. We may ineffectively allocate and balance the supply of our bottled water products among our distribution channels. Our products may become subject to recall in the event of defects or other performance related issues. Our results of operations may fluctuate due to seasonality. Changes to the existing environmental and food and hygiene laws and regulations in China may cause us to incur additional costs that could have an adverse impact on our financial position, and we may not be able to comply with such laws and regulations. Risks Related to Doing Business in China Adverse changes in political and economic policies of China s government could impede the overall economic growth of China, which could reduce the demand for our products and damage our business. Uncertainties with respect to China s legal system could limit the legal protections available to the Company and its stockholders. China s government exerts substantial influence over the manner in which we must conduct our business activities. Past or future violations of complicated Chinese regulations governing merger and acquisition activity involving domestic Chinese companies could materially adversely affect our business. China Water s business will suffer if it loses its land use rights. Any failure to fully comply with China s labor laws could cause potential liability. Accounting laws in China mandate accounting practices which may not be consistent with United States generally accepted accounting principles and therefore our financials and their interpretation involve uncertainties. Restrictions on currency exchange may limit our ability to receive and use sales revenue effectively. Fluctuations in exchange rates could adversely affect our business and the value of our securities. Risks Related to Our Common Stock Our stockholders would experience substantial dilution in their investment as a result of subsequent exercises of outstanding warrants and the issuance of additional shares of common stock. Our stock price could be affected because a substantial number of shares of our common stock will be available for sale in the future. Our stock price may be volatile, which could result in substantial losses for investors in our securities. We currently do not intend to pay any dividends on our common stock. We are subject to anti-takeover effects of certain charter and bylaw provisions and Delaware law, as well as of our substantial insider ownership.

Full 10-K form ▸

1403853--3/11/2010--Heckmann_CORP