Item 1B.
Unresolved Staff Comments
Not applicable.
We do not own any real estate or other physical properties. Our headquarters are located at 75080 Frank Sinatra Dr., Palm Desert, California 92211. We have agreed to pay Heckmann Enterprises, Inc., a monthly fee of $10,000 for office space and administrative services, including secretarial support. We believe that our office facilities are suitable and adequate for our current operations.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers and directors in their corporate capacity.
Item 4.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the quarter ended December 31, 2007.
PART II
Item 5.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Price Range of Common Stock
Our units, which consist of one share of our common stock, par value $0.001 per share, and one warrant to purchase a share of our common stock, trade on the American Stock Exchange under the symbol “HEK.U.” Our common stock has traded separately on the American Stock Exchange under the symbol “HEK” since November 20, 2007. Our warrants have traded separately on the American Stock Exchange under the symbol “HEK.WS” since November 20, 2007. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $6.00 commencing the later of the completion of a business combination or November 9, 2008. Our warrants will expire on November 9, 2011, or earlier upon redemption.
The following tables set forth, for the calendar quarter indicated, the high and low sale prices for the Company’s units, common stock and warrants, respectively, as reported on the American Stock Exchange.
Units
Common Stock
Warrants
Dividends
We have not paid any dividends on our common stock to date and do not intend to pay dividends prior to the completion of a business combination. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
Performance Graph
The following graph compares the cumulative total return for our common stock from November 20, 2007, the date our common stock first became separately tradable, through December 31, 2007 with the comparable cumulative return of two indices, the S&P 500 Index and the Dow Jones Industrial Average Index. The graph assumes $100 invested on November 20, 2007 in our common stock and $100 invested at that same time in each of the two listed indices.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offering
On June 21, 2007, in connection with our formation and initial capitalization, we sold 14,375,000 units at an aggregate price of $71,875, or $0.005 per unit, to our founders without registration under the Securities Act of 1933, as amended. The foregoing units were issued on June 21, 2007, and each of the recipients of such units is an “accredited investor” as defined under Regulation D of the Securities Act of 1933, as amended. As such, the foregoing units were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended. Of this total, 13,975,000 founders’ units were issued to Heckmann Acquisition, LLC, an entity owned and controlled by Mr. Heckmann, our Chairman of the Board and Chief Executive Officer. The remaining 400,000 units were issued to the members of our board of directors other than Mr. Heckmann. Upon the consummation of the Offering and the partial exercise of the over-allotment option by the underwriters, 845,000 units were redeemed for $4,225.
On October 3, 2007, we entered into amended agreements to sell 7,000,000 Warrants (the “Sponsor Warrants”) to our founders without registration under the Securities Act of 1933, as amended. The initial subscription agreements were entered into on June 21, 2007. On November 16, 2007, the Company completed the sale of 7,000,000 Sponsor Warrants at a purchase price of $1.00 per Sponsor Warrant generating gross proceeds to the Company of $7,000,000. Heckmann Acquisition, LLC, an entity owned and controlled by Mr. Heckmann, Chairman of the Board and Chief Executive Officer of the Company, purchased 5,000,000 Sponsor Warrants. The Company’s other directors purchased an aggregate of 2,000,000 Sponsor Warrants. These warrants were issued immediately prior to the consummation of our initial public offering, and each of the recipients of such warrants is an “accredited investor” as defined under Regulation D of the Securities Act, of 1933 as amended. As such, these warrants were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended. The warrants were sold for an aggregate price of $7,000,000 at a price of $1.00 per warrant. No underwriting discounts or commissions were paid with respect to such sales.
On November 16, 2007, the Company consummated its initial public offering (the “IPO”) of 54,116,800 units, including 4,116,800 units issued pursuant to the partial exercise of the underwriters’ over-allotment option. Approximately $428.1 million of the proceeds from the IPO, including approximately $19.5 million of underwriters’ deferred discount and the sale of the Sponsor Warrants, were placed in a trust account maintained by American Stock Transfer & Trust Company, acting as trustee. On November 16, 2007, we used $262,453 of our general working capital to repay the note payable to Mr. Heckmann. The note was repaid in full and cancelled.
We incurred additional offering expenses of approximately $1,034,250, which have been charged to additional paid-in capital.
As of December 31, 2007, after giving effect to our initial public offering and our operations subsequent thereto, including our withdrawal of $1.0 million of the interest earned on the funds held in the trust account through December 31, 2007, approximately $429.6 million was held in trust and we had approximately $1.5 million of unrestricted cash available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.
The following table summarizes the relevant financial data for our business and should be read in conjunction with our financial statements, and the notes and schedules related thereto, which are included in this annual report on Form 10-K.
Income Statement Data
Balance Sheet Data
As of December 31, 2007 the total assets amount includes approximately $429.6 million being held in the trust account, $408.6 million of which will be available to us for the purposes of consummating a business combination within the time period described in this annual report, with $19.5 million in deferred underwriting fees payable upon consummation of a business combination and the remaining $1.5 million being available to us for general working capital purposes. If a business combination is not so consummated, we will be dissolved and the proceeds held in the trust account will be distributed solely to our public stockholders.
We will not proceed with a business combination if public stockholders owning 30.0% or more of the shares sold in our initial public offering vote against the business combination and exercise their conversion rights.
Accordingly, we may effect a business combination if public stockholders owning less than 30% of the shares sold in our initial public offering exercise their conversion rights. If this occurred, we would be required to convert to cash up to approximately 29.99 % of the 54,116,800 shares of common stock sold in our initial public offering, or 16,235,039 shares of common stock, at an initial per share conversion price of $7.91, without taking into account interest earned on the trust account. The actual per share conversion price will be equal to the amount in the trust account, including all accrued interest, as of two business days prior to the proposed consummation of the business combination, divided by the number of shares of common stock sold in this our initial public offering.
Item 7.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our combined consolidated financial statements and the notes thereto included elsewhere in this Form 10-K.
This Form 10-K contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.
We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report on Form 10-K, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the related notes and schedules thereto.
We were formed on May 29, 2007 as a blank check company for the purpose of acquiring, through a merger, stock exchange, asset acquisition, reorganization or similar business combination, one or more operating businesses. We intend to use cash derived from the net proceeds of our initial public offering, and the exercise by the underwriters of their over-allotment option, together with any additional financing arrangements that we undertake, to effect a business combination.
On November 16, 2007, we sold a total of 7,000,000 Sponsor Warrants at a purchase price of $1.00 per Sponsor Warrant in a private placement transaction with our founding officers and directors. Of that total 5,000,000 Sponsor Warrants were sold to Heckmann Acquisition, LLC, an entity owned and controlled by Mr. Heckmann, Chairman of the Board and Chief Executive Officer of the Company, and the remaining 2,000,000 were sold to our directors other than Mr. Heckmann for an aggregate purchase price of $7,000,000. Subsequently, the 5,000,000 Sponsor Warrants held by Heckmann Acquisition, LLC were transferred to Heckmann Enterprises, Inc, an entity owned and controlled by Mr. Heckmann. On November 16, 2007, we consummated our initial public offering of 54,116,800 units (“Units”), including 4,116,800 Units pursuant to the partial Over-Allotment Option exercise, each consisting of one share of common stock and one warrant exercisable for an additional share of common stock, and received proceeds of approximately $421,071,040 net of underwriting discounts and commissions of approximately $10,823,360 (including approximately $19,482,048 of deferred underwriting discounts and commissions placed in the trust account pending completion of a business combination).
As of December 31, 2007, approximately $429.6 million was held in trust and we had approximately $1.5 million of unrestricted cash that we are entitled to withdraw from interest earned on the funds held in the trust account, available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters.
The initial target business or businesses with which we combine must have a collective fair market value equal to at least 80% of our net assets (excluding deferred underwriters’ discounts and commissions). However, we may not use all of the proceeds held in the trust account in connection with a business combination, either because the consideration for the business combination is less than the proceeds in trust or because we finance a portion of the consideration with capital stock or debt securities that we can issue. In that event, the proceeds held in the trust account as well as any other net proceeds not expended will be used to finance the operations of the target business or businesses.
We may issue additional capital stock or debt securities to finance a business combination. The issuance of additional capital stock, including upon conversion of any convertible debt securities we may issue, or the incurrence of debt, could have material consequences on our business and financial condition. The issuance of additional shares of our capital stock (including upon conversion of convertible debt securities):
•
may significantly reduce the equity interest of our stockholders;
•
will likely cause a change in control if a substantial number of our shares of common stock or voting preferred stock are issued, which may affect, among other things, result in the resignation or removal of one or more of our present officers and directors; and
•
may adversely affect prevailing market prices for our common stock.
Similarly, if we issue debt securities, it could result in:
•
default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations;
•
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach the covenants contained in any debt securities, such as covenants that require the satisfaction or maintenance of certain financial ratios or reserves, without a waiver or renegotiation of such covenants;
•
an obligation to immediately repay all principal and accrued interest, if any, upon demand to the extent any debt securities are payable on demand; and
•
our inability to obtain additional financing, if necessary, to the extent any debt securities contain covenants restricting our ability to obtain additional financing while such security is outstanding, or to the extent our existing leverage discourages other potential investors.
Through December 31, 2007, our efforts have been limited to organizational activities, activities relating to our initial public offering, activities relating to identifying and evaluating prospective acquisition candidates, and activities relating to general corporate matters. We have neither engaged in any operations nor generated any revenues other than interest income earned on the proceeds of our private placement and initial public offering. For the period ended December 31, 2007, we earned approximately $2.5 million in interest income, all of which was received into the trust account.
As of December 31, 2007, we had approximately $1.5 million of unrestricted interest earned on the funds held in the trust account available to us for our activities in connection with identifying and conducting due diligence of a suitable business combination, and for general corporate matters. The following table shows the total funds held in the trust account through December 31, 2007:
For the period ended December 31, 2007, we paid or incurred an aggregate of approximately $0.3 million in expenses for the following purposes:
•
premiums associated with our directors and officers liability insurance;
•
legal and accounting fees relating to our SEC reporting obligations and general corporate matters; and
•
miscellaneous expenses.
We believe that we will have sufficient funds to allow us to operate through December 31, 2008, assuming that a business combination is not consummated during that time. Approximately $4,500,000 of working capital over this time period will be funded from the interest earned from the funds held in the trust account. Over this time period, we anticipate incurring expenses for the following purposes:
•
payment of premiums associated with our director’s and officer’s insurance;
•
payment of estimated taxes incurred as a result of interest income earned on funds currently held in the trust account;
•
due diligence and investigation of prospective target businesses;
•
legal and accounting fees relating to our SEC reporting obligations and general corporate matters;
•
structuring and negotiating a business combination, including the making of a down payment or the payment of exclusivity or similar fees and expenses; and
•
other miscellaneous expenses.
Recent Accounting Pronouncements
Fair Value Measurements - In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. For non-financial assets and liabilities, the adoption of SFAS 157 has been deferred until January 1, 2009. We are currently evaluating the adoption of SFAS 157 and its impact on our financial position and results of operation.
The Fair Value Option for Financial Assets and Financial Liabilities - In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of SFAS 159.
Business Combinations - In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature of financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. We expect SFAS No. 141R will have an impact on our consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions we consummate after the effective date. We are still assessing the impact of this standard on our future consolidated financial statements.
Noncontrolling interests in Consolidated Financial Statements - and amendment of ARB No. 51 - In December 2007, the FASB issued SFAS No. 160, Noncontrolling interests in Consolidated Financial Statements - and amendment of ARB No. 51. The provisions of SFAS No. 160 establish accounting and reporting standards for the noncontrolling interests of a subsidiary. The provisions of SFAS No. 160 are effective for us in fiscal year 2009 and will be applied prospectively, except for the presentation of the noncontrolling interests, which for all periods would be reclassified to equity in the consolidated balance sheet and adjusted out of net income in the consolidated statements of operations. We are currently evaluating the impact of the provisions of SFAS No. 160 on our future consolidated financial statements.
Recent Developments
On February 4, and March 3, 2008, we withdrew $3,000,000 and $500,000, respectively, of interest earned on the funds held in the trust account for working capital. On March 13, 2008, we withdrew $935,000 of interest earned on the funds held in the trust account for the purposes of paying taxes on the aggregate amount of interest on the funds held in the trust account
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.
Item 7A.
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk
To date, our efforts have been limited to organizational activities and activities relating to our initial public offering and the identification of a target business. We have neither engaged in any operations nor generated any revenues. As the proceeds from our initial public offering held in trust have been invested in short term investments, our only market risk exposure relates to fluctuations in interest rates.
As of December 31, 2007, approximately $410.1 million (excluding approximately $19.5 million of deferred underwriting discounts and commissions) was held in trust for the purposes of consummating a business combination. The proceeds held in trust (including approximately $19.5 million of deferred underwriting discounts and commissions) have been invested in an institutional money market fund that invests principally in short-term securities issued or guaranteed by the United States. Given the limited risk associated with such securities, we do not view our interest rate risk to be significant. As of December 31, 2007, the effective annualized interest rate payable on our investments was approximately 4.7%.
We have not engaged in any hedging activities since our inception on May 29, 2007. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 8.
Item 8.
Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Heckmann Corporation
We have audited the accompanying balance sheet of Heckmann Corporation as of December 31, 2007 and the related statements of income, stockholders’ equity and cash flows for the period from May 29, 2007 (date of inception) through December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Heckmann Corporation as of December 31, 2007 and the results of its operations and its cash flows for the period from May 29, 2007 (date of inception) through December 31, 2007 in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
San Diego, California
March 27, 2008
HECKMANN CORPORATION
(a development stage company)
BALANCE SHEET
December 31, 2007
See accompanying notes to financial statements
HECKMANN CORPORATION
(a development stage company)
STATEMENT OF INCOME
For the period from May 29, 2007 (inception) through December 31, 2007
See accompanying notes to financial statements
HECKMANN CORPORATION
(a development stage company)
STATEMENT OF STOCKHOLDERS’ EQUITY
For the period from May 29, 2007 (inception) through December 31, 2007
See accompanying notes to financial statements
HECKMANN CORPORATION
(a development stage company)
STATEMENT OF CASH FLOWS
For the period from May 29, 2007 (inception) through December 31, 2007
See accompanying notes to financial statements
HECKMANN CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
Note 1 - Organization and Nature of Business Operations
Heckmann Corporation (the “Company”) was incorporated in Delaware on May 29, 2007 as a blank check company whose objective is to acquire, through a merger, stock exchange, asset acquisition, reorganization or similar business combination, one or more currently unidentified operating business or businesses. The Company is considered to be in the development stage and is subject to the risks associated with activities of development stage companies. All activity through December 31, 2007 relates to the company’s formation, initial public offering (the “Offering”) and efforts to identify prospective target businesses described below and in Note 3. At December 31, 2007, the Company had not commenced any operations other than analysis and development activities associated with investigation of prospective target businesses. The Company has selected December 31 as its fiscal year end.
The registration statement for the initial public offering (the “Offering”) was declared effective by the Securities and Exchange Commission on November 9, 2007. The Company closed the Offering on November 16, 2007 and received proceeds of $428,071,040 net of underwriting discounts and commissions of $10,823,360 (including $19,482,048 of deferred underwriting discounts and commissions placed in the trust account pending completion of a business combination). The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and the Over-Allotment Option Exercise, although substantially all of the net proceeds of the Offering and the Over-Allotment Option Exercise are intended to be generally applied toward consummating a business combination with an operating company or companies. As used herein, a “Target Business” shall mean one or more businesses that at the time of the Company’s initial business combination has a fair market value of at least 80% of the Company’s net assets (excluding deferred underwriting discounts and commissions of approximately $19.5 million) and a “Business Combination” shall mean the acquisition by the Company of such Target Business. Furthermore, there is no assurance that the Company will be able to successfully consummate a Business Combination.
The Company’s efforts in identifying prospective target businesses will not be limited to a particular industry. Instead, the Company intends to focus on various industries and target businesses that may provide significant opportunities for growth.
Upon the closing of the Offering $428,071,040 was placed in a trust account invested until the earlier of (i) the consummation of the Company’s initial Business Combination or (ii) the liquidation of the Company. The amount placed in the trust account consisted of the proceeds of this offering and the concurrent private placement of warrants discussed in Note 4 as well as approximately $19.5 million of deferred underwriting discounts and commissions that will be released to the underwriters on completion of a Business Combination. The remaining proceeds outside of the trust account as well as the interest income of up to $4.5 million earned on the trust account balance that may be released to the Company (as described below) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses; provided, however, that after such release there remains in the trust account a sufficient amount of interest income previously earned on the trust account balance to pay any income taxes on such $4.5 million of interest income.
The Company will seek stockholder approval before it will consummate any Business Combination, even if the Business Combination would not ordinarily require stockholder approval under applicable state law. In connection with the stockholder vote required to approve any Business Combination, the Company’s Initial Stockholders have agreed to vote the shares of common stock owned by them immediately before the Offering in accordance with the majority of the shares of common stock voted by the Public Stockholders. “Public Stockholders” is defined as the holders of common stock sold as part of the Units in the Offering or in the aftermarket. The Company will proceed with a Business Combination only if a majority of the shares of common stock voted by the Public Stockholders are voted in favor of the Business Combination and Public Stockholders owning less than 30% of the shares sold in the Offering exercise their conversion rights. If a majority of the shares of common stock voted by the Public Stockholders are not voted in favor of a proposed initial Business Combination, the Company may combine with another Target Business meeting the fair market value criterion described above within 24 months from the Offering (November 16, 2009)
If a Business Combination is approved and completed Public Stockholders voting against a Business Combination will be entitled to convert their stock into a pro rata share of the total amount on deposit in the trust account, before payment of deferred underwriting discounts and commissions and including any interest earned on their pro rata portion of the trust account, net of income taxes payable thereon, and net of any interest income of up to $4.5 million on the balance of the trust account previously released to the Company to fund its working capital requirements (subject to the tax holdback). Public Stockholders who exercise their conversion rights will continue to have the right to exercise any Warrants they may hold. It is important to note that voting against a Business Combination alone will not result in conversion of a stockholder’s shares into a pro rata share of the trust account, which only occurs when the stockholder exercises the conversion rights described above in accordance with the procedures and conditions prescribed in the Offering.
In the event the Company does not consummate a Business Combination within 24 months after consummation of the Offering, the Company will dissolve and promptly distribute only to its Public Stockholders the amount in the trust account, including accrued interest, less any income taxes payable on interest income, any interest income of up to $4.5 million on the balance of the trust account previously released to the Company to fund its working capital requirements, and up to $75,000 of accrued interest to pay the costs of the Company’s dissolution and liquidation (subject to the tax holdback), plus any remaining net assets. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including trust account assets) will be less than the price per share in the Offering.
Note 2 - Summary of Significant Accounting Policies
Cash and cash equivalents:
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The trust assets are invested in one or more money market funds.
Net income per share:
Basic net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed similar to basic net income per share, but includes the dilutive effect of shares issued pursuant to the Company’s outstanding warrants which are exercisable on the later of (i) the completion of a business combination or (ii) one year after consummation of the Company’s initial public offering.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Financial instruments:
The Company’s financial instruments consist principally of cash and cash equivalents. The Company believes the financial instruments’ recorded values approximate current values because of their nature and respective durations.
Recent accounting developments:
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. For non-financial assets and liabilities, the adoption of SFAS 157 has been deferred until January 1, 2009. We are currently evaluating the adoption of SFAS 157 and its impact on our financial position and results of operation.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of SFAS 159.
In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature of financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. We expect SFAS No. 141R will have an impact on our consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions we consummate after the effective date. We are still assessing the impact of this standard on our future consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling interests in Consolidated Financial Statements - and amendment of ARB No. 51. The provisions of SFAS No. 160 establish accounting and reporting standards for the noncontrolling interests of a subsidiary. The provisions of SFAS No. 160 are effective for us in fiscal year 2009 and will be applied prospectively, except for the presentation of the noncontrolling interests, which for all periods would be reclassified to equity in the consolidated balance sheet and adjusted out of net income in the consolidated statements of operations. We are currently evaluating the impact of the provisions of SFAS No. 160 on our future consolidated financial statements.
Note 3 - Initial Public Offering
On November 16, 2007, the Company sold to the public 54,116,800 Units, including 4,116,800 Units pursuant to the partial Over Allotment Option exercise, at a price of $8.00 per Unit. Each Unit consists of one share of the Company’s common stock, $0.001 par value, and one Redeemable Common Stock Purchase Warrant (“Warrant”). Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $6.00 commencing the later of the completion of a Business Combination with a Target Business or November 9, 2008 and expiring November 9, 2011, unless earlier redeemed. The Warrants will be redeemable at a price of $0.01 per Warrant upon 30 days notice after the Warrants become exercisable, only in the event that the last sale price of the common stock is at least $11.50 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of redemption is given.
In accordance with the Warrant Agreement related to the Warrants, the Company is only required to use its best efforts to effect the registration of the shares of common stock underlying the Warrants. The Company will not be obligated to deliver securities, and there are no contractual penalties for failure to deliver securities, if a registration statement is not effective at the time of exercise. Additionally, in the event that a registration statement is not effective at the time of exercise, the holder of such Warrant shall not be entitled to exercise such Warrant and in no event (whether in the case of a registration statement not being effective or otherwise) will the Company be required to net cash settle the warrant exercise. Consequently, the Warrants may expire unexercised and unredeemed.
Note 4 - Note Payable to Affiliate and Related Party Transactions
Mr. Richard J. Heckmann, Chairman of the Board and Chief Executive Officer of the Company loaned $258,300 to the Company to fund a portion of the expenses owed to third parties. The loan accrued interest at a rate of 3.60% per year and became payable upon the consummation of the Offering. The note was fully repaid on November 16, 2007, including accrued interest of $4,153.
Mr. Heckmann will be paid a monthly fee of $10,000, beginning upon the consummation of the Offering, for certain administrative services, including office space, utilities, and secretarial support. This arrangement is solely for the Company’s benefit and is not intended to provide its officers with compensation in lieu of salary. Through December 31, 2007, the Company had not paid any amounts in accordance with this agreement.
On November 16, 2007, Heckmann Acquisition, LLC, an entity owned and controlled by Mr. Heckmann, purchased 5,000,000 Sponsor Warrants at a price of $1 per warrant. Subsequently, the 5,000,000 Sponsor Warrants held by Heckmann Acquisition, LLC were transferred to Heckmann Enterprises, Inc, an entity owned and controlled by Mr. Heckmann. Heckmann Enterprises, Inc., has agreed that it will not sell or transfer these warrants (except in certain limited circumstances) until after the 90th day following the consummation of a business combination. In addition, on November 16, 2007, 2,000,000 Sponsor Warrants were sold to our directors other than Mr. Heckmann for an aggregate purchase price of $2,000,000.
Note 5 - Founders’ Units
On June 21, 2007, the Company sold 14,375,000 units for an aggregate purchase at a price of $71,875 or $0.005 per unit, to the Company’s founders. Each security consisted of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. Upon the consummation of the Offering and the partial exercise of the over-allotment option by the underwriters, 845,000 units were redeemed for $4,225. Of the remaining units and net of redemption, 13,152,746 founders’ units were issued to Heckmann Acquisition, LLC, an entity that is owned and controlled by Mr. Heckmann, Chairman of the Board and Chief Executive Officer of the Company. Subsequently, the 13,152,746 founders’ units held by Heckmann Acquisition, LLC were transferred to Heckmann Enterprises, Inc, an entity owned and controlled by Mr. Heckmann. The Company’s founders have agreed not to sell or transfer any of these securities, (except in certain limited circumstances), until one year after the Company consummates a business combination.
Note 6 - Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.
Note 7 - Income Taxes
The Company’s provision for income taxes consists of:
The difference between the actual income tax expense and that computed by applying the U.S. federal income tax rate of 35% to pretax income is summarized below:
Significant components of the Company’s deferred tax assets as of December 31, 2007 are shown below:
In July 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure requirements for uncertain tax positions.
The Company adopted FIN 48 upon inception. The following table summarizes the activity related to our unrecognized tax benefits:
All of the unrecognized tax benefits included above would reduce our annual effective tax rate if recognized. We do expect our unrecognized tax benefits to change over the next twelve months.
The Company is subject to taxation in the U.S. and California taxing jurisdictions. The Company’s tax returns for 2007 are subject to examination by the Federal and California tax authorities.
The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. As of December 31, 2007, the Company had no interest or penalties accrued for uncertain tax positions.
Note 8. - Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per common share:
The Company has approximately 74.6 million warrants outstanding, which are not reflected as dilutive securities since their exercisability is contingent upon the latter of November 9, 2008 or a successful Business Combination.
Note 9 - Subsequent Events
On February 4, and March 3, 2008, the Company withdrew $3,000,000 and $500,000, respectively of interest earned on the funds held in the trust account for working capital purposes. On March 13, 2008 the Company withdrew $935,000 of interest earned on the funds held in the trust account for the purposes of paying taxes on the aggregate amount of interest on the funds held in the trust account
Note 10 - Summarized Quarterly Data (unaudited)
Following is a summary of the quarterly results of operations for the periods from May 29, 2007 (inception) through December 31, 2007.
Item 9.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Not applicable.
Item 9A.
Item 9A.
Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this annual report on Form 10-K, we, including our chief executive officer, who also serves as our principal financial officer, conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon this evaluation, our chief executive officer concluded that our disclosure controls and procedures are effective in timely alerting management of any material information relating to us that is required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13-15(f) of the Securities Exchange Act of 1934) that occurred during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities Exchange Commission for newly public companies.
None.
PART III
Item 10.
Item 10.
Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
Certain information, as of March 28, 2008, with respect to each of the current officers and directors is set forth below, including their names, ages, a brief description of their recent business experience, including present occupations and employment, certain directorships that each person holds, and the year in which each person became an officer or director.
The business address of director listed below is 75080 Frank Sinatra Drive, Palm Desert, CA, 92211.
Richard J. Heckmann, Chief Executive Officer, Chairman of the Board
Mr. Heckmann, our Chief Executive Officer and Chairman of the Board, served as Chief Executive Officer and Chairman of the Board of Directors of K2 Inc., or K2, a manufacturer of sporting goods equipment, until his retirement from K2 on August 8, 2007. K2 was acquired by Jarden Corporation on August 8, 2007, and Mr. Heckmann joined the Board of Directors of Jarden Corporation. During his tenure as Chairman and Chief Executive Officer of K2 beginning in November 2002, K2 (which was in workout status at that time) more than doubled revenues, which grew from approximately $582 million for the year ended December 31, 2002 to approximately $1.4 billion for the year ended December 31, 2006 and tripled net income which grew from approximately $12.1 million for the year ended December 31, 2002 to approximately $37.7 million for the year ended December 31, 2006. Prior to his involvement in K2, Mr. Heckmann founded United States Filter Corporation in 1990 and was its Chief Executive Officer. Through a series of acquisitions, United States Filter Corporation grew from annualized revenues of approximately $17 million in 1990 to over $5 billion in 1999, when it was acquired by Vivendi S.A. of Paris, France in March 1999 for approximately $8.2 billion, including the assumption of approximately $1.8 billion of debt. Mr. Heckmann has extensive experience with business acquisitions. While he was with United States Filter Corporation, it consummated over 150 acquisitions, ranging up to $1.7 billion in value. Mr. Heckmann was directly involved in locating targets and conducting business diligence with respect to a significant number of United States Filter Corporation’s and K2’s acquisitions. During Mr. Heckmann’s tenure at K2, K2 consummated over 20 acquisitions, the largest of which was valued at $150 million. Mr. Heckmann is also part owner of the National Basketball Association Phoenix Suns franchise.
In 1971, Mr. Heckmann founded and became Chairman of the Board of Tower Scientific Corporation, which grew into the largest manufacturer of custom prosthetic devices in the United States. In 1977, Tower Scientific was acquired by the Hexcel Corporation. Mr. Heckmann is also a founding shareholder of Callaway Golf, Inc.
Mr. Heckmann was appointed associate administrator for finance and investment of the Small Business Administration in Washington, D.C., from 1978 to 1979, where he was responsible for small business lending and venture capital investments made by the United States government. He served as a director of MPS Group, Inc. from April 2003 through March 2004, Philadelphia Suburban Corporation from August 2000 through February 2002, United Rentals, Inc. from October 1997 through May 2002, Waste Management Inc. from January 1994 through January 1999 and Station Casinos, Inc. from April 1999 through March 2001. In 2003, Mr. Heckmann was appointed to a special governance committee of the New York Stock Exchange, the Corporate Accountability and Listing Standards Committee. He also served as chairman of the Listed Company Advisory Committee of the New York Stock Exchange from 2001 to 2003.
Mr. Heckmann has an agreement with K2 that prohibits him from competing with K2 for a period of three years from August 8, 2007 and prohibits him from soliciting K2’s employees or the business of any of its customers, suppliers or distributors for a period of four years from August 8, 2007. K2’s product lines consist primarily of skiing, baseball, fishing, flotation device, skateboard and paintball products. Although Mr. Heckmann’s non-competition obligation prevents us from acquiring a target company that competes in any of these product lines, our efforts in identifying a prospective target business will not be limited by industry. Because our efforts to identify and consummate a prospective business combination will be significantly broader than K2’s focus, we do not expect that Mr. Heckmann’s non-competition obligation will have a material impact on our ability to find and consummate a business combination, nor do we expect Mr. Heckmann’s non-solicitation obligation to have a material impact on us.
Lou L. Holtz, Director
Lou L. Holtz became a college football television analyst for ESPN in September 2005 after his retirement as the head football coach of the University of South Carolina in November 2004. Prior to joining the University of South Carolina in 1999, Mr. Holtz held various coaching positions, including 11 seasons at the University of Notre Dame from 1986 to 1996, two seasons at the University of Minnesota from 1984 to 1985, seven seasons at the University of Arkansas from 1977 to 1983, four seasons at North Carolina State University from 1972 to 1975 and three seasons at William and Mary from 1969 to 1971. Mr. Holtz spent 1976 as the head coach of the New York Jets of the National Football League. Mr. Holtz is a noted motivational speaker and is the author of The Fighting Spirit.
Alfred E. Osborne, Jr., Director
Dr. Alfred E. Osborne, Jr. is the Senior Associate Dean in the UCLA Anderson School of Management, a position he assumed in July 2003. He has been employed as a professor since 1972 and has served the school in various capacities over the years. Currently, he also serves as the Faculty Director of the Harold Price Center for Entrepreneurial Studies at UCLA, a position he has held since July 2003. Dr. Osborne is a member of the Board of Directors of Kaiser Aluminum, Inc., a fabricated aluminum products manufacturing company, EMAK Worldwide, Inc., a marketing services company, and Wedbush, Inc., a financial services and investment firm. Dr. Osborne also serves as a director of First Pacific Advisors’ Capital, Crescent and New Income Funds.
Dan Quayle, Director
Mr. Quayle served as a congressman, senator and the 44th Vice President of the United States. During his tenure as Vice President, President George H.W. Bush named Dan Quayle head of the Council of Competitiveness, which worked to ensure America’s international competitiveness in the 21st century. He made official visits to numerous countries and was Chairman of the National Space Council.
Since leaving public office, Dan Quayle has authored three books, including Standing Firm, A Vice-Presidential Memoir. He established and sold an insurance business in Indiana. For two years he was a distinguished visiting professor of international studies at Thunderbird, The American Graduate School of International Management.
Dan Quayle joined Cerberus in 1999, and currently serves as Chairman of Cerberus Global Investments. Cerberus is one of the world’s leading private investment firms, with over $27 billion in committed capital and offices in New York, Chicago, Los Angeles, Atlanta, London, Baarn (The Netherlands), Frankfurt, Osaka and Tokyo. As Chairman of Cerberus Global Investments, Dan Quayle has been actively involved in new business sourcing and marketing for Cerberus in North America, Asia and Europe. Mr. Quayle is currently a director of Aozora Bank, Tokyo, Japan.
Donald G. Ezzell, Vice President
Mr. Ezzell joined the company in 2007 and serves as our Vice President, General Counsel, and Secretary. Since 2000, Mr. Ezzell has concurrently served as the President of Owl Creek Investments, Ltd., a private holding company for oil & gas exploration and operating entities based in Houston, Texas, and as a Founder and Director of The General Counsel Group, P.C., a business law firm with offices in Los Angeles, California and Houston, Texas. From 1998-2000, Mr. Ezzell served as Chief Operating Officer & General Counsel to Geoworks Corporation, a publicly listed Nasdaq company in Alameda, California. Prior to that, Mr. Ezzell was in private practice as a corporate attorney with the national law firms of Arter & Hadden LLP, and Thelen Reid & Priest, LLP. Mr. Ezzell received a Bachelor’s of Arts degree from UCLA in 1985 and a Juris Doctorate from Hastings College of the Law, University of California, San Francisco, in 1989.
Number and Terms of Office of Director
The members of our Board of Directors are classified into three classes, one of which is elected at each meeting of the stockholders to hold office for a three-year term and until the successors of each such class have been elected and qualified. The members of each class are set forth below:
Our existing stockholders have not agreed to vote their shares in favor of the re-election of any member of our Board of Directors.
Legal Proceedings
The Company is not a party to any legal proceedings.
Audit Committee
We established an audit committee of the Board of Directors which consists of Dr. Osborne, as Chairman, and Mr. Heckmann and Mr. Quayle. Our Board of Directors has determined that each of Dr. Osborne and Mr. Quayle is an independent director, and that Mr. Heckmann is not independent. On or before November 16, 2009, the audit committee will consist of three members, all of whom will be independent directors. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
•
serving as an independent and objective party to monitor our financial reporting process, audits of our financial statements and internal control system;
•
reviewing and appraising the audit efforts of our independent registered public accounting firm and internal finance department;
•
providing an open avenue of communications among our independent registered public accounting firm, financial and senior management, our internal finance department, and the Board of Directors;
•
overseeing compliance with our related party transactions policy; and
•
reviewing and approving director expense reimbursement claims.
Financial Experts on Audit Committee
The audit committee complies with the independence requirements of Rule 10A-3 of the Exchange Act and the rules of the American Stock Exchange (including the transition rules for companies consummating a recent initial public offering) and is comprised of members who are “financially literate,” meaning they are able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, the audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. We believe that Dr. Osborne satisfies the definition of financial sophistication and also qualifies as an “audit committee financial expert,” as defined under the SEC’s rules and regulations.
Nominating Committee
We established a nominating committee of our board of directors, which consists of Mr. Quayle, as Chairman, and Mr. Holtz and Dr. Osborne, all of whom have been determined by our Board of Directors to be independent directors. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our Board of Directors. The nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.
Code of Ethics
We have adopted a code of ethics that applies to directors, officers and employees that complies with the rules and regulations of the American Stock Exchange.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Act of 1934, the Company’s directors and executive officers, and any persons holding 10% or more of its common stock, are required to report their beneficial ownership and any changes therein to the Commission and the Company. Specific due dates for those reports have been established, and the Company is required to report herein any failure to file such reports by those due dates. Based on the Company’s review of Forms 3, 4 and 5 filed by such persons, the Company believes that during the fiscal year ended December 31, 2007 all Section 16(a) filing requirements applicable to such persons were met in a timely manner.
Conflicts of Interest
In order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, our Chief Executive Officer and each of our directors has agreed, until the earliest of our initial business combination, our liquidation or such time as he ceases to be an officer or director, to present to our company for our consideration, prior to presentation to any other entity, any business opportunity with a fair market value of $200 million, subject to any pre-existing fiduciary or contractual obligations he might have. Mr. Heckmann, as our Chief Executive Officer, will determine whether we pursue any potential transaction presented to us. We have also agreed not to consummate a business combination with an entity with which our officers and directors are affiliated. Furthermore, neither Heckmann Enterprises, Inc., nor any of our directors, nor any entity with which they are affiliated, will be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate the consummation of our initial business combination. We will not enter into a business combination with any of our officers, directors, any of their affiliates or any portfolio company of any of their affiliates.
Potential investors should be aware of the following potential conflicts of interest:
•
Our directors currently are, and may in the future become, affiliated with entities, including other blank check companies, engaged in business activities similar to those we intend to conduct.
•
Although Mr. Heckmann has expressed his full time commitment to our success, he is not required to devote any specific number of hours to our affairs and accordingly, may have conflicts of interest in allocating his time among various business activities.
•
In the event we dissolve and liquidate because we fail to complete a business combination, the shares and warrants owned by our founders will be worthless, resulting in potentially significant losses to them. Our founders’ desire to avoid rendering their securities worthless may result in a conflict of interest when they determine whether the terms, conditions and timing of a particular business combination are appropriate and in our stockholders’ best interests, and the conflict of interest will increase as we approach November 16, 2009 and we have not consummated a business combination.
•
Certain of our directors may enter into consulting or employment agreements with us as part of a business combination, pursuant to which they may be entitled to compensation for their services which may influence their motivation in identifying and selecting a target acquisition, and timely completing a business combination.
•
Our directors may have a conflict of interest with respect to evaluating a particular business combination, if the retention or resignation of any such directors were included by a target business as a condition to any agreement with respect to a business combination.
•
Our directors may purchase shares of common stock in the open market. If they did, they would be entitled to vote such shares as they choose on a proposal to approve a business combination.
We cannot assure you that any of the above-mentioned conflicts will be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
•
the corporation could financially undertake the opportunity;
•
the opportunity is within the corporation’s line of business; and
•
it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of their multiple business affiliations, our directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. In order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, each of our directors (including Mr. Heckmann, our Chief Executive Officer), have signed letter agreements with us pursuant to which they have agreed, until the earliest of our initial business combination, our liquidation or such time as he ceases to be a director, to present to our company for our consideration, prior to presentation to any other entity, any business opportunity with a fair market value of $200 million or more, subject to certain pre-existing fiduciary or contractual obligations he might have. The following table lists our directors, their affiliated entities with which a conflict of interest is reasonably likely and the priority for or against us reflected in the agreements.
Director
Affiliated Entities
Priority
Richard Heckmann
Jarden Corporation
Mr. Heckmann will first present any business opportunity with a fair market value of $200 million or more to us, subject only to Mr. Heckmann’s contractual obligation not to compete with K2, Inc., a subsidiary of Jarden Corporation.
Alfred E. Osborne, Jr.
Kaiser Aluminum, Inc.,
EMAK Worldwide, Inc.,
Wedbush, Inc.
Dr. Osborne may be required to present any business opportunity with a fair market value of $200 million or more to his other affiliated entities before presenting such opportunity to us.
Dan Quayle
Cerberus Global
Investments
Mr. Quayle may be required to present any business opportunity with a fair market value of $200 million or more to Cerberus Global Investments before presenting such opportunity to us.
Messrs. Osborne and Quayle may be required to present business opportunities to their affiliated entities if the business opportunity is within the line of business of their affiliated entities. For a description of the lines of business of Messrs. Osborne and Quayle’s affiliated entities, see “Directors and Executive Officers.”
Our Board of Directors will be responsible for enforcing the agreement, and we do not intend to grant waivers of this provision of the letter agreements.
In connection with the vote required for our initial business combination, all of our founders have agreed to vote their respective shares of common stock in the same manner as a majority of the outstanding shares held by our public stockholders. In addition, they have agreed to waive their respective rights to participate in any liquidation distribution with respect to the 13,530,000 founders’ shares. Any common stock acquired by founders after our initial public offering will be considered part of the holdings of the public stockholders. These founders will have the same rights as other public stockholders with respect to such shares, including voting rights in connection with a potential business combination. Accordingly, they may vote such shares on a proposed business combination any way they choose.
In order to reduce the potential for actual or apparent conflicts, we will not acquire or invest in any company that is an affiliate of an entity with which a member of our Board of Directors or management is affiliated.
Item 11.
Item 11.
Compensation for Officers and Directors
No executive officer has received any cash compensation for services rendered to us. We are paying Mr. Heckmann a fee of $10,000 per month for providing us with administrative services, but only until the consummation of a business combination. Other than the fee payable to Mr. Heckmann, no compensation of any kind, including finder’s fees, consulting fees or other similar compensation, will be paid to any of our officers, directors, founders or any of their respective affiliates, prior to or in connection with a business combination. However, such individuals and entities are being reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target acquisitions and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses by anyone other than our audit committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged. Because of the foregoing, we will generally not have the benefit of independent directors examining the propriety of expenses incurred on our behalf and subject to reimbursement.
Item 12.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of our securities as of March 28, 2008 by:
•
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
•
each of our officers and directors; and
•
all our officers and directors as a group (four persons).
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the sponsor warrants or our other outstanding warrants, as we do not believe that these warrants will become exercisable within 60 days of March 25, 2008.
(1)
Based on a total of 67,646,800 shares of the Company’s common stock issued and outstanding on March 25, 2008.
(2)
Heckmann Enterprises, Inc. is the record holder of all of these shares. Mr. Heckmann is the sole shareholder of Heckmann Enterprises, Inc. , and may be considered to have beneficial ownership of Heckmann Enterprises, Inc.’s interests in us. Mr. Heckmann disclaims beneficial interest of any shares in which he does not have a pecuniary interest.
(3)
Based upon information contained in the Schedule 13G filed February 6, 2008 by HBK Investments, L.P., HBK Services, LLC, HBK Partners II, L.P., HBK Management LLC, and HBK Master Fund, L.P.
(4)
Based upon information contained in the Schedule 13G filed February 13, 2008 by The Baupost Group, L.L.C., SAK Corporation and Seth A. Klarman. Pursuant to the Schedule 13G, Mr. Klarman is the sole director of SAK Corporation, which serves as manager for The Baupost Group.
(5)
Based upon information contained in the Schedule 13G filed January 30, 2008 by QVT Financial LP, QVT Financial GP LLC, QVT Fund LP, and QVT Associates GP, LLC.
(6)
Based upon information contained in the Schedule 13G filed January 25, 2008 by Millenco LLC, Millennium Management LLC and Israel A. Englander. Pursuant to the Schedule 13G, Mr. Englander serves as the managing member of Millennium Management LLC, the manager of Millenco LLC. As a result, each of Mr. Englander and Millennium Management LLC may be deemed to have voting and investment discretion over the securities owned by Millenco LLC.
Our founders own 20% of the issued and outstanding shares of our common stock. Because of the ownership block held by our founders, our founders may be able to effectively exercise control over all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions other than approval of a business combination.
Item 13.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
On June 21, 2007, we issued 14,375,000 units to our founders (13,500,000 net of redemption) for an aggregate purchase price of $71,875 in cash, or $0.005 per unit. Of this total, 13,152,746 founders’ units are held by Heckmann Enterprises, Inc., an entity that is owned by our Chairman and Chief Executive Officer, Mr. Heckmann, 188,628 founders’ units are held by Mr. Holtz, and 94,122 founders’ units are held by each of Dr. Osborne and Mr. Quayle.
Immediately prior to the consummation of our initial public offering, we privately sold 7,000,000 warrants at a price of $1.00 per warrant, for an aggregate purchase price of $7,000,000, to our founders. We sold 5,000,000 of these warrants to Heckmann Acquisition, LLC, an entity that is owned by our Chairman and Chief Executive Officer, Mr. Heckmann. In addition, we privately sold a total of 2,000,000 warrants to our directors other than Mr. Heckmann. The proceeds we receive from the sale of these warrants were placed in the trust account for the benefit of our public stockholders. These warrants are identical to the warrants sold in our initial public offering, except that the sponsors’ warrants will not be redeemable by us so long as they are held by a founder or a founder’s permitted transferee. In addition, our founders have agreed not to transfer, assign or sell any of their sponsors’ warrants or underlying shares (subject to certain limited exceptions for estate planning purposes) until the 90th day following the consummation of a business combination. Our founders have agreed not to transfer, assign or sell any of these securities until one year after we consummate a business combination, except that the 7,000,000 sponsors’ warrants may be transferred after the 90th day following the consummation of a business combination. Our founders have also agreed to waive their right to receive distributions upon our dissolution and liquidation prior to a business combination with respect to their founders’ shares.
The holder of these securities will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of the registration statement. The holder of these securities will be entitled to make up to two demands that we register these shares and can elect to exercise these registration rights at any time commencing three months prior to the date on which the lock-up period for the securities expires, provided that any registration statement will not become effective before the applicable lock-up periods for these securities expires. In addition, the holder of these securities will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the date on which the lock-up period for these securities expires. We will bear the expenses incurred in connection with the filing of any such registration statements other than underwriting commissions incurred by the holders.
We will pay to Mr. Heckmann a monthly fee of $10,000 for certain administrative services, including office space, utilities and secretarial support. This arrangement is solely for our benefit and is not intended to provide our officers with compensation in lieu of a salary.
We will reimburse our officers and directors, subject to approval of our audit committee for any reasonable out-of-pocket expenses incurred by them in connection with activities on our behalf such as identifying and investigating possible target acquisitions and business combinations. There is no limit on the amount of these out-of-pocket expenses reimbursable by us, which will be reviewed only by our audit committee or a court of competent jurisdiction if such reimbursement is challenged.
Other than the $10,000 administrative fee payable to Mr. Heckmann and reimbursable out-of-pocket expenses payable to our officers and directors, no compensation or fees of any kind, including finder’s and consulting fees, will be paid to any of our founders, or to any of their respective affiliates or family members for services rendered to us prior to or with respect to our initial business combination; however, to the extent that such out-of-pocket expenses exceed our available funds outside of the trust account, such out-of-pocket expenses will not be reimbursed unless we complete a business combination.
Mr. Heckmann loaned us $258,300 to fund a portion of the expenses owed by us to third parties. The loan and accrued interest at a rate of 3.60% per year was fully repaid on November 16, 2007.
All ongoing and future transactions between us and any of our officers and directors and their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable than are available from unaffiliated third parties. Such transactions or loans, including any forgiveness of loans, will require prior approval by a majority of our disinterested “independent” directors (to the extent we have any) or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors (or, if there are no “independent” directors, our disinterested directors) determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties. We will not enter into a business combination or invest alongside any of our directors, officers, any affiliate of ours or of any of our directors or officers or a portfolio company of any affiliate of our directors or officers.
Director Independence
Our Board of Directors has determined that Messrs. Holtz and Quayle and Dr. Osborne are “independent directors” as defined in Rule 10A-3 of the Exchange Act and the rules of the American Stock Exchange. In general, an “independent director” is a person other than an officer or employee of ours or any other individual having a relationship, which, in the opinion of our Board of Directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our independent directors will have regularly scheduled meetings at which only independent directors will be present.
Item 14.
Item 14.
Principal Accounting Fees and Services
Fees for professional services provided by our independent registered public accounting firm since inception include:
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings.
Policy on Board Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The audit committee is responsible for appointing, setting compensation, and overseeing the work of the independent auditor. In recognition of this responsibility, the audit committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.
PART IV
Item 15.
Item 15.
Exhibits, Financial Statement Schedules
2. Financial Statement Schedule(s):
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Date: March 28, 2008 By: /s/ Richard J. Heckmann
Name: Richard J. Heckmann
Title: Chairman of the Board,
Chief Executive Officer, and
Chief Financial Officer
(Principal Executive Officer and
Principal Financial Officer)
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