saex-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10–Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2019

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

 

Commission File Number 001-35471

 

SAExploration Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

27-4867100

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

1160 Dairy Ashford Road, Suite 160, Houston, Texas, 77079

(Address of principal executive offices)

(Zip Code)

 

(281) 258-4400

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001

 

SAEX

 

NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes      No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No 

 

As of January 27, 2020, the registrant has 4,299,670 shares of common stock outstanding.

 

 

 

 


 

EXPLANATORY NOTE

 

SAExploration Holdings, Inc. (together with its subsidiaries, “we,” “our” or “us”) has filed an amendment to our Annual Report on Form 10–K for the year ended December 31, 2018 (the “Form 10–K/A”), to amend and restate our consolidated financial statements and related footnote disclosures as of December 31, 2018 and 2017 and for the years ended December 31, 2018 and 2017 (including the unaudited quarterly periods within 2018 and 2017).  The Form 10–K/A also includes under “Item 6. Selected Financial Data” restated selected consolidated statement of operations data for the years ended December 31, 2016, 2015 and 2014 and restated selected consolidated balance sheet data as of December 31, 2016, 2015 and 2014. Accordingly, this Form 10–Q for the quarterly period ended September 30, 2019 (this “Form 10–Q”) contains our restated unaudited condensed consolidated financial statements and related disclosures as of December 31, 2018 and for the three–month and nine–month periods ended September 30, 2018.  These unaudited condensed consolidated financial statements include our accounts and those of our subsidiaries that are wholly–owned, controlled by us or a variable interest entity (“VIE”).

 

Please see the “Explanatory Note” to the Form 10–K/A and “Note 3. Restatement of Previously Reported Consolidated Financial Statements” and “Note 24. Quarterly Data” to our consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” of the Form 10–K/A for additional information about the restatement.  We delayed the filing of this Form 10–Q pending the restatement described therein.

 

For a description of the effect of the restatement as of December 31, 2018 and for the three–month and nine–month periods ended September 30, 2018, see “Note 2. Restatement of Previously Reported Unaudited Condensed Consolidated Financial Statements” to our consolidated financial statements in “Item 1.  Financial Statements” contained herein.  In connection with the restatement of our consolidated financial statements in the Form 10–K/A, management determined that material weaknesses exist in our internal control over financial reporting and that our disclosure controls and procedures were ineffective during the Non–Reliance Periods.  For a description of the material weaknesses identified by management and management’s implemented and planned remediations for those material weaknesses, please see “Item 4. Controls and Procedures” contained herein.

 

(i)


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

Part I. FINANCIAL INFORMATION

 

1

Item 1. Financial Statements

 

1

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

 

1

Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2019 and 2018

 

2

Condensed Consolidated Statements of Comprehensive Loss for the Three Months and Nine Months Ended September 30, 2019 and 2018

 

3

Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Nine Months Ended September 30, 2019 and 2018

 

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

 

6

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 4. Controls and Procedures

 

31

Part II. OTHER INFORMATION

 

34

Item 1. Legal Proceedings

 

34

Item 1A. Risk Factors

 

34

Item 3. Defaults upon Senior Securities

 

34

Item 5. Other Events

 

34

Item 6. Exhibits

 

35

Signatures

 

38

 

 


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

SAExploration Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except number of shares)

(Unaudited)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

 

 

 

 

 

(Restated)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,378

 

 

$

7,579

 

Restricted cash

 

 

257

 

 

 

271

 

Accounts receivable, net

 

 

27,140

 

 

 

26,463

 

Deferred costs on contracts

 

 

5,360

 

 

 

3,746

 

Prepaid expenses and other current assets

 

 

4,102

 

 

 

2,843

 

Total current assets

 

 

50,237

 

 

 

40,902

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $89,372 and $81,904, respectively

 

 

27,881

 

 

 

35,334

 

Multiclient seismic data library, net

 

 

3,684

 

 

 

4,733

 

Operating lease right-of-use assets

 

 

6,976

 

 

 

 

Goodwill

 

 

1,736

 

 

 

1,687

 

Intangible assets, net of accumulated amortization of $1,157 and $932, respectively

 

 

3,828

 

 

 

4,066

 

Tax credits receivable, net

 

 

12,104

 

 

 

13,198

 

Deferred income taxes

 

 

56

 

 

 

2,160

 

Other assets

 

 

270

 

 

 

267

 

Total assets

 

$

106,772

 

 

$

102,347

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,691

 

 

$

10,103

 

Accrued liabilities

 

 

7,724

 

 

 

10,498

 

Income and other taxes payable

 

 

2,600

 

 

 

3,331

 

Operating lease liabilities

 

 

3,056

 

 

 

 

Current portion of long-term debt and finance leases

 

 

582

 

 

 

7,837

 

Deferred revenue

 

 

5,432

 

 

 

4,357

 

Total current liabilities

 

 

30,085

 

 

 

36,126

 

 

 

 

 

 

 

 

 

 

Long-term debt and finance leases

 

 

103,358

 

 

 

83,205

 

Other long-term liabilities

 

 

4,318

 

 

 

380

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Common stock, 4,299,670 and 3,100,496 shares outstanding, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

235,583

 

 

 

232,661

 

Accumulated deficit

 

 

(266,453

)

 

 

(249,349

)

Accumulated other comprehensive loss

 

 

(2,435

)

 

 

(3,035

)

Treasury stock, at cost, 208,009 and 111,245 shares, respectively

 

 

(2,232

)

 

 

(1,866

)

SAExploration stockholders’ deficit

 

 

(35,537

)

 

 

(21,589

)

Noncontrolling interest

 

 

4,548

 

 

 

4,225

 

Total stockholders’ deficit

 

 

(30,989

)

 

 

(17,364

)

Total liabilities and stockholders’ deficit

 

$

106,772

 

 

$

102,347

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

SAExploration Holdings, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months

Ended September 30,

 

 

Nine Months

Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

(Restated)

 

 

 

 

 

 

(Restated)

 

Revenue from services

 

$

23,274

 

 

$

15,003

 

 

$

205,866

 

 

$

69,009

 

Cost of services

 

 

17,075

 

 

 

16,193

 

 

 

162,122

 

 

 

61,908

 

Depreciation and amortization

 

 

2,930

 

 

 

2,951

 

 

 

9,405

 

 

 

7,667

 

Gross profit (loss)

 

 

3,269

 

 

 

(4,141

)

 

 

34,339

 

 

 

(566

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

13,698

 

 

 

14,576

 

 

 

33,806

 

 

 

28,628

 

Misappropriation of funds

 

 

55

 

 

 

265

 

 

 

328

 

 

 

626

 

Total operating expenses

 

 

13,753

 

 

 

14,841

 

 

 

34,134

 

 

 

29,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

 

(10,484

)

 

 

(18,982

)

 

 

205

 

 

 

(29,820

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(3,714

)

 

 

(4,738

)

 

 

(10,843

)

 

 

(10,225

)

Foreign exchange loss, net

 

 

(1,351

)

 

 

(331

)

 

 

(851

)

 

 

(2,510

)

Other income, net

 

 

1,875

 

 

 

1,372

 

 

 

2,788

 

 

 

1,609

 

Total other expense, net

 

 

(3,190

)

 

 

(3,697

)

 

 

(8,906

)

 

 

(11,126

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(13,674

)

 

 

(22,679

)

 

 

(8,701

)

 

 

(40,946

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

(689

)

 

 

(48

)

 

 

5,830

 

 

 

(83

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(12,985

)

 

 

(22,631

)

 

 

(14,531

)

 

 

(40,863

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling interest

 

 

 

 

 

10

 

 

 

2,573

 

 

 

904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to SAExploration

 

$

(12,985

)

 

$

(22,641

)

 

$

(17,104

)

 

$

(41,767

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share (basic and diluted)

 

$

(1.64

)

 

$

(8.41

)

 

$

(2.19

)

 

$

(45.34

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

7,930

 

 

 

3,384

 

 

 

7,818

 

 

 

2,090

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

SAExploration Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

 

 

Three Months

Ended September 30,

 

 

Nine Months

Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

(Restated)

 

 

 

 

 

 

(Restated)

 

Net loss

 

$

(12,985

)

 

$

(22,631

)

 

$

(14,531

)

 

$

(40,863

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

990

 

 

 

192

 

 

 

600

 

 

 

2,005

 

Comprehensive loss

 

 

(11,995

)

 

 

(22,439

)

 

 

(13,931

)

 

 

(38,858

)

Less: comprehensive income attributable to noncontrolling interest

 

 

 

 

 

10

 

 

 

2,573

 

 

 

904

 

Comprehensive loss attributable to SAExploration

 

$

(11,995

)

 

$

(22,449

)

 

$

(16,504

)

 

$

(39,762

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

SAExploration Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

(In thousands)

(Unaudited)

 

Three Months Ended September 30, 2019

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

(Restated)

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit (Restated)

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit (Restated)

 

Balances at June 30, 2019

 

$

 

 

$

235,638

 

 

$

(253,468

)

 

$

(3,425

)

 

$

(2,232

)

 

$

(23,487

)

 

$

5,298

 

 

$

(18,189

)

Net (loss) income

 

 

 

 

 

 

 

 

(12,985

)

 

 

 

 

 

 

 

 

(12,985

)

 

 

 

 

 

(12,985

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

990

 

 

 

 

 

 

990

 

 

 

 

 

 

990

 

Equity-based compensation cost

 

 

 

 

 

(55

)

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

 

 

 

(55

)

Distributions to noncontrolling

  interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(750

)

 

 

(750

)

Balances at September 30, 2019

 

$

 

 

$

235,583

 

 

$

(266,453

)

 

$

(2,435

)

 

$

(2,232

)

 

$

(35,537

)

 

$

4,548

 

 

$

(30,989

)

 

Three Months Ended September 30, 2018

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

(Restated)

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit (Restated)

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit (Restated)

 

Balances at June 30, 2018

 

$

 

 

$

177,023

 

 

$

(208,010

)

 

$

(3,269

)

 

$

(288

)

 

$

(34,544

)

 

$

5,464

 

 

$

(29,080

)

Net (loss) income

 

 

 

 

 

 

 

 

(22,641

)

 

 

 

 

 

 

 

 

(22,641

)

 

 

10

 

 

 

(22,631

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

192

 

 

 

 

 

 

192

 

 

 

 

 

 

192

 

Equity-based compensation cost

 

 

 

 

 

6,473

 

 

 

 

 

 

 

 

 

 

 

 

6,473

 

 

 

 

 

 

6,473

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,578

)

 

 

(1,578

)

 

 

 

 

 

(1,578

)

Accretion of discount on Series

  A preferred stock

 

 

 

 

 

(5,336

)

 

 

 

 

 

 

 

 

 

 

 

(5,336

)

 

 

 

 

 

(5,336

)

Dividend on Series A preferred

  stock

 

 

 

 

 

(495

)

 

 

 

 

 

 

 

 

 

 

 

(495

)

 

 

 

 

 

(495

)

Conversion of Series A

  preferred stock

 

 

 

 

 

(15,427

)

 

 

 

 

 

 

 

 

 

 

 

(15,427

)

 

 

 

 

 

(15,427

)

Common stock and Series

  E warrants issued in

  conversion of Series A

  preferred stock

 

 

 

 

 

54,045

 

 

 

 

 

 

 

 

 

 

 

 

54,045

 

 

 

 

 

 

54,045

 

Conversion option related

  to 6% convertible notes due

  2023, net of allocated costs

 

 

 

 

 

15,361

 

 

 

 

 

 

 

 

 

 

 

 

15,361

 

 

 

 

 

 

15,361

 

Distribution to noncontrolling

  interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(500

)

 

 

(500

)

Balances at September 30, 2018

 

$

 

 

$

231,644

 

 

$

(230,651

)

 

$

(3,077

)

 

$

(1,866

)

 

$

(3,950

)

 

$

4,974

 

 

$

1,024

 

 

4


 

SAExploration Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit (continued)

(In thousands)

(Unaudited)

 

Nine Months Ended September 30, 2019

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

(Restated)

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit (Restated)

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit (Restated)

 

Balances at December 31, 2018

 

$

 

 

$

232,661

 

 

$

(249,349

)

 

$

(3,035

)

 

$

(1,866

)

 

$

(21,589

)

 

$

4,225

 

 

$

(17,364

)

Net (loss) income

 

 

 

 

 

 

 

 

(17,104

)

 

 

 

 

 

 

 

 

(17,104

)

 

 

2,573

 

 

 

(14,531

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

600

 

 

 

 

 

 

600

 

 

 

 

 

 

600

 

Issuance of common stock

 

 

 

 

 

578

 

 

 

 

 

 

 

 

 

 

 

 

578

 

 

 

 

 

 

578

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(366

)

 

 

(366

)

 

 

 

 

 

(366

)

Equity-based compensation cost

 

 

 

 

 

2,344

 

 

 

 

 

 

 

 

 

 

 

 

2,344

 

 

 

 

 

 

2,344

 

Distributions to noncontrolling

  interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,250

)

 

 

(2,250

)

Balances at September 30, 2019

 

$

 

 

$

235,583

 

 

$

(266,453

)

 

$

(2,435

)

 

$

(2,232

)

 

$

(35,537

)

 

$

4,548

 

 

$

(30,989

)

 

Nine Months Ended September 30, 2018

 

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

(Restated)

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit (Restated)

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit (Restated)

 

Balances at December 31, 2017

 

$

 

 

$

133,742

 

 

$

(189,178

)

 

$

(5,082

)

 

$

(113

)

 

$

(60,631

)

 

$

4,570

 

 

$

(56,061

)

Adoption of ASU 2016-16

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

294

 

Net (loss) income

 

 

 

 

 

 

 

 

(41,767

)

 

 

 

 

 

 

 

 

(41,767

)

 

 

904

 

 

 

(40,863

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,005

 

 

 

 

 

 

2,005

 

 

 

 

 

 

2,005

 

Equity-based compensation cost

 

 

 

 

 

9,114

 

 

 

 

 

 

 

 

 

 

 

 

9,114

 

 

 

 

 

 

9,114

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,753

)

 

 

(1,753

)

 

 

 

 

 

(1,753

)

Common stock issued in debt

  exchange

 

 

 

 

 

472

 

 

 

 

 

 

 

 

 

 

 

 

472

 

 

 

 

 

 

472

 

Discount on Series A preferred

  stock issued in debt exchange

 

 

 

 

 

61,971

 

 

 

 

 

 

 

 

 

 

 

 

61,971

 

 

 

 

 

 

61,971

 

Accretion of discount on Series

  A preferred stock

 

 

 

 

 

(61,971

)

 

 

 

 

 

 

 

 

 

 

 

(61,971

)

 

 

 

 

 

(61,971

)

Accretion of Series A preferred

  stock to redemption value

 

 

 

 

 

21,376

 

 

 

 

 

 

 

 

 

 

 

 

21,376

 

 

 

 

 

 

21,376

 

Dividend on Series A preferred

  stock

 

 

 

 

 

(1,614

)