10-Q 1 saex-10q_20200930.htm 10-Q saex-10q_20200930.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, 2020

 

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.)

 

13645 N. Promenade Blvd., Stafford, Texas, 77477

(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:  None

 

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 November 6, 2020, the registrant has 6,612,332 shares of common stock outstanding.

 

 

 


TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

Part I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

 

1

Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2020 and 2019

 

2

Condensed Consolidated Statements of Comprehensive Loss for the Three Months and Nine Months Ended September 30, 2020 and 2019

 

3

Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Three Months and Nine Months Ended September 30, 2020 and 2019

 

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

 

5

Notes to Unaudited Condensed Consolidated Financial Statements

 

6

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

 

23

Item 4. Controls and Procedures

 

30

Part II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

34

Item 1A. Risk Factors

 

34

Item 3. Defaults upon Senior Securities

 

38

Item 6. Exhibits

 

39

Signatures

 

41

 

 

 

 


PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS 

 

SAExploration Holdings, Inc.

(Debtors–in–Possession)

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,987

 

 

$

5,441

 

Restricted cash

 

 

75

 

 

 

74

 

Accounts receivable, net

 

 

6,891

 

 

 

51,582

 

Deferred costs on contracts

 

 

343

 

 

 

14,966

 

Prepaid expenses and other current assets

 

 

6,903

 

 

 

5,324

 

Total current assets

 

 

36,199

 

 

 

77,387

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $98,011

   and $92,204, respectively

 

 

28,730

 

 

 

37,289

 

Multiclient seismic data library, net

 

 

 

 

 

2,719

 

Operating lease right-of-use assets

 

 

5,505

 

 

 

6,421

 

Goodwill

 

 

1,720

 

 

 

1,766

 

Intangible assets, net of accumulated amortization of $1,522 and $1,270, respectively

 

 

3,487

 

 

 

3,751

 

Tax credits receivable, net

 

 

 

 

 

12,104

 

Other assets

 

 

777

 

 

 

778

 

Total assets

 

$

76,418

 

 

$

142,215

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,485

 

 

$

30,966

 

Accrued liabilities

 

 

3,506

 

 

 

6,526

 

Income and other taxes payable

 

 

928

 

 

 

5,410

 

Operating lease liabilities

 

 

1,517

 

 

 

2,576

 

Current portion of long-term debt and finance leases

 

 

28,326

 

 

 

112,401

 

Deferred revenue

 

 

633

 

 

 

8,724

 

Total current liabilities

 

 

36,395

 

 

 

166,603

 

 

 

 

 

 

 

 

 

 

Long-term debt and finance leases

 

 

 

 

 

7,145

 

Other long-term liabilities

 

 

4,107

 

 

 

4,280

 

 

 

 

 

 

 

 

 

 

Liabilities subject to compromise

 

 

99,755

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

Additional paid-in capital

 

 

239,677

 

 

 

240,068

 

Accumulated deficit

 

 

(301,495

)

 

 

(274,535

)

Accumulated other comprehensive loss

 

 

(209

)

 

 

(2,912

)

Treasury stock

 

 

(2,232

)

 

 

(2,232

)

SAExploration stockholders’ deficit

 

 

(64,259

)

 

 

(39,611

)

Noncontrolling interest

 

 

420

 

 

 

3,798

 

Total stockholders’ deficit

 

 

(63,839

)

 

 

(35,813

)

Total liabilities and stockholders’ deficit

 

$

76,418

 

 

$

142,215

 

 

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

1


SAExploration Holdings, Inc.

(Debtors–in–Possession)

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue from services

 

$

2,171

 

 

$

23,274

 

 

$

163,370

 

 

$

205,866

 

Cost of services

 

 

7,873

 

 

 

17,075

 

 

 

121,298

 

 

 

162,122

 

Depreciation and amortization

 

 

3,096

 

 

 

2,930

 

 

 

12,038

 

 

 

9,405

 

Gross (loss) profit

 

 

(8,798

)

 

 

3,269

 

 

 

30,034

 

 

 

34,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

5,917

 

 

 

13,698

 

 

 

27,329

 

 

 

33,806

 

Misappropriation of funds

 

 

 

 

 

55

 

 

 

 

 

 

328

 

Total operating expenses

 

 

5,917

 

 

 

13,753

 

 

 

27,329

 

 

 

34,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

 

(14,715

)

 

 

(10,484

)

 

 

2,705

 

 

 

205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2,635

)

 

 

(3,714

)

 

 

(9,950

)

 

 

(10,843

)

Foreign exchange gain (loss), net

 

 

109

 

 

 

(1,351

)

 

 

(4,665

)

 

 

(851

)

Other income, net

 

 

242

 

 

 

1,875

 

 

 

1,344

 

 

 

2,788

 

Reorganization expenses

 

 

(12,940

)

 

 

 

 

 

(12,940

)

 

 

 

Total other expense, net

 

 

(15,224

)

 

 

(3,190

)

 

 

(26,211

)

 

 

(8,906

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(29,939

)

 

 

(13,674

)

 

 

(23,506

)

 

 

(8,701

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

76

 

 

 

(689

)

 

 

847

 

 

 

5,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(30,015

)

 

 

(12,985

)

 

 

(24,353

)

 

 

(14,531

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling

   interest

 

 

 

 

 

 

 

 

2,607

 

 

 

2,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to SAExploration

 

$

(30,015

)

 

$

(12,985

)

 

$

(26,960

)

 

$

(17,104

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share (basic and diluted)

 

$

(3.01

)

 

$

(1.64

)

 

$

(2.55

)

 

$

(2.19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

   (basic and diluted)

 

 

9,969

 

 

 

7,930

 

 

 

10,582

 

 

 

7,818

 

 

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

2


SAExploration Holdings, Inc.

(Debtors–in–Possession)

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(30,015

)

 

$

(12,985

)

 

$

(24,353

)

 

$

(14,531

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

113

 

 

 

990

 

 

 

2,703

 

 

 

600

 

Comprehensive loss

 

 

(29,902

)

 

 

(11,995

)

 

 

(21,650

)

 

 

(13,931

)

Less: comprehensive income attributable to noncontrolling

  interest

 

 

 

 

 

 

 

 

2,607

 

 

 

2,573

 

Comprehensive loss attributable to SAExploration

 

$

(29,902

)

 

$

(11,995

)

 

$

(24,257

)

 

$

(16,504

)

 

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

3


SAExploration Holdings, Inc.

(Debtors–in–Possession)

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

(In thousands)

(Unaudited)

 

Three Months Ended September 30, 2020

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit

 

Balances at June 30, 2020

 

$

 

 

$

240,366

 

 

$

(271,480

)

 

$

(322

)

 

$

(2,232

)

 

$

(33,668

)

 

$

423

 

 

$

(33,245

)

Net loss

 

 

 

 

 

 

 

 

(30,015

)

 

 

 

 

 

 

 

 

(30,015

)

 

 

 

 

 

(30,015

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

113

 

 

 

 

 

 

113

 

 

 

 

 

 

113

 

Equity-based compensation cost

 

 

 

 

 

(689

)

 

 

 

 

 

 

 

 

 

 

 

(689

)

 

 

 

 

 

(689

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Balances at September 30, 2020

 

$

 

 

$

239,677

 

 

$

(301,495

)

 

$

(209

)

 

$

(2,232

)

 

$

(64,259

)

 

$

420

 

 

$

(63,839

)

 

Three Months Ended September 30, 2019

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit

 

Balances at June 30, 2019

 

$

 

 

$

235,638

 

 

$

(253,468

)

 

$

(3,425

)

 

$

(2,232

)

 

$

(23,487

)

 

$

5,298

 

 

$

(18,189

)

Net loss

 

 

 

 

 

 

 

 

(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

)

 

Nine Months Ended September 30, 2020

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit

 

Balances at December 31, 2019

 

$

 

 

$

240,068

 

 

$

(274,535

)

 

$

(2,912

)

 

$

(2,232

)

 

$

(39,611

)

 

$

3,798

 

 

$

(35,813

)

Net (loss) income

 

 

 

 

 

 

 

 

(26,960

)

 

 

 

 

 

 

 

 

(26,960

)

 

 

2,607

 

 

 

(24,353

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,703

 

 

 

 

 

 

2,703

 

 

 

 

 

 

2,703

 

Equity-based compensation cost

 

 

 

 

 

(391

)

 

 

 

 

 

 

 

 

 

 

 

(391

)

 

 

 

 

 

(391

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,985

)

 

 

(5,985

)

Balances at September 30, 2020

 

$

 

 

$

239,677

 

 

$

(301,495

)

 

$

(209

)

 

$

(2,232

)

 

$

(64,259

)

 

$

420

 

 

$

(63,839

)

 

Nine Months Ended September 30, 2019

 

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Stock

 

 

Total

SAExploration

Stockholders’

Deficit

 

 

Noncontrolling

Interest

 

 

Total

Stockholders’

Deficit

 

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

)

 

 

 

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

4


SAExploration Holdings, Inc.

(Debtors–in–Possession)

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(24,353

)

 

$

(14,531

)

Adjustments to reconcile net loss to net cash provided by (used in) operating

   activities:

 

 

 

 

 

 

 

 

Tax credits returned to State of Alaska

 

 

9,396

 

 

 

 

Reserve for potential tax credits monetization

 

 

2,708

 

 

 

 

Tax credits used to offset production taxes

 

 

 

 

 

1,094

 

Depreciation and amortization

 

 

12,503

 

 

 

9,886

 

Equity-based compensation cost

 

 

(391

)

 

 

2,344

 

Provision for doubtful accounts

 

 

1,645

 

 

 

1,619

 

Gain on sale of disposal and equipment

 

 

(284

)

 

 

(648

)

Amortization of loan issuance costs and debt discounts

 

 

2,785

 

 

 

2,835

 

Unrealized loss on foreign currency transactions

 

 

4,709

 

 

 

610

 

Noncash reorganization expenses

 

 

11,885

 

 

 

 

Deferred taxes

 

 

 

 

 

2,023

 

Changes in operating assets and liabilities

 

 

13,325

 

 

 

(6,607

)

Net cash provided by (used in) operating activities

 

 

33,928

 

 

 

(1,375

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,150

)

 

 

(1,158

)

Proceeds from disposal of property and equipment

 

 

514

 

 

 

696

 

Net cash used in investing activities

 

 

(636

)

 

 

(462

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Long-term debt and finance lease repayments

 

 

(16,890

)

 

 

(7,604

)

Long-term debt borrowings

 

 

6,801

 

 

 

17,666

 

Proceeds from issuance of common stock

 

 

 

 

 

100

 

Purchase of treasury stock

 

 

 

 

 

(366

)

Distribution to noncontrolling interest

 

 

(5,985

)

 

 

(2,250

)

Net cash (used in) provided by financing activities

 

 

(16,074

)

 

 

7,546

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted

  cash

 

 

(671

)

 

 

76

 

Net change in cash, cash equivalents and restricted cash

 

 

16,547

 

 

 

5,785

 

Cash, cash equivalents and restricted cash at the beginning of year

 

 

5,515

 

 

 

7,850

 

Cash, cash equivalents and restricted cash at the end of period

 

$

22,062

 

 

$

13,635

 

 

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

 

 

5


 

SAExploration Holdings, Inc.

(Debtors–in–Possession)

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1.  GENERAL

Description of the Business

SAExploration Holdings, Inc. (“we,” “our,” “us” or “SAEX”) is a full–service provider of seismic data acquisition, logistical support and processing services in North America, South America, Asia Pacific, West Africa and the Middle East to customers in the oil and natural gas industry.

Our chief operating decision maker regularly reviews financial data by country to assess performance and allocate resources, resulting in the conclusion that each country in which we operate represents a reporting unit.  As these reporting units are similar in terms of economic characteristics, nature of products, processes and type of customers, we have concluded that our seismic data contract services operations comprise one single reportable segment.

Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

On August 27, 2020 (the “Petition Date”), we and certain of our wholly–owned direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions (collectively, the “Petition” and the cases commenced thereby, the “Chapter 11 Cases”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”) to pursue a Chapter 11 plan of reorganization (as amended, the “Plan”).  The Chapter 11 Cases have been consolidated for procedural purposes only and are being administered jointly under the caption In re: SAExploration Holdings, Inc., et. al. (Case No. 20–34306).    

In connection with the Chapter 11 filing, we entered into a Restructuring Support Agreement (as amended, the “RSA”) with lenders of 100% of the principal amount outstanding under our credit facility, lenders of approximately 82.4% of the principal amount outstanding under our senior loan facility and holders of 100% of our 6.0% Senior Secured Convertible Notes due 2023 (the “2023 Notes”) (such lenders and holders referred to herein as the “Supporting Parties”) and a Backstop Commitment Agreement (as amended, the “BCA”) with the Supporting Parties (the “Backstop Parties”).  On November 1, 2020, we entered into an Amendment to the RSA with certain of the Supporting Parties party thereto and an Amendment to the BCA with certain of the Backstop Parties party thereto.

As amended, the RSA contemplates the restructuring (the “Restructuring”) of the Debtors pursuant to the Plan, which contemplates (i) the entry into a new first lien exit facility in an aggregate principal amount of $15.0 million with lenders under our existing credit facility and senior loan facility; (ii) the conversion of the existing credit facility into a new second lien exit facility in an aggregate principal amount of $20.5 million with the existing lenders; (iii) the elimination of $89.0 million of principal plus accrued interest with respect to our existing senior loan facility and 2023 Notes; and (iv) a rights offering (the “Rights Offering”) pursuant to which all eligible holders of loans under our existing credit facility and senior loan facility will be offered the opportunity to purchase loans to be advanced under the new first lien exit facility and shares of new common stock to be issued by reorganized SAEX for an aggregate purchase price of $15.0 million that will represent 95% of the outstanding new common stock to be issued by reorganized SAEX.  Pursuant to the BCA, the Rights Offering will be backstopped by certain Backstop Parties who will receive a backstop commitment premium payable in new common stock that will represent 2.5% of the outstanding new common stock to be issued by reorganized SAEX as consideration for backstopping the Rights Offering or, if the BCA is terminated in certain circumstances, payable in the amount of approximately $0.9 million in cash.  The new common stock to be issued by reorganized SAEX will be subject to further dilution by new common stock to be issued by reorganized SAEX in connection with a management incentive plan.  The Plan also provides that holders of general unsecured claims and holders of our existing common stock and warrants to purchase our existing common stock will not receive any distribution in respect of such claims or common stock and warrants, respectively.

Subject to Bankruptcy Court approval of the Plan and the satisfaction of certain conditions to the Plan and related transactions, we have proposed to consummate the Plan and emerge from Chapter 11 before the end of December 2020.  There can be no assurances that the Plan will be approved or confirmed by the Bankruptcy Court by that time, or at all. 

6

 


SAExploration Holdings, Inc.

(Debtors–in–Possession)

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

As a result of the filing of the Chapter 11 Cases, the principal and interest due under our credit facility, our senior loan facility and our 2023 Notes became immediately due and payable.  However, any efforts to enforce such payment obligations with respect to our credit facility, our senior loan facility and our 2023 Notes are automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of such debt instruments will be subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

We expect to continue our operations without interruption during the pendency of the Chapter 11 Cases.  For the duration of the Restructuring and after the Chapter 11 Cases, our operations and our ability to develop and execute our business plan are subject to risks and uncertainties associated with the Restructuring and Chapter 11 Cases.

Accounting Standards Codification 852–10, Reorganizations (“ASC 852–10”), applies to entities that have filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.  In accordance with ASC 852–10, transactions and events directly associated with the Chapter 11 Cases are required to be distinguished from the ongoing operations of the business.  In addition, ASC 852–10 requires changes in the accounting and presentation of liabilities, as well as expenses and income directly associated with the Chapter 11 Cases.  

Liabilities Subject to Compromise

Liabilities subject to compromise in our condensed consolidated financial statements include pre–petition liabilities that may be affected by a Chapter 11 plan at the amounts expected to be allowed, even if they may be settled for lesser amounts.  If there is uncertainty about whether a secured claim is undersecured, or will be impaired under the Chapter 11 plan, the entire amount of the claim is included in liabilities subject to compromise.  Difference between liabilities we have estimated and the claims to be filed will be investigated and resolved in connection with the claims resolution process in the Chapter 11 Cases.  We will continue to evaluate these liabilities throughout the Chapter 11 Cases and adjust amounts as necessary.  Such adjustments may be material.

The components of “Liabilities subject to compromise” included in our unaudited condensed consolidated balance sheets are as follows:

 

 

 

September 30,

2020

 

Long-term debt

 

$

95,829

 

Accrued liabilities

 

 

3,034

 

Accounts payable

 

 

892

 

Total

 

$

99,755

 

 

Costs of Reorganization

The Debtors have incurred and will continue to incur significant costs associated with the Chapter 11 Cases.  The amount of these costs, which are being expensed as incurred, are expected to significantly affect our results.  The following table summarizes the components included in “Reorganization expenses” in our unaudited condensed consolidated statements of operations for the three months and nine months ended September 30:

 

 

 

2020

 

Long-term debt discounts and issuance costs

 

$

11,885

 

Advisory and professional fees

 

 

1,055

 

Total

 

$

12,940