SAExploration Holdings, Inc. Annual Report 2016

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-Kþ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or ¨ ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number 001-35471SAExploration Holdings, Inc.(Exact name of registrant as specified in its charter) Delaware27-4867100(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.) 1160 Dairy Ashford Rd., Suite 160, Houston, Texas77079(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code (281) 258-4400 Securities registered pursuant to Section 12(b) of the Act:Common Stock, $0.0001 Par ValueThe NASDAQ Global Market(Title of each class)(Name of each exchange on which registered)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨NoþþIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨NoþþIndicate 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 1934during 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 filingsrequirements for the past 90 days. Yes þ þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes þ þ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation in S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form 10-K. Yes ¨ NoþþIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company)Smaller reporting company þþIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ NoþþThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2016, the last business day ofthe registrant’s most recently completed second fiscal quarter was $1,448,601, calculated by reference to the closing price of $16.53 for the registrant’scommon stock on The Nasdaq Global Market on that date.Number of shares of Common Stock, $0.0001 par value, outstanding as of March 8, 2017: 9,358,529 DOCUMENTS INCORPORATED BY REFERENCEProxy Statement for 2017 Annual Meeting of Stockholders -- Referenced in Part III of this ReportTABLE OF CONTENTS PART I2ITEM 1. Business.2ITEM 1A. Risk Factors.11ITEM 2. Properties.25ITEM 3. Legal Proceedings.25 PART II25ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.25ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations27ITEM 8. Financial Statements and Supplementary Data.43ITEM 9A. Controls and Procedures.43 PART III44ITEM 10. Directors, Executive Officers and Corporate Governance.44ITEM 11. Executive Compensation.44ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.44ITEM 13. Certain Relationships and Related Transactions, and Director Independence.44ITEM 14. Principal Accountant Fees and Services.45 PART IV45ITEM 15. Exhibits and Financial Statement Schedules.45Exhibit Index47Index to Financial Statements.FS-1iCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains “forward-looking statements” within the meaning of the federal securities laws, with respect to our financial condition, results ofoperations, cash flows and business, and our expectations or beliefs concerning future events. These forward-looking statements can generally be identifiedby phrases such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “plans to,” “ought,” “could,” “will,” “should,” “likely,” “appears,” “projects,”“forecasts,” “outlook” or other similar words or phrases. There are inherent risks and uncertainties in any forward-looking statements. Although we believethat our expectations are reasonable, we can give no assurance that these expectations will prove to have been correct, and actual results may vary materially.Except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect events, new information orotherwise. Some of the important factors that could cause actual results to differ materially from our expectations are discussed below. All written and oralforward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.Factors that could cause actual results to vary materially from our expectations include the following: •developments with respect to the Alaskan oil and natural gas exploration tax credit system that may continue to affect the willingness of thirdparties to participate in financing and monetization transactions and our ability to timely monetize tax credits that have been assigned to us byour customer;•changes in the Alaska oil and natural gas exploration tax credit system that may significantly affect the level of Alaskan exploration spending;•fluctuations in the levels of exploration and development activity in the oil and gas industry;•intense industry competition;•limited number of customers;•credit and delayed payment risks related to our customers;•the availability of liquidity and capital resources, including our limited ability to make capital expenditures and the potential impact this has onour business and competitiveness;•need to manage rapid growth and contraction of our business;•delays, reductions or cancellations of service contracts;•operational disruptions due to seasonality, weather and other external factors;•crew availability and productivity;•whether we enter into turnkey or term contracts;•high fixed costs of operations;•substantial international business exposing us to currency fluctuations and global factors, including economic, political and militaryuncertainties;•ability to retain key executives; and•need to comply with diverse and complex laws and regulations.Refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this report for specificrisks which would cause actual results to be significantly different from those expressed or implied by any of our forward-looking statements. It is notpossible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-lookingevents and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, readers of this report are cautioned not to place undue reliance on the forward-looking statements.1PART IITEM 1. Business.Overview SAExploration Holdings, Inc. and its Subsidiaries (collectively, the “Corporation”, "we", or "our") is an internationally-focused oilfield services companyoffering a full range of vertically-integrated seismic data acquisition and logistical support services in Alaska, Canada, South America, West Africa andSoutheast Asia to our customers in the oil and natural gas industry. In addition to the acquisition of 2D, 3D, time-lapse 4D and multi-component seismic dataon land, in transition zones between land and water, and offshore in depths reaching 3,000 meters, we offer a full-suite of logistical support and in-field dataprocessing services. We operate crews around the world that are supported by over 27,500 owned land and marine channels of seismic data acquisitionequipment and other leased equipment as needed to complete particular projects. Seismic data is used by our customers, including major integrated oilcompanies, national oil companies and independent oil and gas exploration and production companies, to identify and analyze drilling prospects andmaximize successful drilling. The results of the seismic surveys we conduct belong to our customers and are proprietary in nature; we do not acquire data forour own account or for future sale or maintain multi-client data libraries.We specialize in the acquisition of seismic data in logistically complex and challenging environments and delicate ecosystems, including jungle, mountain,arctic and subaquatic terrains. We have extensive experience in deploying personnel and equipment in remote locations, while maintaining a strong quality,health, safety and environmental ("QHSE") track record and building positive community relations in the locations where we operate. We employ highlyspecialized crews made up of personnel with the training and skills required to prepare for and execute each project and, over time, train and employ largenumbers of people from the local communities where we conduct our surveys. Our personnel are equipped with the technology necessary to meet the specificneeds of the particular project and to manage the challenges presented by sensitive environments.We were initially incorporated in Delaware on February 2, 2011, under the name Trio Merger Corp. as a blank check company in order to serve as a vehiclefor the acquisition of a target business. On June 24, 2013, we completed a business combination in which the entity formerly known as SAExplorationHoldings, Inc. (“Former SAE”) merged into our wholly-owned subsidiary (the “Merger”), and we operate the business of Former SAE.Our principal headquarters are located in Houston, Texas at 1160 Dairy Ashford Rd., Suite 160, Houston, Texas, 77079, Telephone: (281) 258-4400, and ourweb address is www.saexploration.com. We do not intend for information contained in our website to be a part of this report.Our operations in our various geographic locations are conducted through our subsidiary SAExploration, Inc. and its wholly-owned subsidiaries and branchoffices in the United States (primarily Alaska), Canada, Peru, Colombia, Papua New Guinea, Brazil, Bolivia, Malaysia, and New Zealand.Recent DevelopmentsDuring 2016 we explored a range of transactions to address our significant cash flow and liquidity difficulties and the longer term need to realign our capitalstructure with our current business. On June 13, 2016, we entered into a comprehensive restructuring support agreement (the “Restructuring SupportAgreement”) with holders (the “Supporting Holders”) of approximately 66% of the par value of our 10% senior secured notes due 2019 (the “Senior SecuredNotes” and the holders thereof, the “Existing Holders”), in which the Supporting Holders and we agreed to enter into and implement a proposedcomprehensive restructuring of our balance sheet (the “Restructuring”), which was completed in the third quarter of 2016. The Restructuring is discussedfurther in Note 2 to our Consolidated Financial Statements.Seismic Data Acquisition Services We provide a full range of seismic data acquisition services, including in-field data processing, and related logistics services. We currently provide ourservices on only a proprietary basis to our customers and the seismic data acquired is owned by our customers once acquired.Our seismic data acquisition and logistics services include the following:•Program Design2•Planning and Permitting•Camp Services•Survey•Drilling•Recording•Reclamation; and•In-field Data ProcessingProgram Design, Planning and Permitting. A seismic survey is initiated at the time the customer requests a proposal to acquire seismic data on its behalf. Weemploy an experienced design team, including geophysicists with extensive experience in 2D, 3D and time-lapse 4D survey design, to recommendacquisition parameters and technologies to best meet the customer’s exploration objectives. Our design team analyzes the request and works with thecustomer to put an operational, personnel and capital resource plan in place to execute the project.Once a seismic program is designed, we assist the customer in obtaining the necessary permits from governmental authorities and access rights of way fromsurface and mineral estate owners or lessees where the survey is to be conducted. It is usually our permitting crew that is first to engage with the localresidents and authorities. We believe our knowledge of the local environment, cultural norms and excellent QHSE track record enable us to engender trustand goodwill with the local communities, which our customers are able to leverage over the longer exploration cycle in the area.Camp Services. We have developed efficient processes for assembling, operating and disassembling field camps in challenging and remote project locations.We operate our camps to ensure the safety, comfort and productivity of the team working on each project and to minimize our environmental impact throughthe use of wastewater treatment, trash management, water purification, generators with full noise isolation and recycling areas.In areas like South America and Southeast Asia, logistical support needs to be in place to establish supply lines for remote jungle camps. To insure thequality of services delivered to these remote camps, we own ten supply and personnel river vessels to gain access to remote jungle areas. We also have fivejungle camps and a series of 40 fly camps that act as advance camps from the main project camp. Each of these jungle base camps contains a full servicemedical facility complete with doctors and nurses in the remote chance any potential injuries need to be stabilized for medical transport. The camps areequipped with full meal kitchens held to high standards of cleanliness, sleeping and recreational quarters, power supply, communications links, air support,water purification systems, black water purification systems, offices, repair garages, fuel storage and many more support services.Survey and Drilling. In a typical seismic recording program, the first two stages of the program are survey and drilling. Once the permitting is completed, oursurvey crews enter the project areas and begin establishing the source and receiver placements in accordance with the survey design agreed to by thecustomer. The survey crew lays out the line locations to be recorded and, if explosives are being used, identifies the sites for shot-hole placement. Thedrilling crew creates the holes for the explosive charges that produce the necessary acoustical impulse.The surveying and drilling crews are usually employed by us but may be third party contractors depending on the nature of the project and its location.Generally, the choice of whether to subcontract out services depends on the expertise available in a certain region and whether that expertise is moreefficiently obtained through subcontractors or by using our own labor force. For the most part, services are subcontracted within Alaska and Canada and ourpersonnel are used in other regions where we operate. When subcontractors are used, we manage them and require that they comply with our work policiesand QHSE objectives.In Alaska and Canada, the surveying and drilling crews are typically provided by third party contractors but are supervised by our personnel. In Alaska andCanada, our vibroseis source units consist of the latest source technology, including eight AHV IV 364 Commander Vibrators and twelve environmentallyfriendly IVI mini vibrators, complete with the latest Pelton DR electronics. In South America and Southeast Asia, we perform our own surveying and drilling,which is supported by up to 200 drilling units, including people-portable, low impact self-propelled walk behind, track-driven and heli-portable deployeddrilling rigs. Our senior drilling staff has a combined work experience of over 50 years in some of the most challenging environments in the world. On mostprograms there are multiple survey and drilling crews that work at a coordinated pace to remain ahead of the data recording crews.3Recording. We use equipment capable of collecting 2D, 3D, time-lapse 4D and multi-component seismic data. We utilize vibrator energy sources orexplosives depending on the nature of the program and measure the reflected signals with strategically placed sensors. Onshore, geophones are manuallyburied, or partially buried, to ensure good coupling with the surface and to reduce wind noise. Offshore, the reflected signals are recorded by eitherhydrophones towed behind a survey vessel or by geophones placed directly on the seabed. We increasingly employ ocean bottom nodes positioned byremote operated vehicles on the seafloor in our marine data acquisition operations. We have available over 27,500 owned land and marine seismic recordingchannels with the ability to access additional equipment, as needed, through rental or long-term leasing sources. All of our systems record equivalent seismicinformation but vary in the manner by which seismic data is transferred to the central recording unit, as well as their operational flexibility and channel countexpandability. We utilize 11,500 channels of Sercel 428/408 equipment, 6,000 channels of Fairfield Land Nodal equipment and 10,000 channels ofGeospace GSX equipment.Historically, we have made significant capital investments to increase the recording capacity of our crews by increasing channel count and the number ofenergy source units we operate. This increase in channel count demand is driven by customer needs and is necessary in order to produce higher resolutionimages, increase crew efficiencies and undertake larger scale projects. In response to project-based channel requirements, we routinely deploy a variablenumber of channels with a variable number of crews in an effort to maximize asset utilization and meet customer needs. When recording equipment is at ornear full utilization, we utilize rental equipment from strategic suppliers to augment our existing inventories. We believe we will realize the benefit ofincreased channel counts and flexibility of deployment through increased crew efficiencies, higher revenues and increased margins.Historically, we have dedicated a significant portion of our capital investment to purchasing and leasing wireless recording systems rather than the traditionalwired systems. We utilize this equipment as primarily stand-alone recording systems, but on occasion it is used in conjunction with cable-based systems. Thewireless recording systems allow us to gain further efficiencies in data recording and provide greater flexibility in the complex environments in which weoperate. In addition, we have realized increased crew efficiencies and lessened the environmental impact of our seismic programs due to the wirelessrecording systems because they require the presence of fewer personnel and less equipment in the field. We believe we will experience continued demand forwireless recording systems in the future.We also utilize multi-component recording equipment on certain projects to further enhance the quality of data acquired and help our customers enhancetheir development of producing reservoirs. Multi-component recording involves the collection of different seismic waves, including shear waves, which aidsin reservoir analysis such as fracture orientation and intensity in shales and allows for more descriptive rock properties.Reclamation. We have experienced teams responsible for reclamation of the areas where work has been performed so as to minimize the environmentalfootprint from the seismic program. These programs can include reforestation or other activities to restore the natural landscape at our worksites.In-field Data Processing. Our knowledgeable and experienced team provides our customers with superior quality in-field data processing. We believe thatour strict quality control processes meet or surpass industry-established standards, including identifying and analyzing ambient noise, evaluating fieldparameters and employing obstacle-recovery strategies. Using the latest technology, our technical and field teams electronically manage customer data fromthe field to the processing office, minimizing time between field production and processing. All of the steps employed in our in-field data processingsequence are tailored to the particular customer project and objectives.Industry OverviewSeismic technology is the primary tool used to locate oil and gas reserves, and it facilitates the development of complex reservoirs. Seismic data is used topinpoint and determine the locations of subsurface features favorable for the accumulation of hydrocarbons, as well as define the make-up of the sedimentaryrock layers and their corresponding fluids. Seismic data is acquired by introducing acoustic energy into the earth and water through controlled energysources. Seismic energy sources can consist of truck-mounted vibration equipment in accessible terrain, explosives such as dynamite in more difficult terrain,or vessel-mounted air guns in shallow water and certain marsh environments. The sound waves created by explosives or vibration equipment are reflectedback to the surface and collected by seismic sensors referred to as “geophones” or “hydrophones,” which measure ground and water displacement. One ormore strategically positioned seismic sensors are connected to a recording channel which transmits the data to a central recording location. A typical projectinvolves the use of thousands, and sometimes tens of thousands, of channels recording simultaneously over the survey area. In general, the higher the numberof recording channels employed in a given survey, the richer the data set that is produced.A seismic survey is acquired with a surface geometry grid of seismic energy sources and receivers extending over very large areas. The size of this grid varieswith and depends on the size, depth and geophysical characteristics of the target to be imaged. The4lines must be accurately positioned, so the location of each source and receiver point is obtained using either GPS, inertial, or conventional optical surveymethods depending upon the vegetation and environment in the prospect area. Seismic receivers are deployed on the surface of the area being surveyed atregular intervals and patterns to measure, digitize and transmit reflected seismic energy to a set of specialized recording instruments. The transportation ofcables, geophones and field recording equipment can be by truck, vessel or helicopter depending upon the terrain and environment within the area to beimaged.Land seismic data acquisition. For land applications, geophones are buried, or partially buried, to ensure good coupling with the surface and to reduce windnoise. Burying geophones in the ground is a manual process and may involve anywhere from a few to more than 100 people depending on the size of theseismic crew and the terrain involved. Cables that connect the geophones to cabled recording systems may also be deployed manually or, in some cases,automatically from a vehicle depending on the terrain. The acoustic source for land seismic data acquisition is typically a fleet of large hydraulic vibratortrucks, but may also be explosives detonated in holes drilled for such purposes.On a typical land seismic survey, the seismic recording crew is supported by a permitting and surveying crew along with a vibroseis and/or drilling crew. Thepermitting crew secures permission from the landowner and mineral owner or lease to gain access to the surface and subsurface rights to conduct the seismicprogram. The surveying crew lays out the receiver locations to be recorded and, in a survey using an explosive source, identifies the sites where the drillingcrew creates the holes for the explosive charges that produce an acoustical impulse. In other surveys, a mechanical vibrating unit, such as a vibrator truck, isused as the seismic energy source. The seismic crew lays out the geophones and recording instruments, directs shooting operations and records the acousticalsignal reflected from subsurface strata. The number of individuals on each crew is dependent upon the size and nature of the seismic survey.Offshore seismic data acquisition. In marine surveys, air guns, which release high-pressure compressed air into the water column, are used as the acousticenergy source. For ocean bottom cable operations, an assembly of vertically oriented geophones and hydrophones connected by electrical wires typically isdeployed on the sea floor to record and relay data to a seismic recording vessel. Increasingly, ocean bottom nodes positioned by remote operated vehicles areused in areas of obstructions (such as production platforms) or shallow water inaccessible to ships towing seismic streamers (such as submerged cables).Transition zone seismic data acquisition. In the transition zone area where land and water come together, elements of both land data acquisition and offshoredata acquisition are employed. Transition zone seismic data acquisition is similar to ocean bottom cable applications in that both hydrophones andgeophones are lowered to the ocean floor. However, due to the shallow water depths, only small vessels and manual labor can be used to deploy and retrievethe cables. Additionally, the source vessels and acoustic source arrays must be configured to run in shallow water. In transition zone areas consisting ofswamps and marshes, explosives must be used as an acoustic source in addition to air guns.Two-dimensional, or 2D, seismic data is recorded using single lines of receivers crossing the earth’s surface, and, once processed, results in only a profileimage of the earth, and the data is generally used only to identify gross structural features. Prior to 1980, all seismic data acquired was 2D, and 2D surveys arestill widely employed in locations previously unexplored by E&P companies to provide preliminary data for broad-scale exploration evaluation. Three-dimensional, or 3D, seismic data surveys have proven more effective in providing detailed views of subsurface structures.The increased use of 3D seismic data by the oil and natural gas industry in the 1980s helped drive significant increases in drilling success rates as better dataquality allowed operators to optimize well locations and results. Today, the vast majority of seismic data acquired in North America is 3D, of which highdensity 3D is a growing component.More recently, the seismic industry has seen the development of four-dimensional, or 4D, imaging technology, also known as time-lapse seismic. 4D seismicdata incorporates numerous 3D seismic surveys over the same reservoir at specified intervals of time and can help determine changes in flow, pressure andsaturation. As hydrocarbons are depleted from a field, the pressure and composition of the fluids may change. By scanning a reservoir over a given period oftime, the flow of the hydrocarbons within can be traced and better understood. In addition, 4D seismic data can help geologists understand how a reservoirreacts to gas injection or water flooding and can help locate untapped pockets of oil or natural gas within the reservoir.In conventional 3D seismic surveys, only the primary wave, or P-wave, is acquired. P-wave reflection cannot always image fluid saturated zones properly.Multi-component seismic data acquisition captures the seismic wave field more completely than conventional P-wave techniques. In multi-componentacquisition, multiple sets of data are received at each receiver, P-wave and two measurements (X, Y) of the shear wave, or S-wave. Information obtained fromthe S-wave passing through a fluid-saturated medium provides a better interpretation of the reservoir structure. Evaluating P- and S-wave data togetherprovides additional information to reduce uncertainty in prospect evaluation.5Once seismic data is acquired, complex mathematical algorithms are used to transform the data into 2D profiles, 3D volumes of the earth’s subsurface or 4Dtime-lapse seismic data. These images are then interpreted by geophysicists and geologists for use by oil and natural gas companies in evaluating prospectiveareas, designing drilling programs, selecting drilling sites and managing producing reservoirs.Markets and TrendsNorth AmericaWhile the last several years have seen a decline in demand, the North American market has historically been a stable and sustainable market for 3D seismicdata acquisition. Use of 3D technology is the norm in the United States and Canada as international oil companies seek to maximize the efficiency of theirreservoirs and reduce exploration risk.We expanded into North America in 2011 through our acquisitions of Datum Exploration Ltd. in Canada and Northern Exploration Services in Alaska. Witheach of those acquisitions, we brought on board personnel with extensive operations experience in each location. Our operations in the North Americanmarket are consistent with our strategy to help increase our equipment utilization rates, while concurrently increasing margins, by balancing growth in Northand South America, which have complementary operating seasons. While this model continues to be a viable operating model, the recent market downturnhas created significant pressure on competitive cost structures and pricing. This trend is expected to continue as long as customers remain hesitant to commitcapital to large projects in the current commodity price environment.South AmericaThe economies in South American countries continue to expand and develop, demanding significantly more energy to fuel their growth. As the politicalenvironments stabilize, oil companies are increasing operations in the market and are seeking experienced seismic service providers with complexenvironment know-how, strong QHSE records and excellent relations with local communities to satisfy their exploration needs.We have maintained operations in South America since 2006 while further growing our presence in Bolivia, Brazil, Colombia, and Peru. While the recentmarket downturn significantly impacted exploration activity in South America particularly during 2015 and continuing through 2016, our revenuegeneration from new projects is beginning to improve. However, no assurance can be given that the improved activity level will continue or that futuredecreases will not occur.Southeast AsiaExploration activities in Southeast Asia have declined recently with lower commodity prices but there is a steady demand for energy in the region. In 2010,we entered the Southeast Asian market by commencing operations in Papua New Guinea for one of our major long-time customers. We have expanded ouroperations in Southeast Asia into New Zealand and shallow-water marine work in Malaysia.West AfricaIn late 2016, we entered the West Africa market to perform a deep water ocean bottom marine project for a major customer. Historically, West Africa haspresented numerous offshore marine markets. More recently, offshore marine seismic activity has been increasing in certain West African countries. Theseprojects are more focused on production-enhancement initiatives than new exploration. Despite the current macro-economic instability related to the oil andgas market downturn, we expect overall offshore marine seismic activity to continue to improve in the near to medium-term future.StrengthsFull service logistics provider. A majority of our revenues is earned through high-margin logistics-related activities performed in-house. Unlike many otherseismic data acquisition companies, we focus on providing a complete service and logistical solutions package, especially in our international operations,which allows efficient movement into remote areas. This provides us with opportunities to capture a larger portion of the revenues associated with eachproject and gives us what we believe to be a strategic advantage over our competitors, who generally outsource logistics services to multiple third parties.Usually we are the first point of contact with the local communities, and we believe having contact with these communities from initiation of the projectthrough the seismic phase and demonstrating our commitment to QHSE forms relationships that benefit us and our customers over the longer term.Additionally, our logistical expertise can be a value proposition in price negotiations with our customers, allowing us to maintain higher margins in certainregions of the world, particularly in the more remote areas and challenging environments.6International platform. We operate in numerous regions around the world and continue to maintain our market share in those markets. Our experienceincludes projects in Alaska, Canada, Bolivia, Brazil, Colombia, Peru, Malaysia, Papua New Guinea, West Africa and New Zealand. We maintain a localpresence in many of these areas. As the majority of our operations are focused in locations previously unexplored by E&P companies, the first projects inthose areas tend to be for the acquisition of 2D data for preliminary, broad-scale exploration evaluation. That initial acquisition often leads to further work, asthe 2D data is used to determine the location and design of additional 3D and 4D surveys, which are then used for more detailed analysis to maximize actualdrilling potential and success. Typically, once we are hired for a project, we tend to get follow-on surveys due to our familiarity with the customer, the localcommunities and the project. The international platform also enables us to expand and contract in various regions around the world to match the changes indemand in certain regions as driven by commodity prices, economic factors and energy consumption in the local markets.Extensive experience in challenging environments. We specialize in seismic data acquisition services in logistically challenging environments on land, intransition zones and in water. We believe that our extensive experience operating in such complex locations, including our expertise in logisticsmanagement and deploying personnel and equipment customized for the applicable environment, provides us with a significant competitive advantage.Many of the areas of the world where we work have limited seasons for seismic data acquisition, requiring high utilization of key personnel andredeployment of equipment from one part of the world to another. Most of our remote area camps, drills and support equipment are easily containerized fortransport to locations anywhere in the world. As a result, if conditions deteriorate in a current location or demand rises in another location, we are able toquickly redeploy our crews and equipment to other parts of the world. We have a logistical support department that works with management to keep ourequipment strategically located in areas of high utilization.Strong local relationships and stringent QHSE processes. E&P companies seek experienced seismic service providers with complex environment know-how,strong QHSE records and excellent relations with local communities to satisfy their seismic needs. Our highly trained and qualified QHSE team has extensiveexperience working in diverse ecosystems and complex cultural environments. We believe this experience allows us to deliver high quality data and efficientoperations through systems and processes designed to minimize health and safety risk and overall community and environmental impact. We believe that ourstrong local relationships, QHSE track record and our history of successful reclamation programs facilitate negotiating permits and other seismic dataacquisition rights on behalf of our customers.Cash flow generation supported by backlog and competitive bids. As of December 31, 2016, we had approximately $119 million of backlog under contract,in addition to approximately $404 million of bids outstanding, with minimal additional growth capex required. We believe our backlog results in longervisibility to future cash flows relative to our peers. Such visibility is also evidenced by our strong number of bids outstanding. Our key operations outside ofNorth America are generally in countries with strict concession leasing requirements, resulting in clients planning seismic shoots well in advance of thecapital being spent. Additionally, the short duration of operating seasons, especially in Alaska, leads to more advanced planning which in turn results in amore accurate cash flow forecast. Non-North American seismic shoots are also less susceptible to cancellation due to the long-term nature of very expensivedevelopment programs compared to more volatile, commodity-price driven shorter-term projects typical of North America.Strong relationships with blue chip customer base. Members of our management team have long-standing relationships often extending over 30 years withmany of the largest oil and gas companies in the world. Our global operating footprint allows us to leverage those relationships throughout the world, and webelieve our prior performance for those customers enhances our ability to obtain new business from existing and past customers.Experienced management team with significant operational experience and ownership stake. We believe the experience, knowledge base and relationshipsthat our management team has built over the years enhance our operating and marketing capabilities and underlie our strong reputation in the industry. Infact, we believe the operating expertise of our management team frequently leads to winning bids for new business. Virtually every member of ourmanagement team has technological and first-hand experience of the seismic data acquisition industry stemming from years of field work.Strategy We believe we have a strategic advantage over a substantial number of our competitors in the areas in which we operate because of our expertise in logisticsand our ability to provide a complete solution in remote and complex areas.We plan to build upon our competitive strengths to grow our business through the following strategies:•Maintain strict focus on contract work with key clients. We intend to continue to work on a fully contracted basis with major national andinternational oil and gas companies and capitalize on our long-term relationships with our customers.7Unlike many of our competitors, we do not acquire data for our own use or maintain multi-client data libraries, which are either unfunded or partiallyfunded speculative libraries, and involve significantly more risk and uncertainty. We seek to add value for our customers through a materialreduction of the following risks:•Exploration risk-we deliver consistent high-quality seismic data utilizing the most advanced technology;•Data acquisition risk-we fulfill our promises regarding the timing, quality and scope of our services;•Reputation risk-we attract and retain highly skilled and experienced professionals who embody our strong focus on customer service, safetyand environmental safeguards;•QHSE risk-we place the highest priority on the health and safety of our workforce, the protection of our assets, the environment and thecommunities where we conduct our work, and we strive for continual improvement in all QHSE aspects; and•Financial risk-we are able to employ a higher proportion of turnkey contracts in our operations, which shift most of the businessinterruption risks onto us.•Provide full in-house logistics services. We intend to continue to focus on our logistics expertise, which, in addition to our seismic data acquisitionabilities, allows us to provide a complete service package to our customers. We believe our vertical integration will continue to provide for efficientmovement into remote areas as we further expand internationally, giving us a strategic advantage over our competitors. Many of the areas of theworld where we work have limited seasons for seismic data acquisition, requiring high utilization of key personnel and redeployment of equipmentfrom one part of the world to another. We believe that few of our competitors have a global reach that is similar to ours.•Focus on global diversification and capitalize on market positioning in emerging basins. We seek to maintain our market share in the markets inwhich we currently operate and continue our positioning into other emerging markets, such as worldwide ocean bottom seismic services, which webelieve hold the highest degree of potential for opportunities during this downturn in the overall market. Emerging economies will likely continueto expand and develop, demanding significantly more energy to fuel their growth. As the political environments stabilize in many of thosecountries, oil and natural gas companies will likely increase operations in these markets. With our geographic expansion from providing servicesexclusively in South America to providing services in Alaska, Canada, Southeast Asia and West Africa, we are able to achieve better utilization ofour personnel and equipment through redeployment from off-season areas to in-season areas, helping to reduce some of the volatility in our financialperformance.•Maintain local relationships and stringent QHSE processes as the foundation of all our projects. We plan to maintain our focus on strongcommunity relations and QHSE standards. We believe our continued success in those areas can be leveraged to help us further maintain our marketshare in these emerging markets. •Continue higher utilization of turnkey contracts to capitalize on higher operating margins. Our contracts for proprietary seismic data acquisitionservices reflect a high proportion of turnkey contracts, which are fixed fee, compared to term contracts, which use a variable or day-rate fee basis.This provides us with the opportunity to maximize the advantage we have from being a full-service provider and the operational efficiencies createdby our vertical integration. Our customers prefer turnkey contracts because they shift much of the business interruption risk onto us. We alsoincreasingly use hybrid contracts where we may share with our customers a certain degree of the risks for certain business interruptions, such asweather, community relations and permitting delays, that are outside of our control.We enable these strategies by continuing to pursue excellence in the following activities:•Building and maintaining mutually beneficial, long-term relationships with customers;•Aggressively marketing our capabilities and customer-value added proposition;•Continually monitoring technological developments in the industry and, as needed, implementing cutting-edge technologies that can give us acompetitive advantage;•Sharing best practices across regions to ensure the consistent delivery of high quality service; and•Continuing to seek innovative ideas to reduce the seasonal gaps in our equipment utilization rates.8Seasonal Variation in BusinessSeismic data acquisition services are performed outdoors and, consequently, are subject to weather and seasonality. Particularly in Alaska and Canada, theprimary season for seismic data acquisition is during the winter, from approximately December to April, since much of the terrain for seismic data acquisitioncannot be accessed until the ground has frozen. The weather conditions during this time of year can affect the timing and efficiency of operations. Inaddition, this prime season can be shortened by warmer weather conditions.In South America and Southeast Asia, our operations are affected by the periods of heavy rain in the areas where seismic operations are conducted.Specifically, the jungle areas of Colombia, Bolivia and Peru are affected by heavy rain during certain parts of the year so we must either avoid taking projectsduring these time periods or limit the weather risk in a particular customer contract. Many of the heavy rain periods in South America, though, are during thehigh season for Alaska and Canada, and there are opportunities to maximize the utilization of equipment and personnel by moving them between theseregions to take advantage of the different high seasons.In all areas of operation, the weather is an uncontrollable factor that affects our operations at various times of the year. We try to minimize these risks duringthe bidding process by utilizing the expertise of our personnel as to the weather in a particular area and through the negotiation of downtime clauses in ourcontracts with our customers. Due to the unpredictability of weather conditions, there may be times when adverse conditions substantially affect ouroperations and the financial results of a particular project may be impacted.Marketing Our services are marketed from our various offices around the world. We have a corporate business development and marketing staff and also have localmanagers who interact with customers in each country of operations. Through these customer interactions, we are able to remain updated on a customer’supcoming projects in the area and to work with the customer on projects in other countries.Contracts are obtained either by direct negotiation with a prospective customer or through competitive bidding in response to invitations to bid. Most of ourrevenue historically has been generated through repeat customer sales and new sales to customers referred by existing and past customers. In addition, asignificant portion of our engagements results from competitive bidding. Contracts are awarded primarily on the basis of price, experience, availability,technological expertise and reputation for dependability and safety. With the involvement and review of senior management, bids are prepared byknowledgeable regional operations managers who understand their respective markets, customers and operating conditions and who communicate directlywith existing and target customers during the bid preparation process.We also work closely with customers on a direct award basis to plan particular seismic data acquisition projects. Due to the complexity of the areas where wedo business, these projects can take a number of months in planning and consulting with the customer on exploration goals and parameters of the projects tofit within a particular budget. By working closely with the customer, we are able to acquire seismic data for a project efficiently and within the customer’srequired timeframe.Contracts and BacklogWe conduct data acquisition services under master service agreements with our customers that set forth certain obligations of our customers and us. Asupplemental agreement setting forth the terms of a specific project, which may be canceled by either party on short notice, is entered into for every dataacquisition project. The supplemental agreements are either “turnkey” agreements that provide for a fixed fee to be paid to us for each unit of data acquired,or “term” agreements that provide for a fixed hourly, daily or monthly fee during the term of the project. Turnkey agreements generally mean more profitpotential, but involve more risks due to potential crew downtimes or operational delays. Under term agreements, we are ensured a more consistent revenuestream with improved protection from crew downtime or operational delays, but with a decreased profit potential.Our contracts for proprietary seismic data acquisition services reflect a high proportion of turnkey contracts, which is preferred by our customers because itshifts much of the business interruption risk onto us; however, it provides us with the greatest opportunity to maximize the advantage we have from being afull-service provider and the operational efficiencies created by our vertical integration. We attempt to negotiate on a project-by-project basis some level ofweather downtime protection within the turnkey agreements and increasingly use hybrid contracts where we may share with our customers a certain degree ofthe risks for certain business interruptions, such as weather, community relations and permitting delays, that are outside of our control.9Our backlog estimates represent those projects for which a customer has executed a contract or signed a binding letter of award. Our backlog can varysignificantly from time to time, particularly if the backlog is made up of multi-year contracts with some of our more significant customers. Backlog estimatesare based on a number of assumptions and estimates including assumptions related to foreign exchange rates and proportionate performance of contracts. Therealization of our backlog estimates is further affected by our performance under term rate contracts, as the early or late completion of a project under termrate contracts will generally result in decreased or increased, as the case may be, revenues derived from those projects. Contracts for services are alsooccasionally modified by mutual consent and often can be terminated for convenience by the customer. Because of potential changes in the scope orschedule of our customers’ projects, and the possibility of early termination of customer contracts, we cannot predict with certainty when or if our backlogwill be realized. Material delays, payment defaults or cancellations on the underlying contracts could reduce the amount of backlog currently reported and,consequently, could inhibit the conversion of that backlog into revenues. In addition, worsening overall market conditions are likely to result in furtherreductions of backlog, which will impact our financial performance.Customers Our customers include national and international oil companies and independent oil and gas exploration and production companies. Our revenues arederived from a concentrated customer base; however, we are not substantially dependent on any one customer. Based on the nature of our contracts andcustomer projects, our significant customers can and typically do change from year to year and the largest customers in any one year may not be indicative ofthe largest customers in the future. During the year ended December 31, 2016, we had three customers, Alaskan Seismic Ventures, BG Bolivia Corporation,and Hocol Petroleum Limited, that individually exceeded 10% of our consolidated revenue and represented 74% of consolidated revenue for the period.During the year ended December 31, 2015, we had four customers, Alaskan Seismic Ventures, Repsol, Prosper Energy Systems Group Sdn Bhd (Malaysia),and BP Exploration, that individually exceeded 10% of our consolidated revenue and represented 77% of our consolidated revenue for the period.Competition The acquisition of seismic data for the oil and gas industry is a highly competitive business. Factors such as price, experience, asset availability and capacity,technological expertise and reputation for dependability and safety of a crew significantly affect a potential customer’s decision to award a contract to us orone of our competitors. In addition, the recent excess supply and downturn in commodity prices has decreased demand for seismic services, furtherintensifying the competitive landscape and causing further pressure on pricing and margins.Our competitors include much larger companies with greater financial resources, more available equipment and more crews, as well as companies ofcomparable and smaller sizes. Our primary competitors are Compagnie Générale de Géophysique (CGG), Geokinetics, Inc., Global Geophysical Services, Inc.,BGP, Inc. and Dawson Geophysical Company. In addition to those companies, we also compete for projects from time to time with smaller seismic companiesthat operate in local markets.Intellectual Property We rely on certain proprietary information, proprietary software, trade secrets and confidentiality and licensing agreements to conduct our operations. Wecontinually strive to improve our operating techniques and technologies, through internal development activities and working with vendors to develop newprocesses and technologies to maintain pace with industry innovation. Through this process, we have developed certain proprietary processes and methods ofdoing business, particularly with respect to logistics. Although those processes and methods may not be patentable, we seek to protect our proprietaryinformation by entering into confidentiality agreements with our key managers and customers.Equipment Purchases and Capital Expenditures During 2016, we made minimal capital expenditures of approximately $3.4 million, primarily related to the purchase of a set of vibrators. During 2015, wemade capital expenditures of approximately $6.4 million, which included purchases of non-seismic recording equipment necessary to outfit a second crew onthe North Slope in Alaska and to acquire other seismic acquisition and logistics equipment. Under our current business model, capital expenditures will bekept at minimum levels other than very low maintenance expenditures until we see improvement in the overall oil and natural gas market.Historically, in line with our focus on wireless land data acquisition, we purchased a cableless seismic data acquisition system which allows up to three crewsto operate under the system at the same time. Following customer needs for higher density land programs using a single point receiver application and toanswer the demand for conventional and unconventional oil and gas exploration, we purchased high sensitivity geophones and two types of vibrators, furtherstrengthening our position as a full10solution provider for land data acquisition methods and technologies. Additional equipment investments were made for ongoing operations in Alaska inorder to increase efficiency. We also invested in cable equipment in order to provide customers in Latin America with cable systems as wireless technology isslower to take hold in that market.We will continue to employ and expand as needed our wireless equipment on a worldwide basis while maintaining the ability to provide services to the stillexisting cable markets. Our capital purchases have and will allow us to take advantage of all aspects of the geophysical exploration services market, rangingfrom land, marine and transition zone data acquisition; 2D, 3D, 4D and multi-component data acquisition; use of different methods to acquire data such asusing vibroseis (vibrating) and impulsive sources; as well as vertical seismic profiling and reservoir monitoring. Investments in expanding further into ourSouth America and Southeast Asia markets will also focus upon surveying, drilling and base camp operations.Government and Environmental Regulations Our operations are subject to various international, federal, provincial, state and local laws and regulations. Those laws and regulations govern variousaspects of operations, including the discharge of explosive materials into the environment, requiring the removal and clean-up of materials that may harm theenvironment or otherwise relating to the protection of the environment and access to private and governmental land to conduct seismic surveys. We believewe have conducted our operations in material compliance with applicable laws and regulations governing our activities.The costs of acquiring permits and remaining in compliance with environmental laws and regulations, title research, environmental studies and surveys aregenerally borne by our customers. Although our direct costs of complying with applicable laws and regulations have historically not been material, thechanging nature of such laws and regulations makes it impossible to predict the cost or impact of such laws and regulations on future operations. AdditionalUnited States or foreign government laws or regulations would likely increase the compliance and insurance costs associated with our customers’ operations.Significant increases in compliance expenses for customers could have a material adverse effect on customers’ operating results and cash flows, which couldalso negatively impact the demand for our services.Employees and Subcontractors As of February 28, 2017, we had 576 employees, 249 of whom were located in the United States. From time to time and on an as-needed basis, we supplementour regular workforce with individuals that we hire temporarily or as independent contractors in order to meet certain business needs. Our U.S. employees arenot represented by any collective bargaining agreement, and we believe that our employee relations are good.Generally, the choice of whether to subcontract out services depends on the expertise available in a certain region and whether that expertise is moreefficiently hired through subcontractors or by using our own labor force. For the most part, services are subcontracted within North America and ourpersonnel are used in other regions where we operate. When subcontractors are used, we manage them and require that they comply with our work policiesand QHSE systems.ITEM 1A. Risk Factors.Our business, financial position, results of operations or liquidity could be adversely affected by any of these risks. The risks and uncertainties we describeare not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair ourbusiness or operations. Any adverse effect on our business, financial position, results of operations or liquidity could result in a decline in the value of ourcommon stock and other securities.Risks Relating to Our Business and Industry Our business largely depends on the levels of exploration and development activity in the oil and natural gas industry, a historically cyclical industry. Adecrease in this activity caused by low oil and natural gas prices, increased supply, and reduced demand, such as has occurred over the last several years,has had an adverse effect on our business, liquidity and results of operations. Demand for our services depends upon the level of spending by oil and natural gas companies for exploration, production, development and fieldmanagement activities, which depend, in part, on oil and natural gas supplies and prices. The markets for oil and natural gas have historically been volatileand are likely to continue to be so in the future. In addition to the market prices of oil and natural gas, our customers’ willingness to explore, develop andproduce depends largely upon prevailing industry conditions that are influenced by numerous factors over which our management has no control. A declinein oil and natural gas11exploration activities and commodity prices, as has occurred over the last several years, has adversely affected the demand for our services and our results ofoperations. Factors affecting the prices of oil and natural gas and our customers’ desire to explore, develop and produce include:•the level of supply and demand for oil and natural gas;•expectations about future prices for oil and natural gas;•the worldwide political, military and economic conditions;•the ability of the Organization of Petroleum Exporting Countries to set and maintain production levels and prices for oil;•the rate of discovery of new oil and natural gas reserves and the decline of existing oil and natural gas reserves;•the cost of exploring for, developing and producing oil and natural gas;•the ability of exploration and production companies to generate funds or otherwise obtain capital for exploration, development and productionoperations;•technological advances affecting energy exploration, production and consumption;•government policies, including environmental regulations and tax policies, regarding the exploration for, production and development of oil andnatural gas reserves, the use of fossil fuels and alternative energy sources and climate change;•weather conditions, including large-scale weather events such as hurricanes that affect oil and natural gas operations over a wide area or affectprices; and•changes in the Alaskan oil and gas tax credit system which may significantly affect the level of exploration spending within Alaska and hasnegatively affected our current liquidity position.Over the last several years, oil prices have declined significantly due in large part to increasing supplies, weakening demand growth, some oil and gasproducing countries' position to not cut production and the lifting of sanctions against Iran. The weakening economic outlook for non-U.S. oil demand,especially in China and Europe, has put more downward pressure on prices. Thus, the price for crude oil has decreased significantly beginning in the thirdquarter of 2014.As a result of these decreases in crude oil prices, many E&P companies have reduced their capital expenditures, which has resulted in diminished demand forour services and products and downward pressure on the prices we charge or the level of work we do for our customers.We cannot assure you that the exploration and development activities by our customers will be maintained at current levels. Any significant decline inexploration or production-related spending by our customers, whether due to a decrease in the market prices for oil and natural gas or otherwise, would have amaterial adverse effect on our results of operations. Additionally, increases in oil and natural gas prices may not increase demand for our products andservices or otherwise have a positive effect on our results of operations or financial condition. Our revenues are subject to fluctuations that are beyond our control, which may be significant and could adversely affect our results of operations in anyfinancial period. Our operating results may vary in material respects from quarter to quarter. Factors that cause variations include the timing of the receipt and commencementof contracts for seismic data acquisition, processing or interpretation and customers’ budgetary cycles, all of which are beyond our control. In addition, in anygiven period, we could have idle crews which result in a significant portion of our revenues, cash flows and earnings coming from a relatively small numberof crews. Lower crew utilization rates can be caused by land access permit and weather delays, seasonal factors such as holiday schedules, shorter winter daysor agricultural or hunting seasons, and crew repositioning and crew utilization and productivity. Additionally, due to location, type of service or particularproject, some of our individual crews may achieve results that constitute a significant percentage of our consolidated operating results. Should any of ourcrews experience changes in timing or delays due to one or more of these factors, our financial results could be subject to significant variations from period toperiod. Combined with our fixed costs, these revenue fluctuations could also produce unexpected adverse results of operations in any fiscal period.In addition to the above potential fluctuations in our revenue, we may also have significant third-party pass-through costs that are reflected in our revenuesbut correspond to a very small administrative margin charged to the customer. Therefore, our revenues for certain periods may include a large amount of thesethird-party charges and can cause our gross profit margin to be lower.12Revenues derived from our projects may not be sufficient to cover our costs of completing those projects or may not result in the profit we anticipated whenwe entered into the contract. Our revenue is determined, in part, by the prices we receive for our services, the productivity of our crews and the accuracy of our cost estimates. Theproductivity of our crews is partly a function of external factors, such as weather and third party delays, over which we have no control. In addition, costestimates for our projects may be inadequate due to unknown factors associated with the work to be performed and market conditions, resulting in cost over-runs. If our crews encounter operational difficulties or delays, or if we have not correctly priced our services, our results of operation may vary and, in somecases, may be adversely affected.Our projects are performed on both a turnkey basis where a defined amount and scope of work is provided by us for a fixed price and additional work, whichis subject to customer approval, is billed separately, and is performed on a term basis where work is provided by us for a fixed hourly, daily or monthly fee.The relative mix of turnkey and term agreements, as related to our projects, can vary widely from time to time. The revenue, cost and gross profit realized on aturnkey contract can vary from our estimated amount because of changes in job conditions, variations in labor and equipment productivity from the originalestimates, and the performance of subcontractors. In addition, if conditions exist on a particular project that were not anticipated in the customer contractsuch as excessive weather delays, community issues, governmental issues or equipment failure, then the revenue timing and amount from a project can beaffected substantially. Turnkey contracts may also cause us to bear substantially all of the risks of business interruption caused by weather delays and otherhazards. Those variations, delays and risks inherent in billing customers at a fixed price may result in us experiencing reduced profitability or losses onprojects.The significant fixed costs of our operations could result in operating losses. We are subject to significant fixed operating costs, which primarily consist of depreciation and maintenance expenses associated with our equipment, certaincrew costs and interest expense on our outstanding indebtedness. Extended periods of significant downtime or low productivity caused by reduced demand,weather interruptions, equipment failures, permit delays or other causes could negatively affect our results and have a material adverse effect on our financialcondition and results of operations because we will not be able to reduce our fixed costs as fast as revenues decline.Our results of operations could be adversely affected by asset impairments. We periodically review our portfolio of equipment for impairment. A prolonged downturn could affect the carrying value of our equipment or other assetsand require us to recognize a loss. We may be required to write down the value of our equipment if the present value of future cash flows anticipated to begenerated from the related equipment falls below net book value. A decline in oil and natural gas prices, if sustained, can result in future impairments.Because the impairment of long-lived assets or goodwill would be recorded as an operating expense, such a write-down would negatively affect our netincome and may result in a breach of certain of our financial covenants under the terms of the documents governing our indebtedness.Our working capital needs are difficult to forecast and may vary significantly, which could cause liquidity issues and require us to seek additionalfinancing that we may not be able to obtain on satisfactory terms, or at all. Our working capital needs are difficult to predict with certainty. Our available cash varies in material respects as a result of, among other things, the timing ofour projects, our customers’ budgetary cycles and our receipt of payment. In particular, delays in receiving payments on our accounts receivable relating toour Alaskan tax credits discussed below may cause liquidity issues for us in the future. Our working capital requirements may continue to increase, due tocontraction in our business or expansion of infrastructure that may be required to keep pace with technological advances. Over time, we must continue toinvest additional capital to maintain, upgrade and expand our seismic data acquisition capabilities. In addition, some of our larger projects require significantupfront costs. We therefore may be subject to significant and rapid increases in our working capital needs that could require us to seek additional financingsources. While we currently have a senior loan facility and a revolving line of credit, and we have reduced our outstanding indebtedness as a result of theRestructuring, we have minimal remaining borrowing base and restrictions in our debt agreements as well as our current cash flow and liquidity difficultiesmay impair our ability to obtain other sources of financing, and access to additional sources of financing may not be available on terms acceptable to us, or atall. In addition, as described in Note 6, our revolving line of credit has a maturity date of November 6, 2017 and, as described in Note 7, our senior term loanfacility has a maturity date of January 2, 2018. While we are currently working on various financing alternatives that could replace or renew our revolvingline of credit or senior loan facility, there can be no assurance that we will be able to obtain additional financing on satisfactory terms, or at all.Developments in the State of Alaska and their consequences for the market for exploration tax credits and the impacts of those developments on our cashflow have intensified the negative impact on our current liquidity and cash flow.13The State of Alaska offers two types of exploration tax credits (“Tax Credits”), which certain of our Alaskan customers receive in connection with theacquisition of seismic data that we generate. These customers may utilize cash received from the State of Alaska for the Tax Credits or, more typically, fromthe proceeds of a third party loan secured by the Tax Credits to pay accounts receivable due to us. As a result, we have, from time to time, accounts receivabledue from Alaskan customers where the timing and amount of payment to us may be dependent upon when the Tax Credits can be monetized. In connectionwith the above, our Alaskan customers manage the Tax Credit process, which includes filing an application, undergoing an audit and receiving a Tax Creditcertificate for the permitted amount. However, the ultimate disposition and timing of the process of the issuance of a Tax Credit certificate by the State ofAlaska is outside our control. Historically, applicants have been able to quickly monetize Tax Credits before the issuance of the Tax Credit certificates andremit prompt payment to us by securing a loan from a financial institution secured by the Tax Credits. However, we believe, based on publicly availableinformation, that the State of Alaska’s existing budget deficit, delays in the State of Alaska paying on Tax Credits compared to historical timing, a veto bythe governor of Alaska over the line item in the budget to pay Tax Credits in the fiscal 2017 budget and speculation regarding possible legislation that mayamend the current Tax Credit program have produced substantial uncertainty about the timing of reimbursement from the State of Alaska for Tax Credits. Asa consequence of this uncertainty, we believe that many, if not all, third-party financial institutions have suspended lending against Tax Credits prior toissuance of a Tax Credit certificate. In turn, our Alaskan customers’ ability to monetize these Tax Credits in a timely manner has also been materially andadversely affected.In particular, at December 31, 2016, we had an account receivable of approximately $81.6 million due to us from one customer, making this currently ourlargest account receivable and the single largest item affecting our short-term liquidity, other than the general decline in our business due to the downturn inthe business of oil and natural gas exploration and production companies. This customer relies upon Tax Credits to fund projects performed by us. Althoughthis customer had previously notified us that it was working on several possible monetization solutions, it informed us that it was unsuccessful in monetizingits Tax Credits and that it was highly unlikely that it would be able to pay us the account receivable on a timely basis. As a result, in 2016 our customerassigned $72.9 million of Tax Credits related to completed programs to us so that we can seek to monetize these Tax Credits and apply the resulting cash, asmonetization occurs, toward the customer’s repayment of its overdue account receivable. In January 2017, the customer assigned the remaining $16.1 millionof Tax Credits to us. Based on the expected timing to monetize the Tax Credits, we have reclassified certain of our receivables from current accountsreceivable to long-term accounts receivable and may need to reclassify additional accounts receivable in the future.In its review of approximately $30.2 million of Tax Credit applications during the audit process, we received approximately $24.4 million of Tax Creditsfrom the State of Alaska during the year ended December 31, 2016. The State of Alaska disallowed approximately $5.8 million of what we believe should beeligible expenditures. Our customer filed an appeal of this decision on October 18, 2016 seeking a reversal of the disallowed amount. During the year endedDecember 31, 2016, we recorded a reduction of our accounts receivable balance of $10.9 million related to the monetization of Tax Credit certificates andrecorded an additional reduction of $3.5 million in 2017 through March 10, 2017. We expect certificates representing approximately $58.8 million in TaxCredits to be issued on a rolling basis in 2017.There continues to be uncertainty regarding the timely payment by the State of Alaska of its obligations on issued Tax Credit certificates as well as ourability to accurately estimate the timeframe for such payments. We continue to explore options to monetize the Tax Credit certificates, including an option tosell the certificates in the secondary market at a discount to purchasers that are able to apply the certificates to reduce their own Alaskan tax liabilities. Thereis a risk that any monetization of the Tax Credits certificates, however, will reflect a substantial discount and may be insufficient to fully repay the customer’soutstanding account receivable. Should this occur, we may be required to record an impairment of the amount due from our customer.As part of the Restructuring, we entered into a senior loan facility, which added up to $30.0 million in additional liquidity. The senior loan facility is securedby a junior first lien on our accounts receivable, which includes the Tax Credits and certificates evidencing the Tax Credits. Those Tax Credits andcertificates are also pledged on a senior first lien basis to the lender under our revolving credit facility. All proceeds from monetizing the Tax Credits or TaxCredit certificates are paid into an account at the lender under the revolving credit facility and automatically reduce the amount we have borrowed under thatline of credit. The senior loan facility requires that once we have received $15 million in proceeds from the Tax Credits or Tax Credit certificates, unlesswaived by the lenders (or individual lenders) under the senior loan facility, mandatory repayments of the amount received for the Tax Credits or Tax Creditcertificates must be made. As a result, once we have received $15 million in proceeds from the Tax Credits or Tax Credit certificates, which we expect willoccur shortly, until the outstanding balance on the senior loan facility is paid in full, the amount owed to the lender under the senior loan facility must comefrom cash or from a re-borrowing of the amount due under our revolving credit facility. If we are able to monetize our Tax Credits as we anticipate, however,we expect that we will be able to repay the senior loan facility in 2017 but, in any event, it will mature on January 2, 2018. While we are currently working onvarious financing alternatives that would replace or renew our revolving credit facility or senior loan facility, there can be no assurance that we will be able toobtain additional financing on satisfactory terms, or at all.14Until we are able to finally resolve the issue described above, we may continue to experience liquidity issues. The Restructuring, which provided additionalborrowing capacity, and the debt exchange which reduced our indebtedness expense and allows us to pay interest in kind, provided significant levels of shortterm liquidity which should mitigated the acuteness of this issue, but there can be no assurance that it will solve the issue of our need to monetize our TaxCredits.Our operations are subject to weather and seasonality, which may affect our ability to timely complete projects. Our seismic data acquisition services are performed outdoors and often in difficult or harsh climate conditions, and are therefore subject to weather andseasonality. In Canada and Alaska, the primary season for seismic data acquisition is during the winter, from December to April, as many areas are onlyaccessible when the ground is frozen. The weather conditions during this time of year can affect the timing and efficiency of operations. In addition, thisprime season can be shortened by warmer weather conditions.In South America and Southeast Asia, our operations are affected by the periods of heavy rain in the areas where seismic operations are conducted. In all areasin which we operate, the weather is an uncontrollable factor that affects our operations at various times of the year. Due to the unpredictability of weatherconditions, there may be times when adverse conditions may cause our operations to be delayed and result in additional costs and may negatively affect ourresults of operations.Our operations are subject to delays related to obtaining government permits and land access rights from third parties which could result in delaysaffecting our results of operations. Our seismic data acquisition operations could be adversely affected by our inability to obtain timely right of way usage from both public and private landand/or mineral owners. We cannot begin surveys on property without obtaining any required permits from governmental entities as well as the permission ofthe private landowners who own the land being surveyed. In recent years, it has become more difficult, costly and time-consuming to obtain access rights ofway as drilling activities have expanded into more populated areas. Additionally, while landowners generally are cooperative in granting access rights, somehave become more resistant to seismic and drilling activities occurring on their property. In addition, governmental entities do not always grant permitswithin the time periods expected. Delays associated with obtaining such permits and rights of way may negatively affect our results of operations.Our backlog can vary significantly from time to time and our backlog estimates are based on certain assumptions and are subject to unexpectedadjustments and cancellations and thus may not be timely converted to revenues in any particular fiscal period, if at all, or be indicative of our actualoperating results for any future period.Our backlog estimates represent those projects for which a customer has executed a contract or signed a binding letter of award. Our backlog can varysignificantly from time to time, particularly if the backlog is made up of multi-year contracts with some of our more significant customers. Backlog estimatesare based on a number of assumptions and estimates including assumptions related to foreign exchange rates and proportionate performance of contracts. Therealization of our backlog estimates is further affected by our performance under term rate contracts, as the early or late completion of a project under termrate contracts will generally result in decreased or increased, as the case may be, revenues derived from those projects. Contracts for services are alsooccasionally modified by mutual consent and often can be terminated for convenience by the customer. Because of potential changes in the scope orschedule of our customers’ projects, and the possibility of early termination of customer contracts, we cannot predict with certainty when or if our backlogwill be realized. Material delays, payment defaults or cancellations on the underlying contracts could reduce the amount of backlog currently reported and,consequently, could inhibit the conversion of that backlog into revenues. In addition, worsening overall market conditions could result in further reductionsof backlog which will impact our financial performance.We face intense competition in our business that could result in downward pricing pressure and the loss of market share. Competition among seismic contractors historically has been, and likely will continue to be, intense. Competitive factors have in recent years included price,crew experience, asset availability and capacity, technological expertise and reputation for quality and dependability. We also face increasing competitionfrom nationally owned companies in various international jurisdictions that operate under less significant financial constraints than those we experience.Many of our competitors have greater financial and other resources, more customers, greater market recognition and more established relationships andalliances in the industry than we do. They and other competitors may be better positioned to withstand and adjust more quickly to volatile marketconditions, such as fluctuations in oil and natural gas prices and production levels, as well as changes in government regulations. Additionally, the seismicdata acquisition business is extremely price competitive and has a history of protracted periods of months or years where seismic contractors under financialduress bid jobs at unattractive pricing levels and therefore adversely affect industry15pricing. Competition from those and other competitors could result in downward pricing pressure, which could adversely affect our margins, and could resultin the loss of market share.Capital requirements for the technology we use can be significant. If we are unable to finance these requirements, we may not be able to maintain ourcompetitive advantage. Seismic data acquisition technologies historically have steadily improved and progressed, and, over the long-term, we expect this trend to continue.Manufacturers of seismic equipment may develop new systems that have competitive advantages relative to systems now in use that either render theequipment we currently use obsolete or require us to make substantial capital expenditures to maintain our competitive position. In order to remaincompetitive, we may need to continue to invest additional capital to maintain, upgrade and expand our seismic data acquisition capabilities.Our capital requirements, which are primarily the cost of equipment, historically have been significant. We attempt to minimize our capital expenditures byrestricting our purchase of equipment to equipment that we believe will remain highly utilized, and we strategically rent equipment utilizing the most currenttechnology to cover peak periods in equipment demands. We may not be able to finance all of our capital requirements, however, when and if needed, toacquire new equipment. If we are unable to do so, there may be a material negative impact on our operations and financial condition. Under our currentbusiness model, however, capital expenditures will be kept at minimum levels other than for maintenance expenditures until we see improvement in themarket for seismic services. While we own or can rent the equipment needed for our current levels of business, long-term limiting our capital expendituresmay result in an increased competitive disadvantage.Our revenues are generated by a concentrated number of customers. We derive our revenues from a concentrated customer base in the international oil and natural gas industry. Although we historically have not beendependent on any one customer, recently we had one customer that has represented a significant portion of our accounts receivable. Our largest customers canand typically do change from year to year and our largest customers in any one year may not be indicative of our largest customers in the future. If any of ourcustomers were to terminate their contract with us on a large project or fail to contract for our services in the future because they are acquired, alter theirexploration or development strategy, experience financial difficulties, as a result of concerns over our current cash flow and liquidity difficulties or for anyother reason, and we were not able to replace their business with business from other customers, our business, financial condition and results of operationscould be materially and adversely affected. We operate under hazardous conditions that subject us and our employees to risk of damage to property or personal injury and limitations on ourinsurance coverage may expose us to potentially significant liability costs. Our activities are often conducted in dangerous environments and include hazardous conditions, including operation of heavy equipment, the detonation ofexplosives, and operations in remote areas of developing countries. Operating in such environments, and under such conditions, carries with it inherent risks,such as loss of human life or equipment, as well as the risk of downtime or reduced productivity resulting from equipment failures caused by an adverseoperating environment. Those risks could cause us to experience injuries to our personnel, equipment losses, and interruptions in our business.Although we maintain insurance, our insurance contains certain coverage exclusions and policy limits. There can be no assurance that our insurance will besufficient or adequate to cover all losses or liabilities or that insurance will continue to be available to us on acceptable terms, or at all. Further, we mayexperience difficulties in collecting from insurers as such insurers may deny all or a portion of our claims for insurance coverage. A claim for which we are notfully insured, or which is excluded from coverage or exceeds the policy limits of our applicable insurance, could have a material adverse effect on ourfinancial condition.We may be held liable for the actions of our subcontractors. We often work as the general contractor on seismic data acquisition surveys and consequently engage a number of subcontractors to perform services andprovide products. While we generally obtain contractual indemnification and insurance covering the acts of those subcontractors, and require thesubcontractors to obtain insurance for our benefit, there can be no assurance we will not be held liable for the actions of those subcontractors. In addition,subcontractors may cause damage or injury to our personnel and property that is not fully covered by insurance or by claims against the subcontractors. Our agreements with our customers may not adequately protect us from unforeseen events or address all issues that could arise with our customers. Theoccurrence of unforeseen events or disputes with customers could result in increased liability, costs and expenses for our projects. 16We enter into master service agreements with many of our customers that allocate certain operational risks. Despite the inclusion of risk allocation provisionsin our agreements, our operations may be affected by a number of events that are unforeseen or not within our control and our agreements may not adequatelyprotect us from each possible event. If an event occurs which we have not contemplated or otherwise addressed in our agreement we, and not our customer,will likely bear the increased cost or liability.To the extent our agreements do not adequately address those and other issues, or we are not able to successfully resolve resulting disputes, we may incurincreased liability, costs and expenses. This may have a material adverse effect on our results of operations. We, along with our customers, are subject to compliance with governmental laws and regulations that may expose us to significant costs and liabilitiesand may adversely affect the demand for our services. Our operations, and those of our customers, are subject to a variety of federal, provincial, state and local laws and regulations in the United States and foreignjurisdictions, including stringent laws and regulations relating to protection of the environment, particularly those relating to emissions to air, discharges towater, treatment, storage and disposal of regulated materials and remediation of soil and groundwater contamination. Those laws and regulations may imposenumerous obligations that are applicable to our operations including:•the acquisition of permits before commencing regulated activities; and•the limitation or prohibition of seismic activities in environmentally sensitive or protected areas such as wetlands or wilderness areas.Numerous governmental authorities, such as the U.S. Environmental Protection Agency (the “EPA”) and analogous state agencies in the United States andgovernmental bodies with control over environmental matters in foreign jurisdictions, have the power to enforce compliance with those laws and regulationsand any permits issued under them, oftentimes requiring difficult and costly actions. We may incur substantial costs, including fines, damages, criminal orcivil sanctions, remediation costs and natural resource damage claims, or experience interruptions in our operations for violations or liabilities arising underthese laws and regulations. Further, we may become liable for damages against which we cannot adequately insure or against which we may elect not toinsure because of high costs or other reasons. Our customers are subject to similar environmental laws and regulations.We expend financial and managerial resources to comply with all the laws and regulations applicable to our operations. Any changes in environmental lawsand regulations or re-interpretation of enforcement policies that result in more stringent and costly regulations, or that change waste handling, storage,transport, disposal or remediation requirements could have a material adverse effect on our results of operations and financial position. The fact that suchlaws or regulations change frequently makes it impossible for us to predict the cost or impact of such laws and regulations on our future operations. The costsof complying with applicable environmental laws and regulations are likely to increase over time and we cannot provide any assurance that we will be ableto remain in compliance with respect to existing or new laws and regulations or that such compliance will not have a material adverse effect on our business,financial condition and results of operations, or on the operations of our customers which could affect demand for our services. Although regulatorydevelopments that may occur in subsequent years could have the effect of reducing industry activity, we cannot predict the nature of any new restrictions orregulations that may be imposed. We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions orregulations. In addition, as a result of the mobility of our equipment, operations in foreign jurisdictions and the utilization of a multi-national work force, we and ourcustomers are subject to various federal, provincial, state and local laws and regulations in the United States and foreign jurisdictions relating to the import orexport of equipment and the immigration and employment of non-citizen employees or sub-contractors. Numerous governmental authorities, such as the U.S.Customs and Border Protection, the Bureau of Industry and Security and the Office of Foreign Assets Control, and analogous governmental bodies in foreignjurisdictions have laws and regulations which prohibit or restrict operations in certain jurisdictions and doing business with certain persons in suchjurisdictions, and we and our customers may be required to obtain and maintain licenses, permits, visas and similar documentation for operations. We mayincur substantial costs, including fines and damages, criminal or civil sanctions for violations or liabilities arising under these laws and regulations.Our operations outside of the United States are subject to additional political, economic, and other risks and uncertainties that could adversely affect ourbusiness, financial condition, results of operations, or cash flows, and our exposure to such risks will increase as we expand our international operations. 17Our operations outside of North America accounted for a substantial portion of our consolidated income. Our international operations are subject to a numberof risks inherent in any business operating in foreign countries, and especially those operating in emerging markets. As we continue to increase our presencein those countries, our operations will continue to encounter the following risks, among others:•government instability or armed conflict, which can cause our potential customers to withdraw or delay investment in capital projects, therebyreducing or eliminating the viability of some markets for our services;•potential expropriation, seizure, nationalization or detention of assets;•risks relating to foreign currency, as described below;•import/export quotas or unexpected changes in regulatory environments and trade barriers;•civil uprisings, riots and war, which can make it unsafe to continue operations, adversely affect both budgets and schedules and expose us to losses;•availability of suitable personnel and equipment, which can be affected by government policy, or changes in policy, which limit the importation ofqualified crew members or specialized equipment in areas where local resources are insufficient, and legal restrictions or other limitations on ourability to dismiss employees;•laws, regulations, decrees and court decisions under legal systems that are not always fully developed and that may be retroactively applied andcause us to incur unanticipated and/or unrecoverable costs, as well as delays which may result in real or opportunity costs; and•terrorist attacks, including kidnappings of our personnel.If any of those or other similar events should occur, it could have a material adverse effect on our financial condition and results of operations.We are subject to taxation in many foreign jurisdictions and the final determination of our tax liabilities involves the interpretation of the statutes andrequirements of taxing authorities worldwide. Our tax returns are subject to routine examination by taxing authorities, and those examinations may result inassessments of additional taxes, penalties and/or interest.Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We may notsucceed in developing and implementing policies and strategies that are effective in each location where we do business, and we may experience projectdisruptions and losses, which could negatively affect our profitability.Our results of operations can be significantly affected by foreign currency fluctuations and regulations.A portion of our revenues is derived in the local currencies of the foreign jurisdictions in which we operate. Accordingly, we are subject to risks relating tofluctuations in currency exchange rates. In the future, and especially as we further expand our operations in international markets, our customers mayincreasingly make payments in non-U.S. currencies. Fluctuations in foreign currency exchange rates could affect our revenues, operating costs and operatingmargins. In addition, currency devaluation can result in a loss to us if we hold deposits of that currency. Hedging foreign currencies can be difficult,especially if the currency is not actively traded. We cannot predict the effect of future exchange rate fluctuations on our operating results.In addition, we are subject to risks relating to governmental regulation of foreign currency, which may limit our ability to:•transfer funds from or convert currencies in certain countries;•repatriate foreign currency received in excess of local currency requirements; and•repatriate funds held by our foreign subsidiaries to the United States at favorable tax rates.As we continue to develop our operations in foreign countries, there is an increased risk that foreign currency controls may create difficulty in repatriatingprofits from foreign countries in the form of taxes or other restrictions, which could restrict our cash flow.Economic and political conditions in Latin America pose numerous risks to our operations.Our business operations in the Latin American region constitute a material portion of our business. As events in the region have demonstrated, negativeeconomic or political developments in one country in the region can lead to or exacerbate economic or political instability elsewhere in the region.Furthermore, events in recent years in other developing markets have placed pressures on the stability of the currencies of a number of countries in LatinAmerica in which we operate, including Brazil, Colombia and Peru. While certain areas in the Latin American region have experienced economic growth, thisrecovery remains fragile.18Certain Latin American economies have experienced shortages in foreign currency reserves and have adopted restrictions on the use of certain mechanisms toexpatriate local earnings and convert local currencies into U.S. Dollars. Any such shortages or restrictions may limit or impede our ability to transfer or toconvert such currencies into U.S. Dollars and to expatriate such funds for the purpose of making timely payments of interest and principal on ourindebtedness. In addition, currency devaluations in one country may have adverse effects in another country. Some Latin American countries havehistorically experienced high rates of inflation. Inflation and some measures implemented to curb inflation have had significant negative effects on theeconomies of these countries. Governmental actions taken in an effort to curb inflation, coupled with speculation about possible future actions, havecontributed to economic uncertainty at times in most Latin American countries. These countries may experience high levels of inflation in the future thatcould lead to further government intervention in the economy, including the introduction of government policies that could adversely affect our results ofoperations. In addition, if any of these countries experience high rates of inflation, we may not be able to adjust the price of our services sufficiently to offsetthe effects of inflation on our cost structures. A high inflation environment would also have negative effects on the level of economic activity andemployment and adversely affect our business, results of operations and financial condition.Current and future legislation or regulation relating to climate change and hydraulic fracturing could negatively affect the exploration and production ofoil and gas and adversely affect demand for our services. In response to concerns suggesting that emissions of certain gases, commonly referred to as “greenhouse gases” (“GHG”) (including carbon dioxide andmethane), may be contributing to global climate change, legislative and regulatory measures to address the concerns are in various phases of discussion orimplementation at the federal, state and international levels. Many states, either individually or through multi-state regional initiatives, have already takenlegal measures intended to reduce GHG emissions, primarily through the planned development of GHG emission inventories and/or GHG cap and tradeprograms.Although various climate change legislative measures have been under consideration by the U.S. Congress, it is not possible at this time to predict whether orwhen Congress may act on climate change legislation. The EPA has promulgated a series of rulemakings and taken other actions that the EPA states willresult in the regulation of GHG as “air pollutants” under the existing federal Clean Air Act. Furthermore, in 2010, EPA regulations became effective thatrequire monitoring and reporting of GHG emissions on an annual basis, including extensive GHG monitoring and reporting requirements. While this ruledoes not control GHG emission levels from any facilities, it will cause covered facilities to incur monitoring and reporting costs. Moreover, lawsuits havebeen filed seeking to require individual companies to reduce GHG emissions from their operations.This increasing focus on global warming may result in new environmental laws or regulations that may negatively affect us and our customers. This couldcause us to incur additional direct costs in complying with any new environmental regulations, as well as increased indirect costs resulting from ourcustomers incurring additional compliance costs that get passed on to us. Moreover, passage of climate change legislation or other legislative or regulatoryinitiatives that regulate or restrict emissions of GHG may curtail production and demand for fossil fuels such as oil and natural gas in areas where ourcustomers operate and thus adversely affect future demand for our services. Reductions in our revenues or increases in our expenses as a result of climatecontrol initiatives could have adverse effects on our business, financial position, results of operations and prospects.Hydraulic fracturing is an important and commonly used process in the completion of oil and natural gas wells. Hydraulic fracturing involves the injection ofwater, sand and chemical additives under pressure into rock formations to stimulate oil and natural gas production. Due to public concerns raised regardingpotential impacts of hydraulic fracturing, legislative and regulatory efforts at the federal level and in some states have been initiated to require or make morestringent the permitting, reporting and compliance requirements for hydraulic fracturing operations. These legislative and regulatory initiatives imposingadditional reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it more difficult or costly to complete oil and naturalgas wells. Shale gas and shale oil cannot be economically produced without extensive fracturing. In the event such initiatives are successful, demand for ourseismic acquisition services may be adversely affected.As a company subject to compliance with the Foreign Corrupt Practices Act (the “FCPA”), our business may suffer because our efforts to comply with U.S.laws could restrict our ability to do business in foreign markets relative to our competitors who are not subject to U.S. law. Any determination that we orour foreign agents have violated the FCPA may adversely affect our business, operations and reputation. We operate in certain parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance withanti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are ableto secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or using othermethods that U.S. law and regulations prohibit us from using.19As a U.S. corporation, we are subject to the regulations imposed by the FCPA, which generally prohibits U.S. companies and their intermediaries from makingimproper payments to foreign officials for the purpose of obtaining or keeping business and which imposes stringent recordkeeping requirements. Inparticular, we may be held liable for actions taken by our strategic or local partners even though our partners are not subject to the FCPA. Any such violationscould result in substantial civil and/or criminal penalties and might adversely affect our results of operations and our ability to continue to work in thosecountries.The enactment of legislation implementing changes in U.S. or foreign tax laws affecting the taxation of international business activities or the adoption ofother tax reform policies could materially impact our financial position and results of operations.Changes to U.S. or foreign tax laws could impact the tax treatment of our foreign earnings. Due to the scope of our international business operations, anychanges in the U.S. or foreign taxation of these operations may increase our worldwide effective tax rate and adversely affect our financial condition andoperating results. The international scope of our operations and our corporate and financing structure may expose us to potentially adverse tax consequences.We are subject to taxation in and to the tax laws and regulations of multiple jurisdictions as a result of the international scope of our operations and ourcorporate and financing structure. We are also subject to intercompany pricing laws, including those relating to the flow of funds between our companies.Adverse developments in these laws or regulations, or any change in position regarding the application, administration or interpretation of these laws orregulations in any applicable jurisdiction, could have a material adverse effect on our business, financial condition and results of operations. In addition, thetax authorities in any applicable jurisdiction, including the United States, may disagree with the positions we have taken or intend to take regarding the taxtreatment or characterization of any of our transactions, including the tax treatment or characterization of our indebtedness, intercompany loans andguarantees. If any applicable tax authorities, including the U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any ofour transactions, it could result in the disallowance of deductions and the imposition of tax withholding.We may be unable to attract and retain executive officers and skilled and technically knowledgeable employees, which could adversely affect our business. Our continued success depends upon retaining and attracting executive officers and highly skilled employees. A number of our executive officers andemployees possess many years of industry experience and are highly skilled, and members of our management team also have relationships with oil and gascompanies and others in the industry that are integral to our ability to market and sell our services. Our inability to retain such individuals could adverselyaffect our ability to compete in the seismic service industry. We may face significant competition for such skilled personnel, particularly during periods ofincreased demand for seismic services. Although we utilize employment agreements and other incentives to retain certain of our key employees, there is noguarantee that we will be able to retain those personnel. If we do not manage growth and contractions in our business effectively, our results of operations could be adversely affected. Historically, we have experienced significant growth but for the last several years we have contracted our business in response to the decline in oil andnatural gas exploration activities. Both growth and contraction have placed significant demands on our personnel, management, infrastructure and supportmechanisms and other resources. We must continue to improve our operational, financial, management, legal compliance and information systems to keeppace with the growth of or contractions in our business. We may also expand through the strategic acquisition of companies and assets. We must plan andmanage any acquisitions effectively to achieve revenue growth and maintain profitability in our evolving market. If we fail to manage growth of orcontractions in our business effectively, our ability to provide services could be adversely affected, which could negatively affect our operating results.The requirements of being a public company increase our operating expenses and divert management’s attention. As a public company, we are subject to the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act,the Dodd-Frank Act and other applicable securities rules and regulations. Compliance with these rules and regulations require us to incur significantadditional legal, accounting and other expenses that we would not incur if we were not a public company.The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. TheSarbanes-Oxley Act and the rules subsequently implemented by the SEC and the national securities exchanges, establish certain requirements for thecorporate governance practices of public companies. For example, as a result of becoming a public company, we have additional board committees and arerequired to maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improveour disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight are20required. As a result, management’s attention has been and will continue to be diverted from other business concerns, which could harm our business andoperating results.Because we are a smaller reporting company, to date our independent auditor has not been required to issue an attestation report regarding our internalcontrol over financial reporting in the annual reports on Form 10-K that we file with the SEC, and we have been subject to scaled disclosure requirements. Wewill remain a smaller reporting company as long as the market value of our securities held by non-affiliates is below $75 million, as of the end of our secondfiscal quarter each year. If we cease to be a smaller reporting company, our expenses will further increase and additional time will be required of ourmanagement to comply with those additional requirements.Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our financial obligations.While the Restructuring we completed on July 27, 2016 caused our total debt outstanding to significantly decrease from our total debt outstanding on June30, 2016, our high level of indebtedness could still have significant effects on our business. For example, our level of indebtedness and the terms of our debtagreements may: •increase the risk that we may default on our debt obligations;•prevent us from raising the funds necessary to repurchase second lien notes or senior secured notes tendered to us if there is a change of control (asdefined in the indentures for the second lien notes and the senior secured notes) or other event requiring such a repurchase, and any failure torepurchase second lien notes or senior secured notes tendered for repurchase would constitute a default under the indentures for our notes and mayconstitute a default under other debt;•require us to use a substantial portion of our cash flow from operations to pay interest and principal on our indebtedness, which would reduce the fundsavailable for working capital, capital expenditures and other general corporate purposes;•limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments, or general corporatepurposes particularly in light of the fact that a substantial portion of our assets have been pledged to secure our indebtedness, which may limit theability to execute our business strategy;•heighten our vulnerability to downturns in our business, our industry or in the general economy and restrict us from exploiting business opportunitiesor making acquisitions;•place us at a competitive disadvantage compared to those of our competitors that may have proportionately less debt;•limit management’s discretion in operating our business;•limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate or the general economy; and•result in higher interest expense if interest rates increase and we have outstanding floating rate borrowings.Each of these factors may have a material adverse effect on our business, financial condition and results of operations. Our ability to make payments withrespect to our indebtedness will depend on our future operating performance, which will be affected by a broad range of factors, including our ability tomonetize our Tax Credits, prevailing economic conditions and financial, business and other factors affecting us and our industry, many of which are beyondour control. Despite existing debt levels, we may still be able to incur substantially more debt, which would increase the risks associated with our leverage. Even with our existing debt levels, we and our subsidiaries may be able to incur additional debt in the future, including debt under our revolving creditfacility. Although our revolving credit facility matures on November 6, 2017, our borrowing base has been reduced and the terms of our debt agreementslimit our ability to incur additional debt, these terms may not prevent us from incurring amounts of additional debt. In addition, we are working on variousfinancing alternatives that would replace or renew our revolving credit facility or senior loan facility, there can be no assurance that we will be able to obtainadditional financing on satisfactory terms, or at all. If new debt is added to our current debt levels, however, the risks associated with our leverage mayintensify. Our debt agreements impose or may impose significant operating and financial restrictions on us and our subsidiaries that may prevent us from pursuingcertain business opportunities and restrict our ability to operate our business. Our debt agreements contain covenants that restrict our and our restricted subsidiaries’ ability to take various actions, such as:21•transferring or selling certain assets;•paying dividends or distributions, repaying subordinated indebtedness (if any) or making certain investments or other restricted payments;•incurring or guaranteeing additional indebtedness or, with respect to our restricted subsidiaries, issuing preferred stock;•creating or incurring liens securing indebtedness;•incurring dividend or similar payment restrictions affecting restricted subsidiaries;•consummating a merger, consolidation or sale of all or substantially all our and our restricted subsidiaries’ assets;•entering into transactions with affiliates; and•engaging in a business other than our current business and businesses related, ancillary or complementary, to our current businesses or immaterialbusinesses.In addition, the security documents relating to our indebtedness restrict us and our restricted subsidiaries from taking or omitting to take certain actions thatwould adversely affect or impair in any material respect the collateral securing those obligations. Any future debt may also require us to comply with anumber of affirmative and negative covenants in addition to the covenants listed above.While we are currently working on various financing alternatives that could replace ore renew our revolving credit facility or our senior loan facility, therecan be no assurance that we will be able to obtain additional financing on satisfactory terms, or at all, or that more restrictive terms will not be imposed uponus in any of our new debt agreements.We may be prevented from taking advantage of business opportunities that arise if we fail to meet certain financial ratios or because of the limitationsimposed on us by the restrictive covenants under these agreements. In addition, the restrictions contained in our debt agreements may also limit our ability toplan for or react to market conditions or meet capital needs, or may otherwise restrict our activities or business plans and adversely affect our ability tofinance our operations, enter into acquisitions, execute our business strategy, effectively compete with companies that are not similarly restricted or engagein other business activities that would be in our interest. In the future, we may incur other debt obligations that might subject us to additional and differentrestrictive covenants that could also adversely affect our financial and operational flexibility. In the event that we default under any of these financial orother covenants, we would be required to seek waivers or amendments to the applicable agreements or to refinance the applicable indebtedness, and wecannot assure you that we would be able to do so on terms we deem acceptable, or at all. Failure to comply with applicable covenants would constitute adefault under the applicable debt instrument and would generally allow the applicable lenders or other debt holders to demand immediate repayment of allindebtedness outstanding thereunder and, in the case of secured indebtedness and subject to the intercreditor agreement, if applicable, to seize and sell thecollateral and to apply the proceeds from those sales to satisfy such indebtedness, any of which could have a material adverse impact on our results ofoperations and financial condition. These events would likely in turn trigger cross-acceleration and cross-default rights under other debt agreements, whichwould allow the applicable lenders or other debt holders to exercise similar rights and remedies. If the amounts outstanding under any of our debt agreementswere to be accelerated or if the applicable lenders or other debt holders were to foreclose upon the collateral securing any such indebtedness, we cannotassure you that our assets would be sufficient to repay the money owed to our lenders. We have in the past failed to comply with financial and othercovenants in debt and have therefore been required to obtain waivers and amendments from prior lenders, and there can be no assurance that we will notexperience similar defaults in the future or that waivers or amendments will be obtained. Our debt agreements contain restrictive covenants that may limit our ability to respond to changes in market conditions or pursue business opportunities. Our debt agreements contain restrictive covenants that limit our ability to, among other things: •incur or guarantee additional debt;•pay dividends;•repay subordinated debt prior to its maturity;•grant additional liens on our assets;•enter into transactions with our affiliates;•repurchase stock;22•make certain investments or acquisitions of substantially all or a portion of another entity’s business assets;•undergo a change of control; and•merge with another entity or dispose of our assets.Complying with these covenants, or the covenants of any new debt agreements we may enter into to renew or replace our existing debt agreements, may limitour ability to respond to changes in market conditions or pursue business opportunities that would otherwise be available to us.If we are unable to comply with the restrictions and covenants in our debt agreements, there could be a default under the terms of such agreements, whichcould result in an acceleration of repayment and the sale of our assets to satisfy our obligations with our lenders. Failure to maintain existing financing orto secure new financing could have a material adverse effect on our liquidity and financial position. If we are unable to comply with the restrictions and covenants in our debt agreements, there could be a default under the terms of those agreements. In theevent of a default under those agreements, lenders could terminate their commitments to lend or accelerate the loans and declare all amounts borrowed dueand payable. Borrowings under other debt that contain cross-acceleration or cross-default provisions, may also be accelerated and become due and payable.In addition, substantially all of our debt obligations are secured by a lien on substantially all of our U.S. assets and certain of our foreign assets, including65% of the equity interests in our first-tier foreign subsidiaries. In the event of foreclosure, liquidation, bankruptcy or other insolvency proceeding relating tous or to our subsidiaries that have guaranteed our debt, holders of our secured indebtedness and our other lenders will have prior claims on our assets. If anyof those events occur, our assets might not be sufficient to repay in full all of our outstanding indebtedness and we may be unable to find alternativefinancing. Even if we could obtain alternative financing, it might not be on terms that are favorable or acceptable to us. Additionally, we may not be able toamend our debt agreements or obtain needed waivers on satisfactory terms or without incurring substantial costs. Failure to maintain existing or secure newfinancing could have a material adverse effect on our liquidity and financial position.Risks Relating to Our Securities and the RestructuringThere is a limited trading market for our securities and the market price of our securities is subject to volatility.The market price of our common stock could be subject to wide fluctuations in response to, and the level of trading that develops with our common stockmay be affected by, numerous factors, many of which are beyond our control. These factors include, among other things, our reverse stock split, our newcapital structure as a result of our Restructuring, our limited trading history subsequent to our Restructuring, our historically limited trading volume, theconcentration of holdings of our common stock, actual or anticipated variations in our operating results and cash flow, business conditions in our marketsand the general state of the securities markets and the market for energy-related stocks, as well as general economic and market conditions and other factorsthat may affect our future results, including those that are described elsewhere in our Risk Factors. While initially there has been significant trading in ourcommon stock after our Restructuring as the market adjusts to our recapitalization and reverse stock split, no assurance can be given that an active marketwill continue for our common stock or as to the liquidity of the trading market for our common stock. Long term holders of our common stock mayexperience difficulty in reselling, or an inability to sell, their shares. In addition, if an active trading market is not maintained, significant sales of ourcommon stock, or the expectation of these sales, could materially and adversely affect the market price of our common stock.The composition of our board changed significantly.Under the Restructuring, the composition of our board changed significantly. Our board is now made up of seven directors, of which four have not previouslyserved on our board. The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on our boardand, thus, may have different views on the issues that will determine our future. There is no guarantee that the new board will pursue, or will pursue in thesame manner, our current strategic plans. As a result, the future strategy and plans may differ materially from those of the past.There may be circumstances in which the interests of our significant stockholders could be in conflict with the interests of our other stockholders.Funds associated with Whitebox Advisors LLC ("Whitebox") and BlueMountain Capital Management, LLC ("BlueMountain")currently own a majority ofour outstanding common stock and each is a lender under the terms of our second lien notes and senior loan facility. Circumstances may arise in which thesestockholders may have an interest in pursuing or preventing acquisitions, divestitures or other transactions, including the issuance of additional shares ordebt that, in their judgment, could enhance their23investment in us or another company in which they invest. Such transactions might adversely affect us or other holders of our common stock. Furthermore,our Third Amended and Restated Certificate of Incorporation provides for certain continuing nomination rights relating to two of our board memberpositions, subject to certain conditions on share ownership. In addition, our significant concentration of share ownership may adversely affect the tradingprice of our common shares because investors may perceive disadvantages in owning shares in a company with a significant concentration of stockholders.Our financial results after the Restructuring may not reflect historical trends.As a result of our Restructuring, our historical financial performance, particularly our earnings per share, may not be indicative of our financial performanceafter the Restructuring.If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding ourcommon stock or if our operating results do not meet their expectations, our stock price could decline.The market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. Wecurrently do not have and may not obtain research coverage of our common stock by securities and industry analysts. Even if we get coverage, if one or moreof these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turncould cause our stock price or trading volume to decline. Moreover, if we do get coverage, if one or more of the analysts who might cover us downgrades ourcommon stock or publishes unfavorable research, ceases to cover us, or if our operating results do not meet their expectations, our stock price and tradingvolume may decline.We do not expect to pay dividends in the near future.We do not anticipate that cash dividends or other distributions will be paid with respect to our common stock in the foreseeable future. In addition, restrictivecovenants in certain debt agreements to which we are, or may be, a party, may limit our ability to pay dividends or for us to receive dividends from ouroperating companies, any of which may negatively impact the trading price of our common stock.Certain provisions of our certificate of incorporation and our bylaws may make it difficult for stockholders to change the composition of our board andmay discourage, delay or prevent a merger or acquisition that some stockholders may consider beneficial.Certain provisions of our third amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing changes in controlif our board determines that such changes in control are not in our best interests and in the best interests of our stockholders. Those provisions in ourcertificate of incorporation and bylaws include, among other things, those that:•limit the ability of stockholders to nominate or remove directors;•authorize our board to issue preferred stock and to determine the price and other terms, including preferences and voting rights, of those shareswithout stockholder approval;•establish advance notice procedures for nominating directors or presenting matters at stockholder meetings; and•limit the persons who may call special meetings of stockholders.While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our board, they could enable the board tohinder or frustrate a transaction that some stockholders may believe to be in their best interests and, in that case, may prevent or discourage attempts toremove and replace incumbent directors. These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our currentmanagement by making it more difficult for stockholders to replace members of our board, which is responsible for appointing the members of ourmanagement.24ITEM 2. Properties. Properties We lease all of the facilities used in our operations. Our principal facilities are summarized in the table below. Location Square Footage PurposeHouston, Texas, U.S.A. 7,454 Executive officesCalgary, Alberta, Canada 11,344 Executive officesCalgary, Alberta, Canada 12,335 WarehouseAnchorage, Alaska, U.S.A. 4,800 Field OfficeAnchorage, Alaska, U.S.A. 7,524 WarehouseLima, Peru 4,112 Field OfficeLima, Peru 9,235 WarehouseIquitos, Peru 24,757 WarehouseBogotá, Colombia 2,629 Field OfficeBogotá, Colombia 26,802 WarehouseSanta Cruz, Bolivia 5,382 Field OfficeSanta Cruz, Bolivia 15,069 WarehouseRio de Janeiro, Brazil 452 Field OfficeFloriano, Brazil 4,950 Warehouse The leases expire at various times over the next five years and most contain renewal options for additional one year periods. The leases generally require us topay all operating costs, such as maintenance, property taxes and insurance. We believe that our facilities are generally well maintained and adequate to meetour current and foreseeable requirements for the next several years.ITEM 3. Legal Proceedings. In the ordinary course of business, we may be subject to legal proceedings involving contractual and employment relationships, liability claims and a varietyof other matters. Although the results of these other legal proceedings cannot be predicted with certainty, we do not believe that the final outcome of thesematters should have a material adverse effect on our business, results of operations, cash flows or financial condition.PART IIITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market Price of Common Stock and Warrants Our common stock is traded on the Nasdaq Global Market under the symbol “SAEX.” In 2016 we received certain deficiency notices from the Nasdaq GlobalMarket stating that we had not met certain continued listing standards. In January 2017, we received notification from the Nasdaq Global Market that we hadregained compliance. All share prices for common stock reflect the 135-for-1 reverse stock split, which was effective July 26, 2016.Our 2011 warrants were quoted on the Over-the-Counter Bulletin Board under the symbol “SAEXW” prior to their expiration. on June 24, 2016 (the "ExpiredWarrants"). No Expired Warrants remain outstanding at December 31, 2016. As a part of the Restructuring, we issued Series A Warrants and Series B Warrantsto holders of common stock of record on July 26, 2016. While our Series A Warrants and the Series B Warrants are quoted on the Over-the Counter BulletinBoard under the symbol "SXPLW", there is currently no established public trading market for them.The following table sets forth the high and low sales prices for the common stock and bid prices for the Expired Warrants for the periods indicated:25 Common Stock Expired Warrants High Low High LowFiscal 2016: Fourth Quarter$12.17 $6.02 N/A N/AThird Quarter$75.00 $6.32 N/A N/ASecond Quarter$118.80 $16.20 $8.10 $2.70First Quarter$271.35 $89.10 $8.10 $8.10Fiscal 2015: Fourth Quarter$275.40 $265.95 $9.45 $9.45Third Quarter$357.75 $351.00 $13.50 $10.80Second Quarter$459.00 $459.00 $16.20 $16.20First Quarter$529.20 $436.05 $27.00 $27.00Holders As of March 8, 2017, there were 106 holders of record of our common stock. We believe there are more than 4,150 beneficial owners of our common stock.Due to the expiration of the Expired Warrants on June 26, 2016, there are no holders of record of such warrants. As of March 8, 2017 there are 73 holders ofrecord of each of the Series A Warrants and Series B Warrants.Dividends We have not paid any cash dividends on our common stock to date. It is the present intention of our board of directors to retain all earnings, if any, for use inour business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. The payment of dividends will bewithin the discretion of our board of directors and will be contingent upon our revenues and earnings, if any, capital requirements and general financialcondition, the restrictions on dividends contained in our debt agreements, and other matters.Securities Authorized for Issuance under Equity Compensation Plans The following table presents information regarding securities authorized for issuance under our equity compensation plans as of December 31, 2016:Plan Category Number of Securitiesto be Issued UponExercise ofOutstanding Options,Warrants and Rights Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plan(Excluding SecuritiesReflected in the FirstColumn)Equity compensation plans approved by security holders 622,954 $5.10 799,091Equity compensation plans not approved by security holders — — —Total 622,954 $5.10 799,091 For a description of the material features of our equity compensation plans, see Note 14 of “Notes to Consolidated Financial Statements.”26ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements andnotes to those statements included in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Please see thesections entitled “Cautionary Note regarding Forward-Looking Statements” and “Risk Factors” in this report.Introduction We are an internationally-focused oilfield services company offering a full range of vertically-integrated seismic data acquisition and logistical supportservices in Alaska, Canada, South America, Southeast Asia and West Africa to our customers in the oil and natural gas industry. We were initially formed onFebruary 2, 2011 as a blank check company in order to effect a merger, capital stock exchange, asset acquisition or other similar business combination withone or more business entities. On June 24, 2013, our wholly-owned subsidiary completed the Merger with Former SAE, at which time the business of FormerSAE became our business.The Merger was accounted for as a reverse acquisition in accordance with accounting principles generally accepted in the United States of America(“GAAP”). Under this method of accounting, we were treated as the “acquired” company for financial reporting purposes. This determination was primarilybased on Former SAE comprising the ongoing operations of the combined entity, Former SAE senior management comprising the senior management of thecombined company, and the Former SAE common stockholders having a majority of the voting power of the combined entity. In accordance with guidanceapplicable to these circumstances, the Merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger wastreated as the equivalent of Former SAE issuing stock for our net assets, accompanied by a recapitalization. Our net assets were stated at fair value, with nogoodwill or other intangible assets recorded. Operations prior to the Merger are those of Former SAE. The equity structure after the Merger reflects our equitystructure.Overview of our Business Our services include the acquisition of 2D, 3D, time-lapse 4D and multi-component seismic data on land, in transition zones between land and water, andoffshore in depths reaching 3,000 meters. In addition, we offer a full suite of logistical support and in-field data processing services. Our customers includemajor integrated oil companies, national oil companies and independent oil and gas exploration and production companies. Our services are primarily usedby our customers to identify and analyze drilling prospects and to maximize successful drilling, making demand for such services dependent upon the levelof customer spending on exploration, production, development and field management activities, which is influenced by the fluctuation in oil and natural gascommodity prices. Demand for our services is also impacted by long-term supply concerns based on significant increases in production, national oil policiesand other country-specific economic and geopolitical conditions. We have expertise in logistics and focus upon providing a complete service package,particularly in our international operations, which allows efficient movement into remote areas, giving us what we believe to be a strategic advantage overour competitors. Many of the areas of the world where we work have limited seasons for seismic data acquisition, requiring high utilization of key personneland redeployment of equipment from one part of the world to another. All of our remote area camps, drills and support equipment are easily containerized andmade for easy transport to locations anywhere in the world. As a result, if conditions deteriorate in a current location or demand rises in another location, weare able to quickly redeploy our crews and equipment to other parts of the world. By contrast, we tend to subcontract out more of our services in NorthAmerica than in other regions, and our North American revenues tend to be more dependent upon data acquisition services rather than our full line ofservices.While our revenues from services are mainly affected by the level of customer demand for our services, operating revenue is also affected by the bargainingpower of our customers relating to our services, as well as the productivity and utilization levels of our data acquisition crews. Our logistical expertise can bea mitigating factor in service price negotiation with our customers, allowing us to maintain larger margins in certain regions of the world, particularly in themost remote or most challenging climates of the world. Factors impacting the productivity and utilization levels of our crews include permitting delays,downtime related to inclement weather, decrease in daylight working hours during winter months, time and expense of repositioning crews, the number andsize of each crew, and the number of recording channels available to each crew. We have the ability to optimize the utilization of personnel and equipment,which is a key factor to stabilizing margins in the various regions in which we operate. Specifically, we have invested in equipment that is lighter weight andmore easily shipped between the different regions. The ability to reduce both the costs of shipment and the amount of shipping time increases our operatingmargins and utilization of equipment. Similar logic applies to the utilization of personnel. We focus on employing field managers who are mobile and havethe expertise and knowledge of many different markets within our operations. This allows for better timing of operations and the ability of management staffto run those operations while at the same time minimizing personnel costs. An added benefit of a highly mobile field management team is better internaltransfer of skill and operational knowledge and the ability to spread operational efficiencies rapidly between the various regions.27Generally, the choice of whether to subcontract out services depends on the expertise available in a certain region and whether that expertise is moreefficiently obtained through subcontractors or by using our own labor force. For the most part, services are subcontracted within North America and ourpersonnel are used in other regions where we operate. When subcontractors are used, we manage them and require that they comply with our work policiesand QHSE objectives.Key Accomplishments Despite the contraction in our business due to the deterioration in the oil and natural gas industry over the last several years, since inception, we have grownat a rapid pace, with operating revenue growing from $23.4 million in 2007, the first full year of operations, to $205.6 million in 2016. Moreover, during thedownturn, we have successfully improved our operating margins through cost reductions and field-level efficiencies. We continue to develop our coremarkets while consistently evaluating opportunities to further expand our geographical footprint, operational capabilities and logistical expertise to provideseismic data acquisition and related services in logistically challenging areas.Since our progression from providing services exclusively in South America to now operating in North America, West Africa and Southeast Asia, we are ableto achieve improved levels of utilization through redeployment of key personnel and seismic equipment from off-season areas to in-season areas, helpingreduce some of the peaks and valleys in our financial performance. We anticipate future improvement in long-term financial performance and more consistentoperating results as a result of reducing the impact of our otherwise highly seasonal business through such redeployments.Capital Investments and Impact on Operations During 2016, we made minimal capital expenditures of approximately $3.4 million, primarily related to the purchase of a set of vibrators. During 2015, wemade capital expenditures of approximately $6.4 million, which included purchases of non-seismic recording equipment necessary to outfit a second crew onthe North Slope in Alaska and to acquire other seismic acquisition and logistics equipment. Under our current business model, capital expenditures will bekept at minimum levels other than very low maintenance expenditures until we see improvement in the overall oil and natural gas market.Historically, in line with our focus on wireless land data acquisition, we purchased a wireless seismic data acquisition system which allows up to three crewsto operate under the system at the same time. Following customer needs for higher density land programs using a single point receiver application and toanswer the demand for conventional and unconventional oil and gas exploration, we purchased high sensitivity geophones and two types of vibrators, furtherstrengthening our position as a full solution provider for land data acquisition methods and technologies. Additional equipment investments were made forongoing operations in Alaska in order to increase efficiency. We also invested in cable equipment in order to provide customers in South America withreliable systems as wireless technology is slower to take hold in that market.We will continue to employ our wireless equipment on a worldwide basis while maintaining the ability to provide services to the still existing cable markets.Our capital purchases have allowed us to take advantage of all aspects of the geophysical services market, ranging from land, marine and transition zone dataacquisition; 2D, 3D, 4D and multi-component data acquisition; use of different methods to acquire data such as using vibroseis (vibrating) and impulsivesources; as well as vertical seismic profiling and reservoir monitoring. Any investments in expanding further into our onshore markets in South America andSoutheast Asia will likely also focus upon surveying, drilling and base camp operations.Fiscal 2016 Summary The following discussion is intended to assist in understanding our financial position at December 31, 2016, and our results of operations for the year endedDecember 31, 2016. Financial and operating results for the year ended December 31, 2016 include:•Revenues from services were $205.6 million in 2016, a decrease of 9.9% from $228.1 million in 2015.•Gross profit was $45.0 million in 2016, a decrease of $5.7 million, or 11.3%, from $50.8 million in 2015.•Operating income was $11.2 million in 2016, a decrease of $4.4 million, or 27.9%, from $15.6 million in 2015.•Net loss was $22.0 million in 2016, an increase of $16.6 million, from a net loss of $5.4 million in 2015.•Adjusted EBITDA was $36.1 million in 2016, a decrease of 6.8% from $38.8 million in 2015.•Cash and cash equivalents totaled $11.5 million as of December 31, 2016 compared to $11.3 million as of December 31, 2015.28Results of Operations The following section sets forth, for the periods indicated, certain financial data derived from our consolidated statements of operations. Amounts arepresented in thousands unless otherwise indicated.Revenues by Geographic RegionThe following table is a summary of our revenues by the geographic region in which we provided services for the years ended December 31, 2016 and 2015: Years Ended December 31, 2016 % ofRevenue 2015 % of Revenue Increase(Decrease) Percentage ChangeRevenue from services: North America$86,967 42.3% $173,416 76.0% $(86,449) (49.9)%South America116,542 56.7% 27,252 12.0% 89,290 327.6 %Southeast Asia1,734 0.8% 27,469 12.0% (25,735) (93.7)%West Africa321 0.2% — — 321 —Total revenue$205,564 100.0% $228,137 100.0% $(22,573) (9.9)%North America: The decrease in revenue was primarily due to decreased revenue in Alaska resulting from a reduction in the amount and size of projects in2016 due to the uncertainty in the oil and gas environment coupled with the changes in the Alaskan state tax credit legislation and uncertainty around thestate of Alaska's fiscal condition and future actions. Revenue also decreased in Canada due to a decrease in the amount of active projects. In addition, 2015revenue was substantial due to significant growth in Alaska as a result of favorable market and regulatory conditions prior to the negative factors impactingoil and gas producers in 2016.South America: The increase in revenue during 2016 was primarily due to the execution of larger scope projects in Bolivia and Colombia in 2016 along withseveral smaller scope projects in Colombia. This was partially offset by a decrease in projects in Peru due to the completion of several smaller scope projectsin 2015. In 2015, some smaller scope projects in Colombia experienced delays resulting from regulatory issues that slowed the government approval process.Southeast Asia: The decrease in revenue during 2016 was primarily due to minimal activity during the period compared to the completion of a large deepwater ocean bottom marine project in Malaysia in 2015.West Africa: In late 2016, we entered the West Africa market to perform a deep water ocean-bottom marine project for a major customer. We had minimalrevenue in 2016 as most of the project will be completed in 2017.Comparison of Operating Results for the Years Ended December 31, 2016 and 2015 The following table is a summary of the results of operations for the years ended December 31, 2016 and 2015: Years Ended December 31, 2016 % of Revenue 2015 % of RevenueRevenue from services$205,564 100.0 % $228,137 100.0 %Gross profit45,036 21.9 % 50,763 22.3 %Selling, general and administrative expenses29,253 14.2 % 34,542 15.2 %Loss on disposal of property and equipment, net4,542 2.2 % 632 0.3 %Income from operations11,241 5.5 % 15,589 6.8 %Other expense, net(27,194) (13.2)% (18,338) (8.0)%Provision for income taxes6,056 3.0 % 2,693 1.2 %Less: net income attributable to noncontrolling interest3,021 1.5 % 4,433 1.9 %Net loss attributable to the Corporation$(25,030) (12.2)% $(9,875) (4.3)%29Revenue from Services. Our revenue from services decreased by $22,573 or 9.9%, from $228,137 in 2015 to $205,564 in 2016. As explained above, 2016revenue decreased significantly in Alaska and Malaysia due to a decrease in active projects compared to the prior period. Increases in South America andWest Africa were due to minimal or no activity in 2015 compared to a large project in Bolivia, increased activity in Colombia, and the commencement of aproject in Nigeria in 2016.Gross Profit. Gross profit decreased by $5,727 or 11.3%, from $50,763 in 2015, representing 22.3% of revenue, to $45,036 in 2016, representing 21.9% ofrevenue. The decrease in gross profit was largely due to a decrease in active projects in 2016 compared to 2015. Gross profit as a percentage of salesdecreased slightly due to a decline in revenues resulting in a reduced ability to absorb certain fixed costs. This was partially offset by operationalimprovements on several projects.Adjusted Gross Profit. Adjusted gross profit decreased by $7,454 or 10.8%, from $68,900 in 2015, representing 30.2% of revenue, to $61,446 in 2016,representing 29.9% of revenue. The decrease in adjusted gross profit and adjusted gross profit as a percentage of revenues was primarily due to the decrease inrevenues.Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses decreased in 2016 by $5,289 to $29,253 or 14.2% ofrevenues compared to $34,542 or 15.2% of revenues for 2015. SG&A expenses in 2016 as a percentage of revenue decreased versus 2015 despite a decreasein revenue due to further headcount reductions and cost controls implemented during 2016. SG&A expense for 2016 includes $928 in severance costsincurred in our Peru, Colombia, Canada, Alaska and corporate locations related to the workforce reduction program that began in early 2015.Loss on disposal of property and equipment. In 2016, we recorded total losses on disposal of property and equipment of $4,542 while in 2015 we recorded aloss of $632. This increase in loss is primarily due to the sale of some ocean bottom nodal equipment and related support gear in Alaska in the fourth quarterof 2016.Total Other Income (Expense). Total other income (expense) was comprised of the following: Years Ended December 31, 2016 2015 Increase(Decrease)Other income (expense): Costs incurred on debt restructuring$(5,439) $— $(5,439)Gain on early extinguishment of debt— 3,014 (3,014)Interest expense, net(23,697) (16,739) (6,958)Foreign exchange gain (loss), net1,977 (4,393) 6,370Other, net(35) (220) 185Total other expense, net$(27,194) $(18,338) $(8,856)The increase in 2016 expense was primarily due to:•Costs incurred for the debt restructuring completed in July 2016 of $5,439;•The gain on early extinguishment of debt in the amount of $3,014 recorded in 2015 which resulted from the exchange of senior secured notes forcommon stock, which was not repeated in 2016; and•Increase in interest expense primarily related to the amortization of loan issuance costs for our senior loan facility described below of $9,464 of thetotal $23,697 incurred; partially offset by•Favorable foreign currency exposure resulting from exchange gains in 2016 versus losses in 2015 on principally unrealized transactions as a resultof the weakening U.S. dollar in early 2016 versus strengthening U.S. dollar in 2015 compared to currencies in Canada and Brazil.Income Taxes. Our income tax provision increased $3,363 in 2016 compared to 2015 primarily as a result of pre-tax income in our foreign operations, offsetby the valuation allowance decrease of $9,247 and the effects of differences between U.S. and foreign tax rates.We operate in Bolivia and Colombia, as subsidiaries or branches of a U.S. entity (whereby the earnings of the branches are included as U.S. taxable income).These subsidiaries or branches are subject to foreign taxation based on the financial results of the operations under the laws of each applicable taxjurisdiction.30Corporate income taxes are calculated based on GAAP and U.S. and various international tax codes and regulations. The appropriate foreign taxes paid in thecountry of operations are credited against U.S. corporate taxes subject to the U.S. foreign tax credit limitations. Deferred tax assets and liabilities arerecognized using the asset and liability method based on the differences between the financial statement carrying amounts of existing assets and liabilitiesand their respective tax bases, operating losses and tax credit carry forwards, as stipulated under GAAP. Where appropriate, valuation allowances are providedto reserve the amount of net operating loss and tax credit carry forwards where it is not more likely than not that they will be realized due to variousprovisions of both U.S. and foreign tax laws.A comprehensive model is used to account for uncertain tax positions, which includes consideration of how we recognize, measure, present and discloseuncertain tax positions taken or to be taken on a tax return. The income tax laws and regulations are voluminous and are often ambiguous. As such, we arerequired to make many subjective assumptions and judgments regarding our tax positions that can materially affect amounts recognized in our consolidatedbalance sheets and statements of operations.Our U.S. statutory tax rate was 35% for years ended December 31, 2016 and 2015. For 2016, our effective tax rate was (38.0)% due to the effects of differencesbetween U.S. and foreign tax rates, net of federal benefit. For 2015, our effective tax rate was (98.0)% due principally to permanent differences, the effects ofdifferences between U.S. and foreign tax rates, and the recording of the valuation allowances against the U.S. deferred tax assets.In June 2014, we initiated a Foreign Subsidiary Reorganization plan to normalize our consolidated effective tax rate through the restructuring of our foreignbranch offices into subsidiaries. Pursuant to this plan, we transferred the assets used in our foreign branch operations as of December 31, 2014 to existing ornew subsidiaries incorporated in the same jurisdictions in which the branches were located. The operational aspects of the plan remain in process in SouthAmerica and we expect to realize the benefits from a more efficient tax structure in future years.Net Income Attributable to Noncontrolling Interest. The $1,412 decrease in 2016 compared to 2015 is due to the decreased income earned by thenoncontrolling interest ("Joint Venture Partner") under contracts performed by us on the North Slope of Alaska. Under the terms of our agreement with theJoint Venture Partner, they receive 51% of the portion of the applicable contracts' gross revenues paid to the joint venture entity as discussed further underNote 15 of "Notes to Consolidated Financial Statements".Net Loss Attributable to the Corporation. For the year ended December 31, 2016, net loss attributable to the Corporation was $25,030 compared to a net lossof $9,875 for the year ended December 31, 2015. The increase in net loss attributable to the Corporation for the year ended December 31, 2016 was primarilydue to the following factors:•Lower gross profit as a result of decreased revenues;•Higher interest expense, primarily attributable to amortization of loan issuance costs related to our senior loan facility described below;•Loss on sale of assets related to the sale of the group of ocean bottom nodes and supporting equipment in Alaska; and•Costs incurred with the debt restructuring completed in July 2016; partially offset by•Lower SG&A expenses due to cost reduction initiatives; and•Favorable foreign currency exposure primarily in Brazil and Canada.Liquidity and Capital Resources Our principal source of cash is from the seismic data acquisition services we provide to customers, supplemented as necessary by drawing against ourrevolving credit facility and advances under our senior loan facility. Our cash is primarily used to provide additional seismic data acquisition services,including the payment of expenses related to operations and the acquisition of new seismic data equipment, and to pay the interest on outstanding debtobligations. Our cash position and revenues depend on the level of demand for our services. Historically, cash generated from operations, along with cashreserves and borrowings from commercial, private, and related parties, have been sufficient to fund our working capital and to acquire or lease seismic dataequipment. Amounts in the remainder of this section are presented in thousands unless otherwise indicated. References to Notes are to the notes of ourconsolidated financial statements.Working Capital. Working capital as of December 31, 2016 was $40,807 compared to $36,826 as of December 31, 2015. Our increase in working capital isprimarily due to borrowings under our senior loan facility described below which provided additional funding up to $30 million which was used to decreaseaccounts payable and accrued liabilities. This was partially offset by increases in the amounts due from one customer in Alaska as described further belowand in Note 3. We also received additional short term funding through the exchange of our senior secured notes for second lien notes executed in 2016,which provides for payments of interest in kind at our election for the first 12 months. Interest on the second lien notes recorded as paid in kind for31the year ended December 31, 2016 was $3,619. The exchange of our senior secured notes for second lien notes further described below also providedadditional funding through the exchange of $7,459 of accrued interest for second lien notes.Cash Flows. Cash used by operations during 2016 was $19,848, compared to cash provided by operations of $3,224 during 2015, a decrease in cashprovided by operations of $23,072. Cash provided by the net loss and net cash adjustments to net loss decreased to $11,042 for 2016 compared to cashprovided of $16,215 for 2015, primarily due to an increase in net loss partially offset by increases in noncash charges for the amortization of debt issuancecosts for our senior loan facility and loss on sale of assets. Net changes in operating assets and liabilities resulted in cash used of $30,890 for 2016 comparedto $12,991 for 2015, which increased primarily due to the higher accounts receivable from the customer discussed further in Note 3 partially offset by highertaxes incurred but not yet paid due to revised payment plans in South America.At December 31, 2016, our largest account receivable from one customer was $81.6 million, representing 76% of total consolidated accounts receivable. Thiscustomer was relying on monetization of tax credits under a State of Alaska tax credit program (“Tax Credits”), either from proceeds from the State of Alaskaor from third party financing sources, to satisfy the accounts receivable. There remains substantial uncertainty regarding the timing of reimbursement from theState of Alaska and the availability of third party financing to the customer, or us, in order for us to collect our accounts receivable. This account representsthe single largest item affecting our short-term liquidity, other than the general decline in our business due to the downturn in the business of oil and naturalgas exploration and production companies.Due to the customer’s inability to monetize the Tax Credits, our customer assigned $72.9 million of Tax Credits during the year ended December 31, 2016 sothat we can seek to monetize these Tax Credits once issued by the State of Alaska and apply the resulting cash, as monetization occurs, toward the customer’srepayment of its overdue account receivable. In January 2017, the customer assigned the remaining $16.1 million of Tax Credits to us. Based upon theexpected timing to monetize the Tax Credits as of December 31, 2016, we have reclassified $38.0 million from current accounts receivable to long-termaccounts receivable in our December 31, 2016 consolidated balance sheet.In its review of approximately $30.2 million of Tax Credit applications during the audit process, we received approximately $24.4 million of Tax Creditcertificates from the State of Alaska during 2016. The State of Alaska disallowed approximately $5.8 million of what we believe should otherwise be eligibleexpenditures. Our customer filed an appeal of this decision on October 18, 2016 seeking a reversal of the disallowed amount. During the year endedDecember 31, 2016, we recorded a reduction of the accounts receivable balance of $10.9 million related to the monetization of Tax Credits and recorded anadditional reduction of $3.5 million in 2017 through March 10, 2017. We expect certificates representing approximately $58.8 million of Tax Credits to beissued on a rolling basis in 2017.There continues to be uncertainty regarding the timely payment by the State of Alaska of its obligations on issued Tax Credit certificates as well as ourability to accurately estimate the timeframe for such payments. We continue to explore options to monetize the Tax Credit certificates, including an option tosell the certificates in the secondary market at a discount to purchasers that are able to apply the certificates to reduce their own Alaskan tax liabilities. Thereis a risk that any monetization of the Tax Credit certificates, however, will reflect a substantial discount and may be insufficient to fully repay the customer’soutstanding account receivable. Should this occur, we may be required to record an impairment to the amount due from our customer.During 2016, we explored a range of transactions to address our significant cash flow and liquidity difficulties and the longer term need to realign our capitalstructure with our current business. On June 13, 2016, we entered into a comprehensive restructuring support agreement (the “Restructuring SupportAgreement”) with holders (the “Supporting Holders”) of approximately 66% of the par value of our 10% senior secured notes due 2019 (the “Senior SecuredNotes” and the holders thereof, the “Existing Holders”), in which the Supporting Holders and we agreed to implement a proposed comprehensiverestructuring of our balance sheet (the “Restructuring”), which was completed in the third quarter of 2016. The Restructuring is discussed further in Note 2.As a part of the Restructuring, we completed a debt for equity exchange involving our Senior Secured Notes, which deferred the cash requirement for the July2016 interest payment and at our election allows for the payment of interest in kind for a period of up to 12 months on the exchanged debt, with the deferredand in kind interest payments ultimately due at the maturity of the second lien notes.Also, as part of the Restructuring, we entered into the senior loan facility discussed below, which added up to $30.0 million in additional liquidity. Thesenior loan facility is secured by a junior first lien on our accounts receivable, which includes the Tax Credits and certificates evidencing the Tax Credits.Those Tax Credits and certificates are also pledged on a senior first lien basis to the lender under our revolving credit facility, also discussed below. Allproceeds from monetizing the Tax Credits or Tax Credit certificates are paid into an account at the lender under the revolving credit facility andautomatically reduce the amount we have32borrowed under that line of credit. The senior loan facility requires that once we have received $15 million in proceeds from the Tax Credits or Tax Creditcertificates, unless waived by the lenders (or individual lenders) under the senior loan facility, mandatory repayments of the amount received for the TaxCredits or Tax Credit certificates must be made. As a result, once we have received $15 million in proceeds from the Tax Credits or Tax Credit certificates,which we expect will occur shortly, until the outstanding balance on the senior loan facility is paid in full, the amount owed to the lender under the seniorloan facility must come from cash or from a re-borrowing of the amount due under our revolving credit facility. This constrains our ability to use therevolving credit facility for working capital or cash flow purposes until we have repaid the senior loan facility, and borrowings under the revolving creditfacility will no longer be available after the line matures on November 6, 2017. If we are able to monetize our Tax Credits as we anticipate, however, weexpect that we will be able to repay the senior loan facility in 2017 but, in any event, it will mature on January 2, 2018. While we are currently working onvarious financing alternatives that would replace or renew our revolving line of credit or senior loan facility, there can be no assurance that these efforts willbe successful or will be on satisfactory terms. Nonetheless, as a result of the Restructuring, we currently believe that our existing cash, cash generated fromoperations and our other sources of working capital, such as our revolving credit facility and our senior loan facility, coupled with our expectations formonetization of our Tax Credit certificates and our reduced need for working capital due to our reductions in expenses, will be sufficient for us to meet ouranticipated cash needs for the next twelve months during 2017.Capital Expenditures. Cash used in investing activities during 2016 was $2,864, compared to $6,277 during 2015, a decrease in cash used of $3,413. Thedecrease resulted from lower capital expenditures during 2016 compared to 2015, primarily due to the uncertainty in the macro oil and gas environment.Capital expenditures in 2016 totaled $3,352 primarily consisting of a set of vibrators purchased for our North America operations. Due to the current state ofthe industry, we do not plan to make any significant capital expenditures in the near future. Therefore, based on current market conditions, SAE expects itstotal capital expenditures for 2017 will be under $5.0 million. Capital expenditures in 2015 totaled $6,443, which primarily consisted of purchases of dataprocessing software and equipment and the remaining cash payments for our 2014 purchase of non-seismic recording equipment necessary to outfit a secondcrew on the North Slope in Alaska. Financing. Cash provided by financing activities during 2016 was $21,842, compared to $2,286 during 2015, an increase in cash provided of $19,556. Cashprovided by financing activities in 2016 primarily resulted from borrowings under our senior loan facility, partially offset by payment of loan issuance costsrelated to the transaction described below, repayment of our revolving credit facility, and the distribution payment to the noncontrolling interest in our jointventure to perform contracts for the acquisition and development of geophysical and seismic data and related services on the North Slope of Alaska. Cashprovided by financing activities in 2015 was primarily from the borrowings under our revolving credit facility partially offset by the distribution payment tothe noncontrolling interest in our joint venture described above. As of December 31, 2016, our total outstanding indebtedness was $117,963, consisting ofsenior secured notes of $1,830, second lien notes of $80,238, borrowings under our senior loan facility of $29,995, borrowings under our revolving creditfacility of $5,844 and capital lease obligations of $56.Senior Secured Notes. On July 2, 2014, we entered into an indenture ("Indenture") under which we issued $150,000 of senior secured notes due July 15,2019, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in offshore transactionspursuant to Regulation S under the Securities Act. On June 19, 2015, all outstanding senior secured notes were exchanged for an equal amount of new SeniorSecured Notes, which are substantially identical in terms to the original senior secured notes except that the Senior Secured Notes are registered under theSecurities Act of 1933, as amended. The Senior Secured Notes bear interest at the annual rate of 10% payable semi-annually in arrears on January 15 and July15 of each year, commencing on January 15, 2015. For a complete discussion of the terms and security for the Senior Secured Notes, see Note 8.The Indenture relating to the Senior Secured Notes contains covenants which include limitations on our ability to:•transfer or sell assets;•pay dividends, redeem subordinated indebtedness or make other restricted payments;•incur or guarantee additional indebtedness or, with respect to our restricted subsidiaries, issue preferred stock;•create or incur liens;•incur dividend or other payment restrictions affecting our restricted subsidiaries;•consummate a merger, consolidation or sale of all or substantially all of our or our subsidiaries’ assets;•enter into transactions with affiliates;33•engage in business other than our current business and reasonably related extensions thereof; and•take or omit to take any actions that would adversely affect or impair in any material respect the collateral securing the Senior Secured Notes.We were in compliance with the Indenture covenants for the Senior Secured Notes as of December 31, 2016.On August 26, 2015, we entered into a privately-negotiated exchange agreement with certain funds managed by Fidelity Management & Research Company("Holders") to exchange $10,000 principal amount of Senior Secured Notes ("Exchanged Notes") for 2,366,307 shares of our common stock ("ExchangedStock"), unadjusted for our recent reverse-stock split, as determined using a 30-day volume weighted average share price as of August 26, 2015. Inconnection with the exchange, we paid all accrued unpaid interest on the Exchanged Notes to the Holders in cash, and the Exchanged Notes were cancelled.The Exchanged Stock was valued at $6,602 based on the $2.79 average share price on August 27, 2015, the closing date of the exchange. The exchangeresulted in a gain on early extinguishment of debt of $3,014 in the year ended December 31, 2015, consisting of the difference between the principal amountof the Exchanged Notes less the fair value of the Exchanged Stock, reduced by the Exchanged Notes pro rata portion of the Senior Secured Notesunamortized deferred loan issuance costs on the closing date of $343 and legal fees of $41. Exchange of Senior Secured Notes for Second Lien Notes. As discussed in Note 2, we commenced an offer on June 24, 2016 to exchange each $1 of theSenior Secured Notes for (i) $0.50 of newly issued 10% Senior Secured Second Lien Notes due 2019 ("Second Lien Notes") and (ii) 46.41 shares of the newlyissued common stock (giving effect to a 135-for-1 reverse stock split that was effected in connection with closing of the exchange offer). The exchange offerclosed on July 27, 2016 (the "Closing Date"). On the Closing Date, a total of $138,128 face value of the Senior Secured Notes were exchanged for (i) $76,523Second Lien Notes, including $7,459 Second Lien Notes representing accrued and unpaid interest and (ii) 6,410,502 shares of our common stock.The exchange was accounted for as a modification in the year ended December 31, 2016. The Second Lien Notes were recorded at the net carrying value ofthe Senior Secured Notes exchanged of $134,522, less the fair value of our common stock issued to participating noteholders of $65,003, plus the accruedand unpaid interest of $7,459 included in the exchange. The resulting $455 excess of carrying value over face value of the Second Lien Notes is beingamortized over the term of the Second Lien Notes. The fair value of the common stock was determined using the probability-weighted expected returnmethod based on a combination of the income and market approaches and a mergers and acquisition scenario. Costs incurred by the participating noteholdersduring the exchange of $345 were recognized as debt discount and are being amortized over the term of the Second Lien Notes.In connection with the exchange offer, we also completed a consent solicitation to make certain proposed limited amendments to the terms of the indenturefor the Senior Secured Notes, the related security documents and the existing intercreditor agreement to permit the Restructuring as discussed in Note 7. TheSecond Lien Notes terms are substantially similar to the Senior Secured Notes with the following modifications: •The Second Lien Notes have a maturity date of September 24, 2019, provided that, if any of the Senior Secured Notes remain outstanding as ofMarch 31, 2019, the maturity date of the Second Lien Notes will become April 14, 2019 upon the vote of the holders of a majority of the then-outstanding Second Lien Notes.•The liens securing the Second Lien Notes are junior to the liens securing the Senior Loan Facility and senior to the liens securing the Senior SecuredNotes after the Closing Date.•In addition to the exchange consideration, each participating holder received accrued and unpaid interest on its tendered Senior Secured Notes thatwere accepted for exchange from their last interest payment date of January 15, 2016 to, but not including, the settlement date, which was paid in theform of Second Lien Notes with a principal amount equal to the amount of such accrued and unpaid interest totaling $7,459.•Interest on the Second Lien Notes is payable quarterly. We may elect to pay interest on the Second Lien Notes in kind with additional Second LienNotes for the first twelve months of interest payment dates following the Closing Date, provided that, if we make this election, the interest on theSecond Lien Notes for such in kind payments will accrue at a per annum rate 1% percent higher than the cash interest rate of 10%. We elected to payinterest in the year ended December 31, 2016 of $3,619 in kind. •The Second Lien Notes have a special redemption right at par of up to $35 million of the issuance to be paid out of the proceeds of the Alaska TaxCredit certificates and is conditioned upon payment in full of the revolving credit facility and34the senior loan facility.•The Second Lien Notes include a make-whole provision requiring that if the Second Lien Notes are accelerated or otherwise become due andpayable prior to their stated maturity due to an Event of Default (including but not limited to our bankruptcy or liquidation (including theacceleration of claims by operation of law)), then the applicable premium payable with respect to an optional redemption will also be immediatelydue and payable, along with the principal of, accrued and unpaid interest on, the Second Lien Notes and constitutes part of the obligations in respectthereof as if such acceleration were an optional redemption of the Second Lien Notes, in view of the impracticability and extreme difficulty ofascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each holder’s lost profits as a result thereof.Revolving Credit Facility. On November 6, 2014, SAExploration, Inc., SAExploration Holdings, Inc., and our other domestic subsidiaries (collectively, "we"or "our") and Wells Fargo Bank, National Association (“Lender”) entered into a Credit and Security Agreement providing for a $20,000 revolving line ofcredit facility (the “Revolving Credit Facility”) secured by our U.S. assets, including accounts receivable and equipment, subject to certain exclusions andexceptions as set forth in the credit agreement. As a result of a yearly appraisal of the orderly net liquidation value of existing eligible equipment by theLender that occurred during the fourth quarter of 2016, our borrowing base under the Revolving Credit Facility was lowered to $9,357. This process is furtherdescribed below. The proceeds of the Revolving Credit Facility are used primarily to fund our working capital needs for our operations and for generalcorporate purposes. As of December 31, 2016 and 2015, borrowings of $5,844 and $7,899, respectively, were outstanding under the Revolving CreditFacility. The weighted average interest rate on borrowings outstanding as of December 31, 2016 was 4.00%. Borrowings made under the Revolving Credit Facility bear interest, payable monthly, at a rate of daily three months LIBOR plus 3% (4.00% and 3.61% atDecember 31, 2016 and 2015, respectively). The Revolving Credit Facility has a maturity date of November 6, 2017, unless terminated earlier at thediscretion of the borrower. We may request, and the Lender may grant, an increase to the maximum amount available under the Revolving Credit Facility inminimum increments of $1,000 not to exceed an additional $10,000 in the aggregate, so long as certain conditions as described in the Credit Agreement aremet. At this time, those conditions have not been met.The credit agreement includes a sub-facility for letters of credit in amounts up to the lesser of the available borrowing base or $10,000. Letters of credit aresubject to Lender approval and a fee, which accrues at the annual rate of 3% of the undrawn daily balance of the outstanding letters of credit, payablemonthly. An unused line fee of 0.5% per annum of the daily average of the maximum Revolving Credit Facility amount reduced by outstanding borrowingsand letters of credit is payable monthly. As of December 31, 2016 and 2015, letters of credit totaling $0 and $100, respectively, were outstanding under thesub-facility. Under the Revolving Credit Facility, borrowings are subject to borrowing base availability and may not exceed 85% of the amount of eligible accountsreceivable, as defined, plus the lesser of $20,000 or 85% of the orderly net liquidation value of existing eligible equipment per appraisal and 85% of hardcosts of acquired eligible equipment, less the aggregate amount of any reserves established by the Lender. As noted above, this process resulted in loweringour borrowing base to $9,357. If borrowings under the Revolving Credit Facility exceed $5,000, we are subject to minimum rolling 12 months EBITDArequirements of $20,000 on a consolidated basis and $8,000 on our operations in the State of Alaska. The credit agreement contains covenants including, but not limited to:•maintain and deliver to Lender, as required, certain financial reports, records and other items,•subject to certain exceptions under the credit agreement, restrictions on our ability to incur indebtedness, create or incur liens, enter intofundamental changes to our corporate structure or to the nature of our business, dispose of assets, permit a change in control, acquire non-permittedinvestments, enter into affiliate transactions or make distributions,•maintain the minimum EBITDA specified above, and•maintain eligible equipment, as defined, located in the State of Alaska with a value of at least 75% of the value of such equipment included in theborrowing base availability. Eligible equipment also includes the value of certain equipment outside the United States as defined in the creditagreement.The credit agreement also contains representations, warranties, covenants and other terms and conditions, including relating to the payment of fees to theLender, which are customary for agreements of this type. We are in compliance with the credit agreement covenants as of December 31, 2016.35In connection with the Restructuring discussed in Note 2, we entered into an amendment with the Lender to the Revolving Credit Facility on June 29, 2016,to permit the entry into and borrowings under the senior loan facility, the issuance of the Second Lien Notes, the entry into an amended and restatedintercreditor agreement, the amendments to the existing security agreement and any necessary amendments to the collateral agreements relating to the SeniorSecured Notes and consented to and waived any and all defaults or events of default resulting directly from the Restructuring. We paid $54 in fees inconnection with the execution of the amendment, which was charged to selling, general and administrative expenses during the year ended December 31,2016.In addition, as described in Note 6, our revolving line of credit has a maturity date of November 6, 2017. While we are currently working on various financingalternatives that could replace or renew our revolving line of credit, there can be no assurance that these efforts will be successful or will be on satisfactoryterms.Senior Loan Facility. On June 29, 2016, we, as borrower, and each of our domestic subsidiaries, as guarantors (the “Guarantors”), entered into a $30 millionmulti-draw senior secured term loan facility (the "Senior Loan Facility") with the Supporting Holders of the Senior Secured Notes. In addition to theSupporting Holders, one additional holder of the Senior Secured Notes subsequently elected to participate as a lender in the Senior Loan Facility based ontheir proportionate ownership of the Senior Secured Notes as discussed in Note 19. The Senior Loan Facility provides funding up to a maximum amount of$30,000. Under the original terms of the Senior Loan Facility, $15,000 became immediately available and the remaining $15,000 would become availablefor borrowing based upon our receipt of Alaska Tax Credit certificates of not less than $25,000. On October 24, 2016, the lenders amended the Senior LoanFacility to waive the Alaska Tax Credit requirement, thereby allowing us to immediately access the remaining $15,000 borrowing base. Under the terms ofthe Senior Loan Facility, the remaining availability can be borrowed on up to three separate dates. As of December 31, 2016 borrowings of $29,995 wereoutstanding under the Senior Loan Facility. The Senior Loan Facility is secured by a junior first lien on our accounts receivable, which includes the TaxCredits and certificates evidencing the Tax Credits. Those Tax Credits and certificates are also pledged on a senior first lien basis to the Lender under ourRevolving Credit Facility. Any proceeds from monetizing the Tax Credits or Tax Credit certificates are paid into an account at the Lender under theRevolving Credit Facility and automatically reduce the amount we have borrowed under our revolving line of credit. The Senior Loan Facility requires thatonce we have received $15 million in proceeds from the Tax Credits or Tax Credit certificates, unless waived by the lenders (or individual lenders) under theSenior Loan Facility, mandatory payments of proceeds from the Tax Credits or certificates must be made to reduce the amount outstanding under the SeniorLoan Facility.Borrowings under the Senior Loan Facility bear interest at a rate of 10% per year, payable monthly. The Senior Loan Facility has a maturity date of January 2,2018, unless terminated earlier. In connection with the borrowing, costs totaling $30,082 were recorded as a deferred loan issuance cost on the balance sheetin the year ended December 31, 2016. The deferred loan issuance costs recorded in 2016 included a $600 facility fee, legal and investment banking costs,and $28,425 for the fair value of 2,803,302 shares of our common stock issued to the lenders on July 27, 2016. The fair value of the common stock wasdetermined using the probability-weighted expected return method based on a combination of the income and market approaches and a mergers andacquisition scenario. The deferred loan issuance costs are being amortized on a straight line basis over the term of the Senior Loan Facility.The Senior Loan Facility is secured by substantially all of the collateral securing the obligations under (i) Revolving Credit Facility (ii) the Senior SecuredNotes and (iii) the Second Lien Notes, respectively, including the receivable due us as discussed in Note 3. This security interest is junior to the securityinterest in such collateral securing the obligations under the Revolving Credit Facility and senior to the security interests in such collateral securing theobligations under the Second Lien Notes and the Senior Secured Notes.The Senior Loan Facility contains negative covenants that restrict our and the Guarantors’ ability to incur indebtedness, create or incur liens, enter intofundamental changes to our corporate structure or to the nature of our business, dispose of assets, permit a change in control to occur, make certainprepayments, other payments and distributions, make certain investments, enter into affiliate transactions or make certain distributions, and maintain anddeliver certain financial reports, projections, records and other items. The Senior Loan Facility also contains customary representations, warranties, covenantsand other terms and conditions, including relating to the payment of fees to the Senior Loan Facility agent and the lenders, and customary events of default.We were in compliance with the Senior Loan Facility covenants as of December 31, 2016.Supplemental Indenture for Senior Secured Notes. On June 29, 2016, we, the guarantors party thereto (the “Senior Secured Notes Guarantors”) andWilmington Savings Fund Society, FSB (successor to U.S. Bank National Association), as trustee for the Senior Secured Notes (the “Existing Trustee”),entered into a first supplemental indenture (the “Supplemental Indenture”) to the indenture governing the Senior Secured Notes (the “Existing Indenture”).The Supplemental Indenture modified the Existing Indenture to, among other things, permit the incurrence of additional secured indebtedness pursuant tothe Senior Loan Facility and the issuance of the Second Lien Notes in the exchange offer. The Supplemental Indenture includes additional changes necessaryto give effect36to the Restructuring and directs the Existing Trustee, in its capacity as noteholder collateral agent for the Senior Secured Notes, to enter into the Amendedand Restated Intercreditor Agreement and the amendment to the Existing Security Agreement, each as described below, on behalf of holders of the SeniorSecured Notes. The material terms of the Existing Indenture, other than the amendments summarized above, remain substantially as set forth in the ExistingIndenture. Amended and Restated Intercreditor Agreement. On June 29, 2016, Wells Fargo, in its capacity as lender and collateral agent under the Revolving CreditFacility, Wilmington Savings Fund Society, FSB (successor to U.S. Bank National Association), in its capacity as trustee and collateral agent for the SeniorSecured Notes and Second Lien Notes, and Delaware Trust Corporation, in its capacity as administrative agent and collateral agent for the Senior LoanFacility, amended and restated the Intercreditor Agreement, dated as of November 6, 2014, by and between Wells Fargo and Wilmington Savings FundSociety, FSB (as successor to U.S. Bank National Association) (the “Existing Intercreditor Agreement” and as amended and restated, the “Amended andRestated Intercreditor Agreement”), to govern the relationship of the holders of the Senior Secured Notes, the holders of Second Lien Notes, and the lendersunder our Revolving Credit Facility and Senior Loan Facility, with respect to the collateral and certain other matters. The Amended and RestatedIntercreditor Agreement, among other things, modifies the terms of the Existing Intercreditor Agreement to (i) establish the relative priorities, rights,obligations and remedies with respect to the collateral among the holders of the Senior Secured Notes, the holders of the Second Lien Notes, the lendersunder the Revolving Credit Facility, the lenders under the Senior Loan Facility, and the holders of future debt that is permitted to share the security interestscurrently held by them and the collateral agents of the foregoing (collectively, the “Secured Parties”); and (ii) modify the terms of the Existing IntercreditorAgreement so that the holders of obligations under the Senior Loan Facility and the Second Lien Notes share the security interests currently held by theTrustee on behalf of the Existing Holders and Wells Fargo as the lender under the Revolving Credit Facility as follows:•the obligations under the Revolving Credit Facility are secured by all of the existing collateral on a senior first lien priority basis;•the obligations under the Senior Loan Facility are secured by all of the existing collateral on a junior first lien priority basis;•the obligations under the Second Lien Notes are secured by substantially all of the existing collateral on a second lien priority basis; and•the obligations under the Senior Secured Notes are secured by substantially all of the existing collateral on a third lien priority basis.In addition, the Amended and Restated Intercreditor Agreement provides that, following a triggering event, as among the Secured Parties, the SeniorRepresentative has the right (subject to a purchase option by the other Secured Parties) to, or the right to direct any other collateral agent to, adjust or settleinsurance policies or claims in the event of any loss thereunder relating to insurance proceeds with respect to collateral, to approve any award granted in anycondemnation or similar proceeding affecting such insurance proceeds and to enforce rights, exercise remedies and discretionary rights and powers withrespect to collateral; and similarly, the Secured Parties agreed that if we or any guarantor becomes subject to a case under the U.S. Bankruptcy Code, theSecured Parties will only be permitted to object to a debtor-in-possession financing or the use of cash collateral if the Secured Parties for which the SeniorRepresentative is the collateral agent also object. The “Senior Representative” under the Amended and Restated Intercreditor Agreement will be Wells Fargoas the Revolving Credit Facility agent, until the obligations under the Revolving Credit Facility have been discharged in full, after which the Senior LoanFacility agent will be the Senior Representative; and once the Revolving Credit Facility agent and the Senior Loan Facility agent each cease to be the SeniorRepresentative and the obligations under each of the Revolving Credit Facility and Senior Loan Facility have been discharged in full, the SeniorRepresentative will be Wilmington Savings Fund Society, FSB, as the New Noteholder Collateral agent. The material terms of the Amended and RestatedIntercreditor Agreement, other than those summarized above, remain substantially as set forth in the Existing Intercreditor Agreement as described in Note 7,except that the Noteholder Collateral agent will no longer have a first-priority security interest in the “Noteholder Priority Collateral” (as such term is definedin the Existing Intercreditor Agreement).Security Agreement Amendment. On June 29, 2016, we and the Senior Secured Note Guarantors, as pledgors, also entered into an amendment (the “SecurityAgreement Amendment”) to the Security Agreement, dated as of July 2, 2014 (as amended from time to time, the “Existing Security Agreement”), withWilmington Savings Fund Society, FSB, as noteholder collateral agent for the Senior Secured Notes. The Security Agreement Amendment introducedconforming changes to reflect the provisions incorporated into the Amended and Restated Intercreditor Agreement.We may from time to time seek to retire or purchase our outstanding Senior Secured Notes and Second Lien Notes through cash purchases and/or exchangesfor equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend onprevailing market conditions, the availability of cash and our liquidity requirements, contractual restrictions and other factors. The amounts involved may bematerial.37Use of Adjusted EBITDA and Adjusted Gross Profit (Non-GAAP measures) as Performance Measures Adjusted EBITDAWe use an adjusted form of EBITDA to measure period over period performance, which is a non-GAAP measurement. Adjusted EBITDA is defined as netincome (loss) plus depreciation and amortization, plus interest expense, plus income taxes, plus share-based compensation, plus loss (gain) on disposal ofproperty and equipment, plus costs incurred on debt restructuring, plus loss (gain) on early extinguishment of debt, plus foreign exchange loss (gain) andplus nonrecurring one-time expenses. Our management uses adjusted EBITDA as a supplemental financial measure to assess: •the financial performance of our assets without regard to financing methods, capital structures, taxes, historical cost basis or nonrecurringexpenses;•our liquidity and operating performance over time in relation to other companies that own similar assets and calculate adjusted EBITDA in asimilar manner; and•the ability of our assets to generate cash sufficient to pay potential interest cost.We consider adjusted EBITDA as presented below to be the primary measure of period-over-period changes in our operational cash flow performance. The computation of our adjusted EBITDA (a non-GAAP measure) from net loss, the most directly comparable GAAP financial measure, is provided in thetable below (in thousands): Years Ended December 31, 2016 2015Net loss$(22,009) $(5,442)Depreciation and amortization (1)16,910 18,721Interest expense, net23,697 16,739Provision for income taxes6,056 2,693Share-based compensation (2)1,383 1,061Loss on disposal of property and equipment, net (3)4,542 632Costs incurred on debt restructuring (4)5,439 —Gain on early extinguishment of debt (5)— (3,014)Foreign exchange loss (gain), net (6)(1,977) 4,393Nonrecurring expenses (7)(8)2,092 3,006Adjusted EBITDA$36,133 $38,789(1)Depreciation and amortization expense was charged to the statements of operations as follows: Years Ended December 31, 2016 2015Cost of services$16,410 $18,137Selling, general and administrative expenses500 584Total depreciation and amortization expense$16,910 $18,721(2)Share-based compensation primarily relates to the non-cash value of stock options and restricted stock awards granted to our employees and directors.We did not previously adjust for share-based compensation as it was not a significant component of our overall compensation until the adoption of the2016 Long Term Incentive Plan further described in Note 14. We have adjusted the results for prior periods for comparability purposes. (3) Loss on disposal of property and equipment, net is primarily the impact of sale of equipment. Due to the significance of these noncash charges in thecurrent period, we believe adjusting for this provides more comparative information among our peers and a better indication of the ongoing performanceof our core operations. We have adjusted the results for prior periods for comparability purposes. (4) Costs were incurred during 2016 on the restructuring of debt that was completed in July 2016.(5)The privately-negotiated agreement dated August 26, 2015 with certain funds managed by Fidelity Management & Research Company to exchange$10,000 principal amount of Senior Secured Notes for 2,366,307 shares of our common stock, unadjusted for our reverse stock split, resulted in a gain onearly extinguishment of debt of $3,014 in the year ended December 31, 2015.38The gain consisted of the principal amount of the Exchanged Notes less the fair value of the Exchanged Stock, reduced by the Exchanged Notes prorataportion of the Senior Secured Notes unamortized deferred loan issuance costs of $343 and legal fees of $41.(6)Foreign exchange (gain) loss, net includes the effect of both realized and unrealized foreign exchange transactions.(7)Nonrecurring expenses in 2016 primarily consist of severance payments of $928 incurred in our Peru, Colombia, Canada, Alaska locations, paymentsrelated to tax services provided in connection with our Restructuring and various non-operating expenses incurred at the corporate and Peru locations.(8)Nonrecurring expenses in 2015 primarily consist of severance payments of $1,255 incurred in our Peru, Colombia, Canada, Alaska and corporatelocations and customer and vendor claims of $1,459.Adjusted Gross ProfitWe use an adjusted form of gross profit to measure period over period performance, which is not derived in accordance with GAAP. Adjusted gross profit isdefined as gross profit plus depreciation and amortization expense related to the cost of services. Our management uses adjusted gross profit as a substantialfinancial measure to assess the cost management and performance of our projects. Within the seismic data services industry, companies present gross profitboth with and without depreciation and amortization expense on equipment used in operations, and therefore we also use this measure to assess ourperformance over time in relation to other companies that own similar assets and calculate gross profit in the same manner.The computation of our adjusted gross profit (a non-GAAP measure) from gross profit, the most directly comparable GAAP financial measure, is provided inthe table below (in thousands): Years Ended December 31, 2016 % of Revenue 2015 % of Revenue Increase(Decrease) PercentageChangeGross profit as presented$45,036 21.9% $50,763 22.3% $(5,727) (11.3)%Depreciation and amortization expenseincluded in cost of services16,410 8.0% 18,137 7.9% (1,727) (9.5)%Gross profit excluding depreciation andamortization expense included in cost ofservices$61,446 29.9% $68,900 30.2% $(7,454) (10.8)%(1) Depreciation and amortization expense included in cost of services includes depreciation and amortization on equipment used in operations.The terms EBITDA, adjusted EBITDA and adjusted gross profit are not defined under GAAP, and we acknowledge that these are not measures of operatingincome, operating performance or liquidity presented in accordance with GAAP. When assessing our operating performance or liquidity, investors and othersshould not consider this data in isolation or as a substitute for net income, gross profit, cash flow from operating activities or other cash flow data calculatedin accordance with GAAP. In addition, our calculation of adjusted EBITDA and adjusted gross profit may not be comparable to EBITDA or adjusted grossprofit or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted gross profit in the samemanner. Further, the results presented by adjusted EBITDA and adjusted gross profit cannot be achieved without incurring the costs that the measuresexclude.Critical Accounting Policies Our financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. Preparation of financial statements in conformitywith GAAP requires certain assumptions and estimates to be made that affect the reported amounts of assets and liabilities at the financial statement date andthe reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Because of the use of assumptions andestimates inherent in the reporting process, actual results could differ from those estimates.Revenue RecognitionOur services are provided under master service agreements that set forth our obligations and the obligations of our customers. A supplemental agreement isentered into for each data acquisition project which sets forth the terms of the specific project including the right of either party to cancel on short notice.Customer contracts for services vary in terms and conditions. Contracts are either “turnkey” (fixed price) agreements that provide for a fixed fee per unit ofmeasure, or “term” (variable price) agreements that provide for a fixed hourly, daily or monthly fee during the term of the project. Under turnkey agreements,we recognize revenue based upon output measures as work is performed. This method requires revenue recognition to be based upon quantifiable measures39of progress, such as square or linear kilometers surveyed or each unit of data recorded. Expenses associated with each unit of measure are immediatelyrecognized. If it is determined that a contract will have a loss, the entire amount of the loss associated with the contract is immediately recognized. Revenueunder a “term” contract is billed as the applicable rate is earned under the terms of the agreement. Under contracts that require the customer to pay separatelyfor the mobilization of equipment, we recognize such mobilization fees as revenue during the performance of the seismic data acquisition, using the sameoutput measures as for the seismic work. To the extent costs have been incurred under service contracts for which the revenue has not yet been earned, thosecosts are deferred on the balance sheet within deferred costs on contracts until the revenue is earned, at which point the costs are recognized as cost ofservices over the life of the contract. If we determine that the costs are not recoverable, the costs are expensed.We invoice customers for certain out-of-pocket expenses under the terms of the contracts. Amounts billed to customers are recorded in revenue at the grossamount including out-of-pocket expenses. We also utilize subcontractors to perform certain services to facilitate the completion of customer contracts.Customers are billed for the cost of these subcontractors plus an administrative fee. We record amounts billed to our customers related to subcontractors at thegross amount and record the related cost of subcontractors as cost of services. Sales taxes collected from customers and remitted to government authorities areaccounted for on a net basis and are excluded from revenues in the consolidated statements of operations.Deferred RevenueDeferred revenue primarily represents amounts billed or payments received for services in advance of the services to be rendered over a future period oradvance payments from customers related to equipment leasing.Multiple-Element ArrangementsWe evaluate each contract to determine if the contract is a multiple-element arrangement requiring different accounting treatments for varying components ofthe contract. If a contract is deemed to have separate units of accounting, arrangement consideration is allocated based on each unit of accounting's relativeselling price and the applicable revenue recognition criteria are considered separately for each of the separate units of accounting. We account for eachcontract element when the applicable criteria for revenue recognition have been met. We use our best estimate of selling price when allocating multiple-element arrangement consideration.Allowance for Doubtful AccountsWe maintain an allowance for doubtful accounts for estimated losses in our accounts receivable portfolio. We utilize the specific identification method forestablishing and maintaining the allowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection havebeen exhausted and the potential for recovery is considered remote. While the collectability of outstanding customer invoices is continually assessed, thecyclical nature of our industry may affect our customers’ operating performance and cash flows, impacting our ability to collect on the invoices. Some of ourcustomers are located in certain international areas that are inherently subject to economic, political and civil risks, which may also impact our ability tocollect receivables.Property and Equipment Our property and equipment is capitalized at historical cost and depreciated over the estimated useful life of the asset. The estimation of useful life is basedon circumstances that exist in the seismic industry and information available at the time of the asset purchase. Changes in technology have a significantimpact on these estimates. As circumstances change and new information becomes available, these estimates could change. Seismic equipment is typicallydepreciated over three to ten years.Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation areremoved from the balance sheet, and any resulting gain or loss is reflected in the results of operations for such period.Leases as LesseeWe lease certain equipment and vehicles under lease agreements. Each lease is evaluated to determine its appropriate classification as an operating or capitallease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for as an operating lease. Minimum rentpayments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent. The assets and liabilitiesunder capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market value of the related assets. Assets undercapital leases are40amortized using the straight-line method over the initial lease term. Amortization of assets under capital leases is included in depreciation expense.Long-Lived AssetsLong-lived assets, such as property and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group betested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If thecarrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized to the extent thatthe carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quotedmarket values and third-party independent appraisals, as considered necessary.Currency TranslationThe majority of our operations are conducted outside the United States in countries with stable currencies. Many contracts and local expenses are paid inlocal currencies and not in U.S. Dollars (“USD”). Our results of operations and cash flows could be impacted by changes in foreign currency exchange rates.We do not hold or issue foreign currency forward contracts, option contracts or other derivative financial instruments for speculative purposes or to mitigatethe currency exchange rate risk.Our reporting currency is in USD. For foreign subsidiaries and branches using the local currency as their functional currency, assets and liabilities aretranslated at exchange rates in effect at the balance sheet dates. Revenues and expenses of these foreign subsidiaries are translated at average exchange ratesfor the period. Equity is translated at historical rates, and the resulting cumulative foreign currency translation adjustments resulting from this process areincluded as a component of accumulated other comprehensive income (loss), net of income taxes. Therefore, the USD value of these items in the financialstatements fluctuates from period to period, depending on the value of the USD against these functional currencies. Exchange gains and losses arising fromtransactions denominated in a currency other than the functional currency of the entity involved are included in the consolidated statements of operations asforeign exchange gain (loss), net. For the foreign subsidiaries and branches using USD as their functional currency, any local currency operations are re-measured to USD. The re-measurement of these operations is included in the consolidated statements of operations as foreign exchange gain (loss).Income TaxesIncome taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities andtheir respective tax basis. This method also requires the recognition of future tax benefits for net operating loss (“NOL”) carryforwards. Deferred tax assetsand liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactmentdate. The deferred tax asset is reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of thedeferred tax assets will not be realized.Our methodology for recording income taxes requires judgment regarding assumptions and the use of estimates, including the valuation of deferred taxassets, which can create a variance between actual results and estimates and could have a material impact on our provision or benefit for income taxes. Incertain foreign jurisdictions, the local income tax rate may exceed the U.S. or Canadian statutory rates, and in many of those cases we receive a foreign taxcredit for U.S. or Canadian purposes. In other foreign jurisdictions, the local income tax rate may be less than the U.S. or Canadian statutory rates. In otherforeign jurisdictions we may be subject to a tax on revenues when the amount of tax liability would exceed that computed on our net income before tax inthe jurisdiction, and in such cases, the tax is treated as an income tax for accounting purposes. Uncertain tax positions and the related interest and penaltiesare provided for based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.GoodwillGoodwill represents the excess of purchase price over the fair value of the net assets acquired in the 2011 Datum Exploration Ltd. acquisition. All of ourgoodwill resides in the Canadian operations reporting unit ("Reporting Unit").We are required to evaluate the carrying value of its goodwill at least annually for impairment, or more frequently if facts and circumstances indicate that it ismore likely than not impairment has occurred. We first perform a qualitative assessment by41evaluating relevant events or circumstances to determine whether it is more likely than not that the fair value of the Reporting Unit exceeds its carryingamount. If we are unable to conclude qualitatively that it is more likely than not that the Reporting Unit’s fair value exceeds its carrying value, we will thenapply a two-step quantitative assessment.First, the fair value of the Reporting Unit is compared to its carrying value. If the fair value exceeds the carrying value, goodwill is not impaired and nofurther testing is performed. The second step is performed if the carrying value exceeds the fair value. The implied fair value of the Reporting Unit’s goodwillmust be determined and compared to the carrying value of the goodwill. If the carrying value of the Reporting Unit’s goodwill exceeds its implied fair value,an impairment loss equal to the difference will be recorded.In determining the fair value of the Reporting Unit, we rely on the Income Approach and the Market Approach. Under the Income Approach, the fair value ofa business unit is based on the discounted cash flows it can be expected to generate over its remaining life. The estimated cash flows are converted to theirpresent value equivalent using an appropriate rate of return. Under the Market Approach, the fair value of the business is based on the Guideline PublicCompany (“GPC”) methodology using guideline public companies whose stocks are actively traded that were considered similar to ours as of the valuationdate. Valuation multiples for the GPCs were determined as of the valuation date and were applied to the Reporting Unit's operating results to arrive at anestimate of value.Share-Based CompensationWe record the grant date fair value of share-based compensation arrangements as compensation cost using a straight-line method over the requisite serviceperiod for each separately vesting tranche of an award. The amount of share-based compensation cost recognized during a period is based on the value of theawards that are ultimately expected to vest. Forfeitures are recognized as they occur except in certain circumstances where they are required to be estimated.ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that aliability has been incurred and the amount of the assessment and remediation can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred.Comprehensive IncomeComprehensive income includes net income (loss) as currently reported and also considers the effect of additional economic events that are not required to berecorded in determining net income but rather reported as a separate component of stockholders’ equity. We report foreign currency translation gains andlosses as a component of comprehensive (loss) income. Foreign currency translation gains and losses are not presented net of income taxes because theearnings of the foreign subsidiaries are considered permanently invested abroad and therefore not subject to income taxes or the income tax benefit of foreigncurrency translation losses would be offset by a valuation allowance.Variable Interest EntitiesWe evaluate our joint venture and other entities in which we have a variable interest (a “VIE”), to determine if we have a controlling financial interest and arerequired to consolidate the entity as a result. The reporting entity with a controlling financial interest in the VIE will have both of the followingcharacteristics: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorbthe losses of the VIE that could potentially be significant to the VIE or the right to receive benefit from the VIE that could potentially be significant to theVIE.Fair Value MeasurementsWe have certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with GAAP. Fair value is defined as the pricethat would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketparticipants on the measurement date. When an asset or liability is required to be measured at fair value, an entity is required to maximize the use ofobservable inputs and minimize the use of unobservable inputs using a fair value hierarchy as follows:Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.42Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices forsimilar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. Measurement is based on prices or valuation models requiringinputs that are both significant to the fair value measurement and supported by little or no market activity.Our financial instruments include cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable, accrued liabilities,borrowings under the revolving credit facility and borrowings under the senior loan facility. Due to their short-term maturities, the carrying amounts of thesefinancial instruments approximate fair value at the respective balance sheet dates. Our financial instruments also include various issuances of notes payable.There were no financial instruments measured at fair value on a recurring basis at December 31, 2016 and 2015.Our non-financial assets include goodwill, property and equipment, and other intangible assets, which are classified as Level 3 assets. These assets aremeasured at fair value on a nonrecurring basis as part of our impairment assessments and as circumstances require.Reportable SegmentThe chief operating decision maker regularly reviews financial data by country to assess performance and allocate resources, resulting in the conclusion thateach country in which it operates represents a reporting unit. To determine our reportable segments, we evaluated whether and to what extent the reportingunits should be aggregated. The evaluation included consideration of each reporting unit's services, types of customers, methods used to provide our services,and regulatory environment. We determined that our reporting units sold similar types of seismic data contract services to similar types of major non-U.S. andgovernment owned/controlled oil and gas customers operating in a global market. We concluded that our seismic data contract services operations compriseone single reportable segment.Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2016 or 2015. Effect of Inflation We do not believe that inflation has had a material effect on our business, results of operations, or financial condition during the past two fiscal years.Recently Issued Accounting Pronouncements For a detail of recently issued accounting standards, see Note 4 to the accompanying Consolidated Financial Statements.ITEM 8. Financial Statements and Supplementary Data. The information required by this item appears beginning on page FS-1 hereof and is incorporated herein by reference.ITEM 9A. Controls and Procedures.Management’s Evaluation of Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financialofficers, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of theperiod covered by this report. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31,2016, our disclosure controls and procedures were effective, in all material respects, with regard to the recording, processing, summarizing and reporting,within the time periods specified in the SEC’s rules and forms for information required to be disclosed by us in the reports that we file or submit under theExchange Act. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reportsfiled or submitted under the Exchange Act is accumulated and communicated to our management,43including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.Management's Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting was designed by management, under the supervision of the Chief ExecutiveOfficer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with accounting principles generally accepted in the United States of America, and includes those policies andprocedures that:(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accountingprinciples generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance withauthorizations of our management and directors; and(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on our financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies and procedures may deteriorate.Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, management usedthe criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).Based on our evaluation under the criteria in Internal Control-Integrated Framework (2013), management has concluded that we maintained effectiveinternal control over financial reporting as of December 31, 2016.Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the period covered by this report that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting.PART IIIITEM 10. Directors, Executive Officers and Corporate Governance. The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our2017 Annual Meeting of Stockholders.ITEM 11. Executive Compensation. The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our2017 Annual Meeting of Stockholders.ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our2017 Annual Meeting of Stockholders.ITEM 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our2017 Annual Meeting of Stockholders.44ITEM 14. Principal Accountant Fees and Services. The information required by this item is incorporated by reference to our definitive Proxy Statement to be delivered to stockholders in connection with our2017 Annual Meeting of Stockholders.PART IVITEM 15. Exhibits and Financial Statement Schedules. (a) The following documents are filed as part of this report: (1) Financial Statements. The following consolidated financial statements of the Company appear beginning on page FS-1 and are incorporated by reference into Part II, Item8: Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2016 and 2015Consolidated Statements of Operations for the Years Ended December 31, 2016 and 2015Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016 and 2015Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2016 and 2015Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015Notes to Consolidated Financial Statements (2) Financial Statement Schedules. All schedules are omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto. (3) Exhibits. The information required by this item 15(a)(3) is set forth in the Index to Exhibits accompanying this Annual Report on Form 10-K and is herebyincorporated by reference.45SIGNATURES Pursuant to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. SAEXPLORATION HOLDINGS, INC. Date: March 15, 2017By:/s/ Brent Whiteley Brent Whiteley Chief Financial Officer, General Counsel andSecretary POWER OF ATTORNEY The undersigned directors and officers of SAExploration Holdings, Inc. hereby constitute and appoint Jeff Hastings and Brent Whiteley, and each of them,with full power to act without the other and with full power of substitution and resubstitution, our true and lawful attorneys-in-fact with full power to executein our name and behalf in the capacities indicated below, this annual report on Form 10-K and any and all amendments thereto and to file the same, with allexhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and hereby ratify and confirm all that suchattorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue hereof.In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.SIGNATURE TITLE DATE /s/ Jeff Hastings Chief Executive Officer and Chairman of the Board March 15, 2017Jeff Hastings (Principal Executive Officer) /s/ Brian Beatty Chief Operating Officer and Director March 15, 2017Brian Beatty /s/ Brent Whiteley Chief Financial Officer, General Counsel, and March 15, 2017Brent Whiteley Secretary (Principal Financial Officer and Principal Accounting Officer) /s/ L. Melvin Cooper Director March 15, 2017L. Melvin Cooper /s/ Gary Dalton Director March 15, 2017Gary Dalton /s/ Michael Faust Director March 15, 2017Michael Faust /s/ Michael Kass Director March 15, 2017Michael Kass /s/ Jacob Mercer Director March 15, 2017Jacob Mercer 46EXHIBIT INDEX ExhibitNo. Description Included Form Filing Date2.1 Agreement and Plan of Reorganization dated as of December10, 2012, by and among the Corporation, Trio Merger Sub,Inc., SAExploration Holdings, Inc. and CLCH, LLC. By Reference 8-K December 11, 2012 2.2 First Amendment to Agreement and Plan of Reorganizationdated as of May 23, 2013, by and among the Corporation,Trio Merger Sub, Inc., SAExploration Holdings, Inc. andCLCH, LLC. By Reference 8-K May 28, 2013 2.3 Restructuring Support Agreement dated as of June 13, 2016,among the Corporation, the members of managementidentified therein and the supporting holders identifiedtherein. By Reference 8-K June 13, 2016 3.1 Third Amended and Restated Certificate of Incorporation. By Reference 8-K/A September 9, 2016 3.2 Second Amended and Restated By-Laws. By Reference 8-K August 1, 2016 4.1 Specimen Common Stock Certificate. By Reference 8-K June 28, 2013 4.2 Indenture, dated July 2, 2014, by and among theCorporation, the guarantors named therein and U.S. BankNational Association, as trustee and noteholder collateralagent. By Reference 8-K July 9, 2014 4.3 Form of 10.000% Senior Secured Notes due 2019. By Reference 10-Q August 7, 2015 4.4 Notation of Guarantee executed June 19, 2015, among theCorporation, SAExploration Sub, Inc., SAExploration, Inc.,SAExploration Seismic Services (US), LLC and NES, LLC. By Reference 10-Q August 7, 2015 4.5 First Supplemental Indenture, dated as of June 29, 2016,among the Corporation, the guarantors party thereto, andWilmington Savings Fund Society, FSB, as trustee andnoteholder collateral agent. By Reference 8-K July 1, 2016 4.6 Indenture, dated July 27, 2016, by and among theCorporation, the guarantors named therein and WilmingtonSavings Fund Society, FSB, as trustee and noteholdercollateral agent. By Reference 8-K August 1, 2016 4.7 Form of 10.000% Senior Secured Second Lien Notes due2019. By Reference 8-K August 1, 2016 4.8 Notation of Guarantee executed July 27, 2016, amongSAExploration Sub, Inc., SAExploration, Inc.,SAExploration Seismic Services (US), LLC and NES, LLC. By Reference 8-K August 1, 2016 474.9 Warrant Agreement, dated as of July 27, 2016 between theCorporation and Continental Stock Transfer & TrustCompany, as Warrant Agent. By Reference 8-K August 1, 2016 4.10 Form of Series A Warrant (included in Exhibit 4.9). By Reference 8-K August 1, 2016 4.11 Form of Series B Warrant (included in Exhibit 4.9). By Reference 8-K August 1, 2016 4.12 Registration Rights Agreement dated June 24, 2013, by andbetween the Corporation and CLCH, LLC. By Reference 8-K June 28, 2013 4.13 Registration Rights Agreement dated July 27, 2016,between the Corporation and the holders named therein. By Reference 8-K August 1, 2016 4.14 First Amendment dated as of August 25, 2016 toRegistration Rights Agreement dated July 27, 2016,between the Corporation and the holders named therein. By Reference 8-K August 25, 2016 10.1 Merger Consideration Escrow Agreement dated as of June24, 2013, by and among the Corporation, CLCH, LLC andContinental Stock Transfer & Trust Company. By Reference 8-K June 28, 2013 10.2 Form of Indemnification Agreement. By Reference 8-K June 28, 2013 10.3 Security Agreement, dated July 2, 2014, by and among theCorporation, the guarantors named therein and U.S. BankNational Association, as noteholder collateral agent. By Reference 8-K July 9, 2014 10.4 Credit and Security Agreement, dated November 6, 2014, byand among SAExploration, Inc. as Borrower, theCorporation, SAExploration Sub, Inc., SAExplorationSeismic Services (US), LLC, and NES, LLC as Guarantors,and Wells Fargo Bank, National Association as Lender. By Reference 8-K November 12, 2014 10.5 First Amendment to Credit and Security Agreement dated asof June 29, 2016, by and among Wells Fargo Bank, NationalAssociation, SAExploration, Inc., the Corporation,SAExploration Sub, Inc., NES, LLC, and SAExplorationSeismic Services (US), LLC. By Reference 8-K July 1, 2016 10.6 Term Loan and Security Agreement, dated as of June 29,2016, by and among the Corporation, as borrower, theguarantors named therein, as guarantors, the lenders, fromtime to time party thereto, as lenders and Delaware TrustCompany, as collateral agent and administrative agent. By Reference 8-K July 1, 2016 4810.7 Amended and Restated Intercreditor Agreement, dated as ofJune 29, 2016, by and among Wells Fargo Bank, NationalAssociation, as lender and collateral agent, WilmingtonSavings Fund Society, FSB, as trustee and collateral agent,Delaware Trust Company, as administrative agent, collateralagent and, upon execution of an additional indebtednessjoinder and designation, the additional noteholder agent. By Reference 8-K July 1, 2016 10.8 Security Agreement, dated July 27, 2016, by and among theCorporation, the guarantors named therein and WilmingtonSavings Fund Society, FSB, as noteholder collateral agent. By Reference 8-K August 1, 2016 10.9 Additional Indebtedness Joinder and Designation, dated asof July 27, 2016, by and among Wells Fargo Bank, NationalAssociation, as ABL Agent, Wilmington Savings FundSociety, FSB, as Existing Noteholder Agent, Delaware TrustCompany, as Term Agent, and Wilmington Savings FundSociety, FSB, as Additional Noteholder Agent. By Reference 8-K August 1, 2016 10.10 First Amendment dated as of October 24, 2016 to Term Loanand Security Agreement, dated as of June 29, 2016. By Reference 8-K October 27, 2016 10.11 Form of Director and Officer Indemnification Agreement. By Reference 8-K August 1, 2016 10.12 Amended and Restated Executive Employment Agreement,dated August 3, 2016, by and between the Corporation andJeff Hastings. By Reference (*) 8-K August 9, 2016 10.13 Amended and Restated Executive Employment Agreement,dated August 3, 2016, by and between the Corporation andBrian Beatty. By Reference (*) 8-K August 9, 2016 10.14 Amended and Restated Executive Employment Agreement,dated August 3, 2016, by and between the Corporation andBrent Whiteley. By Reference (*) 8-K August 9, 2016 10.15 Amended and Restated Executive Employment Agreement,dated August 3, 2016, by and between the Corporation andMike Scott. By Reference (*) 8-K August 9, 2016 10.16 Amended and Restated Executive Employment Agreement,dated August 3, 2016, by and between the Corporation andDarin Silvernagle. By Reference (*) 8-K August 9, 2016 10.17 Executive Employment Agreement, dated August 3, 2016,by and between the Corporation and Ryan Abney. By Reference (*) 8-K August 9, 2016 10.18 SAExploration Holdings, Inc. 2013 Non-Employee DirectorShare Incentive Plan. By Reference (*) 8-K August 19, 2013 4910.19 Form of Notice of Stock Award and Agreement under theSAExploration Holdings, Inc. 2013 Non-Employee DirectorShare Incentive Plan between the Registrant and each ofGary Dalton, Gregory R. Monahan, Eric S. Rosenfeld andDavid D. Sgro. By Reference (*) S-4/A December 10, 2013 10.20 Amendment to 2013 Non-Employee Director ShareIncentive Plan. By Reference (*) ProxyStatement September 23, 2016 10.21 Form of SAExploration Holdings, Inc. 2016 Long-TermIncentive Plan, adopted by the Board of Directors on August3, 2016. By Reference (*) 8-K August 9, 2016 10.22 Form of Notice of Stock Option Award—MIP Options andForm of Stock Option Award Agreement—MIP Options(included in Exhibit 10.21). By Reference (*) 8-K August 9, 2016 10.23 Form of Notice of Stock Units Award—MIP Stock Units andForm of Stock Units Award Agreement—MIP Stock Units(included in Exhibit 10.21). By Reference (*) 8-K August 9, 2016 14.1 Code of Ethics. By Reference S-1/A April 28, 2011 21.1 List of subsidiaries. By Reference S-4 April 30, 2015 23.1 Consent of Pannell Kerr Forster of Texas, P.C. Herewith 31.1 Certification of Chief Executive Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002. Herewith 31.2 Certification of Chief Financial Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002. Herewith 32.1 Certification of Chief Executive Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002. Herewith 32.2 Certification of Chief Financial Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002. Herewith 101.IN XBRL Instance Document. Herewith 101.SCH XBRL Taxonomy Extension Scheme Document. Herewith 101.CAL XBRL Taxonomy Calculation Linkbase Document. Herewith 101.DEF XBRL Taxonomy Extension Definition Document. Herewith 101.LAB XBRL Taxonomy Label Linkbase Document. Herewith 50 101.PRE XBRL Taxonomy Presentation Linkbase Document. Herewith _____________________________________________(*) Denotes compensation arrangement.51INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SAEXPLORATION HOLDINGS, INC. Page Report of Independent Registered Public Accounting Firm FS-2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2016 and 2015 FS-3 Consolidated Statements of Operations for the years ended December 31, 2016 and 2015 FS-4 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016 and 2015 FS-5 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2016 and 2015 FS-6 Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015 FS-7 Notes to Consolidated Financial Statements FS-8 FS-1Report of Independent Registered Public Accounting Firm Board of Directors and StockholdersSAExploration Holdings, Inc. We have audited the accompanying consolidated balance sheets of SAExploration Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”)as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), andcash flows for each of the two years in the period ended December 31, 2016. 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 audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engagedto perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting 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 audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SAExplorationHoldings, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the two years in theperiod ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America./s/ Pannell Kerr Forster of Texas, P.C.Houston, TexasMarch 15, 2017FS-2SAExploration Holdings, Inc. and SubsidiariesCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts) As of December 31, 2016 2015ASSETS Current assets: Cash and cash equivalents$11,460 $11,300Restricted cash536 518Accounts receivable, net69,721 67,882Deferred costs on contracts8,644 5,135Prepaid expenses1,977 887Total current assets92,338 85,722Property and equipment, net42,759 61,828Intangible assets, net721 789Goodwill1,711 1,658Deferred loan issuance costs, net20,856 521Accounts receivable, net, noncurrent37,984 —Deferred income tax assets5,122 3,756Other assets164 150Total assets$201,655 $154,424 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable$9,301 $16,575Accrued liabilities12,750 17,818Income and other taxes payable15,605 2,586Borrowings under revolving credit facility5,844 7,899Current portion of capital leases56 115Deferred revenue7,975 3,903Total current liabilities51,531 48,896Borrowings under senior loan facility29,995 —Second lien notes, net80,238 —Senior secured notes, net1,830 135,630Long-term portion of capital leases— 55Deferred income tax liabilities— 55Total liabilities163,594 184,636Commitments and contingencies— —Stockholders’ equity (deficit): Preferred stock, $0.0001 par value, 1,000,000 shares authorized and no shares outstanding— —Common stock, $0.0001 par value, 55,000,000 shares authorized, and 9,358,529 and 129,269 issued andoutstanding at December 31, 2016 and 2015, respectively1 2Additional paid-in capital131,816 35,763Accumulated deficit(92,550) (66,139)Accumulated other comprehensive loss(4,822) (4,271)Total stockholders’ equity (deficit) attributable to the Corporation34,445 (34,645)Noncontrolling interest3,616 4,433Total stockholders’ equity (deficit)38,061 (30,212)Total liabilities and stockholders’ equity (deficit)$201,655 $154,424 The accompanying notes are an integral part of these consolidated financial statements.FS-3SAExploration Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except share and per share amounts) Years Ended December 31, 2016 2015Revenue from services$205,564 $228,137Cost of services excluding depreciation and amortization144,118 159,237Depreciation and amortization included in cost of services16,410 18,137Gross profit45,036 50,763Selling, general and administrative expenses29,253 34,542Loss on disposal of property and equipment, net4,542 632Income from operations11,241 15,589Other income (expense): Costs incurred on debt restructuring(5,439) —Gain on early extinguishment of debt— 3,014Interest expense, net(23,697) (16,739)Foreign exchange gain (loss), net1,977 (4,393)Other, net(35) (220)Total other expense, net(27,194) (18,338)Loss before income taxes(15,953) (2,749)Provision for income taxes6,056 2,693Net loss(22,009) (5,442)Less: net income attributable to noncontrolling interest3,021 4,433Net loss attributable to the Corporation$(25,030) $(9,875) Net loss attributable to Corporation per common share: Basic$(6.13) $(84.55)Diluted$(6.13) $(84.55) Weighted average shares: Basic4,083,103 116,791Diluted4,083,103 116,791 The accompanying notes are an integral part of these consolidated financial statements.FS-4SAExploration Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands) Years Ended December 31, 2016 2015Net loss$(22,009) $(5,442)Foreign currency translation gain (loss)(551) 91Total comprehensive loss(22,560) (5,351)Less: comprehensive income attributable to noncontrolling interest3,021 4,433Comprehensive loss attributable to the Corporation$(25,581) $(9,784) The accompanying notes are an integral part of these consolidated financial statements.FS-5SAExploration Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)For the Years Ended December 31, 2016 and 2015(In thousands, except share amounts) CommonShares IssuedandOutstanding CommonStock atParValue AdditionalPaid-InCapital AccumulatedDeficit AccumulatedOtherComprehensiveIncome (Loss)-Foreign CurrencyTranslation TotalCorporationStockholders’Equity (Deficit) Non-controllingInterest TotalStockholders’Equity (Deficit)Balance at December 31, 2014110,537 $2 $28,185 $(56,264) $(4,362) $(32,439) $3,358 $(29,081)Foreign currency translation— — — — 91 91 — 91Distribution to noncontrollinginterest— — — — — — (3,358) (3,358)Employee shared-basedcompensation expense— — 861 — — 861 — 861Vesting of restricted stock awards805 — — — — — — —Grantee election to fund payrolltaxes out of restricted stock grant(221) — (85) — — (85) — (85)Issuance of restricted shares tonon-employee directors620 — 200 — — 200 — 200Exchange of senior secured notesfor common stock17,528 — 6,602 — — 6,602 — 6,602Net income (loss)— — — (9,875) — (9,875) 4,433 (5,442)Balance at December 31, 2015129,269 2 35,763 (66,139) (4,271) (34,645) 4,433 (30,212)Foreign currency translation— — — — (551) (551) — (551)Distribution to noncontrollinginterest— — — — — — (3,838) (3,838)Employee share-basedcompensation expense— — 1,254 — — 1,254 — 1,254Vesting of restricted stock awards1,542 — — — — — — —Grantee election to fund payrolltaxes out of restricted stock grant(386) — (9) — — (9) — (9)Exercise of stock options85 — — — — — — —Issuance of shares to non-employee directors15,016 — 129 — — 129 — 129Common stock issued inexchange of senior secured notesfor second lien notes6,410,502 1 65,002 — — 65,003 — 65,003Common stock issued toparticipants in senior loan facility2,803,302 — 28,425 — — 28,425 — 28,425Fair value of warrants issued tostockholders— — 1,381 (1,381) — — — —Fractional shares cancelled inreverse stock split(801) — — — — — — —Adjustment for reverse stock split— (2) 2 — — — — —Legal costs of issuing stockassociated with restructuring— — (131) — — (131) — (131)Net income (loss)— — — (25,030) — (25,030) 3,021 (22,009)Balance at December 31, 20169,358,529 $1 $131,816 $(92,550) $(4,822) $34,445 $3,616 $38,061 The accompanying notes are an integral part of these consolidated financial statements.FS-6SAExploration Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Years Ended December 31, 2016 2015Operating activities: Net loss attributable to Corporation$(25,030) $(9,875)Net income attributable to noncontrolling interest3,021 4,433Net loss(22,009) (5,442)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization16,910 18,721Gain on early extinguishment of debt— (3,014)Amortization of loan issuance costs, debt discount and debt premium10,455 1,592Payment in kind interest3,619 —Deferred income taxes(1,322) (1,472)Loss on disposal of property and equipment, net4,542 632Share-based compensation1,383 1,061Bad debt expense12 —Unrealized loss (gain) on foreign currency transactions(2,548) 4,137Changes in operating assets and liabilities: Accounts receivable(37,421) 1,804Prepaid expenses(1,060) 14,888Deferred costs on contracts(3,489) (607)Accounts payable(8,012) (15,280)Accrued liabilities2,153 (804)Income and other taxes payable12,898 (16,908)Deferred revenue4,072 3,716Other, net(31) 200Net cash provided by (used in) operating activities(19,848) 3,224Investing activities: Purchase of property and equipment(3,352) (6,443)Proceeds from sale of property and equipment488 166Net cash used in investing activities(2,864) (6,277)Financing activities: Borrowings under senior loan facility29,995 —Repayment of notes payable— (1,654)Payment of senior loan facility fee, debt discount and loan issuance costs(2,002) (41)Revolving credit facility borrowings44,470 37,687Revolving credit facility repayments(46,525) (29,788)Repayments of capital lease obligations(118) (475)Distribution to noncontrolling interest(3,838) (3,358)Legal fees for stock issuance associated with restructuring(131) —Grantee election to fund payroll taxes out of restricted stock grant(9) (85)Net cash provided by financing activities21,842 2,286Effect of exchange rate changes on cash and cash equivalents1,030 (255)Net change in cash and cash equivalents160 (1,022)Cash and cash equivalents at the beginning of year11,300 12,322Cash and cash equivalents at the end of year$11,460 $11,300 Supplemental disclosures of cash flow information: Interest paid$8,462 $16,225Income taxes paid$254 $3,314Non-cash investing and financing activities: Exchange of senior secured notes for common stock$— $6,602Capital assets acquired included in accounts payable$559 $—Capital assets sold included in accounts receivable$1,850 $—Common stock issued to senior loan facility participants$28,425 $—Senior secured notes exchanged for equity$65,003 $—Accrued interest exchanged for second lien notes$7,459 $—Fair value of warrants issued to stockholders$1,381 $—The accompanying notes are an integral part of these consolidated financial statements.FS-7SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share and per share amounts and as otherwise noted)NOTE 1 — NATURE OF OPERATIONS SAExploration Holdings, Inc. and its Subsidiaries (collectively, the “Corporation”) is an internationally-focused oilfield services company offering seismicdata acquisition and logistical support services in Alaska, Canada, South America, Southeast Asia, and West Africa to its customers in the oil and natural gasindustry. In addition to the acquisition of 2D, 3D, time-lapse 4D and multi-component seismic data on land, in transition zones between land and water, andoffshore in depths reaching 3,000 meters, the Corporation offers a full-suite of logistical support and in-field data processing services. The Corporationoperates crews around the world that utilize over 27,500 owned land and marine channels of seismic data acquisition equipment and other equipment asneeded to complete particular projects. Seismic data is used by its customers, including major integrated oil companies, national oil companies and largeinternational independent oil and gas exploration and production companies, to identify and analyze drilling prospects and maximize successful drilling.The results of the seismic surveys the Corporation conducts belong to its customers and are proprietary in nature; the Corporation does not acquire data for itsown account or for future sale or maintain multi-client data libraries.NOTE 2 — RESTRUCTURINGDuring the year ended December 31, 2016, the Corporation explored a range of transactions to address the Corporation's significant cash flow and liquiditydifficulties and the longer term need to realign its capital structure with its current business, given the uncertainty regarding the State of Alaska tax creditprogram and the continued downturn in the oil and natural gas exploration sector. The effect of the uncertainty regarding the State of Alaska tax creditprogram and its effect on the Corporation’s cash flow and liquidity are discussed further in Note 3. On June 13, 2016, the Corporation entered into acomprehensive restructuring support agreement (the “Restructuring Support Agreement”) with holders (the “Supporting Holders”) of approximately 66% ofthe par value of the Corporation’s 10% senior secured notes due 2019 (the “Senior Secured Notes” and the holders thereof, the “Existing Holders”), in whichthe Supporting Holders and the Corporation agreed to a comprehensive restructuring of the Corporation’s balance sheet, which included the funding of up to$30 million in new capital (the “Restructuring”).The following is a summary of the key aspects of the Restructuring:Exchange of Senior Secured Notes for Second Lien Notes. The Corporation commenced an offer on June 24, 2016 (“Exchange Offer”) to exchange each $1of Senior Secured Notes held by the Existing Holders for (i) $0.50 of newly issued 10% Senior Secured Second Lien Notes due 2019 (the “Second LienNotes”) and (ii) 46.41 shares of newly issued Corporation common stock (giving effect to a 135-for-1 reverse stock split that was effected in connection withclosing of the exchange offer, (the “Reverse Stock Split”)). The Exchange Offer closed on July 27, 2016 (“Closing Date”). In connection with the ExchangeOffer, the Corporation also completed a consent solicitation to make certain proposed limited amendments to the terms of the indenture for the SeniorSecured Notes, the related security documents and the existing intercreditor agreement to permit the Restructuring. The exchange was recognized during thethird quarter of 2016. A further description of the terms of the Second Lien Notes and revised terms of the Senior Secured Notes is provided in Note 8. New Senior Loan Facility. On June 29, 2016, the Supporting Holders and the Corporation entered into a $30 million multi-draw senior secured term loanfacility (the "Senior Loan Facility"). All holders of Senior Secured Notes that participated in the Exchange Offer were also able to participate in the SeniorLoan Facility. Borrowings under the Senior Loan Facility bear interest at a rate of 10% per year, payable monthly. The Senior Loan Facility has a maturitydate of January 2, 2018, unless terminated earlier. As part of the consideration for providing the Senior Loan Facility, the Corporation issued to the lendersshares equal to 28.2% of the outstanding shares of its common stock as of the Closing Date, after giving effect to the Reverse Stock Split. A furtherdescription of the terms of the Senior Loan Facility is provided in Note 7.Change in Priority of Secured Indebtedness. After the Closing Date, the priority claims of the Corporation’s secured indebtedness are (1) the revolving creditfacility, which is secured by all of the existing collateral on a senior first lien priority basis, (2) the Senior Loan Facility, which is secured by all of theexisting collateral on a junior first lien priority basis, (3) the Second Lien Notes, which are secured by substantially all of the existing collateral on a secondlien priority basis and (4) the Senior Secured Notes, which are secured by substantially all of the existing collateral on a third lien priority basis.Reverse Stock Split and Issuance of Common Stock. The Corporation’s stockholders approved a 135-for-1 reverse stock split that was effected on theClosing Date. After the reverse stock split, 9,213,804 shares of common stock, representing 92.69% ofFS-8SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 2 — RESTRUCTURING – (continued)the shares outstanding as of the Closing Date, were issued to the lenders under the Senior Loan Facility and to tendering holders of the Senior Secured Notes.The effect of the Reverse Stock Split on current and prior periods’ earnings per share is discussed in Note 10 and the effect on shares of common stockoutstanding is discussed in Note 13.New Board of Directors. As of the Closing Date, the Board of the Corporation was intended to be comprised of seven directors. The Board was initially sixmembers, but the final director appointment was made on January 11, 2017. The Board now consists of: one member of senior management, four directorschosen by the Supporting Holders, including one member of senior management, one director chosen by Whitebox Advisors LLC and one director chosen byBlueMountain Capital Management, LLC. Each of Blue Mountain Capital Management, LLC and Whitebox Advisors LLC has the right to choose onedirector to be nominated by the Corporation for so long as each of their common stock holdings following the Closing Date exceed 10% of the total sharesoutstanding.Senior Management and Share-Based Compensation. The Corporation has entered into new employment agreements with members of its existing seniormanagement. Existing equity grants under the 2013 Long-Term Incentive Plan vested as of the Closing Date for all current participants. Additionally, theCorporation adopted a management Long Term Incentive Plan, which reserves 1,038,258 total shares of common stock for distribution to covered employeeson terms as further discussed in Note 14.Warrants. As of the Closing Date, the Corporation issued warrants to existing holders of its common stock for 4.5% of the outstanding common stock. Afurther description of the terms of the warrants is provided in Note 12.Costs of Supporting Holders. The Corporation has reimbursed the Supporting Holders and any agent or trustee under the various debt documents for allaccrued and unpaid fees and expenses incurred in connection with the Restructuring including the costs and expenses incurred by counsel to the SupportingHolders in connection with the Restructuring.Effect of Restructuring on Liquidity. As discussed above, the Senior Loan Facility added up to $30.0 million in additional liquidity to the Corporation. Thecompletion of the exchange of the Senior Secured Notes for the Second Lien Notes deferred the cash requirement for the July 2016 interest payment and atthe election of the Corporation allows for the payment of interest in kind for interest covering a period of up to 12 months on the exchanged debt, with thedeferred and in kind interest payments ultimately due at the maturity of the Second Lien Notes. As a consequence, the Corporation currently believes that itsexisting cash, cash generated from operations and other sources of working capital, such as the Revolving Credit Facility described in Note 6 and the SeniorLoan Facility described in Note 7, coupled with monetization of Tax Credit certificates and the reduced need for working capital due to reductions inexpenses, will be sufficient for the Corporation to meet its anticipated cash needs during 2017.NOTE 3 — CREDIT CONCENTRATIONAt December 31, 2016, the Corporation's largest account receivable from one customer was $81.6 million, representing 76% of total consolidated accountsreceivable. This customer was relying on monetization of tax credits under a State of Alaska tax credit program (“Tax Credits”), either from proceeds from theState of Alaska or from third party financing sources, to satisfy the accounts receivable. There remains substantial uncertainty regarding the timing ofreimbursement from the State of Alaska and the availability of third party financing to the customer, or the Corporation, in order for the Corporation tocollect its accounts receivable.Due to the customer’s inability to monetize the Tax Credits, our customer assigned $72.9 million of Tax Credits during the year ended December 31, 2016 sothat we can seek to monetize these Tax Credits and apply the resulting cash, as monetization occurs, toward the customer’s repayment of its overdue accountreceivable. In January 2017, the customer assigned the remaining $16.1 million of Tax Credits to the Corporation. Based upon the expected timing tomonetize the Tax Credits as of December 31, 2016, the Corporation has reclassified $38.0 million from current accounts receivable long term accountsreceivable in the December 31, 2016 consolidated balance sheet.In its review of approximately $30.2 million of Tax Credit applications during the audit process, the Corporation received approximately $24.4 million ofTax Credit certificates from the State of Alaska during the year ended December 31, 2016. The State of Alaska disallowed approximately $5.8 million of whatthe Corporation believes should otherwise be eligible expenditures. The Corporation's customer filed an appeal of this decision on October 18, 2016 seekinga reversal of the disallowed amount. During the year ended December 31, 2016, the Corporation recorded a reduction of the accounts receivable balance of$10.9 million related to the start of the monetization of Tax Credits and recorded an additional reduction of $3.5 million in 2017 throughFS-9SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 3 — CREDIT CONCENTRATION – (continued)the date of issuance of these financial statements. The Corporation still expects additional Tax Credit certificates from the State of Alaska representingapproximately $58.8 million to be issued on a rolling basis in 2017.There continues to be uncertainty regarding the timely payment by the State of Alaska of its obligations on issued Tax Credit certificates as well as theCorporation's ability to accurately estimate the timeframe for such payments. The Corporation continues to explore options to monetize the Tax Creditcertificates, including an option to sell the certificates in the secondary market at a discount to purchasers that are able to apply the certificates to reduce theirown Alaskan tax liabilities. There is a risk that any monetization of the Tax Credits certificates, however, will reflect a substantial discount and may beinsufficient to fully repay the customer’s outstanding account receivable. Should this occur, the Corporation may be required to record an impairment to theamount due from the customer. NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of SAExploration Holdings, Inc., its wholly-owned subsidiaries and controlledentities. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements of theCorporation have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ofAmerica (“GAAP”).Certain amounts in the consolidated balance sheet and consolidated statement of cash flows as of December 31, 2015 and notes to consolidated financialstatements presented herein have been reclassified to conform to the current period presentation. These reclassifications had no effect on net loss attributableto the Corporation, comprehensive loss, or stockholders' equity (deficit).Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amounts of revenuesand expenses during the reporting period. Significant areas requiring the use of management estimates and assumptions include, but are not limited to,accounting for contracts in process, allowance for doubtful accounts, useful lives for depreciation and amortization purposes, valuation of property andequipment, valuation of goodwill and intangible assets, deferred income taxes and income tax uncertainties, share-based compensation, warrants, andcontingencies. While management believes current estimates are reasonable and appropriate actual results could differ materially from current estimates.Significant Risks and UncertaintiesThe Corporation’s primary market risks include fluctuations in oil and natural gas commodity prices which affect demand for and pricing of services. Also,the Corporation conducts operations outside the United States, which exposes the Corporation to market risks from changes in exchange rates. All of theCorporation’s customers are involved in the oil and natural gas industry, which exposes the Corporation to credit risk because the customers may be similarlyaffected by changes in economic and industry conditions. Further, the Corporation generally provides services and extends credit to a relatively small groupof key customers that account for a significant percentage of revenues and accounts receivable of the Corporation at any given time as discussed further inNote 17. Due to the nature of the Corporation’s contracts and customers’ projects, the largest customers can change from year to year and the largestcustomers in any year may not be indicative of the largest customers in any subsequent year. If any key customers were to terminate their contracts or fail tocontract for future services due to changes in ownership or business strategy or for any other reason, the Corporation’s results of operations could be affected.As of December 31, 2016, a significant portion of our receivables are due from one customer as further described in Note 3.Cash and Cash EquivalentsThe Corporation considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Corporation hascash in banks which may exceed insured limits established in the United States and foreign countries. The Corporation has not experienced any losses insuch accounts and management believes it is not exposed to anyFS-10SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)significant credit risk on cash and cash equivalents. The Corporation conducts operations outside the United States, which exposes the Corporation to marketrisks from changes in exchange rates. As of December 31, 2016 and 2015, the balance of cash in subsidiaries outside of the United States totaled $5,960 and$3,275, respectively.Restricted CashRestricted cash consists primarily of cash collateral for labor claims, office rental, cash in another country restricted by exchange control regulations andcustoms bonds.Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are uncollateralized obligations recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable areincluded in net cash provided by operating activities in the consolidated statements of cash flows. The cyclical nature of the Corporation’s industry mayaffect the Corporation’s customers’ operating performance and cash flows, which could impact the Corporation’s ability to collect on these obligations.Additionally, some of the Corporation’s customers are located in certain international areas that are inherently subject to economic, political and civil risks,which may impact the Corporation’s ability to collect receivables. Approximately 19% and 26% of the Corporation's trade accounts receivable atDecember 31, 2016 and December 31, 2015, respectively, were from customers outside the United States. The Corporation maintains an allowance fordoubtful accounts for estimated losses in its accounts receivable portfolio. It utilizes the specific identification method for establishing and maintaining theallowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potentialfor recovery is considered remote.Revenue RecognitionThe Corporation’s services are provided under master service agreements that set forth the respective obligations of the Corporation and its customers. Asupplemental agreement is entered into for each data acquisition project which sets forth the terms of the specific project including the right of either party tocancel on short notice. Customer contracts for services vary in terms and conditions. Contracts are either “turnkey” (fixed price) agreements that provide for afixed fee per unit of measure, or “term” (variable price) agreements that provide for a fixed hourly, daily or monthly fee during the term of the project. Underturnkey agreements, the Corporation recognizes revenue based upon output measures as work is performed. This method requires that the Corporationrecognize revenue based upon quantifiable measures of progress, such as square or linear kilometers surveyed or each unit of data recorded. Expensesassociated with each unit of measure are immediately recognized. If it is determined that a contract will have a loss, the entire amount of the loss associatedwith the contract is immediately recognized. Revenue under a “term” contract is billed as the applicable rate is earned under the terms of the agreement.Under contracts that require the customer to pay separately for the mobilization of equipment, the Corporation recognizes such mobilization fees as revenueduring the performance of the seismic data acquisition, using the same output measures as for the seismic work. To the extent costs have been incurred underservice contracts for which the revenue has not yet been earned, those costs are deferred on the balance sheet within deferred costs on contracts until therevenue is earned, at which point the costs are recognized as cost of services over the life of the contract or, until the Corporation determines the costs are notrecoverable, at which time they are expensed.The Corporation invoices customers for certain out-of-pocket expenses under the terms of the contracts. Amounts billed to customers are recorded in revenueat the gross amount including out-of-pocket expenses. The Corporation also utilizes subcontractors to perform certain services to facilitate the completion ofcustomer contracts. The Corporation bills its customers for the cost of these subcontractors plus an administrative fee. The Corporation records amountsbilled to its customers related to subcontractors at the gross amount and records the related cost of subcontractors as cost of services. Sales taxes collected from customers and remitted to government authorities are accounted for on a net basis and are excluded from revenue in theconsolidated statements of operations.Deferred RevenueDeferred revenue primarily represents amounts billed or payments received for services in advance of the services to be rendered over a future period.Deferred revenue of $7,975 and $3,903 at December 31, 2016 and 2015, respectively, consists primarily of payments for mobilization and seismic services.FS-11SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)Multiple-Element ArrangementsThe Corporation evaluates each contract to determine if the contract is a multiple-element arrangement requiring different accounting treatments for varyingcomponents of the contract. If a contract is deemed to have separate units of accounting, the Corporation allocates arrangement consideration based on theirrelative selling price and the applicable revenue recognition criteria are considered separately for each of the separate units of accounting. The Corporationaccounts for each contract element when the applicable criteria for revenue recognition have been met. The Corporation uses its best estimate of selling pricewhen allocating multiple-element arrangement consideration.Leases as LesseeThe Corporation leases certain equipment and vehicles under lease agreements. The Corporation evaluates each lease to determine its appropriateclassification as an operating or capital lease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for asan operating lease. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods offree rent. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market valueof the related assets. Assets under capital leases are amortized using the straight-line method over the initial lease term. Amortization of assets under capitalleases is included in depreciation expense.Property and EquipmentProperty and equipment is capitalized at historical cost and depreciated over the useful life of the asset. Depreciation on property and equipment is calculatedon the straight-line method over the estimated useful lives of the assets or the lesser of the lease term, as applicable. Management’s estimate of this useful lifeis based on circumstances that exist in the seismic industry and information available at the time of the purchase of the asset. Useful lives and residual valuesof property and equipment are reviewed on an ongoing basis considering the effect of events or changes in circumstances. Repairs and maintenance, whichare not considered betterments and do not extend the useful life of the property, are charged to expense as incurred. When property and equipment are retiredor otherwise disposed of the asset and accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss is reflected inthe results of operations for such period.Long-Lived AssetsLong-lived assets, such as property and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group betested for possible impairment, the Corporation first compares undiscounted cash flows expected to be generated by that asset or asset group to its carryingvalue. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized tothe extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flowmodels, quoted market values and third-party independent appraisals, as considered necessary. No long-lived assets were impaired during the years endedDecember 31, 2016 or 2015.GoodwillGoodwill represents the excess of purchase price over the fair value of the net assets acquired in the 2011 Datum Exploration Ltd. acquisition. All of theCorporation’s goodwill resides in its Canadian operations reporting unit ("Reporting Unit"). Changes in the carrying value of goodwill since 2011 are theresult of foreign currency translation adjustments.The Corporation is required to evaluate the carrying value of its goodwill at least annually for impairment, or more frequently if facts and circumstancesindicate that it is more likely than not impairment has occurred. The Corporation first performs a qualitative assessment by evaluating relevant events orcircumstances to determine whether it is more likely than not that the fair value of the Reporting Unit exceeds its carrying amount. If the Corporation isunable to conclude qualitatively that it is more likely than not that the Reporting Unit’s fair value exceeds its carrying value, it will then apply a two-stepquantitative assessment.FS-12SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)First, the fair value of the Reporting Unit is compared to its carrying value. If the fair value exceeds the carrying value, goodwill is not impaired and nofurther testing is performed. The second step is performed if the carrying value exceeds the fair value. The implied fair value of the Reporting Unit’s goodwillmust be determined and compared to the carrying value of the goodwill. If the carrying value of the Reporting Unit’s goodwill exceeds its implied fair value,an impairment loss equal to the difference will be recorded. The Corporation’s 2016 and 2015 evaluations of goodwill concluded that it was not impaired.In determining the fair value of the Reporting Unit, the Corporation relied on the Income Approach and the Market Approach. Under the Income Approach,the fair value of a business unit is based on the discounted cash flows it can be expected to generate over its remaining life. The estimated cash flows areconverted to their present value equivalent using an appropriate rate of return. Under the Market Approach, the fair value of the business is based on theGuideline Public Company (“GPC”) methodology using guideline public companies whose stocks are actively traded that were considered similar to theCorporation as of the valuation date. Valuation multiples for the GPCs were determined as of the valuation date and were applied to the Reporting Unit’soperating results to arrive at an estimate of value.Intangible AssetsIntangible assets represent customer relationships recorded at cost in connection with the 2011 Datum Exploration Ltd. acquisition. Intangible assets areamortized over their estimated useful lives of 13 years and recorded in selling, general and administrative expense.Deferred Loan Issuance CostsDeferred loan issuance costs are amortized over the term of the related debt (which approximates amortization using the interest method) and recorded ininterest expense. Income TaxesIncome taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities arerecognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities andtheir respective tax basis. This method also requires the recognition of future tax benefits for net operating loss (“NOL”) carryforwards. Deferred tax assetsand liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactmentdate. The deferred tax asset is reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of thedeferred tax assets will not be realized.The Corporation's methodology for recording income taxes requires judgment regarding assumptions and the use of estimates, including the valuation ofdeferred tax assets, which can create a variance between actual results and estimates and could have a material impact on the provision or benefit for incometaxes. The Corporation is required to file income tax returns in the United States (federal) and in various state and local jurisdictions, as well as ininternational jurisdictions. In certain foreign jurisdictions, the local income tax rate may exceed the U.S. or Canadian statutory rates, and in many of thosecases the Corporation receives a foreign tax credit for U.S. or Canadian purposes. In other foreign jurisdictions, the local income tax rate may be less than theU.S. or Canadian statutory rates. In other foreign jurisdictions the Corporation may be subject to a tax on revenues when the amount of tax liability wouldexceed that computed on net income before tax in the jurisdiction and, in such cases, the tax is treated as an income tax for accounting purposes. Foreign Exchange Gains and LossesThe Corporation conducts operations outside the United States, which exposes the Corporation to market risks from changes in foreign exchange rates. TheCorporation’s reporting currency is the U.S. dollar (“USD”). For foreign subsidiaries and branches using local currency as their functional currency, assets andliabilities are translated at exchange rates in effect at the balance sheet dates. Revenues and expenses of these foreign subsidiaries are translated at averageexchange rates for the period. Equity is translated at historical rates, and the resulting cumulative foreign currency translation adjustments resulting from thisprocess are reported as a component of accumulated other comprehensive income (loss), net of income taxes. Therefore, the USD value ofFS-13SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)these items in the financial statements fluctuates from period to period, depending on the value of the USD against these functional currencies. The foreignsubsidiaries and branches using USD as their functional currency are Bolivia, Peru, Malaysia, United Kingdom and Singapore.Exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in theconsolidated statements of operations as foreign exchange gain (losses). For the foreign subsidiaries and branches using USD as their functional currency, anylocal currency operations are re-measured to USD. The re-measurement of these operations is included in the consolidated statements of operations as foreignexchange gain (loss).Share-Based CompensationThe Corporation records the grant date fair value of share-based compensation arrangements as compensation cost using a straight-line method over therequisite service period for each separately vesting tranche of an award. The amount of share-based compensation cost recognized during a period is based onthe value of the awards that are ultimately expected to vest. Forfeitures are recognized as they occur except in certain circumstances where they are requiredto be estimated. ContingenciesLiabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that aliability has been incurred and the amount of the assessment and remediation can be reasonably estimated. Legal costs incurred in connection with losscontingencies are expensed as incurred. Comprehensive Income Comprehensive income includes net income (loss) as currently reported and also considers the effect of additional economic events that are not required to berecorded in determining net income but rather reported as a separate component of stockholders’ equity. The Corporation reports foreign currency translationgains and losses as a component of other comprehensive income (loss). Foreign currency translation gains and losses are not presented net of income taxesbecause the earnings of the foreign subsidiaries are considered permanently invested abroad and therefore not subject to income taxes or the income taxbenefit of foreign currency translation losses would be offset by a valuation allowance.Variable Interest EntitiesThe Corporation evaluates its joint venture and other entities in which it has a variable interest (a “VIE”), to determine if it has a controlling financial interestand is required to consolidate the entity as a result. The reporting entity with a controlling financial interest in the VIE will have both of the followingcharacteristics: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorbthe losses of the VIE that could potentially be significant to the VIE or the right to receive benefit from the VIE that could potentially be significant to theVIE. See the discussion on the Corporation’s variable interest entities in Note 15. Fair Value MeasurementsThe Corporation has certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with GAAP. Fair value is definedas the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transactionbetween market participants on the measurement date. When an asset or liability is required to be measured at fair value, an entity is required to maximize theuse of observable inputs and minimize the use of unobservable inputs using a fair value hierarchy as follows: Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices forsimilar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. FS-14SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. Measurement is based on prices or valuation models requiringinputs that are both significant to the fair value measurement and supported by little or no market activity.The Corporation’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities,borrowings under the revolving credit facility and borrowings under the senior loan facility. Due to their short-term maturities, the carrying amounts of thesefinancial instruments approximate fair value at the respective balance sheet dates. The Corporation's financial instruments also include various issuances ofnotes payable. There were no Corporation financial instruments measured at fair value on a recurring basis at December 31, 2016 and 2015.The Corporation's non-financial assets include goodwill, property and equipment, and other intangible assets, which are classified as Level 3 assets. Theseassets are measured at fair value on a nonrecurring basis as part of the Corporation's impairment assessments and as circumstances require.Reportable SegmentThe chief operating decision maker regularly reviews financial data by country to assess performance and allocate resources, resulting in the conclusion thateach country in which it operates represents a reporting unit. To determine its reportable segments, the Corporation evaluated whether and to what extent thereporting units should be aggregated. The evaluation included consideration of each reporting unit's services, types of customers, methods used to provide itsservices, and regulatory environment. The Corporation determined that its reporting units sold similar types of seismic data contract services to similar typesof major non-U.S. and government owned/controlled oil and gas customers operating in a global market. The Corporation concluded that its seismic datacontract services operations comprise one single reportable segment.Recently Issued Accounting PronouncementsRevenue RecognitionIn May 2014, the Financial Accounting Standards Board ("FASB") issued new guidance intended to change the criteria for recognition of revenue. The newguidance establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosurerequirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customersin an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle,an entity should apply the following five steps: (1) identify contracts with customers, (2) identify the performance obligations in the contracts, (3) determinethe transaction price, (4) allocate the transaction price to the performance obligation in the contract, and (5) recognize revenue as the entity satisfiesperformance obligations. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods withinthat reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within thatreporting period.The Corporation is currently scoping its revenue contracts to address what impact adoption of this guidance would have on its financial position, results ofoperations, cash flows and disclosures. There are two methods of transition permitted under the standard: the full retrospective method, in which the standardwould be applied retrospectively to each prior reporting period presented; or the modified retrospective method, in which the standard would be applied toall contracts in process as of the date of initial application, with the cumulative effect of applying the standard recognized in beginning retained earnings.The Corporation currently anticipates adopting this standard using the modified retrospective method, but the Corporation continues to evaluate bothtransition options available under the standard. The Corporation will adopt this guidance during the first quarter of 2018.Going ConcernIn August 2014, the FASB issued new guidance on disclosures of uncertainties about an entity's ability to continue as a going concern. The guidance requiresmanagement's evaluation of whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern withinone year after the date that the financial statements are issued. This assessment must be made in connection with preparing financial statements for eachannual and interim reporting period.FS-15SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)Management's evaluation should be based on the relevant conditions and events that are known and reasonably knowable at the date the financial statementsare issued. If conditions or events raise substantial doubt about the entity's ability to continue as a going concern, but this doubt is alleviated bymanagement's plans, the entity should disclose information that enables the reader to understand what the conditions or events are, management's evaluationof those conditions or events and management's plans that alleviate that substantial doubt. If conditions or events raise substantial doubt and the substantialdoubt is not alleviated, the entity must disclose this in the footnotes. The entity must also disclose information that enables the reader to understand what theconditions or events are, management's evaluation of those conditions or events and management's plans that are intended to alleviate that substantial doubt.The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Corporation doesnot expect adoption will have a material impact on its financial position, results of operations, cash flows or disclosures.ConsolidationIn February 2015, the FASB issued amended guidance on the consolidation of legal entities including limited partnerships and limited liability corporations.The guidance modifies the consolidation models to be analyzed in determining whether a reporting entity should consolidate certain types of legal entities.The guidance must be applied using one of two retrospective application methods and will be effective for fiscal years beginning after December 15, 2015and for interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. The Corporation's adoption of thisguidance had no impact on its financial position, results of operations, cash flows or disclosures.Debt Issuance CostsIn April 2015, the FASB issued new guidance which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carryingvalue of the associated debt liability, consistent with the presentation of a debt discount. The new guidance does not affect the recognition and measurementof debt issuance costs. Therefore, the amortization of such costs will continue to be calculated using the interest method and be reported as interest expense.The new guidance does not specifically address, and therefore does not affect, the balance sheet presentation of debt issuance costs for revolving debtarrangements. The Corporation adopted the new guidance as of March 31, 2016 and retrospectively for all periods presented. As a result of the adoption ofthe new guidance, the amount of $4,370 was reclassified from deferred loan issuance costs to senior secured notes in the December 31, 2015 condensedconsolidated balance sheet. Other than this reclassification, the adoption of the new guidance had no impact on the Corporation's condensed consolidatedfinancial statements.Financial InstrumentsIn January 2016, the FASB issued new guidance on financial instruments which primarily changes the accounting for equity investments, financial liabilitiesrecorded under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidancerelated to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Theclassification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, including interimperiods within those fiscal years. All entities can early adopt the provision to record fair value changes for financial liabilities under the fair value optionresulting from instrument-specific credit risk in other comprehensive income. Early adoption of these provisions can be elected by public business entities forall financial statements of fiscal years and interim periods that have not yet been issued or that have not yet been made available for issuance. TheCorporation does not expect adoption will have a material impact on its financial position, results of operations, cash flows or disclosures.LeasesIn February 2016, the FASB issued new guidance on lease accounting affecting lessees and lessors. Lessees will be required to recognize assets and liabilitieson the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. As under current GAAP, the recognition,measurement, and presentation of expenses and cash flows arising from a lease for lessees will primarily depend on its classification as a finance or operatinglease. For operating leases, lessees will recognize a single total lease expense. For finance leases, lessees will recognize amortization of the right-of-use assetseparately from interest on the lease liability. For both types of leases, lessees will recognize a right-of-use asset and a lease liability on its balance sheet.Lessor accounting under the new standard will remain similar to lessor accounting under current GAAP. The new standard containsFS-16SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)changes that are intended to align lessor accounting with the lessee accounting model and the revenue recognition standard issued in 2014. For publiccompanies, the new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlyadoption is permitted. The Corporation is currently evaluating what impact adoption of this guidance will have on its financial position, results ofoperations, cash flows and disclosures.Share-Based CompensationIn March 2016, the FASB issued new guidance intended to simplify various aspects of the accounting for share-based compensation. The new guidancerequires the income tax effects related to share-based compensation to be recorded in the income statement at settlement (or expiration), appliedprospectively to all excess tax benefits and tax deficiencies resulting from settlements after the date of adoption of the new guidance. The new guidance alsoremoves the requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable. Under the new guidance, the benefit will berecorded when it arises, subject to normal valuation allowance considerations. This change is required to be applied on a modified retrospective basis, with acumulative effect adjustment to opening retained earnings. All income tax related cash flows resulting from share-based payments are to be reported asoperating activities on the statement of cash flows. Either prospective or retrospective transition of this provision is permitted.Currently, employers are permitted to withhold shares upon settlement of an award to satisfy the employer’s tax withholding requirement without causing theaward to be liability classified. However, the amount is strictly limited to the employer’s minimum statutory tax withholding requirement. The simplificationunder the new guidance allows entities to withhold an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction withoutresulting in liability classification of the award. This provision is required to be adopted using a modified retrospective approach, with a cumulative effectadjustment to opening retained earnings for any outstanding liability awards that qualify for equity classification. Additionally, the new guidance clarifiesthat all cash payments made to taxing authorities on the employees’ behalf for withheld shares should be presented as financing activities on the statement ofcash flows. This change is required to be applied retrospectively. Under the new guidance, entities are permitted to make an accounting policy election forthe impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized whenthey occur. Estimates of forfeitures will still be required in certain circumstances, such as at the time of modification of an award or issuance of a replacementaward in a business combination. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospectiveapproach, with a cumulative effect adjustment recorded to opening retained earnings.The classification and measurement guidance will be effective for public business entities in fiscal years beginning after December 15, 2017, includinginterim periods within those fiscal years, with early adoption permitted. The Corporation adopted the new guidance as of January 1, 2016, including electingto recognize forfeitures when they occur. Adoption of the new guidance did not have a material impact on the Corporation’s financial position, results ofoperations, cash flows or disclosures. Statement of Cash FlowsIn August 2016, the FASB issued new guidance which clarifies the classification and presentation of certain cash flow receipts and payments on the statementof cash flows. It also requires that transactions with more than one category of classification be separated where possible or, if they are not able to beseparated, be classified based on the predominant source or use of the cash flows. The new guidance includes the requirement to classify cash paid for debtprepayment or debt extinguishment costs as a financing outflow. The new guidance is effective for fiscal years beginning after December 15, 2017 for allpublic business entities with early adoption permitted. The Corporation has adopted the new guidance effective as of September 30, 2016 and retrospectivelyfor all periods presented. As a result of the adoption of the new guidance, the amount of $41 was reclassified from operating activities to financing activitiesin the condensed consolidated statement of cash flows for the year ended December 31, 2015. Other than this reclassification, the adoption of the newguidance had no impact on the Corporation's condensed consolidated financial statements.Income TaxesIn October 2016, the FASB issued new guidance intended to improve the accounting for the income tax consequences of intra-entity transfers of assets otherthan inventory. Under current US GAAP, the income tax consequences of intra-entity transfers of assets other than inventory are not recognized until theassets are sold to an outside party. The new guidance requires the recognitionFS-17SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES – (continued)of current and deferred income taxes when the intra-entity transfer of an asset other than inventory occurs. The new guidance is effective for fiscal yearsbeginning after December 15, 2017 for all public business entities with early adoption permitted. The Corporation is currently evaluating what impactadoption of this guidance will have on its financial position, results of operations, cash flows and disclosures.Restricted CashIn November 2016, the FASB issued new guidance intended to reduce the diversity in classification and presentation of restricted cash on the statement ofcash flows. The new guidance will require the beginning-of-period and end-of-period totals on the statement of cash flows to include restricted cash andrestricted cash equivalents. The new guidance is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Corporationdoes not believe the adoption of this guidance will have a material effect on the Corporation's condensed consolidated financial statements.GoodwillIn January 2017, the FASB issued new guidance intended to simplify how an entity tests goodwill for impairment. The new guidance eliminates Step 2 fromthe goodwill impairment test which measured the impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carryingamount of the goodwill. Under the new guidance, the impairment loss will be measured as the amount by which the reporting unit's fair value exceeds itscarrying value. The new guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwillimpairment tests performed after January 1, 2017. The Corporation does not believe the adoption of this guidance will have a material effect on theCorporation's condensed consolidated financial statements.NOTE 5 — DETAIL OF SELECTED BALANCE SHEET ACCOUNTSAccounts ReceivableAccounts receivable is comprised of the following: December 31, 2016 2015Current: Accounts receivable$69,733 $67,882Less allowance for doubtful accounts(12) —Accounts receivable, net$69,721 $67,882Noncurrent: Accounts receivable37,984 —Less allowance for doubtful accounts— —Accounts receivable, net, noncurrent37,984 —Changes in the allowance for doubtful accounts were as follows: Years Ended December 31, 2016 2015Beginning balance$— $—Charges to expense12 —Write-offs— —Ending balance$12 $—FS-18SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 5 — DETAIL OF SELECTED BALANCE SHEET ACCOUNTS – (continued)Prepaid ExpensesPrepaid expenses include the following: December 31, 2016 2015Deposits1,310 195Other667 692Total prepaid expenses$1,977 $887Property and Equipment Property and equipment is comprised of the following: December 31, Estimated Useful Life 2016 2015Field operating equipment3 – 10 years $80,780 $100,001Vehicles3 – 5 years 15,905 16,041Leasehold improvements2 – 5 years 511 481Software3 – 5 years 2,081 1,906Computer equipment3 – 5 years 4,005 3,856Office equipment3 – 10 years 921 901 104,203 123,186Less: accumulated depreciation and amortization (61,444) (61,358)Property and equipment, net $42,759 $61,828 Total depreciation and amortization expense for the years ended December 31, 2016 and 2015 was $16,815 and $18,622, respectively, of which $16,410 and$18,137, respectively, was recorded in cost of services and $405 and $485, respectively, was recorded in selling, general and administrative expense.During the year ended December 31, 2016, the Corporation sold a group of ocean bottom nodes and supporting equipment for aggregate net proceeds of$1,850 which is current reflected in our current accounts receivable and resulted in a pretax loss of $4,580.GoodwillChanges in the carrying value of goodwill were as follows: Balance at December 31, 2014$1,977Foreign currency translation adjustment(319)Balance at December 31, 20151,658Foreign currency translation adjustment53Balance at December 31, 2016$1,711 There have been no goodwill impairment charges since the 2011 Datum Exploration Ltd. acquisition was initially recorded.Intangible AssetsChanges in the carrying value of intangible assets and related accumulated amortization were as follows: FS-19SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 5 — DETAIL OF SELECTED BALANCE SHEET ACCOUNTS – (continued) Gross CarryingAmount AccumulatedAmortization Net CarryingAmountBalance at December 31, 2014$1,491 $(441) $1,050Amortization expense— (99) (99)Foreign currency translation adjustment(162) — (162)Balance at December 31, 20151,329 (540) 789Amortization expense— (95) (95)Foreign currency translation adjustment27 — 27Balance at December 31, 2016$1,356 $(635) $721 Intangible assets consist of customer relationships recorded in connection with the 2011 Datum Exploration Ltd. acquisition. The weighted average usefullife of customer relationships at December 31, 2016 and 2015 was 13 years. Future amortization expense is as follows: 2017$94201894201994202094202194Thereafter251Total$721Deferred Loan Issuance CostsChanges in deferred loan issuance costs and related accumulated amortization were as follows: Gross CarryingAmount AccumulatedAmortization Net CarryingAmountBalance at December 31, 2014$852 $(48) $804Amortization expense— (283) (283)Balance at December 31, 2015852 (331) 521Senior loan facility issuance costs30,082 — 30,082Amortization expense— (9,747) (9,747)Balance at December 31, 2016$30,934 $(10,078) $20,856Loan issuance costs incurred for the revolving credit agreement signed in November 2014 were capitalized during the year ended December 31, 2014 and arebeing amortized over three years. Loan issuance costs incurred for the senior loan facility signed in June 2016 were capitalized during the year endedDecember 31, 2016 and are being amortized over 18 months.Accrued LiabilitiesAccrued liabilities include the following:FS-20SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 5 — DETAIL OF SELECTED BALANCE SHEET ACCOUNTS – (continued) December 31, 2016 2015Accrued payroll liabilities$7,432 $5,794Accrued interest106 6,463Other accrued liabilities5,212 5,561Total accrued liabilities$12,750 $17,818NOTE 6 — REVOLVING CREDIT FACILITYOn November 6, 2014, SAExploration, Inc. (“Borrower”), the Corporation and the Corporation’s other domestic subsidiaries and Wells Fargo Bank, NationalAssociation (“Lender”) entered into a Credit and Security Agreement. The credit agreement provides for a $20,000 revolving line of credit facility (the“Revolving Credit Facility”) secured by the Corporation’s and the Corporation's domestic subsidiaries' U.S. assets, including accounts receivable andequipment, subject to certain exclusions and exceptions as set forth in the credit agreement. As a result of a yearly appraisal of the orderly net liquidationvalue of existing eligible equipment by the Lender that occurred during the fourth quarter of 2016, our borrowing base under the Revolving Credit Facilitywas lowered to $9,357. The proceeds of the Revolving Credit Facility are used primarily to fund the Corporation’s working capital needs for its operationsand for general corporate purposes. As of December 31, 2016 and 2015, borrowings of $5,844 and $7,899, respectively, were outstanding under theRevolving Credit Facility. The weighted average interest rate on borrowings outstanding as of December 31, 2016 was 4.00%. Borrowings made under the Revolving Credit Facility bear interest, payable monthly, at a rate of daily three months LIBOR plus 3% (4.00% and 3.61% atDecember 31, 2016 and 2015, respectively). The Revolving Credit Facility has a maturity date of November 6, 2017, unless terminated earlier. TheCorporation may request, and the Lender may grant, an increase to the maximum amount available under the Revolving Credit Facility in minimumincrements of $1,000 not to exceed an additional $10,000 in the aggregate, so long as certain conditions as described in the credit agreement are met. TheCorporation currently does not meet those conditions.The credit agreement includes a sub-facility for letters of credit in amounts up to the lesser of the available borrowing base or $10,000. Letters of credit aresubject to Lender approval and a fee, which accrues at the annual rate of 3% of the undrawn daily balance of the outstanding letters of credit, payablemonthly. An unused line fee of 0.5% per annum of the daily average of the maximum Revolving Credit Facility amount reduced by outstanding borrowingsand letters of credit is payable monthly. As of December 31, 2016 and 2015, letters of credit totaling $0 and $100, respectively, were outstanding under thesub-facility. Under the Revolving Credit Facility, borrowings are subject to borrowing base availability and may not exceed 85% of the amount of eligible accountsreceivable, as defined, plus the lesser of $20,000 or 85% of the orderly net liquidation value of existing eligible equipment per appraisal and 85% of hardcosts of acquired eligible equipment, less the aggregate amount of any reserves established by the Lender. As noted above, this process resulted in loweringour borrowing base to $9,357. If borrowings under the Revolving Credit Facility exceed $5,000, the Corporation is subject to minimum rolling 12 monthsEBITDA requirements of $20,000 on a consolidated basis and $8,000 on the Corporation’s operations in the State of Alaska. The credit agreement contains covenants including, but not limited to (i) commitments to maintain and deliver to the Lender, as required, certain financialreports, records and other items, (ii) subject to certain exceptions under the credit agreement, restrictions on the ability of the Corporation to incurindebtedness, create or incur liens, enter into fundamental changes to corporate structure or to the nature of the business of the Corporation, dispose of assets,permit a change in control, acquire non-permitted investments, enter into affiliate transactions or make distributions, (iii) maintain the minimum EBITDAspecified above and (iv) maintain eligible equipment, as defined, located in the State of Alaska with a value of at least 75% of the value of such equipmentplus the value of equipment outside the United States which would be otherwise eligible under the credit agreement. The credit agreement also containsrepresentations, warranties, covenants and other terms and conditions, including relating to the payment of fees to the Lender, which are customary foragreements of this type. The Corporation is in compliance with the credit agreement covenants as of December 31, 2016.FS-21SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 6 — REVOLVING CREDIT FACILITY – (continued)In connection with the Restructuring discussed in Note 2, the Corporation and Lender entered into an amendment to the Revolving Credit Facility on June29, 2016, to permit the entry into and borrowings under the Senior Loan Facility, the issuance of the Second Lien Notes, the entry into an amended andrestated Intercreditor Agreement, the amendments to the existing security agreement and any necessary amendments to the collateral agreements relating tothe Senior Secured Notes and consented to and waived any and all defaults or events of default resulting directly from the Restructuring. In connection withthe execution of the amendment, the Corporation paid $54 in fees which were charged to selling, general and administrative expenses in the year endedDecember 31, 2016.NOTE 7 — SENIOR LOAN FACILITYOn June 29, 2016, the Corporation, as borrower, and each of the Corporation’s domestic subsidiaries, as guarantors (the “Guarantors”), entered into the SeniorLoan Facility with the Supporting Holders of the Senior Secured Notes. In addition to the Supporting Holders, one additional holder of the Senior SecuredNotes subsequently elected to participate as a lender in the Senior Loan Facility based on their proportionate ownership of the Senior Secured Notes asdiscussed in Note 19. The Senior Loan Facility provides funding up to a maximum amount of $30,000. Under the terms of the Senior Loan Facility, $15,000became immediately available and the remaining $15,000 became available for borrowing based upon receipt by the Corporation of Alaska Tax Credits ofnot less than $25,000. On October 24, 2016, the lenders amended the Senior Loan Facility to waive the Alaska Tax Credit requirement, thereby allowing theCorporation to immediately access the remaining $15,000 availability. Under the terms of the Senior Loan Facility, the remaining availability can beborrowed on up to three separate dates. As of December 31, 2016 borrowings of $29,995 were outstanding under the Senior Loan Facility. The Senior LoanFacility is secured by a junior first lien on the Corporation's accounts receivable, which includes the Tax Credits and certificates evidencing the Tax Credits.Those Tax Credits and certificates are also pledged on a senior first lien basis to the Lender under the Revolving Credit Facility. Any proceeds frommonetizing the Tax Credits or Tax Credit certificates are paid into an account at the Lender under the Revolving Credit Facility and automatically reduce theamount the Corporation has borrowed under our revolving line of credit. The Senior Loan Facility requires that once the Corporation has received $15million in proceeds from the Tax Credits or Tax Credit certificates, unless waived by the lenders (or individual lenders) under the Senior Loan Facility,mandatory payments of proceeds from the Tax Credits or certificates must be made to reduce the amount outstanding under the Senior Loan Facility.Borrowings under the Senior Loan Facility bear interest at a rate of 10% per year, payable monthly. The Senior Loan Facility has a maturity date of January 2,2018, unless terminated earlier. In connection with the borrowing, costs totaling $30,082 were recorded as a deferred loan issuance cost on the balance sheetin the year ended December 31, 2016. The deferred loan issuance costs recorded in 2016 included a $600 facility fee, legal and investment banking costs,and $28,425 for the fair value of 2,803,302 shares of the Corporation's common stock issued to the lenders on July 27, 2016. The fair value of the commonstock was determined using the probability-weighted expected return method based on a combination of the income and market approaches and a mergersand acquisition scenario. The deferred loan issuance costs are being amortized on a straight line basis over the term of the Senior Loan Facility.The Senior Loan Facility is secured by substantially all of the collateral securing the obligations under (i) the Revolving Credit Agreement (ii) the SeniorSecured Notes and (iii) the Second Lien Notes, including the receivable due to the Corporation discussed in Note 3. This security interest is junior to thesecurity interest in such collateral securing the obligations under the Revolving Credit Facility and senior to the security interests in such collateral securingthe obligations under the Second Lien Notes and the Senior Secured Notes.The Senior Loan Facility contains negative covenants that restrict the Corporation’s and the Guarantors’ ability to incur indebtedness, create or incur liens,enter into fundamental changes to the Corporation’s corporate structure or to the nature of the Corporation’s business, dispose of assets, permit a change incontrol to occur, make certain prepayments, other payments and distributions, make certain investments, enter into affiliate transactions or make certaindistributions, and requires that the Corporation maintain and deliver certain financial reports, projections, records and other items. The Senior Loan Facilityalso contains customary representations, warranties, covenants and other terms and conditions, including relating to the payment of fees to the Senior LoanFacility agent and the lenders, and customary events of default. The Corporation was in compliance with the Senior Loan Facility covenants as of December31, 2016.FS-22SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 7 — SENIOR LOAN FACILITY – (continued)On June 29, 2016, the Corporation, the guarantors party thereto (the “Existing Notes Guarantors”) and Wilmington Savings Fund Society, FSB (successor toU.S. Bank National Association), as trustee for the Senior Secured Notes (the “Existing Trustee”), entered into a first supplemental indenture (the“Supplemental Indenture”) to the indenture governing the Senior Secured Notes (the “Existing Indenture”). The Supplemental Indenture modified theExisting Indenture to, among other things, permit the incurrence of additional secured indebtedness pursuant to the Senior Loan Facility and the issuance ofthe Second Lien Notes in the Exchange Offer. The Supplemental Indenture includes additional changes necessary to give effect to the Restructuring anddirected the Existing Trustee, in its capacity as noteholder collateral agent for the Senior Secured Notes, to enter into the Amended and Restated IntercreditorAgreement and the amendment to the Existing Security Agreement, each as described below, on behalf of the Existing Holders. The material terms of theExisting Indenture, other than the amendments summarized above, remain substantially as set forth in the Existing Indenture.On June 29, 2016, Wells Fargo, in its capacity as lender and collateral agent under the Revolving Credit Facility, Wilmington Savings Fund Society, FSB(successor to U.S. Bank National Association), in its capacity as trustee and collateral agent for the Senior Secured Notes ("Noteholder Collateral Agent"), andDelaware Trust Corporation, in its capacity as administrative agent and collateral agent for the Senior Loan Facility, amended and restated the IntercreditorAgreement, dated as of November 6, 2014, by and between Wells Fargo and Wilmington Savings Fund Society, FSB (as successor to U.S. Bank NationalAssociation) (the “Existing Intercreditor Agreement” and as amended and restated, the “Amended and Restated Intercreditor Agreement”), to govern therelationship of the Existing Holders, the holders of Second Lien Notes, and the lenders under the Corporation’s Revolving Credit Facility and Senior LoanFacility, with respect to the collateral and certain other matters. The Amended and Restated Intercreditor Agreement, among other things, modifies the termsof the Existing Intercreditor Agreement to (i) establish the relative priorities, rights, obligations and remedies with respect to the collateral among theExisting Holders, the holders of the Second Lien Notes, the lenders under the Revolving Credit Facility, the lenders under the Senior Loan Facility, theholders of future debt that is permitted to share the security interests currently held by them and the collateral agents of the foregoing (collectively, the“Secured Parties”); and (ii) modify the terms of the Existing Intercreditor Agreement to permit the holders of obligations under the Senior Loan Facility andthe Second Lien Notes to share the security interests currently held by the Existing Holders and Wells Fargo as the lender under the Revolving Credit Facilityas follows:•the obligations under the Revolving Credit Facility are secured by all of the existing collateral on a senior first lien priority basis;•the obligations under the Senior Loan Facility are secured by all of the existing collateral on a junior first lien priority basis;•the obligations under the Second Lien Notes are secured by substantially all of the existing collateral on a second lien priority basis; and•the obligations under the Senior Secured Notes are secured by substantially all of the existing collateral on a third lien priority basis.In addition, the Amended and Restated Intercreditor Agreement provides that, following a triggering event, as among the Secured Parties, the SeniorRepresentative (defined below) will have the right (subject to a purchase option by the other Secured Parties) to, or the right to direct any other collateralagent to, adjust or settle insurance policies or claims in the event of any loss thereunder relating to insurance proceeds with respect to collateral, to approveany award granted in any condemnation or similar proceeding affecting such insurance proceeds and to enforce rights, exercise remedies and discretionaryrights and powers with respect to collateral. The Secured Parties agreed that if the Corporation or any guarantor becomes subject to a case under the U.S.Bankruptcy Code, the Secured Parties will only be permitted to object to a debtor-in-possession financing or the use of cash collateral if the Secured Partiesfor which the Senior Representative is the collateral agent also object. The “Senior Representative” under the Amended and Restated Intercreditor Agreementis Wells Fargo as the Revolving Credit Facility agent, until the obligations under the Revolving Credit Facility have been discharged in full, after which theSenior Loan Facility agent will be the Senior Representative; and once the Revolving Credit Facility agent and the Senior Loan Facility agent each cease tobe the Senior Representative and the obligations under each of the Revolving Credit Facility and Senior Loan Facility have been discharged in full, theSenior Representative will be Wilmington Savings Fund Society, FSB, as the New Noteholder Collateral Agent. The material terms of the Amended andRestated Intercreditor Agreement, other than those summarized above, remain substantially as set forth in the Existing Intercreditor Agreement, except thatthe Noteholder Collateral Agent will no longer have a first-priority security interest in the “Noteholder Priority Collateral” (as such term is defined in theExisting Intercreditor Agreement).FS-23SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 7 — SENIOR LOAN FACILITY – (continued)On June 29, 2016, the Corporation and the Senior Secured Notes Guarantors, as pledgors, also entered into an amendment (the “Security AgreementAmendment”) to the Security Agreement, dated as of July 2, 2014 (as amended from time to time, the “Existing Security Agreement”), with WilmingtonSavings Fund Society, FSB, as Noteholder Collateral Agent for the Senior Secured Notes. The Security Agreement Amendment introduced conformingchanges to reflect the provisions incorporated into the Amended and Restated Intercreditor Agreement.NOTE 8 — NOTES PAYABLE Notes payable consist of the following: December 31, 2016 201510% second lien notes due 2019: Carrying value, including paid-in-kind interest of $3,619 and unamortized premium of $394$80,536 $—Debt discount, net of accumulated amortization of $47(298) —Total second lien notes outstanding80,238 —10% senior secured notes due 2019: Principal outstanding$1,872 $140,000Unamortized deferred loan issuance costs, net of accumulated amortization of $43 as of December 31,2016 and $1,978 as of December 31, 2015(42) (4,370)Total senior secured notes outstanding1,830 135,630Total notes payable outstanding (long-term)82,068 135,630Senior Secured NotesOn July 2, 2014, the Corporation entered into an Indenture ("Indenture") under which it issued $150,000 of senior secured notes due July 15, 2019, in aprivate offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in offshore transactions pursuant toRegulation S under the Securities Act. On June 19, 2015, all outstanding senior secured notes were exchanged for an equal amount of new senior securednotes ("Senior Secured Notes"), which are substantially identical in terms to the existing senior secured notes except that the Senior Secured Notes areregistered under the Securities Act.The Senior Secured Notes bear interest at the annual rate of 10% payable semi-annually in arrears on January 15 and July 15 of each year, commencing onJanuary 15, 2015. The proceeds from the original issuance of the Senior Secured Notes were used to pay the amounts outstanding under the 2012 CreditAgreement, pay the note payable to the Corporation's former common stockholders, pay related fees and expenses, fund the purchase of equipment related tothe Corporation’s Alaska operations, and for general corporate purposes.On August 26, 2015, the Corporation entered into a privately-negotiated exchange agreement with certain funds managed by Fidelity Management &Research Company ("Holders") to exchange $10,000 principal amount of Senior Secured Notes ("Exchanged Notes") for 2,366,307 shares of theCorporation’s common stock ("Exchanged Stock"), as determined using a 30-day volume weighted average share price as of August 26, 2015. In connectionwith the exchange, the Corporation paid all accrued unpaid interest on the Exchanged Notes to the Holders in cash, and the Exchanged Notes were canceled.The Exchanged Stock was valued at $6,602 based on the $2.79 average share price on August 27, 2015, the closing date of the exchange. The exchangeresulted in a gain on early extinguishment of debt of $3,014 in the year ended December 31, 2015, consisting of the difference between the principal amountof the Exchanged Notes less the fair value of the Exchanged Stock, reduced by the Exchanged Notes prorata portion of the Senior Secured Notes unamortizeddeferred loan issuance costs on the closing date of $343 and legal fees of $41.The Corporation has the right to redeem some or all of the Senior Secured Notes at the redemption prices (expressed as percentages of the principal amount tobe redeemed) set forth below, together with accrued and unpaid interest to, but not including, the redemption date, if redeemed on or after January 15, 2017as indicated:FS-24SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 8 — NOTES PAYABLE – (continued)PeriodPercentageOn or after January 15, 2017 and prior to July 15, 2017107.5%On or after July 15, 2017 and prior to July 15, 2018105.0%On and after July 15, 2018100.0% Subject to certain exceptions, upon the occurrence of a Change of Control (as defined in the Indenture), each holder of Senior Secured Notes will have theright to require the Corporation to purchase that holder’s Senior Secured Notes for a cash price equal to 101% of the principal amounts to be purchased, plusaccrued and unpaid interest to the date of purchase. Upon the occurrence of an Asset Sale (as defined in the Indenture), each holder of Senior Secured Noteswill have the right to require the Corporation to purchase that holder’s Senior Secured Notes for a cash price equal to 100% of the principal amounts to bepurchased, plus accrued and unpaid interest to the date of purchase from any proceeds from the Asset Sale in excess of $7.5 million that are not otherwiseused by the Corporation to either reduce its debt, reinvest in assets or acquire a permitted business. The Indenture, which was amended in connection with the Exchange Offer described below, contains covenants which include limitations on theCorporation's ability to: (i) transfer or sell assets; (ii) pay dividends, redeem subordinated indebtedness or make other restricted payments; (iii) incur orguarantee additional indebtedness or, with respect to the Corporation's restricted subsidiaries, issue preferred stock; (iv) create or incur liens; (v) incurdividend or other payment restrictions affecting its restricted subsidiaries; (vi) consummate a merger, consolidation or sale of all or substantially all of its orits subsidiaries’ assets; (vii) enter into transactions with affiliates; (viii) engage in business other than its current business and reasonably related extensionsthereof; and (ix) take or omit to take any actions that would adversely affect or impair in any material respect the collateral securing the Senior Secured Notes.The Corporation is in compliance with the Indenture covenants as of December 31, 2016.Exchange of Senior Secured Notes for 10% Second Lien NotesAs discussed in Note 2, the Corporation commenced an offer on June 24, 2016 to exchange each $1 of the Senior Secured Notes for (i) $0.50 of newly issued10% Senior Secured Second Lien Notes due 2019 and (ii) 46.41 shares of newly issued Corporation common stock (giving effect to a 135-for-1 reverse stocksplit that was effected in connection with closing of the Exchange Offer). The Exchange Offer closed on July 27, 2016. On the Closing Date, a total of$138,128 face value of the Senior Secured Notes were exchanged for (i) $76,523 Second Lien Notes, including $7,459 Second Lien Notes representingaccrued and unpaid interest and (ii) 6,410,502 shares of Corporation common stock.The exchange was accounted for as a modification during the year ended December 31, 2016. The Second Lien Notes were recorded at the net carrying valueof the Senior Secured Notes exchanged of $134,522, less the fair value of the Corporation common stock issued to participating noteholders of $65,003, plusthe accrued and unpaid interest of $7,459 included in the exchange. The resulting $455 excess of carrying value over face value of the Second Lien Notes isbeing amortized to interest expense over the term of the Second Lien Notes. The fair value of the common stock was determined using the probability-weighted expected return method based on a combination of the income and market approaches and a mergers and acquisition scenario. Costs incurred by theparticipating noteholders during the exchange of $345 were recognized as debt discount and are being amortized over the term of the Second Lien Notes.In connection with the Exchange Offer, the Corporation also completed a consent solicitation to make certain proposed limited amendments to the terms ofthe indenture for the Senior Secured Notes, the related security documents and the existing intercreditor agreement to permit the Restructuring as discussed inNote 7. The Second Lien Notes terms are substantially similar to the Senior Secured Notes with the following modifications: •The Second Lien Notes have a maturity date of September 24, 2019, provided that, if any of the Senior Secured Notes remain outstanding as ofMarch 31, 2019, the maturity date of the Second Lien Notes will become April 14, 2019 upon the vote of the holders of a majority of the then-outstanding Second Lien Notes.•The liens securing the Second Lien Notes are junior to the liens securing the Senior Loan Facility and senior to the liens securing the Senior SecuredNotes after the Closing Date.FS-25SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 8 — NOTES PAYABLE – (continued)•In addition to the exchange consideration, each participating holder received accrued and unpaid interest on its tendered Senior Secured Notes thatwere accepted for exchange from their last interest payment date of January 15, 2016 to, but not including, the settlement date, which was paid in theform of Second Lien Notes with a principal amount equal to the amount of such accrued and unpaid interest totaling $7,459.•Interest on the Second Lien Notes is payable quarterly. The Corporation may elect to pay interest on the Second Lien Notes in kind with additionalSecond Lien Notes for the first twelve months of interest payment dates following the Closing Date, provided that, if the Corporation makes thiselection, the interest on the Second Lien Notes for such in kind payments will accrue at a per annum rate 1% percent higher than the cash interestrate of 10%. The Corporation elected to pay interest during the year ended December 31, 2016 of $3,619 in kind. •The Second Lien Notes have a special redemption right at par of up to $35 million of the issuance to be paid out of the proceeds of the Alaska TaxCredit certificates and is conditioned upon payment in full of the Revolving Credit Facility and the Senior Loan Facility.•The Second Lien Notes include a make-whole provision requiring that if the Second Lien Notes are accelerated or otherwise become due andpayable prior to their stated maturity due to an Event of Default (including but not limited to a bankruptcy or liquidation of the Corporation(including the acceleration of claims by operation of law)), then the applicable premium payable with respect to an optional redemption will also beimmediately due and payable, along with the principal of, accrued and unpaid interest on, the Second Lien Notes and constitutes part of theobligations in respect thereof as if such acceleration were an optional redemption of the Second Lien Notes, in view of the impracticability andextreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each holder’s lost profitsas a result thereof.Future Principal Payments for Notes PayableRequired future principal payments for notes payable outstanding at December 31, 2016 are as follows during the years ending December 31: Amount2017$—2018—201982,0142020—2021—Thereafter—Total$82,014 FS-26SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 9 — LEASES Capital LeasesThe Corporation leases certain machinery and equipment under agreements that are classified as capital leases. As of December 31, 2016, the future minimumlease payments required under the capital leases and the present value of the net minimum lease payments for the years ending December 31 are as follows: Amount2017$582018—2019—2020—2021—Thereafter—Total minimum lease payments58Less: amount representing interest(2)Present value of net minimum lease payments56Less: current maturities of capital lease obligations(56)Long-term capital lease obligations$—Assets recorded under capital leases and included in property and equipment in the Corporation’s consolidated balance sheets consist of the following: December 31, 2016 2015Vehicles92 373Office equipment106 102Total cost of property and equipment under capital leases198 475Less: accumulated amortization(92) (256)Property under capital leases, net$106 $219 Operating LeasesThe Corporation has several noncancelable operating leases, primarily for office, warehouse space, and corporate apartments that are set to expire over thenext five years. These leases generally contain renewal options for a one-year period and require the Corporation to pay all executory costs such asmaintenance and insurance. Rental expense for operating leases for the years ended December 31, 2016 and 2015 was $23,269 and $7,288, respectively.As of December 31, 2016, future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year)for the years ending December 31 are as follows: Amount2017$2,68520182,06220191,30220202022021—Thereafter—Total future minimum lease payments$6,251FS-27SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 10 — EARNINGS PER SHARE Basic income (loss) per share is computed by dividing net income (loss) attributable to the Corporation by the weighted average number of common sharesoutstanding during each period. Diluted income (loss) per share is computed by dividing net income (loss) attributable to the Corporation by the sum of theweighted-average number of shares outstanding during each period and the dilutive potential common shares outstanding during the period determinedunder the treasury stock method. In loss periods, basic net loss and diluted net loss are the same since the effect of potential common shares is anti-dilutiveand therefore excluded.Dilutive potential common shares consist of shares issuable upon (i) the vesting of restricted stock, (ii) the exercising of warrants at average market pricesgreater than their exercise prices, and (iii) the exercising of stock options at average market prices greater than their exercise prices. Under the treasury stockmethod, dilutive potential common shares are determined based on the assumed exercise of dilutive restricted stock, stock options and warrants less thenumber of treasury shares assumed to be purchased from the amount that must be paid to exercise stock options, the amount of compensation expense forfuture service that has not yet been recognized for restricted stock and stock options, and the amount of tax benefits that will be recorded in additional paid-in capital when the dilutive awards become deductible.As discussed in Note 2, the Corporation completed a 135-for-1 reverse split of the outstanding common stock effective as of the Closing Date of theRestructuring. As a result, all share and per share amounts for all periods presented have been adjusted to reflect the reverse split as though it had occurredprior to the earliest period presented.The computation of basic and diluted net loss per share is as follows: Net LossAttributable to theCorporation Shares Per ShareYear Ended December 31, 2016: Basic loss per share $(25,030) 4,083,103 $(6.13)Effect of dilutive securities — — —Diluted loss per share $(25,030) 4,083,103 $(6.13) Year Ended December 31, 2015: Basic loss per share $(9,875) 116,791 $(84.55)Effect of dilutive securities — — —Diluted loss per share $(9,875) 116,791 $(84.55)Options to purchase 311,477 and 1,790 shares of common stock were excluded from the calculation of diluted net loss per share for the years endedDecember 31, 2016 and 2015, respectively, since the option exercise price was higher than the weighted average share price during the period the optionswere outstanding, thus being anti-dilutive. Unvested restricted stock units representing 21,668 and 1,610 issuable shares were excluded from the calculationof diluted net loss per share for the years ended December 31, 2016 and 2015, respectively, since they were anti-dilutive. Warrants to purchase 308,752 and4,310 shares of common stock were excluded from the calculation of diluted net loss per share for the years ended December 31, 2016 and 2015, respectively,since the warrant exercise price was higher than the weighted average share price during the respective periods, thus being anti-dilutive.FS-28SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 11 — INCOME TAXES Income (loss) before income taxes attributable to U.S. (including its foreign branches) and foreign operations are as follows: Years Ended December 31, 2016 2015U.S.$(29,867) $15,263Foreign13,914 (18,012)Total$(15,953) $(2,749) No income taxes are attributable to the noncontrolling interest. The provision for income taxes shown in the consolidated statements of operations and comprehensive loss consists of current and deferred expense (benefit)as shown in the following table: Years Ended December 31, 2016 2015Current income tax expense: U.S. – federal and state$102 $242Foreign7,276 3,923Total current income tax expense7,378 4,165Deferred income tax benefit: U.S. – federal and state— —Foreign(1,322) (1,472)Total deferred income tax benefit(1,322) (1,472)Total provision for income taxes$6,056 $2,693A reconciliation of the provision for income tax expense (benefit) expected at the U.S. federal statutory income tax rate to the effective income tax rate is asfollows: Years Ended December 31, 2016 2015Expected income tax benefit at 35%$(5,583) $(962)Effects of expenses not deductible for tax purposes(1,878) 2,850Tax effect of valuation allowance on deferred tax assets7,115 414Effects of differences between U.S. and foreign tax rates, net of federal benefit6,020 (917)Foreign withholding and AMT667 1,501Rate changes(285) —Other adjustments— (193)Provision for income taxes$6,056 $2,693The net deferred tax assets consist of the following: December 31, 2016 2015Noncurrent deferred tax asset, net$5,122 $3,756Noncurrent deferred tax liability, net— (55)Net deferred tax asset$5,122 $3,701FS-29SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 11 — INCOME TAXES – (continued)The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: December 31, 2016 2015Deferred tax assets: Deferred charges$1,553 $1,316Stock compensation expense237 98Other accruals4,421 2,427Research and development credits160 2,406Capital lease obligation134 134Foreign tax credit and AMT credit carry forwards2,087 13,188Financing costs453 1,974Unrealized loss on foreign currency transactions700 914Net operating loss carry forwards15,668 14,093Total deferred tax assets25,413 36,550Less: valuation allowance(16,890) (26,137)Total deferred tax assets, net8,523 10,413Deferred tax liabilities: Property and equipment(3,061) (6,372)Intangible assets(340) (340)Total deferred tax liabilities(3,401) (6,712)Net deferred tax assets$5,122 $3,701 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assetswill not be realized. The Corporation has evaluated the available evidence and the likelihood of realizing the benefit of its net deferred tax assets.Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making thisassessment. From its evaluation, the Corporation has concluded that based on the weight of available evidence, it is not more likely than not to realize thebenefit of its deferred tax assets recorded in the United States, Malaysia, Brazil and Canada at December 31, 2016. Accordingly, the Corporation had avaluation allowance totaling $16,890 and $26,137 at December 31, 2016 and 2015, respectively. Should the factors underlying management’s analysischange, future valuation adjustments to the Corporation’s net deferred tax assets may be necessary. The valuation allowance was decreased by $9,247 andincreased by $414 during the years ended December 31, 2016 and 2015, respectively.The Corporation is subject to examination in all jurisdictions in which it operates. The Corporation is no longer subject to examination by the InternalRevenue Service or other foreign taxing authorities in which it files for years prior to 2008.Foreign earnings are considered to be permanently reinvested in operations outside the United States and therefore the Corporation has not provided for U.S.income taxes on these unrepatriated foreign earnings.The details of the Corporation’s tax attributes are shown below: December 31,Net Operating Loss Carryforwards:2016 2015United States$22,505 $17,752Canada6,117 5,408Malaysia5,726 5,726Brazil5,149 6,894Others— 7,038Total$39,497 $42,818FS-30SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 11 — INCOME TAXES – (continued) December 31,Foreign Tax Credits Carryforwards:2016 2015United States$100 $11,604Canada654 641United Kingdom727 356Total$1,481 $12,601 December 31,Net Deferred Tax Assets:2016 2015Bolivia$1,368 $1,467Canada— —Colombia2,249 1,735Malaysia233 (55)Peru1,272 554Total$5,122 $3,701 Uncertain tax positions and the related interest and penalties are provided for based upon management’s assessment of whether a tax benefit is more likelythan not to be sustained upon examination by tax authorities. To the extent interest and penalties are assessed with respect to the uncertain tax positions,amounts accrued are reflected as income tax expense. Based on the Corporation’s evaluation, it has been concluded that there are no significant uncertain taxpositions requiring recognition in the Corporation’s consolidated financial statements during the years ended December 31, 2016 and 2015.The Corporation had no accrued interest and penalties included in accrued expenses as of December 31, 2016 and 2015. Interest and penalties recognized asexpense amounted to $11 and $135 for the years ended December 31, 2016 and 2015, respectively.Net Operating LossesDue to the Restructuring, the Corporation's U.S. federal tax net operating loss ("NOL") carryforwards, foreign tax credits ("FTC") carryforwards and Researchand Development Credits ("R&D") carryforwards were subject to Section 382 and Section 383 annual limitations due to the ownership changes from theRestructuring. The Corporation determined some of the carryforwards will expire unutilized and were written down from the deferred tax assets against a fullvaluation allowance.As of December 31, 2016, the Corporation had U.S. federal tax NOL carryforwards of approximately $22,505, which begin to expire in fiscal year 2034. TheseNOL carryforwards, subject to certain requirements and restrictions, including limitations on their use in the event of future ownership changes, may be usedto offset future taxable income and thereby reduce the Corporation’s U.S. federal income taxes otherwise payable. Section 382 of the Internal Revenue Codeof 1986, as amended (the “Code”), imposes an annual limit on the ability of a corporation that undergoes an ownership change to use its NOL carryforwardsto reduce its tax liability.NOTE 12 — WARRANTS Trio Merger Corp. WarrantsThe Corporation sold warrants ("Trio Merger Corp. Warrants") for the purchase of an aggregate of 103,703 shares of the Corporation's common stock at theexercise price of $1,012.50 in the following transactions (adjusted for the effect of the reverse stock split):•In a private sale in February 2011, the Corporation sold 48,148 units, with each unit consisting of one share of common stock and one warrant, to theholders of the Corporation's common stock prior to its initial public offering ("Private Warrants").FS-31SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 12 — WARRANTS – (continued)•In a private sale in February 2011, the Corporation sold 4,444 warrants to EarlyBirdCapital, Inc., the representative of the underwriters for theCorporation’s initial public offering, and its designees ("Private Warrants").•In its initial public offering in June 2011, the Corporation closed the sale of 44,444 units, with each unit consisting of one share of common stockand one warrant ("Public Warrants").•Pursuant to an over-allotment option granted to the underwriters, the Corporation sold an additional 6,667 units in June 2011, with each unitconsisting of one share of common stock and one warrant ("Public Warrants").The units, consisting of one share of common stock and one warrant, were mandatorily separated into their component parts effective March 26, 2012.Following the completion of a business combination, the Corporation then could call the Public Warrants for redemption at $0.01 per warrant if the last saleprice of the Corporation's common stock equals or exceeds $1,687.50 per share, for any 20 trading days within a 30 consecutive trading day period. If theWarrants were called for redemption, the Corporation had the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis". The terms of the Private Warrants and Convertible Debt Warrants are identical to the Public Warrants, except that such warrants are exercisable for cash or ona “cashless basis,” at the holder’s option, and are not redeemable by the Corporation, in each case so long as the warrants are still held by the initialpurchasers or their affiliates.Concurrent with the Closing of the Merger in June 2013, the Corporation, with the written consent of the majority of the holders of the then outstandingwarrants, entered into an amendment to the warrant agreement with Continental Stock Transfer & Trust Company, as warrant agent for all Trio Merger Corp.Warrants, to (i) increase the exercise price of the warrants from $1,012.50 to $1,620.00 per share of the Corporation’s common stock and (ii) increase theredemption price of the warrants from $1,620.00 to $2,025.00 per share of the Corporation’s common stock.On January 7, 2014, the Corporation commenced an offer to exchange the Trio Merger Corp. Warrants for its common stock in a cashless transaction("Warrant Exchange"). Each warrant holder had the opportunity to receive one share of the Corporation's common stock in exchange for every tenoutstanding warrants tendered by the holder and exchanged pursuant to the Warrant Exchange. After completion of the Warrant Exchange, 4,310 (adjustedfor the effect of the reverse stock split) of the original Trio Merger Corp. Public Warrants, with an expiration date of June 24, 2016 and an exercise price of$1,620.00 were outstanding. As of December 31, 2015, there were 4,310 Trio Merger Corp. Public Warrants outstanding. The Trio Merger Corp. PublicWarrants expired unexercised on June 24, 2016 and no remaining Trio Merger Corp. Public Warrants remain outstanding at December 31, 2016.Former SAE WarrantsTwo classes of warrants were issued in 2012 convertible into an aggregate of 2% of Former SAE’s common stock deemed outstanding at the time of theexercise, including any securities or contracts of a dilutive nature, whether or not exercisable at the time of the determination. The warrants have an exerciseprice of $0.01 a share. A portion of the merger consideration payable at Closing was allocable to certain derivative securities of Former SAE that were notconverted or exchanged prior to the Merger. As of December 31, 2016, a total of 200 shares of common stock were held in escrow pending the conversion orexercise of those derivative securities (the “Merger Consideration Escrow”). The escrow agreement provides that CLCH, LLC ("CLCH"), as nominee of theCorporation, will have voting control over all shares of the Corporation's common stock held in the Merger Consideration Escrow.Series A and Series B WarrantsAs an element of the Restructuring discussed in Note 2, on the Closing Date, the Corporation granted to stockholders of record on July 26, 2016, 154,376Series A Warrants and 154,376 Series B Warrants (together, the "Warrants") to purchase shares of the Corporation's common stock. Each Warrant entitles theholder to purchase one share of the Corporation's common stock. The Series A Warrants and Series B Warrants have exercise prices of $10.30 and $12.88,respectively, and expire on July 27, 2021. The Warrants will become exercisable 30 days in advance of their expiration date contingent upon the receipt bythe Corporation of Tax Credit certificates in a face amount of at least $25 million issued by the State of Alaska to the Corporation. The warrants wereaccounted for in equity and recorded at a fair value of $1,381 during the year ended December 31, 2016.FS-32SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 13 — STOCKHOLDERS’ EQUITY Preferred StockThe Corporation is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferencesas may be determined from time to time by the Corporation’s Board of Directors. As of December 31, 2016 and December 31, 2015, there are no shares ofpreferred stock issued or outstanding.Common StockThe Corporation is authorized to issue 55,000,000 shares of common stock with a par value of $0.0001 per share. On June 15, 2016, the Corporation’s boardof directors authorized a 135-for-1 reverse split of the outstanding common stock effective as of the Closing Date of the Restructuring. All share and per shareamounts for all periods presented have been adjusted to reflect the reverse split as though it had occurred prior to the earliest period presented. As ofDecember 31, 2016, a total of 9,358,529 shares were issued and outstanding.Merger Indemnification EscrowIn connection with the Merger, 4,041 shares of Corporation common stock issued to Former SAE stockholders at Closing were deposited in escrow to securethe indemnification obligations under the Merger Agreement. As of May 23, 2016, the remaining escrowed shares were released to the Former SAEstockholders.NOTE 14 — SHARE-BASED COMPENSATIONNon-Employee Director Share Incentive PlanEffective November 1, 2013, stockholders approved the Corporation’s non-employee director share incentive plan, which provides for discretionary grants ofstock awards to the Corporation’s independent non-employee directors as determined by the Corporation’s board of directors. The 2013 Non-EmployeeDirector Plan was amended effective November 3, 2016 to increase the number of shares of the Corporation's common stock available for issuance under theplan from 2,962 (after taking into account the 135-for-1 reverse stock split of the Corporation's common stock effected on July 27, 2016) to 400,000 shares.The awards may take the form of unrestricted or restricted shares of the Corporation’s unissued common stock or options to purchase shares of theCorporation’s unissued common stock. Of the 400,000 shares of common stock reserved for issuance under the 2013 Non-Employee Director Plan, 383,787shares remain available for issuance as of December 31, 2016.During 2016, 15,016 restricted shares were issued under the plan which vested immediately upon issuance, resulting in share-based compensation expense of$129 for the year ended December 31, 2016. The restricted shares granted and vested had a weighted-average grant date fair value of $8.54. During 2015, 620restricted shares were issued under the plan which vested immediately upon issuance, resulting in share-based compensation expense of $200 for the yearended December 31, 2015. The restricted shares granted and vested had a weighted-average grant date fair value of $322.65. Share-based compensationexpense for the 2013 Non-Employee Director Plan is reported under selling, general and administrative expense.2013 Long-Term Incentive Compensation PlanOn June 21, 2013, the stockholders approved the Corporation’s 2013 Long-Term Incentive Compensation Plan ("2013 Plan") for the benefit of certainemployees performing services for the Corporation. The 2013 Plan reserved up to 5,870 unissued shares of Corporation common stock for issuance inaccordance with the 2013 Plan’s terms including a maximum of up to 2,935 shares that could have been issued pursuant to awards of restricted stock. On June29, 2015, the initial awards were granted under the 2013 Plan of 1,790 stock options with an exercise price of $556.20 and 2,416 restricted stock units. Theawards originally had vesting terms of one-third on each of ninety days, one year, and two years after the date of grant. As an element of the Restructuringdiscussed in Note 2, the Corporation terminated the 2013 Plan and all outstanding awards thereunder immediately vested and converted into shares of theCorporation's Common Stock. As a result of the accelerated vesting, the Corporation charged the remaining unrecognized compensation expense on existingawards to the results of operations during the year ended December 31, 2016.FS-33SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 14 — SHARE-BASED COMPENSATION – (continued)2016 Long Term Incentive PlanOn August 3, 2016, the Board of Directors approved and adopted the 2016 Long Term Incentive Plan (“2016 Plan”), for the purpose of promoting the long-term success of the Corporation and the creation of value for its stockholders. On August 4, 2016, the Corporation received written consents from the holdersof a majority of the shares of its common stock outstanding approving and adopting the 2016 Plan. The Company filed a Schedule 14C with the Securitiesand Exchange Commission (the “Information Statement”) on August 15, 2016 and the 2016 Plan became effective on September 4, 2016. The 2016 Plansupersedes any prior management or employee stock compensation plan of the Corporation in effect on the Closing Date. The 2016 Plan provides for awards of stock options, stock appreciation rights, restricted shares, stock units and performance cash awards. The 2016 Planreserves 1,038,258 shares of common stock for distribution to covered employees, including a maximum of 519,129 shares that were reserved for issuancepursuant to awards of restricted stock or stock units. On September 26, 2016, 311,477 stock units and stock options for 311,477 shares of Corporationcommon stock at an exercise price of $10.19 were granted under the 2016 Plan (the "MIP Awards").The MIP Awards vest: (a) one-third on the earliest to occur of (1) the date on which the Corporation receives Tax Credit certificates assigned to theCorporation by Alaska Seismic Ventures, LLC and issued by the Tax Division of the State of Alaska that, together with all such certificates received by theCorporation after the Closing Date, have an aggregate face amount of $25 million or more, or (2) the first anniversary of the Closing Date; and (b) one-thirdeach on the second and third anniversaries of the Closing Date. The MIP Awards expire upon the earlier of termination of the grantee’s employment or tenyears after the grant date.Share-Based Compensation ExpenseShare-based compensation expense for stock option, restricted stock and restricted stock unit awards was as follows: Years Ended December 31, 2016 2015Cost of services$— $—Selling, general and administrative expenses1,383 1,061Total share-based compensation expense1,383 1,061Income tax benefit(484) (371)Increase in net loss$899 $690 Increase in net loss per share: Basic$0.22 $5.91Diluted$0.22 $5.91FS-34SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 14 — SHARE-BASED COMPENSATION – (continued)Stock Options A summary of stock option activity for the year ended December 31, 2016 was as follows: Number ofShares WeightedAverageExercise Price WeightedAverage GrantDate Fair Value WeightedAverageRemainingContractualTerm (Years) Aggregate IntrinsicValueOutstanding at December 31, 20151,790 $556.20 9.5 $—Granted311,477 $10.19 $3.89 Exercised(85) $556.20 (45)Forfeited(1,705) $556.20 Expired— $— Outstanding at December 31, 2016311,477 $10.19 9.7 $—Exercisable at December 31, 2016— $— 0.0 $—The total grant date fair value of stock options awarded during the years ended December 31, 2016 and 2015 was $1,212 and $359, respectively. The totalfair value of stock options vested during the years ended December 31, 2016 and 2015 was $3 and $120, respectively.The Corporation computes the fair value of each stock option on the date of grant using a Black-Scholes option pricing model. The following tablesummarizes the weighted average assumptions used in the Black-Scholes pricing model for the years ended December 31, 2016 and 2015: : 20162015Expected volatility60.7%52.3%Expected lives (in years)5.95.5Risk-free interest rate1.2%1.8%Expected dividend yield—%—%The expected volatility is based on the historical volatility of comparable companies for a period commensurate with the expected lives assumption. Thesimplified method is used to estimate expected lives for options granted during the period for each vesting tranche. The risk-free interest rate is based on theyield on U.S. Treasury securities for a period commensurate with the expected lives assumption. The Corporation has not historically issued dividends anddoes not expect to do so in the future.At December 31, 2016, there was approximately $987 of unrecognized compensation expense for unvested stock option awards with a weighted averagevesting period of 1.57 years.FS-35SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 14 — SHARE-BASED COMPENSATION – (continued)Restricted Stock UnitsA summary of restricted stock units activity for the year ended December 31, 2016 was as follows: Number of Shares Weighted AverageGrant Date FairValueNonvested at December 31, 20151,610 $459.00Granted311,477 $7.85Vested(1,542) $459.00Forfeited(68) $459.00Nonvested at December 31, 2016311,477 $7.85The total grant date fair value of stock units awarded during the years ended December 31, 2016 and 2015 was $2,445 and $1,109, respectively. The total fairvalue of stock units vested during the years ended December 31, 2016 and 2015 was $37 and $310. At December 31, 2016, there was approximately $1,992of unrecognized compensation expense, net of estimated forfeitures, for unvested restricted stock unit awards with a weighted average vesting period of 1.57years.NOTE 15 — VARIABLE INTEREST ENTITIES Effective November 19, 2012, an agreement was entered into between a subsidiary of the Corporation and Kuukpik Corporation (“Kuukpik”) to form aseparate legal entity (“Joint Venture”) for the purpose of performing contracts for the acquisition and development of geophysical and seismic data and forgeophysical and seismic services and any and all related work anywhere on the North Slope of Alaska (onshore or offshore) for a period of five years. TheCorporation and Kuukpik’s percentage ownership interest in the Joint Venture are 49% and 51%, respectively. The sole source of revenue of the JointVenture is contracts performed by the Corporation. Pre-award costs incurred on potential contracts by Kuukpik and the Corporation are absorbed by eachparty and not by the Joint Venture. The Joint Venture receives 10% of gross revenues of all North Slope of Alaska contracts performed by the Corporation,which is distributed to Kuukpik and the Corporation based on their relative ownership percentages. Risk of loss on a contract, including credit risk, is theCorporation's sole responsibility. Based on its power to influence the significant business activities of the Joint Venture and its responsibility to absorbcontract losses, the Corporation was determined to be the primary beneficiary under GAAP and as such consolidates the Joint Venture. The results of the JointVenture are combined with the Corporation and all intercompany transactions are eliminated upon consolidation. Amounts reflected for the Joint Venture inthe consolidated financial statements consist of the balances reported under net income attributable to noncontrolling interest for the years endedDecember 31, 2016 and 2015 and noncontrolling interest on the December 31, 2016 and 2015 balance sheets.Effective October 18, 2016, an agreement was entered into between the Corporation and SAExploration Nigeria Limited (“SAE Nigeria”) for the purpose ofperforming acquisition and development of geophysical and seismic data on a specific project in West Nigeria ("West Nigeria Project"). The Corporationdoes not hold an ownership interest in SAE Nigeria. Risk of loss on the West Nigeria Project, including credit risk, is the Corporation's sole responsibility. Allprofits from the West Nigeria Project remain with the Corporation. Based on its power to influence the significant business activities of SAE Nigeria duringthe completion of the West Nigeria Project, its responsibility to absorb contract losses and the proportion of SAE Nigeria's operations dedicated to the WestNigeria Project at this time, the Corporation was determined to be the primary beneficiary under GAAP and as such consolidates SAE Nigeria for the term ofthe West Nigeria Project. The results of SAE Nigeria are combined with the Corporation and all intercompany transactions are eliminated upon consolidation.NOTE 16 — EMPLOYEE BENEFITSThe Corporation offers a Retirement Registered Saving Plan for all eligible employees of its Canadian operations. The Corporation's plan allows for thematch of each employee’s contributions up to the maximum allowed under the plan or until the Canada Revenue Agency annual limit is reached, but due tothe downturn in the oil industry matching contributions were suspended as of June 1, 2015. For the years ended December 31, 2016 and 2015, theCorporation expensed matching contributions totaling $0 and $153, respectively.FS-36SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 16 — EMPLOYEE BENEFITS – (continued)The Corporation offers a 401(k) Plan for all eligible employees of its U.S. operations. The plan allows for the match of each employee’s contributions up tothe maximum allowed under the plan, but due to the downturn in the oil industry matching contributions were suspended as of June 1, 2015. For the yearsended December 31, 2016 and 2015, the Corporation expensed matching contributions totaling $0 and $112, respectively.NOTE 17 — GEOGRAPHIC AND RELATED INFORMATION A summary of revenue and identifiable assets by geographic areas is as follows: Revenue from Services Identifiable Assets Years Ended December 31, December 31, 2016 2015 2016 2015North America: United States$77,626 $162,066 $55,282 $54,664Canada9,341 11,350 3,804 4,050Total86,967 173,416 59,086 58,714South America: Peru252 15,218 495 1,878Colombia37,394 7,065 2,644 3,970Bolivia76,928 2,822 922 1,051Other1,968 2,147 2,167 2,390Total116,542 27,252 6,228 9,289Southeast Asia: Malaysia1,734 27,469 875 1,300Other— — 6 13Total1,734 27,469 881 1,313West Africa: Nigeria321 — — —Total321 — — —Consolidated$205,564 $228,137 $66,195 $69,316Total excluding United States$127,938 $66,071 $10,913 $14,652Revenue is presented based on the location of the services provided. Identifiable assets include property and equipment, intangible assets and goodwill.FS-37SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 17 — GEOGRAPHIC AND RELATED INFORMATION – (continued)A summary of customers with revenue or accounts receivable in excess of 10% of the consolidated total for 2016 and 2015 is as follows: Revenue from Services Accounts Receivable, Net Years Ended December 31, December 31, Amount % ofConsolidated Amount % ofConsolidated2016 Customer A$74,407 36% Customer B$57,254 28% $81,609 76%Customer C$21,161 10% 2015 Customer B$83,851 37% $50,407 74%Customer F$40,050 18% Customer G$27,469 12% Customer H$23,400 10% NOTE 18 — FAIR VALUE OF FINANCIAL INSTRUMENTSThe Corporation has certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with GAAP. Fair value is definedas the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transactionbetween market participants on the measurement date. When an asset or liability is required to be measured at fair value, an entity is required to maximize theuse of observable inputs and minimize the use of unobservable inputs using a fair value hierarchy as follows: Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices forsimilar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. Measurement is based on prices or valuation models requiringinputs that are both significant to the fair value measurement and supported by little or no market activity.The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, borrowings under theRevolving Credit Facility and borrowings under the Senior Loan Facility are a reasonable estimate of their fair values due to their short duration. There were no Corporation financial instruments measured at fair value on a recurring basis at December 31, 2016 and 2015. The Corporation's financial instruments not recorded at fair value consist of the Senior Secured Notes and the Second Lien Notes. At December 31, 2016, thecarrying value of the Senior Secured Notes and Second Lien Notes was $1,830 and $80,238, respectively. At December 31, 2016, the estimated fair value ofthe Senior Secured Notes and Second Lien Notes was $1,404 and $60,107, respectively. The fair value is determined by a market approach using dealerquoted period-end bond prices. This instrument is classified as Level 2 as valuation inputs for fair value measurements are dealer quoted market prices atDecember 31, 2016 obtained from independent third party sources. However, no assurance can be given that the fair value would be the amount realized in anactive market exchange.FS-38SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 18 — FAIR VALUE OF FINANCIAL INSTRUMENTS – (continued)The Corporation's non-financial assets include goodwill, property and equipment, and other intangible assets, which are classified as Level 3 assets. Theseassets are measured at fair value on a nonrecurring basis as part of the Corporation's impairment assessments and as circumstances require. Goodwill issubjected to an annual review for impairment or more frequently as required.NOTE 19 — RELATED PARTY TRANSACTIONSJeff Hastings, the Corporation’s Chief Executive Officer and Chairman of the Board of Directors, owns and controls Speculative Seismic Investments, LLC(“SSI”), which as of March 10, 2017, holds 109,156 shares of the Corporation’s common stock. SSI is a lender under the Corporation’s Senior Loan Facility inthe principal amount of $543 and exchanged $2,352 of the Corporation’s Existing Notes for $1,334 of Second Lien Notes in the Restructuring consummatedon July 27, 2016. SSI subsequently sold the $1,334 of Second Lien Notes in November 2016 representing $1,176 of face value and $158 of interest paid inkind for the period outstanding and is no longer a holder of any Second Lien Notes. Mr. Hastings also controls CLCH, LLC, which holds 24,221 shares of theCorporation’s common stock. Pursuant to a registration rights agreement dated June 24, 2013, CLCH had one right to demand registration of its shares of ourcommon stock that it acquired in the Merger, as well as piggy-back rights on any offering of our common stock or securities exercisable or exchangeable forour common stock. CLCH has exercised its piggy-back registration rights, and all 24,221 of its shares were registered for resale pursuant to a registrationstatement on Form S-3, Registration No. 333-213386, that became effective mid-September 2016. The Corporation bore the expense incurred in connectionwith the registration statement.NOTE 20 — COMMITMENTS AND CONTINGENCIESIn the ordinary course of business, the Corporation can be involved in legal proceedings involving contractual and employment relationships, liabilityclaims, and a variety of other matters. Although the final outcome of such legal proceedings cannot be predicted with certainty, the Corporation believes thefinal outcome will not have a materially adverse effect on its financial position, results of operations, or cash flows.NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATIONIn July 2014, the Corporation sold $150,000 of senior secured notes due in 2019. On June 19, 2015, all outstanding senior secured notes were exchanged foran equal amount of new senior secured notes ("Senior Secured Notes"), which are substantially identical in terms to the existing senior secured notes exceptthat the Senior Secured Notes are registered under the Securities Act. In July 2016, a total of $138,128 face value of the Senior Secured Notes were exchangedfor (i) $76,523 Second Lien Notes, including $7,459 Second Lien Notes representing accrued and unpaid interest and (ii) 6,410,502 shares of Corporationcommon stock. See Note 8 for further details on the Senior Secured Notes. The Senior Secured Notes were issued by SAExploration Holdings, Inc. and areguaranteed by its 100% owned U.S. subsidiaries: SAExploration Sub, Inc.; SAExploration, Inc.; NES LLC; and SAExploration Seismic Services (U.S.), Inc.(“the Guarantors”). The Guarantors have fully and unconditionally guaranteed the payment obligations of SAExploration Holdings, Inc. on a joint andseveral basis with respect to these debt securities. As of December 31, 2014, foreign branches of the Guarantors in Bolivia, Colombia and Peru have beenreorganized as 100% owned foreign subsidiaries of SAExploration, Inc. and are reported under "Other Subsidiaries" in the condensed consolidated financialstatements for all periods presented.The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:•SAExploration Holdings, Inc. (Reflects investments in subsidiaries utilizing the equity method of accounting. The equity in earnings of subsidiariesis recognized for the period beginning after the Closing of the Merger on June 24, 2013).•Guarantor subsidiaries (Reflects investments in subsidiaries utilizing the equity method of accounting).•All other subsidiaries of SAExploration Holdings, Inc. that are not Guarantors.•The consolidating adjustments necessary to present SAExploration Holdings, Inc. and subsidiaries' financial statements on a consolidated basis.The condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and notes.Certain amounts in the condensed consolidated balance sheets and consolidated statement of cash flows asFS-39SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION – (continued)of December 31, 2015 presented herein have been reclassified to conform to the current period presentation. These reclassifications had no effect on net lossattributable to the Corporation, comprehensive income (loss), or stockholders' equity (deficit). December 31, 2016 Balance SheetSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedASSETS Current assets: Cash and cash equivalents$2,054 $3,446 $5,960 $— $11,460Restricted cash— — 536 — 536Accounts receivable, net22 52,101 17,598 — 69,721Deferred costs on contracts— 8,378 266 — 8,644Prepaid expenses22 268 1,687 — 1,977Total current assets2,098 64,193 26,047 — 92,338Property and equipment, net— 34,277 8,482 — 42,759Investment in subsidiaries(12,653) 63,247 7,500 (58,094) —Intercompany receivables130,433 — — (130,433) —Intangible assets, net— — 721 — 721Goodwill— — 1,711 — 1,711Deferred loan issuance costs, net20,619 237 — — 20,856Accounts receivable, net, noncurrent— 37,984 — — 37,984Deferred income tax assets— — 5,122 — 5,122Other assets— 164 — — 164Total assets$140,497 $200,102 $49,583 $(188,527) $201,655 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable$128 $5,155 $4,018 $— $9,301Accrued liabilities88 5,769 6,893 — 12,750Income and other taxes payable20 746 14,839 — 15,605Borrowings under revolving credit facility— 5,844 — — 5,844Current portion of capital leases— 39 17 — 56Deferred revenue— 7,975 — — 7,975Total current liabilities236 25,528 25,767 — 51,531Borrowings under senior loan facility29,995 — — — 29,995Second lien notes, net80,238 — — — 80,238Senior secured notes, net1,830 — — — 1,830Intercompany payables— 96,559 33,874 (130,433) —Total liabilities112,299 122,087 59,641 (130,433) 163,594Stockholders’ equity (deficit): Common stock1 — — — 1Additional paid-in capital131,816 43,861 22,058 (65,919) 131,816Retained earnings (accumulated deficit)(103,619) 30,538 (27,294) 7,825 (92,550)Accumulated other comprehensive loss— — (4,822) — (4,822)Total stockholders’ equity (deficit) attributable to theCorporation28,198 74,399 (10,058) (58,094) 34,445Noncontrolling interest— 3,616 — — 3,616Total stockholders’ equity (deficit)28,198 78,015 (10,058) (58,094) 38,061Total liabilities and stockholders’ equity (deficit)$140,497 $200,102 $49,583 $(188,527) $201,655FS-40SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION – (continued) December 31, 2015 Balance SheetSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedASSETS Current assets: Cash and cash equivalents$— $8,025 $3,275 $— $11,300Restricted cash— — 518 — 518Accounts receivable, net— 51,198 16,684 — 67,882Deferred costs on contracts— 390 4,745 — 5,135Prepaid expenses26 181 680 — 887Total current assets26 59,794 25,902 — 85,722Property and equipment, net— 49,623 12,205 — 61,828Investment in subsidiaries(15,022) 58,752 7,500 (51,230) —Intercompany receivables115,691 — — (115,691) —Intangible assets, net— — 789 — 789Goodwill— — 1,658 — 1,658Deferred loan issuance costs, net— 521 — — 521Deferred income tax assets— — 3,756 — 3,756Other assets— 150 — — 150Total assets$100,695 $168,840 $51,810 $(166,921) $154,424 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable$— $7,253 $9,322 $— $16,575Accrued liabilities6,495 7,336 3,987 — 17,818Income and other taxes payable13 376 2,197 — 2,586Borrowings under revolving credit facility— 7,899 — — 7,899Current portion of capital leases— 57 58 — 115Deferred revenue— — 3,903 — 3,903Total current liabilities6,508 22,921 19,467 — 48,896Senior secured notes, net135,630 — — — 135,630Long-term portion of capital leases— 39 16 — 55Intercompany payables— 69,417 46,274 (115,691) —Deferred income tax liabilities— — 55 — 55Total liabilities142,138 92,377 65,812 (115,691) 184,636Stockholders’ equity (deficit): Common stock2 — — — 2Additional paid-in capital35,763 43,861 22,708 (66,569) 35,763Retained earnings (accumulated deficit)(77,208) 28,169 (32,439) 15,339 (66,139)Accumulated other comprehensive loss— — (4,271) — (4,271)Total stockholders’ equity (deficit) attributable to theCorporation(41,443) 72,030 (14,002) (51,230) (34,645)Noncontrolling interest— 4,433 — — 4,433Total stockholders’ equity (deficit)(41,443) 76,463 (14,002) (51,230) (30,212)Total liabilities and stockholders’ equity (deficit)$100,695 $168,840 $51,810 $(166,921) $154,424FS-41SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION – (continued) Year Ended December 31, 2016Income StatementSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedRevenue from services$— $77,947 $127,617 $— $205,564Cost of services— 59,445 101,083 — 160,528Gross profit— 18,502 26,534 — 45,036Selling, general and administrative expenses3,862 11,378 14,013 — 29,253Loss (gain) on disposal of property and equipment, net— 4,830 (288) — 4,542Income (loss) from operations(3,862) 2,294 12,809 — 11,241Other (expense) income, net(23,492) (4,510) 808 — (27,194)Equity in income (losses) of investments2,369 8,010 — (10,379) —Income (loss) before income taxes(24,985) 5,794 13,617 (10,379) (15,953)Provision for income taxes45 404 5,607 — 6,056Net income (loss)(25,030) 5,390 8,010 (10,379) (22,009)Less: net income attributable to noncontrolling interest— 3,021 — — 3,021Net income (loss) attributable to the Corporation$(25,030) $2,369 $8,010 $(10,379) $(25,030) Comprehensive net income (loss)$(25,030) $5,390 $7,459 $(10,379) $(22,560)Less: comprehensive net income attributable to noncontrollinginterest— 3,021 — — 3,021Comprehensive net income (loss) attributable to the Corporation$(25,030) $2,369 $7,459 $(10,379) $(25,581) Year Ended December 31, 2015Income StatementSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedRevenue from services$— $162,067 $66,070 $— $228,137Cost of services— 118,845 58,529 — 177,374Gross profit— 43,222 7,541 — 50,763Selling, general and administrative expenses1,545 13,756 19,241 — 34,542Loss (gain) on disposal of property and equipment, net— 729 (97) — 632Income (loss) from operations(1,545) 28,737 (11,603) — 15,589Other expense, net(7,535) (4,394) (6,409) — (18,338)Equity in income (losses) of investments(777) (18,676) — 19,453 —Income (loss) before income taxes(9,857) 5,667 (18,012) 19,453 (2,749)Provision for income taxes18 2,011 664 — 2,693Net income (loss)(9,875) 3,656 (18,676) 19,453 (5,442)Less: net income attributable to noncontrolling interest— 4,433 — — 4,433Net income (loss) attributable to the Corporation$(9,875) $(777) $(18,676) $19,453 $(9,875) Comprehensive net income (loss)$(9,875) $3,656 $(18,585) $19,453 $(5,351)Less: comprehensive net income attributable to noncontrollinginterest— 4,433 — — 4,433Comprehensive net income (loss) attributable to the Corporation$(9,875) $(777) $(18,585) $19,453 $(9,784)FS-42SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION – (continued) Year Ended December 31, 2016Statement of Cash FlowsSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedOperating activities: Net cash provided by (used in) operating activities$(11,057) $(23,540) $17,614 $(2,865) $(19,848)Investing activities: Purchase of property and equipment— (2,917) (435) — (3,352)Return of capital contribution from affiliate— 650 — (650) —Proceeds from sale of property and equipment— — 488 — 488Net cash provided by (used in) investing activities— (2,267) 53 (650) (2,864)Financing activities: Borrowings under senior loan facility29,995 — — — 29,995Payment of senior loan facility fee, debt discount and loanissuance costs(2,002) — — — (2,002)Revolving credit facility borrowings— 44,470 — — 44,470Revolving credit facility repayments— (46,525) — — (46,525)Repayments of capital lease obligations— (57) (61) — (118)Distribution to noncontrolling interest— (3,838) — — (3,838)Intercompany lending(14,742) 27,142 (12,400) — —Return of capital to affiliate— — (650) 650 —Dividend payments to affiliate— — (2,865) 2,865 —Legal fees for stock issuance associated with restructuring(131) — — — (131)Grantee election to fund payroll taxes out of restricted stockgrant(9) — — — (9)Net cash provided by (used in) financing activities13,111 21,192 (15,976) 3,515 21,842Effects of exchange rate changes on cash and cash equivalents— 36 994 — 1,030Net change in cash and cash equivalents2,054 (4,579) 2,685 — 160Cash and cash equivalents at the beginning of period— 8,025 3,275 — 11,300Cash and cash equivalents at the end of period$2,054 $3,446 $5,960 $— $11,460FS-43SAExploration Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands, except for share amounts and as otherwise noted)NOTE 21 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION – (continued) Year Ended December 31, 2015Statement of Cash FlowsSAExplorationHoldings, Inc. TheGuarantors OtherSubsidiaries ConsolidatingAdjustments TotalConsolidatedOperating activities: Net cash provided by (used in) operating activities$(10,775) $(177) $17,976 $(3,800) $3,224Investing activities: Purchase of property and equipment— (3,985) (2,458) — (6,443)Capital contribution to affiliate— (1,225) (3,990) 5,215 —Proceeds from sale of property and equipment— — 166 — 166Net cash provided by (used in) investing activities— (5,210) (6,282) 5,215 (6,277)Financing activities: Repayments of notes payable— (1,654) — — (1,654)Payment of loan facility fee, debt discount, and loan issuancecosts— (41) — — (41)Revolving credit facility borrowings— 37,687 — — 37,687Revolving credit facility repayments— (29,788) — — (29,788)Repayments of capital lease obligations— (49) (426) — (475)Distribution to noncontrolling interest— (3,358) — — (3,358)Grantee election to fund payroll taxes out of restricted stockgrant— (85) — — (85)Intercompany lending10,775 3,411 (14,186) — —Capital contribution from affiliate— — 5,215 (5,215) —Dividend payments to affiliate— — (3,800) 3,800 —Net cash provided by (used in) financing activities10,775 6,123 (13,197) (1,415) 2,286Effects of exchange rate changes on cash and cash equivalents— — (255) — (255)Net change in cash and cash equivalents— 736 (1,758) — (1,022)Cash and cash equivalents at the beginning of period— 7,289 5,033 — 12,322Cash and cash equivalents at the end of period$— $8,025 $3,275 $— $11,300FS-44Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We have issued our report dated March 15, 2017, with respect to the consolidated balance sheets as of December 31, 2016 and 2015 and the relatedconsolidated statements of operations, comprehensive loss changes in stockholders’ equity (deficit), and cash flows for each of the two years in the periodended December 31, 2016 included in the Annual Report of SAExploration Holdings, Inc. on Form 10-K for the year ended December 31, 2016. We herebyconsent to the incorporation by reference of said report in the Registration Statements of SAExploration Holdings, Inc. on Form S-3 (File No. 333-213386)effective September 16, 2016, Form S-8 (File No. 333-213756) effective September 23, 2016 and Form S-8 (File No. 333-214852) effective November 30,2016. /s/ Pannell Kerr Forster of Texas, P.C. Houston, TexasMarch 15, 2017Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeff Hastings, certify that:1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2016 of SAExploration Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 15, 2017/s/ Jeff Hastings Jeff Hastings Chief Executive Officer and Chairman of the Board (Principal Executive Officer)Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Brent Whiteley, certify that:1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2016 of SAExploration Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 15, 2017/s/ Brent Whiteley Brent Whiteley Chief Financial Officer, General Counsel and Secretary(Principal Financial Officer and Principal Accounting Officer) Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of SAExploration Holdings, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2016, as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff Hastings, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 15, 2017/s/ Jeff Hastings Jeff Hastings Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of SAExploration Holdings, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2016, as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Brent Whiteley, Chief Financial Officer, General Counsel and Secretary of theCompany, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of myknowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 15, 2017/s/ Brent Whiteley Brent Whiteley Chief Financial Officer, General Counsel and Secretary(Principal Financial Officer and Principal Accounting Officer)

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